President Obama Lays Out Plans for Restoring Housing Markets
President Obama just completed a speech given in Mesa, AZ in which he highlighted the specifics of his plans for helping the U.S. housing markets recover.
He laid out a 5-point plan that included the following aspects:
1)Help 4-5 million American homeowners who are upside down on their mortgage (their loan balance is higher than their market value of their home) refinance with Fannie Mae and Freddie Mac. Cost to taxpayers will be zero.
2)Sub-prime lenders to modify terms of loans. Only 12% of mortgages are sub-prime loans, but over 50% of the foreclosures are from sub-prime products. The government is setting forth clear guidelines in which these modifications must be handled. The lenders must reduce the mortgage payments down to no more than 31% of the borrower's income. An estimated 3-4 million home owners may be affected.
3) Ensure liquidity and take mortgage rates low my continuing to buy mortgage bonds secured by Fannie Mae and Freddie Mac. Also, help shore up the liquidity of state housing finance authorities.
4) Help families avoid foreclosure by reducing balances to market values on primary residence homes.
5) $2 billion in grants for local neighborhood efforts in fighting foreclosures.
I was impressed by the President's effort to clearly and specifically explain how he plans to tackle this huge problem. I also liked the fact that he ended by saying that lenders, bankers, and consumers must act more responsibly in the future in order for us to avoid encountering these types of problems again.
Now, what the President said sounds good and hopefully will be successful. The question remains, can they pull it off, execute the plan, while still ensuring our future and the future of following generations. Only time will tell.
Wednesday, February 18, 2009
Economic Stimulus Plan Benefits the Housing and Mortgage Industries
Economic Stimulus Plan Benefits the Housing and Mortgage Industries
Revised February 17, 2009
Just signed and sealed...a $787 Billion Stimulus Plan made up of tax cuts and spending programs aims at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II.
Home owners and potential homebuyers stand to gain from key provisions in this stimulus plan. Here is what we know as of today...
Tax Credit for Homebuyers
First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction - a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs - This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings - This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing-
This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance-This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
More Help for Homeowners in the Future
Another thing to keep an eye on in the coming weeks is President Obama's plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That's because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
Revised February 17, 2009
Just signed and sealed...a $787 Billion Stimulus Plan made up of tax cuts and spending programs aims at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II.
Home owners and potential homebuyers stand to gain from key provisions in this stimulus plan. Here is what we know as of today...
Tax Credit for Homebuyers
First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction - a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs - This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings - This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing-
This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance-This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
More Help for Homeowners in the Future
Another thing to keep an eye on in the coming weeks is President Obama's plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That's because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
First Time Home Buyer Tax Credit FAQ
First Time Home Buyer Tax Credit FAQ
Click on the following link to learn more about the new First Time Home Buyer Tax Credit:
http://www.federalhousingtaxcredit.com/2009/faq.php#9
Click on the following link to learn more about the new First Time Home Buyer Tax Credit:
http://www.federalhousingtaxcredit.com/2009/faq.php#9
Thursday, February 5, 2009
Inside Story: False Illusions and What You Need to Know About Mortgage Rates
Inside Story: False Illusions and What You Need to Know About Mortgage Rates
(Distributed with the express permission of Sue Woodard and Barry Habib from Mortgage Market Guide)
The Fed's been at it again, offering words that sound encouraging at first blush, confirming that their buying program of Mortgage Backed Securities is in full swing and will continue as needed. Of course, the media will pick this up and offer their own interpretation, saying "Good news, the Fed's words on continuing their purchasing program mean that rates will continue to drop lower, and remain low into the summer..." But is this really what that means? Not so.
Here's the truth.
Yes, the Fed has been buying Mortgage Bonds, but if you look at what they are purchasing, they are buying a lot of FNMA 30-yr 5.5% and 5.0% Bonds...which won't have much of an impact on present interest rates. Why? First, see the Fed's purchases for yourself by hitting this link: Direct Link to View Fed Mortgage Bond Buying - http://www.newyorkfed.org/markets/mbs/index.html.
So why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced at today's great interest rates.
Stay with me here...
With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.
Here's the most important part.
Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where we stand presently. Now clearly, rates could turn higher, and this window of opportunity could pass them by entirely.
The clincher is this:
Even if those clients ultimately are correct in timing the market, and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting. While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.
I don't want anyone to miss an opportunity by either waiting, or not understanding what is at stake. Let's talk further on this - call or email me and let's discuss what this might mean for you.
(Distributed with the express permission of Sue Woodard and Barry Habib from Mortgage Market Guide)
The Fed's been at it again, offering words that sound encouraging at first blush, confirming that their buying program of Mortgage Backed Securities is in full swing and will continue as needed. Of course, the media will pick this up and offer their own interpretation, saying "Good news, the Fed's words on continuing their purchasing program mean that rates will continue to drop lower, and remain low into the summer..." But is this really what that means? Not so.
Here's the truth.
Yes, the Fed has been buying Mortgage Bonds, but if you look at what they are purchasing, they are buying a lot of FNMA 30-yr 5.5% and 5.0% Bonds...which won't have much of an impact on present interest rates. Why? First, see the Fed's purchases for yourself by hitting this link: Direct Link to View Fed Mortgage Bond Buying - http://www.newyorkfed.org/markets/mbs/index.html.
So why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced at today's great interest rates.
Stay with me here...
With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.
Here's the most important part.
Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where we stand presently. Now clearly, rates could turn higher, and this window of opportunity could pass them by entirely.
The clincher is this:
Even if those clients ultimately are correct in timing the market, and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting. While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.
I don't want anyone to miss an opportunity by either waiting, or not understanding what is at stake. Let's talk further on this - call or email me and let's discuss what this might mean for you.
Tuesday, February 3, 2009
If It Sounds Too Good To Be True...
Many of our clients are getting mail from different mortgage companies offering "special deals" for loans. What happens is as soon as a mortgage lender pulls your credit, the credit bureaus sell your inquiry to mailing lists that are distributed to direct solicitation companies who then call or write you about refinancing with them. Coincidence, huh?
100% of the time I have looked at the direct mail solicitation, it has been deceptive advertising a bait and switch scam, or simply not as advertised when the client called to take advantage.
For instance:
A client and friend of mine dropped off a piece of mail he received from a lender in Ohio, I advertised an "effective" rate of 3.35%. Now, since the rates at the time were in the low to mid 5's, I knew this had to be a scam. Sure enough, the "effective rate" was nothing more than a creative calculation. Basically, they were advertising a loan at an above market rate that was set up on a bi-weekly loan program. Well, the bi-weekly loan program is nothing more than a way to make one extra payment per year, thus reducing the interest expense over the life of the loan. They took the actual interest and acted like it was paid over 30 years to come up with the "effective" rate. Sounded good, but come on, nobody can offer rates in the low 3's for a 30 year fixed mortgage. If it sounds too good to be true, it probably is.
Another client that I was already doing a refinance for called about a month ago and read me a letter he received from his current loan servicer. Well, it advertised a "low cost" refinance. It advertised a flat fee of $1,500 or so. The rate was the same rate I was offering my friend, so I recommended he call to research it further and told him if his current lender could offer the same rate for less cost than me then go ahead and go with them. About an hour later he called back very upset saying that they told him the flat fee was simply just the origination fee and there were other fees involved that made the deal not so special. Once again, if it's too good to be true, it probably is.
About an hour ago I spoke with a title agent who recommended a relative to refinance with us. I offered a very fair rate and low costs to the client, but he chose to go with a loan broker out of Texas. I have nothing against Texas loan brokers, I am friends with several. However, this particular one totally messed up the application and my title agent friend is very upset with the broker. As I said, if it's too good to be true, it probably is.
Finally, a few minutes ago I received a call from a repeat client that received a piece of mail from a lender about refinancing. They advertised 4.75%. This is simply another case of a "quoted rate" and a "real rate." Lenders can LEGALLY quote ANY rate they wish on any given day. All they have to do is put a disclaimer at the end of the ad saying that "rates are subject to change." Guess what? do you really believe that lender who receive their business through direct solicitations are going to quote market rates or give advice that matters to customers? No way! There is no way today at 5:00 a lender can quote 4.75% without any discount points. Just isn't happening. Finally, if it's too good to be true, it probably is.
There are 26 variables that go into setting an actual mortgage rate. Some of these items include credit score, LTV, debt ratio, # of days locked, purchase, refinance, cash out refinance, loan type, discount fees, origination fees, property type, PMI, and others. Oh yea, rates have been changing on average twice per day over the past 6 months. If ANYONE quotes a rate, that is all it is. Don't expect to get that rate. Ask for a RATE LOCK GUARANTEE in WRITING along with a good faith estimate of closing costs to make sure the rate you are being quoted is not offset by higher than normal closing costs. (Why do you think they call it "discount fees?"
The key is only deal with a mortgage professional that you know well, or one whom comes HIGHLY recommended by someone you trust.
100% of the time I have looked at the direct mail solicitation, it has been deceptive advertising a bait and switch scam, or simply not as advertised when the client called to take advantage.
For instance:
A client and friend of mine dropped off a piece of mail he received from a lender in Ohio, I advertised an "effective" rate of 3.35%. Now, since the rates at the time were in the low to mid 5's, I knew this had to be a scam. Sure enough, the "effective rate" was nothing more than a creative calculation. Basically, they were advertising a loan at an above market rate that was set up on a bi-weekly loan program. Well, the bi-weekly loan program is nothing more than a way to make one extra payment per year, thus reducing the interest expense over the life of the loan. They took the actual interest and acted like it was paid over 30 years to come up with the "effective" rate. Sounded good, but come on, nobody can offer rates in the low 3's for a 30 year fixed mortgage. If it sounds too good to be true, it probably is.
Another client that I was already doing a refinance for called about a month ago and read me a letter he received from his current loan servicer. Well, it advertised a "low cost" refinance. It advertised a flat fee of $1,500 or so. The rate was the same rate I was offering my friend, so I recommended he call to research it further and told him if his current lender could offer the same rate for less cost than me then go ahead and go with them. About an hour later he called back very upset saying that they told him the flat fee was simply just the origination fee and there were other fees involved that made the deal not so special. Once again, if it's too good to be true, it probably is.
About an hour ago I spoke with a title agent who recommended a relative to refinance with us. I offered a very fair rate and low costs to the client, but he chose to go with a loan broker out of Texas. I have nothing against Texas loan brokers, I am friends with several. However, this particular one totally messed up the application and my title agent friend is very upset with the broker. As I said, if it's too good to be true, it probably is.
Finally, a few minutes ago I received a call from a repeat client that received a piece of mail from a lender about refinancing. They advertised 4.75%. This is simply another case of a "quoted rate" and a "real rate." Lenders can LEGALLY quote ANY rate they wish on any given day. All they have to do is put a disclaimer at the end of the ad saying that "rates are subject to change." Guess what? do you really believe that lender who receive their business through direct solicitations are going to quote market rates or give advice that matters to customers? No way! There is no way today at 5:00 a lender can quote 4.75% without any discount points. Just isn't happening. Finally, if it's too good to be true, it probably is.
There are 26 variables that go into setting an actual mortgage rate. Some of these items include credit score, LTV, debt ratio, # of days locked, purchase, refinance, cash out refinance, loan type, discount fees, origination fees, property type, PMI, and others. Oh yea, rates have been changing on average twice per day over the past 6 months. If ANYONE quotes a rate, that is all it is. Don't expect to get that rate. Ask for a RATE LOCK GUARANTEE in WRITING along with a good faith estimate of closing costs to make sure the rate you are being quoted is not offset by higher than normal closing costs. (Why do you think they call it "discount fees?"
The key is only deal with a mortgage professional that you know well, or one whom comes HIGHLY recommended by someone you trust.
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