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Archive for the ‘Lending’ Category

handoffHandoffIn an earlier post, I wrote about why it is in the best interest of home sellers and buyers to work with a full-time Realtor who is focused on real estate only; not “double-dipping” by acting as a dual duty  real estate agent and mortgage loan broker. However, as a Realtor, I understand the importance of knowing what is happening with mortgage interest rates and keeping current with the latest mortgage news, loan products and trends. After all, mortgage loans are an integral part of completing most real estate transactions.

Since I am not a mortgage expert, I look to those who are to keep me abreast of their industry. I thought I would share some of the exceptional mortgage blogs that I subscribe to for expert advice.

Rhonda Porter, of The Mortgage Porter blog and also a contributor to the Rain City Guide Real Estate blog, recently wrote a very informative post on preserving your credit standings when going through a divorce or separation. Another relevant post of Rhonda’s addresses mortgage loan options for writing a contingent offer on a home; a way to purchase another home prior to selling your existing home without the risk of paying two mortgages. You’ll find these posts and much, much more on Rhonda’s blog.

A current phenomenon that many homeowners are experiencing is adjustable rate mortgages (ARMs) going up. Morgan Brown of Blown Mortgage blog has strong advice for what steps you can take now and options that are available to those in this situation. Morgan’s blog covers a wide array of industry news including: Wall Street the Economy and Consumer Mortgage Tips. He also writes about why he hates the mortgage industry. Fun stuff!

Both Rhonda and Morgan have been blogging for quite some time. In this handoff from Realtor to Mortgage Lender, you’ll be in good hands in the company of their blog posts and mortgage industry musings!

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Federal Reserve Chairman, Ben S. Bernanke, spoke via satellite to the International Monetary Conference gathered in Cape Town, South Africa, June 5th, 2007.  With regard to the Housing Market and the effect that the sub prime lending practices of 2004-2005 ares having on the housing market, Mr. Bernanke had this to say:”Recent developments in the subprime mortgage market add somewhat to the usual uncertainty in forecasting housing demand.  Subprime mortgage borrowing nearly tripled during the housing boom years of 2004 and 2005.  But decelerating house prices, higher interest rates, and slower economic growth have contributed to an increased rate of delinquency among subprime borrowers.  This increase has occurred almost entirely among borrowers with adjustable-rate mortgages; delinquency rates for fixed-rate subprime mortgages have remained generally stable.  Some of the increased difficulties now being experienced by subprime borrowers are likely the result of an earlier loosening of underwriting standards, as evidenced by the pronounced rise in 2006 in “early payment defaults”–defaults occurring within a few months of mortgage origination.  All told, the rate of serious delinquencies for subprime mortgages with adjustable interest rates–corresponding to mortgages in the foreclosure process or with payments ninety or more days overdue–has risen to about 12 percent, roughly double the recent low seen in mid-2005.1  The rate of serious delinquencies has also risen somewhat among some types of near-prime mortgages, although the delinquency rates in those categories remain much lower than the rate in the subprime market.  

Tighter lending standards in the subprime mortgage market–together with the possibility that the well-publicized problems in this market may dissuade potentially eligible borrowers from applying–will serve to restrain housing demand, although the magnitude of these effects is difficult to quantify.  Subprime and near-prime mortgage originations rose sharply in 2004 and 2005 and likely accounted for a large share of the increase in the number of home sales over that period.  However, originations of nonprime mortgages to purchase homes appear to have peaked in late 2005 and declined substantially since then, and by more (even in absolute terms) than prime mortgage originations.  Thus, some part of the effect on housing demand of the retrenchment in the subprime market has likely already been felt.  Moreover, indicators such as the gross issuance of new subprime and near-prime MBS suggest that the supply of nonprime mortgage credit, though reduced, has by no means evaporated.2  That said, the tightening of terms and standards now in train may well lead to some further contraction in nonprime originations in the period ahead.  We are also likely to see further increases in delinquencies and foreclosures this year and next as many subprime adjustable-rate loans face interest-rate resets.

We will follow developments in the subprime market closely.  However, fundamental factors–including solid growth in incomes and relatively low mortgage rates–should ultimately support the demand for housing, and at this point, the troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system. ”

More of Mr. Bernanke’s remarks…..

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twins.gif  Brian Brady, from Bloodhoundblog.com, recently posted a very interesting article regarding real estate agents that also act as the loan officer. Having been a loan officer in a past life and now being a full-time Real Estate Agent in Southern California, I have a few things to say about dual duties and trying to handle both:

  1. There is way too much to know about either mortgage lending or real estate. It is very difficult to serve clients with  real expertise if their time is divided into the two different segments. It is difficult, but not impossible to continuously learn and keep up with the latest technology and industry related trends in just one of the two jobs.
  2. Mortgage Loan Officers and Real Estate Agents alike, have to pass the CAR Real Estate Exam, but it doesn’t mean that either has the knowledge to represent their clients in both arenas with the client’s best interest in mind. The exam covers the bare-bone basics. Skills are developed with experience, continuous learning and hopefully, a good mentor. If their focus is on one set of skills to learn, becoming better able to serve their clients comes sooner than later.
  3. Mortgage interest rates can, and do, change daily as reported by Jon Ribary at Rain City Guide. Real estate buyers, sellers and mortgage loan applicants are paying good money to have the best representation that they can possibly have, and don’t want to hear excuses when their agent/mortgage loan officer missed a deadline to lock their loan or inform them of a substantial rate change. 
  4. Full-time real estate agents are constantly reviewing and previewing the active listings, pending sales and sold properties to guide potential buyers and sellers as to the worth of properties.
  5. Full-time Mortgage Brokers are in-tune to the bond market and what the Federal Reserve is doing  with the interest rates. They are in constant touch with their wholesale lenders/clients and are getting up-dates regarding what new loan programs are available or are being changed.
  6. A good mortgage broker and real estate agent will have a repetoire of other professionals that they have worked with and have respect for, to whom they refer their clients.
  7. Dual duties also results in double commission for the agent who is also the loan officer, receiving revenue from the loan and also the sale of the property.
  8. A “Jack of all trades” does not necessarily do the best job. If you had a heart condition would you see a General Practitioner or a Cardiologist?

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In the midst of the sub-prime loan debacle, Inman News reports that the Secretary of Housing and Urban Development (HUD) has put before Congress a plan for modernizing FHA loans. In recent years FHA loans have been all but extinct in states with high housing costs, due to their maximum loan limits. Buyers turned to riskier adjustable-rate loans as a means to get into home ownership without, in some cases, as illustrated by the increase of mortgage defaults, full knowledge of how high their payments could reach when the loan adjusted.The proposed plan would allow for higher loan amounts, eliminate the mandatory 3% down-payment and would be flexible with more options. Californians looking to purchase a home with little or no down-payment would certainly benefit from this new FHA loan over-haul; as would home-sellers by having a bigger pool of qualified buyers that are able to purchase their homes.

This important update to FHA home loans, could be a very vital component in keeping our housing market healthy by allowing more buyers safer loans that they can afford. Let your CA State Senator know that you think this is of importance to you. Look for updates in future posts.

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