The World of Mortgage Blog - According to Kimberly and Cathy

Focus On Listings!

Happy Friday

Yesterday Evergreen Home Loans celebrated our 25^th Anniversary with a little campaign and… reflection!  Each year has its own challenges.    Right now it’s LACK OF GOOD INVENTORY for you all to sell.  

The owner of our company, Don Burton said that as a young realtor in the 1980s he didn’t know anything about why high interest rates would make it difficult to sell homes.  He had a strategy for focusing on where the business is and letting the rest go: 

“Pick up the Quarters and Dimes… Leave the nickels and pennies”

The “Quarters” right now are listings:

• Sellers that have equity in their homes
  • Check out neighborhoods that have had recent sales that bring values back up.  One of the guys in our company bought a home at the height of the market in a new neighborhood.  Values have of course dropped since then, but recently a home sold in the area at a price comparable to about what he bought his home for….don’t you know, a couple weeks later 2 more ‘for sale’ signs popped up in his neighborhood.  Be that listing agent.
  • Divorces – align yourself with a family practice attorney or two.  Their clients will likely need to sell their home.
  • New Babies/recent marriages – talk to your past clients.  Whether it’s them, or their kids/friends kids someone might need more space. 

While many lenders are focusing on the new HARP2.0 loan right now,  we’re focused on our purchase business…last year it was 82% of our closings.  Let us know what we can do to help you. 

Rates are still ridiculously low, with no signs of reversing that trend.    

Interest Rate Charts And More!!

Would a GUARANTEED loan from us help get your buyer's offer accepted?

Back in the ‘Old Days’, circa 2007, we always used Evergreen Home Loans “Security + Loan Guarantee” which, in a nut shell says that If for any reason, Evergreen Home Loans fails to close the loan we will pay the seller $1000!  This loan guarantee is subject only to an acceptable appraisal and title report.   Our buyers had a leg-up on the competition when it came to multiple offer situations. 

 

As bank owned homes and short sales took over the market we moved away from this powerful tool.  But we’re pulling it off the shelf! 

 

When it’s a seller’s market, you’ve got to make sure your buyer looks as strong as possible.  Sometimes the highest priced offer doesn’t win the bid…it’s the one the seller and their agent KNOWS is going to close.  

 

Here’s how it works:

• Buyers supply ALL of the required documentation
• We run the complete loan file through our underwriter (not the automated system, but through Judy our underwriter)
• She reviews and signs off on the entire loan file (sans the appraisal and title report)
• You get the guarantee to accompany your offer.
• The seller knows that you have a strong buyer, so YOU get the offer accepted
• We CLOSE FASTER! No hiccups, no mess!

 

It takes about 5 business days to run through this process but the benefit in the end is priceless.  Let us know how we can help. 

Fun Facts about the Real Estate/Mortgage Market

In 2011 investors purchased 1.23 Million homes.  This is up 64% from 2010.

• Investment purchases made up 27% of all the activity in 2011
  • ½ were cash purchases. 
  • ½ were distressed homes
• In a recent survey by Transunion, a troubled homeowner is more likely to let their house payment slip BEFORE they are late on their auto loan or credit cards! Yikes!
  • 9.5% of the troubled homeowners were late on their auto loans and 17.3% were late on their credit cards
  • 40% of them were late on their mortgage.
• In January, more short sales were closed than foreclosures.  This means the banks are agreeing to more deals – good sign!
  • Short sales accounted for 24% of sales
  • Foreclosures accounted for 20% of sales
• The average loan closed in March has a FICO score of 749, and LTV of 77% and a debt-to-income of 35%. – that’s a nice loan. J
  • The average loan denied was a FICO of 699, 85% LTV and a DTI of 43% - this is surprising. 

 

What’s Driving Mortgage Interest Rates?

Mortgage Rates continue to remain low – here’s why. Various European countries continue to struggle with their debt. As they do, US Bonds look more appealing to investors…as they’ve got to park their money somewhere. Mortgage rates benefit when investor’s flock to our bonds. This is likely the largest factor influencing our low mortgage rates these days. When will rates go up: when Europe looks stable and the news comes out that their debt issues have been resolved. Inflation (officially) remains in check. When will rates go up: If (when) inflation takes hold. Those bond holders (holders of mortgage debt) will want a better return on their money once inflation cuts into their margins. Rumors as still swirling about additional Quantitative Easing (QE3) – This is when the Fed buys up mortgage debt. The possibility of this happening keeps mortgage rates low. If the Fed rules it out completely, rates would likely move up.

Financing for Condos, Non-Conforming Condos and Condotels

Financing for Condos, Non-Conforming Condos and Condotels

“Normal” Condo Financing:

€        For new construction/conversion: 70% of units sold or under contract for owner occupied/second homes

€        Existing Projects: NO owner-occupancy ratio requirement if purchasing as an Owner Occupied/2^nd Home. If the subject property is an investment purchase then the owner-occupancy requirement is 51%.

€        100% LTV – through USDA

€        95% LTV – through conventional loan

€        96.5% LTV – through FHA – condo project must be FHA approved

€        Rates are at current market (except conventional loans that have an additional Fannie Mae charge of .75% of the loan amount for condos over 75% LTV)

Home Path Condos

€        If property is classified as a Home Path property, no condo certification or appraisal is required.  So, none of the condo requirements above apply.

€        Rates vary by LTV and credit score

Non-Conforming Condos

€        Defined as: Less than 51% owner occupancy on an investment purchase, over 10% of the units held by one entity, greater than 15% HOA delinquency, some litigation

€        Minimum Loan amount $300,000

€        Max 60% LTV

€        Rates in the 5’s.

€        3 year, 5 year, and 7 year ARMs only

Condotels

Evergreen Home Loans can help under these scenarios:

€        Minimum Loan amount $300,000

€        Max LTV 50% (60% on a case-by-case basis) – so price on the condo would have to be $600,000.

€        Interest Only possible

FHA Changes and Exciting New Programs

Exciting New Programs – We can offer loans with the following situations: 

• Revocable or Irrevocable Trusts. 
• LLC, Partnerships and Corporations
• Job Transfers when job has NOT started.  Just need signed offer letter.
• Foreign Nationals – Requires a sizeable down payment.
• Asset-based loans for people who have a lot of cash and not job income.

FHA Changes: 

FHA buyers need an FHA Case Numbers before April 9, 2012 or they will be subject to the new higher upfront MI fee.  Increasing from 1% to 1.75% upfront MI that is added to buyer’s loan amount.  AND the monthly will increase from 1.15% to 1.25% monthly.  That will increase their monthly payment by approx $17 per month.

Mortgage Market Forecast for 2012

Happy New Year to you and your family!

 

Many of you are familiar with Barry Habib of the Mortgage Market Guide – he provides us daily updates on the stock and bond market as well as events happening around the whole that impact mortgage rates.  It helps us tremendously in our efforts to guide our clients in interest rate lock/float decisions.  The following is a summary of his forecast for 2012.  If any of you would like more information we’re happy to talk through this in greater detail.  His forecast is 8 pages long…we’ll try to be a bit more brief.  J

 

Events that will likely affect interest rates in 2012

€        The European Debt situation – This is an enormously important issue for the world in general but it’s specifically interesting for us in the real estate/mortgage industry as it could have a significant impact on mortgage interest rates.  As The European nations continue to struggle, our mortgage interest rates benefit.  As Barry put it in the forecast, “we’re still the cleanest shirt in the dirty laundry”.  As a result, investors looking for a safe place to put their money are flocking to our bonds.  This helps mortgage rates.

€        Unemployment Rate - He forecasts that unemployment will continue “north of 8% throughout 2012” with more gains in the private sector offsetting losses in government jobs.  With little change in this rate, it won’t be a driver of interest rates for 2012.

€        Quantitative Easing 3 (QE3): The Fed is considering another round of QE under the guise of helping to boost the housing market.  When QE2 was announced (in 2010), rates went down on the rumor but once the program started actually went up.  The current rumor is that there is a 50/50 chance of this happening in the spring - So, rates should currently be benefiting by this rumor for another several months. 

€        The Housing Market forecast:

• o        Delinquency rates have declined and they will continue to do so. 
• o        Home prices will likely decline modestly (1 to 2%) in the first ½ of 2012 and then recover in the 2^nd 1/2  
• o        Rental/Investment properties will make up a larger portion of the market in 2012

 

Interest Rate Forecast

€        He sees interest rates moving ‘a leg’ lower in the first part of 2012 as QE3 rumors swirl

€        These lower rates, as we talked about above, would likely quickly reverse after QE3 actually gets implemented.

€        If the Fed doesn’t do QE3, rates will continue to be attractive through the first part of the year, moving a bit higher towards the end of 2012 as the economy picks up.

€        Rates may dip down near 3.5% and rise somewhere in the mid-to-high 4’s in 2012 but not likely higher than that unless inflation starts to spike higher. 

 

We find this whole topic fascinating, but understand that not everyone does…so we’ll leave it there.  If you’d like have a deeper understanding of how any of the issues above may affect the real estate/mortgage market give us a call. 

 

Reminder on Condo Financing AND Quick update on 'near-term' Interest rates

Just as a reminder:  Watch for the following requirements on Condos for financing on Conventional and FHA loans

• Needs under 15% delinquency on condo dues  (30 days+)
• Watch that not more than 10% of the units are owned by one entity
• Watch that not more than 20% of the project is commercial in nature
• No litigation can be pending (accept if it’s in connection with individual owners to collect HOA dues)
• 70% of the units must be sold or under contract as an owner occupied (or 2^nd home) status on a new project/conversion
• Association must have at least 10% of budget in reserves for capital expenditures and deferred maintenance.
• Needs 51% owner occupancy (or 2^nd home)

 

Quick Interest Rate summary from Barry Habib at Mortgage Market Guide:

While he doesn’t anticipate interest rates will be moving much higher in the near-term because of the uncertainty in Europe and the prospects of additional Mortgage Bond buying (QE3), he doesn’t see interest rates moving lower either.  Inflation, the enemy of low mortgage rates, is elevated and if it continues to creep higher it will limit any improvement in home loan rates. 

New FHA Loan Limits & Realtor $1000 Bonus on Freddie Mac Prop

Happy Thanksgiving!

Our team is working this holiday so call on the 24 hour access line 206.774.7594 if you need help.

Couple of items to share:

• Freddie Mac is offering a realtor bonus of $1000 for any home sold where Freddie Mac is the seller.  This is for sales between Nov 15 and March 15, 2012.
• FHA/HUD is in the process of raising their loan limits above the $506,000 current balance.  For the King/Snohomish areas it’s likely to be raised back to the $567,500 limit.  Once this has finalized, we’ll send you written confirmation of the actual loan limits.