The Mortgage Consumer Blog

HVCC will Ruin the Mortgage Business if it is not Immediately Eliminated

There is no time to lose. The beast is out of the cage and it is eating away at your money. If you are in the marketplace you are most definitely being plagued by the HVCC demon. No longer can a loan officer work with his long time colleague, who he knows will do a good job of putting an accurate value on your home. Instead he is at the mercy of some anonymous group called an AMC whose job it is to rip you off.

Even now, a normal $400 appraisal might cost $575. Furthermore, there is no credibility with these folks. They might go out to your home even if they know that comparable home sales are much lower than the value you are seeking. What do they care, they do not have to worry about their reputation. They are part of the anonymous machine. Programmed to take your money and run no matter what the result.

It does not matter if you are refinancing home loans in Oregon or seeking California home mortgage loans, this problem is nationwide. Appraisers don't like it. They are losing business and taking in less money per appraisal. Loan officers don't like it, they are at the mercy of the lender to pay up front for the appraisal, or never get their loan file looked at. What if an appraisal is ordered and the loan turns out to be impossible to complete? Why should anyone pay for an appraisal before they know if the loan even has a chance of finishing?

What if a loan can be completed one lender and not another, but you don't really know that until the loan goes through the underwriting process. If the lender who you ordered the appraisal from is incapable of qualifying you, and the lender who can qualify you refuses to accept the appraisal, that borrower might have to actually order another appraisal. How do you spell getting ripped off! Two appraisals because your first lender could not finish the loan is outrageous.

Bottom line, HVCC does not benefit the consumer in any way, shape or form. Examples of this disastrous new program are nationwide. Every loan officer already has a story to tell. If you are involved in this industry, sign a petition, call a legislator, let's create a nationwide groundswell of discontent. Such sentiment, if loud enough, will surely rid us of this idiotic new regulation.

Produce the Note

In this time of Mortgage turmoil, when foreclosures are at their highest point in decades, it's ironic that there is one weapon available to the homeowner trying to stave off losing their home. THE PROMISORY NOTE - the instrument that proves that the lender trying to foreclose on your property actually, is the lender that originally lent you the money in the first place.

It does not matter if you are refinancing home loans in Oregon or California home mortgage loans, this is a nationwide event.

In the hustle and bustle and free wheeling atmosphere of mortgage backed securities and credit default swaps, some lenders have actually lost the note on your property. This can be very helpful to you when negotiating with a threatening lender, who is trying to own your property, and kick you out of your home. In court, judges are siding with the homeowner when a NOTE cannot be found.

This story on CNN exlpains this sitaution more accurately than I can here.

http://www.youtube.com/watch?v=YUZdANb6UaY

Please listen and learn.

Interest Rates Rise on the back of a Great Economic Panic

On Friday of last week and Tuesday, Wednesday and Thursday of this week, the bond market went into a level orange panic attack. Suddenly the psychology of the marketplace was sell, sell, sell. Get out while you can, before the crash of the US economy falls down upon us all.

As a result, the bonds started to rise faster and more sever ly than at anytime since the Fall of 2008. The rates for home mortgages climbed from 4.875% to 5.625% for the same type loan; the standard 30 year fixed rate mortgage. Such a rise in rates was destined to create a mortgage climate of  zero refinances, and homes would invariably stay on the market longer, because buyers would no longer be able to afford the purchase price at such higher interest rate levels.

It did not matter if you were refinancing home loans in Oregon or seeking California Home Mortgage Loans this was a national event that not only threatened the home mortgage business, but ultimately the entire US and global economy. Higher interest rates would most certainly have the ominous affect of stopping the economic progress seen during the first half of 2009.

Then came Thursday and the sale of the 7 year bond. Fortunately for all involved the 7 year bond sale went great. Lots of buyers came forward to purchase the debt, thereby allowing the US Government to borrow more billions of dollars, to continue to fund the stimulus package, that has propelled the US economy out from the brink of disaster.

Immediately, the stock market rallied, the yield on the mortgage related 10 year bond dropped, the panic about the economy calmed, and the economic recovery - well it ultimately dodged a near fatal bullet.

So be it for a normal peaceful week in the marketplace.

Refinancing Home Loans in Oregon and California

The other day I was thinking about how so many people are refinancing home loans in Oregon these days because of the lower rates and how that is helping the economy. This is also true for those that are refinancing California Home Mortgage Loans. Every loan that is refinanced, where the borrower is taking advantage of these historically low rates, is putting extra money into the national economy. That $150 per month or whatever the savings is for each home owner is money being spent at the grocery store or the nearby restaurant or on some sports event or concert. It is money being funneled back into the economy.

Primer On The Difference Between an FHA Loan and a Regular "Conventional" Mortgage Loan

It is in every borrower's best interest to understand the difference between a Conventional and an FHA loan, especially if they owe more than 80% of their home's value or are interested in purchasing a home with less than 20% down payment. It does not matter if borrowers are refinancing home loans in Oregon or looking for California home mortgage loans. this knowledge is universal and can be applied anywhere in the nation.

First FHA will allow a borrower who wants to refinance, or purchase a home, the opportunity to borrow up to 96.5% of their home's value. This is also known as LTV or the "loan to value" ratio. If it is a refinance, and they want to borrow 96.5% LTV, then the borrowers are not allowed to take out any cash. The only refinance that will be accepted is one where the borrower benefits with a reduced monthly payment from a lower interest rate.

A borrower can work with a Conventional loan if they only have to borrow 95% or less LTV. It's usually financially better to secure a Conventional loan than an FHA loan because of the 1.75% up front fee that FHA requires. This can be a significant extra fee if the loan amount is three or four hundred thousand dollars. For example, the extra fee on $300,000 is actually $5,250.

So if you have at least a 5% down payment on a purchase, or have at least 5% equity in your home when you are ready to refinance, you might qualify for a Conventional loan and forgo the 1.75% up front fee. If you can afford a 10% down payment, or have 10% in equity when you are ready to refinance, you have an even better chance of securing a Conventional loan. This is because there are several restrictions on Conventional loans between 90% and 95% LTV and many borrowers will not be strong enough financially to qualify. For example, the credit score must be exceptional (over 720 points) to get a loan over 90% LTV.

One advantage to an FHA loan is the cost of their Mortgage Insurance Program. Mortgage Insurance is an extra fee that must be paid alongside the regular monthly Mortgage Payment. Regardless if it is a Conventional or FHA loan, anytime a borrower needs a loan that is over 80%, they will be required to add a Mortgage Insurance Premium to their monthly payment.

FHA's mortgage premium is a standard .50% of the loan amount. In other words it does not matter if you borrow 81% or 94%, if you borrow over 80%, the Mortgage Insurance Premium would be the same at .5%. A .50% Mortgage Insurance premium on $200,000 would be $200,000 x .50%, which equals $1,000. This is an annual premium and so it needs to be divided by 12. Therefore, the Mortgage Insurance Premium on an FHA $200,000 loan would cost an extra $83.33 per month ($1,000 divided by 12 = $83.33).

With a conventional loan there are different percentages associated with different LTV's. For example a borrower who needs a loan that is over 80% but under 85% LTV will have a smaller Mortgage Insurance Premium than someone who needs to borrow 90% or 95%.

The Mortgage Insurance Premium payment under 85% LTV is about the same as the FHA premium, but the Mortgage Insurance Premium (also known as MIP) on a 90% or 95% LTV loan is much higher than FHA. So where as the FHA loan asks for a large upfront fee of 1.75% and a smaller monthly Mortgage Insurance Premium, the Conventional lender does not ask for an upfront fee, but collects a larger Mortgage Insurance Premium during the life of the loan. A good loan officer can crunch the numbers and figure out which type of loan is in your best interest.

I hope that this explanation clarifies the differences between the two loans and shows the advantages and disadvantages of each type.

So What happened to the Mortgage Business? Why did it Fall Apart and How did it Lead to our Economic Meltdown?

It really doesn't matter if you are seeking to refinance home loans in Oregon or you are seeking out California Home Mortgage Loans, you and the entire country have been affected by the shenanigans of a few very rich, very insidious and extremely unethical entrepreneurs in the banking industry.

The old saying goes if it seems like it's too good to be true; it’s probably too good to be true. Although there are plenty of folks who the public can blame, I primarily focus on the lenders who offered such ridiculous loans and the insurers who had the audacity to insure them so the lenders would be covered in case a borrower defaulted.

 

Of these two groups the insurers were by far the more idiotic. It was one thing for a lender to concoct a lending program that would entice first time home buyers to enter the housing market with no or low down payments and inexpensive first year monthly payments. If they could lead such a borrower to bite, well - power to them. Of course there was a horrible insidiousness to these programs, because the lenders knew full well that most of these borrowers would not be able to pay their mortgage payments after the loans started adjusting.

 

Nevertheless, can the lenders be blamed? They were just providing a service to Wall Street who was interested in selling as many securitized bonds as they could get their hands on. Since Wall Street could get these mortgage bonds rated AAA, even though they weren’t, even Wall Street could not pass up such a lucrative opportunity.

 

It's obvious now that the lenders, the executives on Wall Street, and the Bond Rating agencies were living on the edge of legality and ethical behavior, but the insurers, who looked at these products and told the lenders and Wall Street that they would insure these bonds against liability, in order to generate exorbitant profits in insurance premiums, were certainly past the point of ethical behavior and incredibly idiotic in their assumptions.

 

Either the insurers were too stupid to know or too greedy to care, but when the loans started to default and the foreclosures started to rise, the insurers were left holding a large part of the bag. Not only did their idiocy destroy the behemoth insurer AIG, but in the process put the world economy in the precarious place that it is in today.

 

Wall Street asked for the loans so they could create bonds by packaging them together and selling them to rich clients and countries. The Lenders were more than happy to provide the loans for the profits that they would receive. The Bond Holders were happy to rate the loans for the commission on each securitized bond they evaluated, and the Insurers were happy to insure the loans……….. wait a minute for the losses that they were sure to incur? That is where the logic breaks down and that is why I now deem the insurers the most ignorant of the groups involved. In this crowd of misfits, that is really saying something.

The Mortgage Industry is Not What it Used to Be

It does not matter if you are refinancing home loans in Oregon or seeking California Home Mortgage Loans, if you are not a w2 employee you are in for a big surprise when you try to qualify for a loan. Income is all that matters these days and in some ways it's a very good thing. I mean whoever came up with the idea that a person can simply state to the bank what they earn must had one too many margaritas that night.

Furthermore, for the whole industry to just "buy into the idea" is idiotic at best and disingenous at worst. Knowing full well that the huge sums of money they were earning would come back to bite them the great lenders of Wall Street just kept on putting people into homes without even knowing if they could pay for them.

How Important Is A Borrower's Income in Getting a Home Loan? What Kinds of Income Qualify?

How important is your income in this new lending environment? What if I am self-employed can I get a loan? How much do I need to earn to qualify for a loan these days?

Now that a borrower can no longer rely on a stated income loan to purchase or refinance their home many borrowers are simply out of luck. In the marketplace income is now king. Furthermore, self employed income can also be problematic because when a self employed person subtracts the tax deductions they legitimately can take to lower their tax burden, they might no longer show enough "net" income to qualify for a loan. Therefore the income that is most valid in this lending marketplace is w2 income.

If, however, after taking your legitimate deductions a self employed person can show a "net" income that is sufficient enough to qualify for a loan, then that person may also purchase a new home or refinance their old lien.

Generally speaking if a borrower earns say $3,000 per month then they should be able to borrow up to $1,350 per month as a mortgage payment. However, this $1,350 must not only cover their principal and interest payment but also a monthly calculation of their property taxes and insurance. This calculates to about 45% of their gross income.

Self employed individuals are not allowed the benefits of a w2 employee. To qualify, they are only allowed to borrow up to 45% of their "net" income or income after deductions.

This first calculation of 45% is used for a borrower's principal, interest, monthly property taxes and insurance payment (PITI). There is however another calculation required to complete the lending process and that is the total debt to income ratio. This calculation adds up not only the PITI, but also includes credit card debt (minimum monthly payments), auto loans, boat loans and any other debt indicated on a standard credit report. This accumulated debt must not exceed 50% of the borrower's income or lenders might reject the loan request.

For borrowers who have over 50% total debt to income ratios other compensating factors will determine their success or failure. Most important among these are credit score where anything over 720 points will increase a borrowers chances. Second accumulated assets will also help a borrower achieve success. If a borrower is has over $30,000 in accumulated assets - money market accounts, cds, stocks, etc. this too will help their chances.

In a market environment where interest rates are so low and refinancing can be such a sound financial decision, it's important to know whether you can qualify under the new tough qualifying guidelines of today's marketplace. I hope that this can help you decide you have what it takes to qualify for a new home loan.

  

My name is Allen Sayble and I have been a loan officer since 2001. I specialize in hard to find loans through FHA and USDA for borrowers with less than stellar credit, or who want to borrow over 80% of their home's value. I also enjoy helping borrowers in sound financial positions. You have worked hard to keep your credit strong and keep your financial ship moving in the right direction. I will work hard to get you the best interest rates the industry has to offer.

Although I am based out of Ashland, Oregon and can write Oregon Home Loans. I am also capable of completing California Home Mortgage Loans. Please visit my website at www.mortgageconsumer.com to learn valuable information about the loan business and receive a FREE CREDIT REPORT. You can also contact me at 541-324-9623.

How is the United States Going to Sell all the Homes Currently Listed?

How Long will the Mortgage Crisis Last?

There are so many homes on the market right now. Several from foreclosure, several from speculators trying to get out from under their investment, several from builders who thought that the housing boom would never end, and others who have put their homes on the market, but cannot find a buyer. As prices go down because buyers are scarce, the question arises, when are we going to see a turnaround in the housing market?

As long as lenders keep such strict guidelines, when it comes to lending money for home purchases, it does not matter if the borrower is seeking Oregon Home Loans or California Home Loan Mortgage Rates, very few people will be able to buy a home at this time; far less than are necessary to buy up all of the homes on the market today. This is especially true because interest rates have risen since June 1st making homes much less affordable. Furthermore, interest rates have risen because of inflation and as long as inflation and strict lending guidelines persist, our housing crisis will not only remain at crisis levels, but could even worsen.

The only alternative in this present scenario is for home prices to fall further, so they can be more affordable. However, that strains those borrowers in adjustable loans and negative amortization loans, who would like to refinance, but can't, because their house is now worth less than the debt they owe.

This will cause more homeowners to default on their loans when their adjustable rates reset, creating more foreclosures, and further exacerbating the housing crisis.

Consequently, this spiral might be with us for quite a while.

Say Goodbye to Indy mac

It really doesn't matter if you are seeking out Oregon Home Loans or California Home Loan Mortgage Rates the loss of Indy Mac Bank will put a dent in finding the right lender for you. That is because Indy Mac always had great service and great interest rates, especially for clients on the west coast.

They will be missed.