Mortgage Related Topics

Are you working at a non-depository financial institution? Starting at :38 We will be providing a mechanism for putting non bank financial institutions out of everybody’s misery. [Is Secretary Geithner smiling?] There will be death panels enacted by this congress. But they will be for non-bank financial institutions that will not be considered too big to die. And I say that because we have this euphemism that we are going to be resolving these institutions. It has not been my experience that when someone says that they are going to resolve something, they kill it. We are talking about dissolution, not resolution. We are talking about making it unpleasant for the entities… Note: The underlining emphasis and [commentary] was mine of course. I don’t know for sure what the future will hold, but it sure seems like the winds of change are starting to blow when it comes to how mortgages are originated. Hat Tip Rob Chrisman (by far one of the smartest mortgage people I have ever followed) for sharing the video.

So you think you want to buy a house that has multiple offers on it? What I am about to suggest is called The Better To Be Lucky Than Good Plan and it’s success can largely depend on what your connection with karma is with the Gods in Charge of Decisions on Bank Owned Properties. Step One Once you have found a house and you realize that there is currently multiple offers in on it – maybe even at least one of them is for cash, it is time to get creative. In this case, creative is known as something called an escalation clause . The escalation clause can be worded in a number of different ways, but the essence of it is “buyer agrees to pay X% or X$ over the next highest offer.” Step Two Being creative can be fun, but unless you are also smart and creative, it could backfire on you. So now that you have been creative, you can protect yourself by being smart . Being smart in this case requires that in addition to your escalation clause, you also use a “subject to appraisal” clause such as this one The Phoenix Real Estate Guy stated in the comments from a post I wrote last week : Appraisal Contingency: Buyer’s obligation to complete this sale is contingent upon an appraisal of the Premises by an appraiser acceptable to lender for at least the sales price . If the Premises fails to appraise for the sales price, Buyer has five (5) days after notice of the appraised value to cancel this Contract and receive a refund of the Earnest Money or the appraisal contingency shall be waived. Once you have submitted your offer that is both creative and smart , it is time to sit back and let the fun begin. From what I can tell, the people who work for the Gods in Charge of Decisions on Bank Owned Properties are seldom able to turn one of these offers with an escalation clause in it down. I am sure it happens, but I just don’t see it happen very much. Step Three Once the offer has been accepted by the people who work for the Gods in Charge of Decisions on Bank Owned Properties, it is time to order the appraisal. Due to HVCC laws, appraisals today can be tricky and usually drive people nuts… but in this case, don’t let it drive you nuts – if the Better To Be Lucky Than Good Plan works out, you are about to save some money and be able to buy the home you want. Step Four If my math is correct so far, once you get the appraisal back, you will quickly realize that as a result of you being creative , you currently have an offer in that is possibly tens of thousands of dollars over the appraised value of the home. Good thing you were also smart . Now is the time when you go back to the person who works for the Gods in Charge of Decisions on Bank Owned Properties and ask them which one of these three choices they want to pick: Cancel the contract because the property did not appraise for the sales price Get a different appraisal done with the seller paying for it Negotiate with the seller to lower the sales price to the appraised value How do you tell if you are one of those people who think it might be better to be lucky than good? The person who works for the Gods in Charge of Decisions on Bank Owned Properties chooses door number three from the choices above and you end up with the house you wanted at the appraised value. It might be easier than you think to be lucky… especially if the short sale department happens to be part of the “ Retard Division “. Other Recent Multiple Offer Thoughts: Escalation Clauses: Bad or Good? Multiple Offers and “Winning” The Bidding War Disclaimer: I am not a Realtor but I get to watch them work every day and most days it is more fun than not. Be sure to consult with a licensed Realtor before trying any of this at home.

If you found this blog, chances are that you are a consumer who is looking for more information about a mortgage. Maybe even more specifically, you are searching for specific information about how to get the best deal on your mortgage. So I thought I would take the time to list out the Top 10 Reasons Someone Shouldn’t Use Zillow’s Mortgage Marketplace to Shop for a Mortgage . Number Ten You much prefer filling out a form on the Internet somewhere that looks like this… because you wonder what will happen if you do. Number Nine When you fill out a form that looks like number ten, you also want to give your personal information – just in case someone needs it. Number Eight You sometimes get lonely. You like to get phone calls. From lots of different people. Forget it if they want to talk about your mortgage – you want to tell them all about how your garden is doing. You know that by filling out a form, you will soon have lots of different people to talk to from all over the country. And they sound like such nice people when they call. Number Seven Your Realtor’s brother seems like he is so smart about mortgages. You feel lucky that you found the World’s Best Realtor who has a brother who is the World’s Best Loan Officer on the back of the shopping cart at Safeway. Number Six You really don’t have all that much time to fill out any forms on the internet. Can’t you just sign a form or two and be done with it? Number Five Your sister said that she found her loan officer on MySpace and he was so cute – he even gave her a ride in his BMW to the title company. Number Four You can’t find any loan officers on Zillow who are offering you any cash-back-at-closing when you buy your house and you really need to find someone who can offer “creative financing”. Number Three Your mom used a loan officer that she liked before – and he said that he could “help you out” even though he has a side job now stocking shelves at Home Depot. Number Two You like the fact that you can go to the Realtor’s office and stop by the Loan Officer’s office right there in the Real Estate Office. Having them together makes it so easy . And finally, the Number One Reason Someone Shouldn’t Use Zillow’s Mortgage Marketplace to Shop for a Mortgage? You feel sorry for your brother. Who also happens to be a mortgage broker.

Pull up a chair, I need to have a serious conversation with you for a minute. Something happened this week that you may not be aware of yet and although I don’t want to alarm you unnecessarily, I want to help you protect yourself from the fallout of what happened. What Happened This Week This week something out-of-the-ordinary happened when the government effectively shut down a large wholesale bank named Taylor, Bean and Whitaker. Yes, it has been all over the news but I worry that many people just assume that it was just another bank failure – heck, they pretty much happen on a weekly basis (always on Friday of course) so what is the big deal, right? Wrong. Why Taylor Bean and Whitaker Closing Is Important To You No matter who you are – or whether you are currently in the process of getting a loan or not, the closing of Taylor Bean and Whitaker will impact the way you shop for a mortgage. One of the reasons it will impact everyone is that Taylor Bean and Whitaker was one of the “last options” for many types of loans. As lenders have tightened up their guidelines, many lenders simply “don’t do” certain types of loans anymore. FHA Jumbos, FHA Manufactured Homes, FHA 203k Streamlines, USDA Loans – these were all loans that TBW did and loan officers all over the country used TBW for years. The Single Most Important Question You Can Ask Your Loan Officer With the closing of TBW, many loan officers are now scrambling to get their loan placed somewhere else – and the sad truth of it all is that many people who were just about to close their loan will not be able to close their loan somewhere else because no one else will do the loan that TBW would have done . So, the single most important question that you can ask your loan officer — please pick up the phone right now and ask it if you haven’t already is: Do you have a backup lender in place in case the current lender you have my loan with closes their doors? And don’t settle for any answer other than yes or no .  Don’t let your loan officer go wishy-washy on you. This is an answer that you need to know. You need to know that your loan is in line at XYZ lender and should something happen to XYZ lender, is there a backup plan in place? And if there isn’t… well – it is time that you demand that your loan officer get one . Because in today’s mortgage market – as proven again this week by the closing of Taylor Bean and Whitaker – anything can happen. And by being proactive and making sure you have a backup plan in place should something happen, you can mitigate the risk of a financial crisis of your own. More Information: HUD Press Release Wall Street Journal Article Taylor Bean Press Release Dan Green does a great job of putting together a FAQ list for many questions people have about the Taylor Bean and Whitaker event.

Many people in who are current on their mortgage payments and want to refinance their home have spoken with their lender about the Obama refinance — where they can be up to 105% “under water” and still get a Fannie Mae / Freddie Mac loan. What they are finding out once their appraisal comes back is that they are actually “under water” by more than 105% — and now they are trying to decide what to do. Should they just keep making payments at their high interest rate? Should they stop making payments and try to get a loan modification? Should they try for a loan modification even though they are current? All of these are good questions – and really, there is no easy answer. There for sure is not an answer that will fit everyone’s situation perfectly — each situation is different and individual. But… There is a possibility — note the word possibility — that the guidelines on the Obama refinance will soon be expanded where you can be up to 125% upside down on your home and qualify for the Obama refinance. It hasn’t been made official yet — but for many people who currently have been turned down by their lender and are trying to decide whether to: Just keep making their mortgage payments as normal Stop making payments and try to get a loan modification Try for a loan modification even though they are current Now there is at least one more option on the table — wait and see if the Obama refinance guidelines get expanded . According to Bloomberg: Fannie Mae and Freddie Mac may get permission to begin refinancing mortgages with loan-to-value ratios above 105 percent as the Obama administration seeks to boost participation in its anti-foreclosure programs. “We’re actively considering how to structure a program that makes sense over 105 percent,” Federal Housing Finance Agency Director James Lockhart said yesterday. He said a ratio of 125 percent “is a number” that’s on the table, though “not necessarily the number we’re going to end up with.”

Friday morning was a first for me – I reported to the courthouse for grand jury duty. I had never been called for jury duty before, so I thought it might be fun. I reported to the courthouse and was waiting in the juror-waiting-room and I saw quite a few “tweets” on Twitter about how FHA issued a mortgagee letter stating that homeowners could now monetize their new home buyer tax credit when buying a home rather than wait for their tax refund to come from the IRS. So I was stuck in the jury waiting room when HUD finally issued an announcement for something that everyone has been wondering about for at least the last few weeks. Katie did an excellent job of announcing and covering this plan , but I figured that it was big enough that we could talk about it in at least one more blog post. Key Highlights Of New Home Buyer Tax Credit Monetization Plan FHA will allow approved organizations to “monetize” the tax credit for new home buyers by helping them turn their future tax credit into money they can use for closing costs / down payment FHA issued guidelines about how the program will work and how much it should cost New home buyers will still need to have the initial 3.5% for their down payment Using The 8000 Tax Credit For Your Down Payment One of the most popular questions is “can I use the 8000 tax credit for my down payment?” and the answer officially is YES — but only after you have paid the initial 3.5% down payment on your own. In other words, you can’t use the 8000 tax credit for the first 3.5% of the down payment, but if you wanted to use the 8000 tax credit for a down payment over and above the 3.5%, you can. From the official HUD announcement: Pursuant to 12 U.S.C. 1709(b)(9), the homebuyer’s downpayment required for eligibility for FHA insurance may not consist of any funds (including funds derived from a sale of the homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction (or by any third party or entity that is reimbursed, directly or indirectly, by the financially benefiting person or entity).  Accordingly, the proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefiting person or entity), may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs. Using the 8000 Tax Credit For Closing Costs You can use the 8000 tax credit for closing costs that are normally associated with buying a home. Lender fees, title fees, inspection fees — these are all “normal” closing costs and you can use the 8000 tax credit monetization plan for these costs. How Much Does The Tax Credit Monetization Program Cost? In my opinion, HUD did a nice job of making sure that the costs for this program are reasonable. According to the Mortgagee Letter: Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer.  In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive.  (Example:  $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.) Other Resources I am sure that there will still be many, many questions about this program — so here are a few resources that may be of help. Also, don’t forget to ask a loan officer at a FHA approved lender — they should be very helpful when trying to understand exactly how this program works. HUD Official Announcement Official Mortgagee Letter 2009-15 New Home Buyer 8000 Tax Credit Down Payment: Answers To Questions Oh, and for those of you who were wondering how jury duty went — I was excused from jury duty after I told the judge: “ Your Honor, I am a local loan officer and I have a family. My employer doesn’t pay me for jury duty – in fact they don’t even pay me unless I close a loan and if I am selected to serve on the jury for six months , I worry that one wife and two kids might end up starving to death after they kick me out of the house…” Dismissed.