First the News!
We finally got word today from one of our lenders
with whom we broker loans that they will start
accepting registrations for the new conforming-
jumbo loan limits to $697,500 in San Diego
beginning April 27.
The conforming limit is currently $417,000.
The Economic Stimulus Act of 2008 allowed FHLMC
and FNMA to purchase loans up to $697,500 in San
Diego. At the end of 2008, that figure was
reduced to $546,250 in San Diego.
The 2009 American Recovery and Reinvestment Act
(ARRA) was passed in February and allowed for
the reinstatement of the higher $697,500 limit
in San Diego. We have been waiting for two months
to see that the guidelines have been finalized
and that lenders would start accepting applications
for the higher limits.
The reason this is a big deal for borrowers is
because the jumbo loans - those above $417,000
traditionally - have not been readily available
and when they have been offered, it has been at
significantly higher rates and fees.
The conforming-jumbo loans at the higher limit
will allow more borrowers to finance at affordable
interest rates, and that is going to help a lot
of people.
MORTGAGE BROKERAGE AND MORTGAGE BANKING
As I work with clients and facilitate their
requests for home loans, there are a couple
of different ways I can represent their interests.
As a mortgage broker, I serve as an advocate for
you, the borrower, with the lender.
I help you complete the mortgage application,
educate you as to available loan programs and
costs, and counsel you on any concerns and
possible solutions that could affect your loan
approval.
The lenders make their loan products available
to us through what they call their wholesale
division. It is called that because they
offer their interest rates and fees at a
"wholesale" price to us and allow us to earn
our compensation for the work we do.
When lenders create loans directly, that is
commonly called their retail operation. The
rates and fees that they charge are competitive
with what we charge as mortgage brokers. They
then pay their staff for the work that they
do for the lenders as employees.
So, you should find that the quotes you receive
from the lenders directly or through mortgage
brokers to be very similar. If that were not
the case, one or the other would not be able to
compete and would cease to be a player in the
mortgage market.
Based on our knowledge, experiences and resources,
we package your loan for presentation to the
lender. We do not have any direct ability to
approve your loan, but we are well-versed in the
guidelines for your loan request and can often
persuasively influence the underwriter to approve
your loan if there are differences of opinion.
The lender will approve the loan, draw the loan
documents, and fund the loan.
If we are unable to gain approval with Lender A,
we can take the same package that we have put
together and submit the request to Lenders B, C,
D, etc. if necessary to work toward approval.
Although it may be maddening at times to have
lenders give us so many different opinions and
viewpoints when it comes to getting your loan
approved, it is also the major advantage that I
have in helping you.
If every lender gave us the same answer at all
times, there would be no need to have multiple
sources with which to place your loan request.
So, having some lenders who will say "yes" when
others say "no" is actually a good thing, and
we do our best to find the "yes" lenders as
early in the process as possible.
If you were to apply through a lender's retail
operation, and they said "no", you would have
to generate a new loan request with another
lender. This would take significantly more time
and effort on your part, since you would have
to regenerate the loan application repetitively.
Also, you may have additional fees for duplicate
appraisals of the home since most retail lenders
do not find another lender's appraisals acceptable.
Being able to assist borrowers as a mortgage broker
is a very valuable resource for you. My experience,
my knowledge, and my ability to match your qualifi-
cations to the available loan products saves you
time and trouble at competitive rates and fees.
In addition to mortgage brokerage, I also have
the resources to offer mortgage banking.
Mortgage banking is distinct from mortgage broker-
age because the banking operation allows me to
have the loan underwritten, loan documents prepared,
and the funding of the loan all under the control
of our company.
In this case, we have a select number of lender
relationships, currently about 5-10, that are known
as correspondent lenders.
This means that our company has developed the trust
and the relationship with these lenders for us
to make the loan decision on behalf of the lender.
We have arranged for lines of credit to create
these loans - these are commonly known as warehouse
lines, because after the loan is funded they are
"warehoused" until the lender for whom we created
the loan purchases the loan from our company.
Being able to offer loans within a correspondent
lending relationship gives me the added ability
to have your file move more efficiently through
the process. I have more access to the underwriter,
the document preparation person and the funder of
the loan to try to facilitate special situations
or timing issues.
In today's lending environment, many companies that
were previously able to offer mortgage banking have
had to give it up because their warehouse lines of
credit have not been renewed. Being able to main-
tain these lines of credit requires frequent re-
qualification, and as the mortgage business hit
so many obstacles in the last couple of years,
a lot of companies could not maintain their quali-
fications.
When you are ready to take action to purchase a
home or refinance existing home loans, be sure to
check in with me. My many resources, access to
competitive lending programs, and my 31 years of
experience can be of tremendous benefit to you.
Wednesday, April 22, 2009
Wednesday, April 8, 2009
Rays of Sunshine
Over the past couple of years, we have seen the
housing and mortgage industries going through
some bleak times, after spiraling out of control
for a while.
As we have been slogging through the upheaval
and dealing with the slumping housing market
and more restrictive lending environment, we
have been hopeful that we would see evidence
of improvement.
There are some indications that we may be turning
the corner.
1. Well-maintained and fairly priced homes that
are being offered for sale are moving much more
quickly, and in many cases receiving multiple
offers.
Although the foreclosed properties and short
sales have not been absorbed by the market, there
is some evidence that they are slowing down.
And home buyers seem to have collectively come to
the realization that now is the time to buy.
There are still buyers that want to get the rock-
bottom price and will make as many offers to
distressed sellers as it takes to get the "best
deal". But, many people who want to finally
enter the housing market at these reduced prices
are acting now, and are negotiating fair prices.
This leads me to believe that buyers are thinking
that the bottom (or close to the bottom) has been
reached. And it is this mentality as much as
anything else, that will bring us out of the
slumping home price spiral.
2. Interest rates are staying low. The conforming
loan category, those loans up to $417,000 that
Fannie Mae and Freddie Mac purchase from lenders,
are staying below 5.00% with modest loan fees.
These rates are at levels that have not been seen
for the last 40-50 years. And buyers are recognizing
that borrowing money at these rates is a bargain
not to be overlooked.
We don't know how long they will last, but it is
reasonable to assume that once rates start to go up
again, we may not see these levels for a long time.
With the new government spending programs that have
been enacted in the last 60 days, there is a real
concern for future inflation, and that would mean
higher interest rates will be coming.
3. Any time now, Fannie Mae and Freddie Mac are to
announce the new guidelines and regulations that
will enable them to purchase loans above the $417,000
conforming limit to a new limit of $697,500 in San
Diego County.
This new availability of mortgage money that will be
priced somewhere between the conforming loans and
traditional jumbo loans will add liquidity to the
market.
Even though underwriting standards have tightened
a lot in the last year and a half, they have
stabilized and become more predictable. We have
not been "chasing" guidelines like we were doing
last year, when we could not get files to lenders
quickly enough before they tightened their criteria.
4. FHA and VA lending is becoming more common.
Because conventional loans no longer allow for
minimal down payments of zero or 5% cash, many
borrowers are seeking traditional loans that
allow for these lesser down payments.
FHA loans allow for down payments as low as 3.5%.
VA loans allow for 100% financing, and no down
payment, but does require that the borrower have
earned VA eligibility by their military service.
With home prices experiencing their drop, many
more homes now fit within the FHA and VA loan
limits. Contact me if you are interested in
exploring these options.
5. Jumbo loans (traditionally those above $417,000
but soon those above $697,500) are slowly being
offered again.
The maximum loan amounts and the loan-to-value
ratios are not as aggressive as they once were,
but the lenders are recognizing that there is
a way to make these loans with high quality and
manageable risk.
There has been a void in the market serving this
jumbo category because so many of these loans were
bundled in with the mortgage-backed security pools
that went bad. Investors were very leery of buying
large mortgages that were secured by homes that
were losing value, making their risk even greater.
The fact that lenders are putting their toes in the
water gives further credence to the idea that home
prices are starting to stabilize and maybe move
upward.
If you are interested in buying or refinancing,
take the time to explore your options and develop
a game plan for taking advantage of this convergence
of low home prices and low interest rates.
There are some great opportunities available right
now!
housing and mortgage industries going through
some bleak times, after spiraling out of control
for a while.
As we have been slogging through the upheaval
and dealing with the slumping housing market
and more restrictive lending environment, we
have been hopeful that we would see evidence
of improvement.
There are some indications that we may be turning
the corner.
1. Well-maintained and fairly priced homes that
are being offered for sale are moving much more
quickly, and in many cases receiving multiple
offers.
Although the foreclosed properties and short
sales have not been absorbed by the market, there
is some evidence that they are slowing down.
And home buyers seem to have collectively come to
the realization that now is the time to buy.
There are still buyers that want to get the rock-
bottom price and will make as many offers to
distressed sellers as it takes to get the "best
deal". But, many people who want to finally
enter the housing market at these reduced prices
are acting now, and are negotiating fair prices.
This leads me to believe that buyers are thinking
that the bottom (or close to the bottom) has been
reached. And it is this mentality as much as
anything else, that will bring us out of the
slumping home price spiral.
2. Interest rates are staying low. The conforming
loan category, those loans up to $417,000 that
Fannie Mae and Freddie Mac purchase from lenders,
are staying below 5.00% with modest loan fees.
These rates are at levels that have not been seen
for the last 40-50 years. And buyers are recognizing
that borrowing money at these rates is a bargain
not to be overlooked.
We don't know how long they will last, but it is
reasonable to assume that once rates start to go up
again, we may not see these levels for a long time.
With the new government spending programs that have
been enacted in the last 60 days, there is a real
concern for future inflation, and that would mean
higher interest rates will be coming.
3. Any time now, Fannie Mae and Freddie Mac are to
announce the new guidelines and regulations that
will enable them to purchase loans above the $417,000
conforming limit to a new limit of $697,500 in San
Diego County.
This new availability of mortgage money that will be
priced somewhere between the conforming loans and
traditional jumbo loans will add liquidity to the
market.
Even though underwriting standards have tightened
a lot in the last year and a half, they have
stabilized and become more predictable. We have
not been "chasing" guidelines like we were doing
last year, when we could not get files to lenders
quickly enough before they tightened their criteria.
4. FHA and VA lending is becoming more common.
Because conventional loans no longer allow for
minimal down payments of zero or 5% cash, many
borrowers are seeking traditional loans that
allow for these lesser down payments.
FHA loans allow for down payments as low as 3.5%.
VA loans allow for 100% financing, and no down
payment, but does require that the borrower have
earned VA eligibility by their military service.
With home prices experiencing their drop, many
more homes now fit within the FHA and VA loan
limits. Contact me if you are interested in
exploring these options.
5. Jumbo loans (traditionally those above $417,000
but soon those above $697,500) are slowly being
offered again.
The maximum loan amounts and the loan-to-value
ratios are not as aggressive as they once were,
but the lenders are recognizing that there is
a way to make these loans with high quality and
manageable risk.
There has been a void in the market serving this
jumbo category because so many of these loans were
bundled in with the mortgage-backed security pools
that went bad. Investors were very leery of buying
large mortgages that were secured by homes that
were losing value, making their risk even greater.
The fact that lenders are putting their toes in the
water gives further credence to the idea that home
prices are starting to stabilize and maybe move
upward.
If you are interested in buying or refinancing,
take the time to explore your options and develop
a game plan for taking advantage of this convergence
of low home prices and low interest rates.
There are some great opportunities available right
now!
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