Lender panels re-cap, Part 2. Part one is further down the page.
Denise Dedrick of M & I Bank, 928.203.4484
Jim Hostler of Lender’s Direct, 928.225.7418
Mark Miskiel of The Lending Company, 928.634.7987
Shelly White-Collier of Northern Arizona Mortgage, 928.634.4251
Shelley Williams of People’s Mortgage, 928.821.0782 (Cell)
Let’s talk about credit, shall we? Our panels sure talked about it a lot, so we will, too.
“Credit is King.” That statement was repeated, well, repeatedly. Our panel members agreed that all of the other components of a loan don’t much matter if the borrowers have a remedial credit score. If it’s under 620 they’re going to have a problem.
Here are some of the very important points that were made about credit:
· It doesn’t matter how golden the Buyers are, it doesn’t matter if they have a credit score of over 800, it doesn’t matter that they have a big down payment, it doesn’t matter that their income to debt ratio is better then perfect – everybody gets put through the wringer. Everybody.
After they’re approved and gotten through the wringer DO NOT LET ANYTHING CHANGE! Advise your clients to wait until after close of escrow to buy the new furniture and washer/dryer. They should absolutely not spend any of the funds that were considered during the process, and they sure shouldn’t run up the credit cards. Bank balances could be checked at the last minute, a final credit check might be pulled. People have been denied because they got all excited and ran out and bought the materials for the new deck and now they’re denied.
Here’s a good one: There have been instances where that final last-minute credit check lowered the buyer’s credit score by the few points that it took to make them suddenly unable to qualify for the loan that they just got approved for. Doh! We can remind the lender to “refresh” the credit report as opposed to re-pulling it – a refresh doesn’t count as a hit.
The Buyer will be required to sign a 4506-T form, which authorizes the lender to get copies of their taxes straight from the IRS. The days are over when a Buyer could present the lender with “copies” of taxes that say exactly what the lender wants to see. After close, taxes may be pulled and re-pulled from the IRS and scrutinized and re-scrutinized. Why? So that the lender can see if maybe the borrower has amended the pack of lies that was actually filed with Uncle Sam in order to qualify for the loan. This happens a lot in the case of a default – the lender is looking for fraud so that they can make the originator buy back the loan.
If the Buyers want to shop around for a loan officer, that’s great. As they talk to Loan people, they should never authorize that their credit be run until they’ve settled on somebody. A bunch of inquiries hitting their credit could be enough to tip them out of an acceptable credit score and “Go buy a house!” into “Forget about it, Bub!”
If a disputed debt comes up on a buyer’s credit report it must be cleared up. “But it isn’t mine! That’s some other guy!” doesn’t cut it. The underwriter will insist that a dispute be cleaned up or removed because they want to know for sure that the Buyer won’t have to pay it, which would change the income-to-debt ratios.
Request that your lender pull a “soft” credit inquiry as opposed to a “hard” inquiry. Soft inquiries don’t impact credit – hard ones do. What’s the difference? I don’t know. That’s what they said – ask the lenders.
The initial credit check can be an alert to a borrower’s creditors, since they do keep track of inquiries. If they see a credit check from a mortgage company they sometime hurry up quick and report or re-report a bad debt that they might have actually given up on a long time ago. They figure that the debt has a good chance of getting paid off if somebody wants to buy a house.
We live in the information age. Encourage your Buyer to be absolutely up front and honest with their lender. If the lender knows about issues in the beginning they can figure out how to structure the deal and how to best advise everybody involved.
Believe that glitches and blips and cover-ups will be discovered. I trust our panel when they tell us that if there is fraud on the loan application or letters of explanation it will be caught, the loan denied and the Buyer possibly prosecuted. It’s just not worth it.
Some good questions came up at both of the meetings.
Q: Will the banks have to adjust their standards in the future to take into account what has happened to so many people lately, credit-wise?
A: They’re going to have to if they want to lend money. This is just common sense, but no concrete plans have been announced.
Q: Have Arizona’s non-recourse laws affected the number of foreclosures?
A: Non-recourse means that on the first mortgage on primary residences, the lender can take back the property in the case of default, but that’s about it – they can’t go after the borrower for any deficiency. Of course non-recourse has affected the thought processes of homeowners who are in trouble or upside-down. They’ve also put a big red flag on Arizona loan files.
Q: Are there really 3.75% 30-year fixed conventional loans available?
A: Yes, but to get that rate the borrower is going to have to pay some points. If they can live with 4% there are no points.
Q: Wow! Who is offering that?
A: We all have pretty much the same products available.
(Note from Carol Anne: I got emails from a lot of lenders who weren’t on the panel, saying that they do 203k rehab loans. Shelley Williams of People’s Mortgage does 203k rehabs, and Denise Dedrick of M&I says that they are getting set up to do them. This was cool because I thought that 203ks had gone the way of the dodo. Some lenders do FHA or Rural Housing or VA and others don’t. Jim Hostler does manufactured home loans and Mark Miskiel is all over USDA. It looks like what one guy won’t touch is the other one’s bread and butter. Ask your favorite lender – if they don’t deal with a program they know who does and they will be generous with that knowledge.)
Q: Are lenders bombarded with homeowners trying to take advantage of the low interest rates by refinancing?
A: No. You have to have equity to refinance and a lot of people don’t have the equity needed.
Q: What about these astonishing interest rates that I see advertised? Like, half a point?
A: That’s probably a “teaser” rate. It might go up after a certain amount of time, or costs are passed on to the borrower up front or it’s a bait-and-switch.
Q: I have an ARM (Adjustable Rate Mortgage) on my house that re-sets at the beginning of the year. When should I re-fi?
A: You might not want to. If it re-sets to 3.5% (which some of them are) your payment will go down.
Q: How hard is it to re-fi if I have enough equity?
A: The process is the same, whether for a new loan or a re-fi.
Q: What motivates you guys? It sounds like it’s as hard to be in the mortgage business as it is to be a REALTOR® right now.
A: We’re motivated by the same things that REALTORS® are - the satisfaction of doing a good job. We take these people personally, the same as REALTORS®. We care about the buyers and want to see them in a home. Denise Dedrick said, “The lenders do take it to heart when a deal falls apart. We work hard from pre-approval to processing to underwriting to closing to make it a smooth process for the REALTOR® and client. To say it stinks when a deal dies is an understatement.”
Q: Who is your favorite type of borrower? (I expected them all to say “Jumbos” but not one of them did.)
A: (in alphabetical order by last name)
· Denise Dedrick of M&I loves the challenge of a “different” loan.
· Jim Hostler of Lender’s Direct loves the self-employed and investors.
· Mark Miskiel of The Lending Company loves the coaching, helping people get ready to borrow.
· Shelly White-Collier of Northern Arizona Mortgage loves working with young couples.
· Shelley Williams of People’s Mortgage loves 1st time home buyers.
Q: What’s the secret? How do you guys get the loans approved after the internet lenders give up?
A: Online doesn’t have the human element. The guy dealing with borrowers that he’s never met just can’t care enough to be like a little terrier (That was Shelly White-Collier who said “We’re like little terriers.”) worrying at the details until it works. Our job is to make the buyers real to the underwriter. These borrowers have to be seen by the underwriter as Tom and Alice and their 2 kids and their dog, not file number such-and-such.
Q: How do you keep a borrower hanging in there while they jump through all of the hoops?
A: Keep reminding them that it will be worth it. Mark Miskiel said it well: “While loans are more difficult, we don’t want to scare off buyers. Prepare them for the increased paperwork and scrutiny but remind them that a buyer today is saving huge amounts of money both in the purchase price and historically low interest rates. Those savings are worth the extra work needed to purchase a home. If you broke it down to the amount of extra hours a buyer has to put into the transaction versus the savings that they’ll put in their pocket, it’s thousands of dollars an hour for the extra work. Not bad!”
Q: Is the market stabilizing?
A: Pretty much. There are still pockets where prices are going down, which forces the appraisers to label Arizona a “declining market.” This freaks out the Far Away lenders and underwriters.
Q: Are loan modifications working?
A: No. 60% of loan mods default, often because the so-called modification has a higher payment than the one that the borrowers couldn’t make in the first place. The result is that more home in the US are now owned by banks than by the public. Yikes!
And on that happy note, I wish y’all a good weekend. Holler if you have any questions!
Monday, August 30, 2010
Tuesday, August 24, 2010
Every year, English teachers from across the country can submit their collections of actual analogies and metaphors found in high school essays. These excerpts are published each year to the amusement of teachers across the country.
Here are last year's winners:
1. Her face was a perfect oval, like a circle that had its two sides gently compressed by a Thigh Master.
2. His thoughts tumbled in his head, making and breaking alliances like underpants in a dryer without Cling Free.
3. He spoke with the wisdom that can only come from experience, like a guy who went blind because he looked at a solar eclipse without one of those boxes with a pinhole in it and now goes around the country speaking at high schools about the dangers of looking at a solar eclipse without one of those boxes with a pinhole in it.
4. She grew on him like she was a colony of E. Coli and he was room-temperature Canadian beef.
5. She had a deep, throaty, genuine laugh, like that sound a dog makes just before it throws up.
6. Her vocabulary was as bad as, like, whatever.
7. He was as tall as a six-foot, three-inch tree.
8. The revelation that his marriage of 30 years had disintegrated because of his wife's infidelity came as a rude shock, like a surcharge at a formerly surcharge-free ATM machine.
9. The little boat gently drifted across the pond exactly the way a bowling ball wouldn't.
10. McBride fell 12 stories, hitting the pavement like a Hefty bag filled with vegetable soup.
11. From the attic came an unearthly howl. The whole scene had an eerie, surreal quality, like when you're on vacation in another city and Jeopardy comes on at 7:00 p.m. instead of 7:30.
12. Her hair glistened in the rain like a nose hair after a sneeze.
13. The hailstones leaped from the pavement, just like maggots when you fry them in hot grease.
14. Long separated by cruel fate, the star-crossed lovers raced across the grassy field toward each other like two freight trains, one having left Cleveland at 6:36 p.m. traveling at 55 mph, the other from Topeka at 4:19 p.m. at a speed of 35 mph.
15. They lived in a typical suburban neighborhood with picket fences that resembled Nancy Kerrigan's teeth.
16. John and Mary had never met. They were like two hummingbirds who had also never met.
17. He fell for her like his heart was a mob informant and she was the East River.
18. Even in his last years, Granddad had a mind like a steel trap, only one that had been left out so long, it had rusted shut.
19. Shots rang out, as shots are wont to do.
20. The plan was simple, like my brother-in-law Phil. But unlike Phil, this plan just might work.
21. The young fighter had a hungry look, the kind you get from not eating for a while.
22. He was as lame as a duck. Not the metaphorical lame duck, either, but a real duck that was actually lame, maybe from stepping on a landmine or something.
23. The ballerina rose gracefully en pointe and extended one slender leg behind her, like a dog at a fire hydrant.
24. It was an American tradition, like fathers chasing kids around with power tools.
25. He was deeply in love. When she spoke, he thought he heard beeps, as if she were a garbage truck backing up.
Here are last year's winners:
1. Her face was a perfect oval, like a circle that had its two sides gently compressed by a Thigh Master.
2. His thoughts tumbled in his head, making and breaking alliances like underpants in a dryer without Cling Free.
3. He spoke with the wisdom that can only come from experience, like a guy who went blind because he looked at a solar eclipse without one of those boxes with a pinhole in it and now goes around the country speaking at high schools about the dangers of looking at a solar eclipse without one of those boxes with a pinhole in it.
4. She grew on him like she was a colony of E. Coli and he was room-temperature Canadian beef.
5. She had a deep, throaty, genuine laugh, like that sound a dog makes just before it throws up.
6. Her vocabulary was as bad as, like, whatever.
7. He was as tall as a six-foot, three-inch tree.
8. The revelation that his marriage of 30 years had disintegrated because of his wife's infidelity came as a rude shock, like a surcharge at a formerly surcharge-free ATM machine.
9. The little boat gently drifted across the pond exactly the way a bowling ball wouldn't.
10. McBride fell 12 stories, hitting the pavement like a Hefty bag filled with vegetable soup.
11. From the attic came an unearthly howl. The whole scene had an eerie, surreal quality, like when you're on vacation in another city and Jeopardy comes on at 7:00 p.m. instead of 7:30.
12. Her hair glistened in the rain like a nose hair after a sneeze.
13. The hailstones leaped from the pavement, just like maggots when you fry them in hot grease.
14. Long separated by cruel fate, the star-crossed lovers raced across the grassy field toward each other like two freight trains, one having left Cleveland at 6:36 p.m. traveling at 55 mph, the other from Topeka at 4:19 p.m. at a speed of 35 mph.
15. They lived in a typical suburban neighborhood with picket fences that resembled Nancy Kerrigan's teeth.
16. John and Mary had never met. They were like two hummingbirds who had also never met.
17. He fell for her like his heart was a mob informant and she was the East River.
18. Even in his last years, Granddad had a mind like a steel trap, only one that had been left out so long, it had rusted shut.
19. Shots rang out, as shots are wont to do.
20. The plan was simple, like my brother-in-law Phil. But unlike Phil, this plan just might work.
21. The young fighter had a hungry look, the kind you get from not eating for a while.
22. He was as lame as a duck. Not the metaphorical lame duck, either, but a real duck that was actually lame, maybe from stepping on a landmine or something.
23. The ballerina rose gracefully en pointe and extended one slender leg behind her, like a dog at a fire hydrant.
24. It was an American tradition, like fathers chasing kids around with power tools.
25. He was deeply in love. When she spoke, he thought he heard beeps, as if she were a garbage truck backing up.
Monday, August 23, 2010
I have a revision to my last Bits N’ Pieces. I incorrectly identified the writer of the letter to the editor that I was responding to as Ms. Lavone Turnipseed. I have been informed that Lavone Turnipseed would be MR. Turnipseed to me. I made an assumption, and you know what they say about assumptions.
I am not sending this correction to the paper – Mr. Turnipseed did not mention it in his rebuttal letter in the Verde Independent, so I’m leaving it alone there.
To read what I'm referring to, go to http://www.verdevalleynews.com/main.asp?Search=1&ArticleID=37732&SectionID=36&SubSectionID=1192&S=1
and my reply at
http://www.verdevalleynews.com/main.asp?Search=1&ArticleID=37732&SectionID=36&SubSectionID=1192&S=1
*****************************************************************
Last week we invited a panel of mortgage brokers and bankers to speak at both the Cottonwood and Sedona MLS meetings.
In alphabetical order, our panel consisted of:
Denise Dedrick of M & I Bank, 928.203.4484
Jim Hostler of Lender’s Direct, 928.225.7418
Mark Miskiel of The Lending Company, 928.634.7987
Shelly White of Northern Arizona Mortgage, 928.634.4251
Shelley Williams of People’s Mortgage, 928.821.0782 (Cell)
I chose the members of the panel with my customary scientific precision. At the Tuesday morning MLS meeting in Cottonwood one day, somebody said how great the appraiser panel had been a few weeks before, and why didn’t we get together a lender panel? I yelled across the room at the 5 lenders present at the meeting, “Hey! Y’all want to do a lender’s panel?” They said “Yes! Yes, they did.”
Following is my re-cap. I have taken some poetic license and amalgamated similar points into one (I assume) coherent sentence. This turned into a very long report so you’re getting a two-parter, half this week and half next week.
***********************************************************
The points that were made during the panels seemed to consist of 3 separate threads:
1: What do we as REALTORS® need to understand about the loan process?
And,
2: What can we as REALTORS® do to help the process of getting our Buyers a loan or selling our listing to a Buyer who needs a loan?
And,
3: What do our Buyers need to understand before getting involved with today’s loan process? What are their expectations versus the current reality?
Our panel felt that REALTORS® need to understand and accept that the lending process has changed in a big way.
A good straightforward vanilla loan will take 45 days to complete, and that’s after the preliminary work to get a bona fide LSR has been done. An intricate loan can take much longer.
It can take weeks to get our hands on an Loan Status Report because there is now so much more that a lender has to know about the borrower before they can issue one. Because the brokers and bankers are now licensed, the days of them just willy-nilly shooting out an LSR (just because we want one) are over.
Get your Buyer pre-qualified up front. When the lender tells you the maximum that the Buyer can pay for a house don’t try to push it higher. This max can change overnight depending on interest rate fluctuations and changing guidelines. The program that your Buyer just got pre-qual’d for could be gone tomorrow.
Communicate, especially in the beginning! Communicate with the buyer, communicate with the lender. The REALTOR® is the go-between and sometimes the translator from mortgage-speak to English. We are all a team, working towards the same goal. As the facilitator, remember that reminding is fine while nagging just takes up valuable time.
Make sure that the lender knows up front about property condition. A house has to be habitable to get a loan because they all made crosses with their fingers at the mention of 203K rehab loans. Private roads, unpermitted additions, property flips, humongous seller proceeds when the seller hasn’t owned the house for very long – these can all take time to explain and resolve.
If your Buyer lives in Far Away, allow an extra 15 days for sending docs back and forth.
Out or state buyers are loaded with fraud red flags; they’re automatically suspected of perpetrating “buy and bail” schemes (Buy a new house at today’s prices and interest rates and walk away from the old, possibly upside-down house.) and are scrutinized even more closely than locals.
Flips: we absolutely have to disclose property flips. If the seller purchased the property less than 18 months ago the lender needs to know that – it will require extra documentation and possibly 2 appraisals.
Short sales: can anything be done by the Buyer’s lender to facilitate a short sale? No, not really. A Borrower can get a loan in certain circumstances in as little as a year after short selling a house. This requires tons of documentation regarding the hardship that caused the short sale, and why that hardship is no longer valid.
Don’t encourage a Buyer to try for a stated income or Non-qualifying loan – they no longer exist. If they are self-employed check to see if they’ve filed their taxes on time and if they have voluminous documentation to back up those taxes. Getting a loan for a self-employed person is going to be like being audited. (When we asked the panel about stated income loans, they all had a hearty laugh.) I was later contacted by one of our Affiliate lenders who told ne that he does do rehab loans. Getting your ducks in a row is critical if you're going to advise your client correctly.
Use local lenders. The Buyer’s personal banker in Kansas is not going to know the answer to the questions that the underwriter who lives in the basement in New Jersey is going to ask.
Speaking of underwriters, we all need to understand their mentality. Before these panels I always considered underwriters to be a bunch of dribbling idiots. I now understand that an underwriter (or asset manager or bank loan modification guy) might have been flipping burgers at McDonald’s just last week.
Did you know that if an underwriter approves a loan that subsequently defaults they could be fired? Yep – just like that. Yes, some of them might be idiots, but that’s not the main thing that we’re dealing with – they’re scared. Don’t get me wrong here – all underwriters are not morons. Most underwriters are smart professionals, trying to do a good job. As always, one unprofessional apple gives the whole barrel a bad name. I’ve mixed my metaphors, but you know what I mean.
Underwriters have pet peeves. One guy might insist on P & Ls every time no matter what, another might get wadded up about whether the borrower’s taxes were filed on time without extensions, another might get upset that the borrower hasn’t been on the job for 20 years, another might not like that somebody has gotten married and changed their name more than once.
Every loan is subject to a thing called buy-back. Buy-back is a Big Deal. An underwriter approves a loan, and the originator sells it to an investor. The loan defaults. The investor then goes through the file with a fine toothed comb, desperately looking for a mistake or fraud or any sort of loophole. If he finds one (and before, he always found something) he can make the originator buy the loan back. This has happened a lot in the past few years – buy-backs have caused quite a few companies to go under, and the possibility of being hit with a buy-back is one of the thing that makes the underwriters so hard to get along with.
Remember: default = fired. Buy-back = fired. Underwriter = occasionally unprepared and afraid.
This opens the discussion of the “layers.” Even though one lender has certain guidelines, they always have to keep in mind that they’re going to have to sell the loan to an investor. So even though one company’s guidelines are not as strict as another’s, they’re all protecting their exit strategy on that loan and the strictest guidelines will prevail.
Tune in next week, same time, same channel. Thanks!
Monday, August 9, 2010
Sunday, August 8, 2010
Letter to the Verde Independent, August 8, 2010.
Dear Editor: I am compelled to respond to Ms. Lavone Turnipseed's letter to the Editor of Sunday, August 8, entitled "This bill is set to hurt the retiring generation." She repeats the tired old rumor that "under the new health care bill all real estate transactions will be subject to a 3.8% sales tax." Happily, this is simply not true.
Can I give you some hard facts? The facts are that, yes, certain sales by high-income households will be affected by the new Medicare tax, possibly 1-point-five percent of US households. (Not 1-point-five percent of the US population - I said households.) This tax applies only to people with an Adjusted Gross Income (AGI) of $200,000 for a single person or $250,000 for a couple. The tax only kicks in after you take your capital gains exemption.
How about an example? A couple with an AGI above the $250,000 limit sells their primary residence for $2,000,000. They make a $750,000 profit. Capital gains laws protect $500,000 of that $750,000, assuming that they have lived there for 2 out of the past 5 years. The 3.8% tax applies only to the $250,000 left over. Their tax liability under this new Medicare tax is $9500. With all of the problems facing America right now, I'm not going to have a lot of heartburn over the fact that somebody in those income brackets profited $750,000 and had to give Medicare $9500 of it.
Ms. Turnipseed, please don't be embarrassed that you were fooled. Somebody made this up and then published it, and then somebody else repeated it and it has spread like wildfire throughout certain circles.
To read the Health Care bill, go to http://www.huffingtonpost.com/2009/07/15/house-health-care-bill-fu_n_234372.html
To verify my research, go to http://www.factcheck.org/2010/04/a-38-percent-sales-tax-on-your-home/ or
http://www.snopes.com/politics/taxes/realestate.asp or
http://www.realtor.org/small_business_health_coverage.nsf/docfiles/government_affairs_myth_busters.pdf/$FILE/government_affairs_myth_busters.pdf
Thank you,
Carol Anne Warren
2010 President, Sedona Verde Valley Association of REALTORS®
928-300-9031
carolanne@adobegr.com
For fairness' sake, here's Ms. Turnipseed's letter;
8/7/2010 1:29:00 PMLetter: This bill is set to hurt the retiring generation
Editor:Under the new health care bill - did you know that all real estate transactions will be subject to a 3.8 percent sales tax? The bulk of these new taxes don’t kick in until 2013 (presumably after Obama’s re-election). You can thank Nancy, Harry and Barack and your local Democrat Congressman for this one. If you sell your $400,000 home, there will be a $15,200 tax. This bill is set to hurt the retiring generation who often downsize their homes. Is this Hope & Change great or what? Does this stuff make your November and 2012 vote more important?Oh, you weren’t aware this was in the Obamacare bill? Guess what, you aren’t alone. There are more than a few members of Congress that aren’t aware of it either (result of Clandestine midnight voting for huge bills they’ve never read). AND, there are a few other surprises lurking.
Lavone Turnipseed Camp Verde
Dear Editor: I am compelled to respond to Ms. Lavone Turnipseed's letter to the Editor of Sunday, August 8, entitled "This bill is set to hurt the retiring generation." She repeats the tired old rumor that "under the new health care bill all real estate transactions will be subject to a 3.8% sales tax." Happily, this is simply not true.
Can I give you some hard facts? The facts are that, yes, certain sales by high-income households will be affected by the new Medicare tax, possibly 1-point-five percent of US households. (Not 1-point-five percent of the US population - I said households.) This tax applies only to people with an Adjusted Gross Income (AGI) of $200,000 for a single person or $250,000 for a couple. The tax only kicks in after you take your capital gains exemption.
How about an example? A couple with an AGI above the $250,000 limit sells their primary residence for $2,000,000. They make a $750,000 profit. Capital gains laws protect $500,000 of that $750,000, assuming that they have lived there for 2 out of the past 5 years. The 3.8% tax applies only to the $250,000 left over. Their tax liability under this new Medicare tax is $9500. With all of the problems facing America right now, I'm not going to have a lot of heartburn over the fact that somebody in those income brackets profited $750,000 and had to give Medicare $9500 of it.
Ms. Turnipseed, please don't be embarrassed that you were fooled. Somebody made this up and then published it, and then somebody else repeated it and it has spread like wildfire throughout certain circles.
To read the Health Care bill, go to http://www.huffingtonpost.com/2009/07/15/house-health-care-bill-fu_n_234372.html
To verify my research, go to http://www.factcheck.org/2010/04/a-38-percent-sales-tax-on-your-home/ or
http://www.snopes.com/politics/taxes/realestate.asp or
http://www.realtor.org/small_business_health_coverage.nsf/docfiles/government_affairs_myth_busters.pdf/$FILE/government_affairs_myth_busters.pdf
Thank you,
Carol Anne Warren
2010 President, Sedona Verde Valley Association of REALTORS®
928-300-9031
carolanne@adobegr.com
For fairness' sake, here's Ms. Turnipseed's letter;
8/7/2010 1:29:00 PMLetter: This bill is set to hurt the retiring generation
Editor:Under the new health care bill - did you know that all real estate transactions will be subject to a 3.8 percent sales tax? The bulk of these new taxes don’t kick in until 2013 (presumably after Obama’s re-election). You can thank Nancy, Harry and Barack and your local Democrat Congressman for this one. If you sell your $400,000 home, there will be a $15,200 tax. This bill is set to hurt the retiring generation who often downsize their homes. Is this Hope & Change great or what? Does this stuff make your November and 2012 vote more important?Oh, you weren’t aware this was in the Obamacare bill? Guess what, you aren’t alone. There are more than a few members of Congress that aren’t aware of it either (result of Clandestine midnight voting for huge bills they’ve never read). AND, there are a few other surprises lurking.
Lavone Turnipseed Camp Verde
Friday, August 6, 2010
Mortgage Rate Falls Under 4.5 %
Freddie Mac reports that long-term mortgage rates moved south again this week. Interest on 30-year fixed loans hit a new low of 4.49 percent, compared to 4.54 percent last week and 5.22 percent a year ago; and the 15-year mortgage landed at 3.95 percent, down from 4 percent last week and 4.63 percent a year ago.
Five-year adjustable-rate mortgages reached a new low of 3.63 percent, down from 3.76 percent last week and 4.73 percent a year ago; while one-year ARMs fell to 3.55 percent from 3.64 percent last week and 4.78 percent a year ago.
Source: The Wall Street Journal, Amy Hoak and Nick Timiraos (08/06/10)
Freddie Mac reports that long-term mortgage rates moved south again this week. Interest on 30-year fixed loans hit a new low of 4.49 percent, compared to 4.54 percent last week and 5.22 percent a year ago; and the 15-year mortgage landed at 3.95 percent, down from 4 percent last week and 4.63 percent a year ago.
Five-year adjustable-rate mortgages reached a new low of 3.63 percent, down from 3.76 percent last week and 4.73 percent a year ago; while one-year ARMs fell to 3.55 percent from 3.64 percent last week and 4.78 percent a year ago.
Source: The Wall Street Journal, Amy Hoak and Nick Timiraos (08/06/10)
Thursday, August 5, 2010
A financial crisis can strike anyone. It seems we have all had clients who were once thriving but now are facing difficult decisions regarding their finances. The reasons vary, but the outcomes are similar. The people come from all walks of life—lawyers, dentists, truck drivers, teachers, the list is endless. Here is some good news: Nothing will keep us down forever. Everything has a limitation on how long it can affect our credit. Most derogatory issues have a seven-year limit, Chapter 7 bankruptcy stays on credit reports for ten years, but nothing is forever. The Fair Credit Reporting Act provides the details of how long derogatory items can remain on the credit report.
The reality is that for most consumers facing turmoil today, they will be eligible to purchase a home again in three years. Federal Housing Administration (FHA) guidelines allow for someone to purchase a home three years after a foreclosure, as long as there has been nothing delinquent after the original event. For example, let’s say that two years after a foreclosure, I have a dispute with a satellite television company, and they report a collection on my credit report. Anything negative (such as this dispute) after the original event (the foreclosure) could potentially derail my chances for being approved at the three-year mark.
Someone who had an FHA, Veterans Affairs (VA) or United States Department of Agriculture (USDA) Rural Housing loan previously may have a federal claim against them in the Credit Alert Verification Reporting System (CAIVRS). They would have to wait three years from the date the federal claim was paid, which generally adds six to nine months to the timeline. Any mortgage lender can check the Housing & Urban Development (HUD) system to see if there is a claim against the borrower.
Keep in mind that the three C’s to an approval apply: credit, capacity and collateral. The borrower still has to have two years of continued verifiable employment, they must make enough money to qualify for the purchase, and they must have the minimum required down payment (3.5% for FHA). There will be a lot of scrutiny for someone who has had a past foreclosure (or short sale, bankruptcy, deed-in-lieu of foreclosure, etc.). The back end debt-to-income ratio for an average consumer is generally 41% or more; for someone coming out of a financial crisis, the debt-to-income ratio may be a maximum of 36%.
RESOURCESImpact of Adverse Credit Events on the Ability of Consumers to Purchase Another HomeNAR has posted a chart showing FHA, Fannie Mae and Freddie Mac credit policies for short sales, deeds-in-lieu, foreclosures and bankruptcies.
The Facts about Your Credit ScoreThis article from the June 2010 issue of Arizona REALTOR® Magazine explores what you should know about that pesky three-digit number known as your FICO score.
As far as credit goes, many lenders require a minimum credit score of 620; some require 640, so this can be a hurdle. It is critical that borrowers have “enough” credit, which is generally three accounts open for the past 12 months plus a rental history. Traditional credit, the type included on a credit report (credit cards, auto, student loan, etc.), is preferable, but that’s not always the case. Alternative credit is non-traditional credit, such as utilities, cable, cell phone and other accounts that generally do not appear on the credit report. Paying the electric bill on time every month takes on greater importance simply because the borrower may have to go to the utility company for a letter of credit. The alternative credit must be paid on time. I have had clients compile the alternative credit documents, but if the payments were not made on time, it is unusable.
Rent payments should be made by personal check when possible. Copies of the cancelled rent check should be obtained and saved to prove the rent payments were made on time. Paying cash can come back to bite consumers if the landlord cannot or will not verify rent or if the landlord is at arms length. If the landlord is at arms length, or disappears, it will be imperative to prove the rent was paid on time for the past 12 months.
Consumers should save all documentation they receive. This goes without saying, but I have had clients who have shredded their entire bankruptcy package. Fortunately bankruptcy paperwork can be obtained at the federal courthouse if it has been misplaced. The reason saving all documents is so important is because the bad debt market buys and sells old debt, which could result in issues needing to be resolved. It is difficult to resolve these issues without documentation; the old adage of “he who holds the sword rules the land” certainly applies to the world of debt. The most common issue is a credit card that reaches charge-off status (180 days delinquent). It is placed into collection, which likely means it will be sold in a portfolio on the bad debt market. The debt is purchased for 5% - 20% of the original amount; it then shows up as a collection on the credit report. This can be problematic if the date of delinquency is changed, which is not uncommon, so saving all documentation for future reference is a smart move.
How long should this documentation be saved? Most people answer seven years. Although that may be generally true for tax audit purposes, it is not the case for bad debt since it carries a declining value, yet always has a value to third parties. For example, a collection stemming from a vehicle repossession ten years ago may still be worth 1% - 5% of the original collection amount. If someone can purchase an old debt of $10,000 for $100, there is motive to abuse the debt collection system and potentially break the law in pursuit of the old debt. Consumers should be aware of the importance of holding onto documentation since they very well may find themselves in a position of needing to prove something, especially dates. The cleanest method of documentation is the credit report itself; saving copies annually of a credit report is an excellent practice to keep a record of all important account dates. It is one of the best protections against abuse and can be handy when requalifying for a mortgage. The only government-mandated source for a free credit report is www.annualcreditreport.com.
The borrower will have to explain in a letter three important points to the underwriter:
Why did the foreclosure, short sale or bankruptcy occur?
Why was the event out of their control?
Why is it unlikely the circumstances will repeat?
Approval is at the discretion of the underwriter based on perceived risk, so this explanation is important. The bottom line is that when consumers who have a past financial issue are ready to consider buying a home again, they should consult a lender to see how their specific situation applies. The lender should give them an assessment of where they are now and what needs to happen in order to qualify for a mortgage.
The reality is that for most consumers facing turmoil today, they will be eligible to purchase a home again in three years. Federal Housing Administration (FHA) guidelines allow for someone to purchase a home three years after a foreclosure, as long as there has been nothing delinquent after the original event. For example, let’s say that two years after a foreclosure, I have a dispute with a satellite television company, and they report a collection on my credit report. Anything negative (such as this dispute) after the original event (the foreclosure) could potentially derail my chances for being approved at the three-year mark.
Someone who had an FHA, Veterans Affairs (VA) or United States Department of Agriculture (USDA) Rural Housing loan previously may have a federal claim against them in the Credit Alert Verification Reporting System (CAIVRS). They would have to wait three years from the date the federal claim was paid, which generally adds six to nine months to the timeline. Any mortgage lender can check the Housing & Urban Development (HUD) system to see if there is a claim against the borrower.
Keep in mind that the three C’s to an approval apply: credit, capacity and collateral. The borrower still has to have two years of continued verifiable employment, they must make enough money to qualify for the purchase, and they must have the minimum required down payment (3.5% for FHA). There will be a lot of scrutiny for someone who has had a past foreclosure (or short sale, bankruptcy, deed-in-lieu of foreclosure, etc.). The back end debt-to-income ratio for an average consumer is generally 41% or more; for someone coming out of a financial crisis, the debt-to-income ratio may be a maximum of 36%.
RESOURCESImpact of Adverse Credit Events on the Ability of Consumers to Purchase Another HomeNAR has posted a chart showing FHA, Fannie Mae and Freddie Mac credit policies for short sales, deeds-in-lieu, foreclosures and bankruptcies.
The Facts about Your Credit ScoreThis article from the June 2010 issue of Arizona REALTOR® Magazine explores what you should know about that pesky three-digit number known as your FICO score.
As far as credit goes, many lenders require a minimum credit score of 620; some require 640, so this can be a hurdle. It is critical that borrowers have “enough” credit, which is generally three accounts open for the past 12 months plus a rental history. Traditional credit, the type included on a credit report (credit cards, auto, student loan, etc.), is preferable, but that’s not always the case. Alternative credit is non-traditional credit, such as utilities, cable, cell phone and other accounts that generally do not appear on the credit report. Paying the electric bill on time every month takes on greater importance simply because the borrower may have to go to the utility company for a letter of credit. The alternative credit must be paid on time. I have had clients compile the alternative credit documents, but if the payments were not made on time, it is unusable.
Rent payments should be made by personal check when possible. Copies of the cancelled rent check should be obtained and saved to prove the rent payments were made on time. Paying cash can come back to bite consumers if the landlord cannot or will not verify rent or if the landlord is at arms length. If the landlord is at arms length, or disappears, it will be imperative to prove the rent was paid on time for the past 12 months.
Consumers should save all documentation they receive. This goes without saying, but I have had clients who have shredded their entire bankruptcy package. Fortunately bankruptcy paperwork can be obtained at the federal courthouse if it has been misplaced. The reason saving all documents is so important is because the bad debt market buys and sells old debt, which could result in issues needing to be resolved. It is difficult to resolve these issues without documentation; the old adage of “he who holds the sword rules the land” certainly applies to the world of debt. The most common issue is a credit card that reaches charge-off status (180 days delinquent). It is placed into collection, which likely means it will be sold in a portfolio on the bad debt market. The debt is purchased for 5% - 20% of the original amount; it then shows up as a collection on the credit report. This can be problematic if the date of delinquency is changed, which is not uncommon, so saving all documentation for future reference is a smart move.
How long should this documentation be saved? Most people answer seven years. Although that may be generally true for tax audit purposes, it is not the case for bad debt since it carries a declining value, yet always has a value to third parties. For example, a collection stemming from a vehicle repossession ten years ago may still be worth 1% - 5% of the original collection amount. If someone can purchase an old debt of $10,000 for $100, there is motive to abuse the debt collection system and potentially break the law in pursuit of the old debt. Consumers should be aware of the importance of holding onto documentation since they very well may find themselves in a position of needing to prove something, especially dates. The cleanest method of documentation is the credit report itself; saving copies annually of a credit report is an excellent practice to keep a record of all important account dates. It is one of the best protections against abuse and can be handy when requalifying for a mortgage. The only government-mandated source for a free credit report is www.annualcreditreport.com.
The borrower will have to explain in a letter three important points to the underwriter:
Why did the foreclosure, short sale or bankruptcy occur?
Why was the event out of their control?
Why is it unlikely the circumstances will repeat?
Approval is at the discretion of the underwriter based on perceived risk, so this explanation is important. The bottom line is that when consumers who have a past financial issue are ready to consider buying a home again, they should consult a lender to see how their specific situation applies. The lender should give them an assessment of where they are now and what needs to happen in order to qualify for a mortgage.
Wednesday, August 4, 2010
Short sales of homes are becoming more common in Arizona as a means of avoiding foreclosure. But these transactions, where a home is sold for less that its mortgage balance, can be exploited by investors or agents looking for a quick profit—hurting other home values in the process.
Homeowners, desperate to avoid foreclosure, are prime targets for short sale fraud because the those sellers and their bank are more likely to accept a low-ball offer. FBI Special Agent Eric Spingler says, "Someone will come to them and say, 'I can help you negotiate a short sale with your bank and get you out of this.'" Spingler adds, "But what they don't tell the bank is that they have an investor on the back side that is ready to purchase the house for a much higher price."
Arizona Real Estate Commissioner Judy Lowe says, "There is a dramatic trend toward this [kind of mortgage fraud]" in the Valley. Lowe points out that the low-ball price in the first sale of the home makes a larger deficiency in paying the mortgage balance—and therefore may mean the seller owes a larger tax burden for the deficiency. The low price also hurts home values for everyone in the neighborhood.
The Arizona Department of Real Estate and the Arizona Association of Realtors have put together a short sale seller advisory with links to web sites that have information on the process of short selling and how to avoid potential pitfalls.Read more: http://www.azcentral.com/12news/news/articles/2010/07/27/20100727shortsalefraud.html#ixzz0veuMOOit
Homeowners, desperate to avoid foreclosure, are prime targets for short sale fraud because the those sellers and their bank are more likely to accept a low-ball offer. FBI Special Agent Eric Spingler says, "Someone will come to them and say, 'I can help you negotiate a short sale with your bank and get you out of this.'" Spingler adds, "But what they don't tell the bank is that they have an investor on the back side that is ready to purchase the house for a much higher price."
Arizona Real Estate Commissioner Judy Lowe says, "There is a dramatic trend toward this [kind of mortgage fraud]" in the Valley. Lowe points out that the low-ball price in the first sale of the home makes a larger deficiency in paying the mortgage balance—and therefore may mean the seller owes a larger tax burden for the deficiency. The low price also hurts home values for everyone in the neighborhood.
The Arizona Department of Real Estate and the Arizona Association of Realtors have put together a short sale seller advisory with links to web sites that have information on the process of short selling and how to avoid potential pitfalls.Read more: http://www.azcentral.com/12news/news/articles/2010/07/27/20100727shortsalefraud.html#ixzz0veuMOOit
Tuesday, August 3, 2010
Dalai Lama: Compassion and love constitute non-violence in action. They are the source of all spiritual qualities: forgiveness, tolerance, all the virtues. They give meaning to our activities and makes them constructive. There is nothing amazing about being rich or highly educated; only when the individual has a warm heart do these attributes become worthwhile.
"When another person makes you suffer, it is because he suffers deeply within himself, and his suffering is spilling over. He does not need punishment; he needs help. That's the message he is sending."
Thich Nhat Hanh
Thich Nhat Hanh
Sunday, August 1, 2010
RECIPE FOR JOY
Seek joy first and foremost.
Seek reasons to laugh.
Seek reasons to offer words of praise to self and others.
Seek beauty in nature, beasts & other humans.
Seek reasons to love in every segment of every day.
Look for something that brings forth within you a feeling of love.
Seek that which uplifts you.
Seek opportunity to offer that which uplifts another.
Seek a feeling of well-being.
Know that your value can only be measured in terms of joy.
Acknowledge your absolute freedom to do any of these things, or not do any of these things.
It is without exception your choice in every moment of every day.
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