100% Financing, No Down Payment, USDA Loan for Chameleon Lending, and the Chameleon=aire

Lets step away from the so controversial "Bailout" talk for a minute. This is an industry for Realtors and Lenders that are willing to change right now. As water runs from a wide space to a tight space, it changes very quickly to meet it's new boundaries. Everyone in the Real Estate business knows that the history of our industry is UP and DOWN. As the Real Estate boundaries change, so must the contents w/in it...that's us Realtors and Lenders. There is very few people left with large down payment. There are many more buyers out there that need 100% financing, but can't get it, that only 2 years ago would have had no problem. There is still 100% no down payment home loans in Texas, Dallas, Frisco, and what ever other areas. VA is 100%, USDA Guarantee Rural is 100% and allows the buyer to have the seller pay closing costs over the amount of the appraisal...yeah! It's our job as lenders to decide which families are disciplined enough to get into a home that is leveraged by a 100% loan, and also that the home is not in a risky area that might depreciate quickly so the home owner couldn't sell if he needed to.
As a Personal Mortgage Consultant, I feel that it is my duty to my clients and my Realtor alliances to be a chameleon lender right now and as week to week we see new FHA guidelines, conventional Mortgage Insurance changes, and all the other changes we are seeing happen so fast. I believe that if the Realtor or Lender in this market can target the right places with the right "tools", they will be a chameleonaire and find success.

Washington Mutual Bust, Todays Interest Rates

The Federal Deposit Insurance Corporation or FDIC seized Washington Mutual and sold the thrift's assets to to JP Morgan Chase. This is one of the largest bank falls in our history. Some said pitfalls that WAMU ran into that caused this issue was their involvement in the subprime world, and even more the "option ARM". In case you are not aware of what the option ARM is, I'll tell you. The Option ARM was a popular loan in the California area where appreciation was blasting upward so fast that you could stand to buy a home that negatively amortized because the appreciation "outran" the negatively amortizing costs of interest. In the Option ARM, you had the option to make a monthly payment that was less than an "interest only" payment. Let me dig in a little deeper to explain. In this lowest payment option they gave you, your monthly payment had $0 money going to principle, and only a portion of what you owed the lender in interest monthly was paid. This means that the remainder of what you owed the lender in your monthly interest went back on top of the loan...therefore increasing your loan amount every month. In other states where homes weren't appreciating so fast, and eventually California, buyers would get into a home with this loan, or refinance using this loan because they couldn't afford the monthly payment they were currently paying, and the loan amount would eventually get to an amount defined in the loan details that said they could no longer make the lowest payment anymore, and then they would be forced to pay the next lowest payment option in that program which was the interest only payment that they couldn't afford int he first place...so they eventually foreclose.
Today was one of the first interest rate "betterings" in over a week. The mortgage interest rate market today was a result more of the reaction of the bailout and economic news rather than the economic reports that were issued at any point this week. Scary news with such a large bank falling. What will our economy and banking look like in the coming year? Really scary!

Banker 3% Down Payment for Conventional Loans

RMIC is a mortgage insurance company that makes it possible for families to put down as little as 3% on a conventional purchase or refinance. Without mortgage insurance, lenders won't risk one loan that equals to 97% of the total purchase or appraised value amount of a home. RMIC just announced that they are not going to issue their mortgage insurance with broker lenders or wholesalers anymore starting November the 1st. This is another positive for those bankers out there. The Release Notes from RMIC on the 15th read exactly as, "Loans with LTV/CLTVs of 95.01% to 97% may only be originated through a lender's retail channels (i.e., broker originated and wholesale loans are ineligible). In order to be considered a retail loan, the loan must be closed and the MI ordered in the name of the originating lender, by that lender's personnel. The minimum representative FICO required for insurance on loans over 95% LTV/CLTV will remain 720 as stated in the August 27, 2008 release notes."

Converting Existing Home to Rental to Qualify for New Purchase

Assistant Secretary of Housing for FHA, Brian Montgomery, announced a new plan to govern against the "buy and bail" issue so prevalent in our industry today. Recently, FHA and others in the mortgage industry have observed an increasing number of homeowners who have chosen to vacate their existing principal residence and purchase a new residence. Brian suggested that this was occurring more frequently now because of rising costs in fuel, and families were targeting homes more near their place of employment, or simply that today's market has offered so many opportunities for great deals that they were taking those opportunities and bailing on their current home.
The new "temporary plan" will determine that the homeowner can afford both mortgages without rental income or that they stand in equity depth on the current home that they could easily sell it rather than default if they couldn't rent it.

There are two exceptions to this new temporary plan by FHA:

1. When a homebuyer is relocating with a new or current employer to an area recognizable to FHA as a commutable distance. In that case, the underwriter will use an executed lease agreement of no less than 12 months from day of close, and verification of a security deposit and/or first month's rent was paid to the homeowner to determine satisfactory offset of rental mortgage payment is actual.
2. The home owner has a 75% or better current Loan-to-Value in the current home determined by a residential appraisal dated no more than six MONTHS old, or by comparing the unpaid principle balance to the original sales price of the property.

Government Makes Ends (profit) AND Helps Banks With Toxic Mortgage Assets - Title Inspired by CNN Money

Ok, for the Layman's terms...that's how I "roll". I put it in terms YOU can understand.

Govie (Government, Washington, Uncle Sam, etc...) has got a plan. Treasury Secretary Henry Paulson (money organizer of Government) has suggested that Govie buys the "toxic" mortgage assets from American banks at a discount. This means that the banks can unload their risky mortgage assets to the government for less than what they are worth, but expectantly better than what those assets are worth after the next wave of defaults comes through...the bank can stand to loose a calculated amount, but possibly not an unforeseen/unexpected amount that might occur in foreclosure costs. This way, banks stand to have a higher probability to make it through this U-G-L-Y situation. Now, I like the idea of the plan for a simple reason. First, I'm not an economist and therefore it's my opinion. I like it because our government has taken on some major liabilities in the very recent past with the Fannie/Freddie help, bailing out big player lenders, war, etc... It's obvious that our government has the strength and money to help everyone when times call for it. A good example of a sign that might show that, is this; Me and you are not economists, so we have to look to signs of those people in our world that are, to see what confidence they have in our Govie for help. Well, when Henry suggested this option to help, stocks blew up like 400 points. If stocks are going up, that means the people who are economist and ARE in the "know", are momentarily confident. Back to why I like this. Since the government is buying these mortgage assets for "cents on the dollar", they stand to make a profit when the market turns around. You catch that? I'm ok with Govie making "ends" (ends=money or profit) on such a scenario so that they can reimburse themselves for the spending they have done to get our economy back to par, so that the next time our economy is against the ropes, they'll have the money power to dig America out again.

Oh by the way, rates terrible today because of all this. Remember, whats good for the economy isn't usually good for our mortgage interest rates. If you wonder why, search my archived blogs that explain that.

Brad

Aurora and Lehman Brothers Negative Media Gets You the Best Rate On Your Mortgage

Just in case you are new to the search and learning mortgage, the basics are as follows. Mortgage rates are directly related to bonds. When bonds do good, your mortgage rates drop. Today the bond market opened very positive again like yesterday...that's good for your interest rate and helps you get the best interest rate possible. Oppositely as yesterday where the bond market did SUPER and the Stock Market plunged, as the bonds did well today, the Stock Market opened with modest gains as well. Yesterday we saw a large swing in rates, but today we may only see a little swing. If we see a couple more days like yesterday and today, rates will be as low as they have been in 3 years.
WHY ARE RATES SUDDENLY DROPPING?
Lehman Brothers, a large player in the lending world, filed bankruptcy. This makes the more risky stock investments even more risky, so the stock investors take their money out of stock and put it in bonds...supply and demand. So yesterday, the Dow Jones Industrial blundered a 500 point drop. Aurora is a subsidiary to Lehman and more involved in the day to day mortgage lending and servicing, so expectations of Aurora's success are no good either...they are giant in this mortgage lending world.
Paul Jackson said it in a way that makes it very easy to understand, "In lending terms, Aurora is a shell of its former self: the company, once an Alt-A powerhouse for Lehman, laid off 1,300 employees starting in January of this year as it cut both wholesale and correspondent origination channels. As recently as the first half of 2007, however, Aurora was regularly seen producing more than $3 billion a month of Alt-A mortgages." He also mentioned that they are a giant when it comes to servicing companies - ranked 15Th largest service by Inside Mortgage Finance for 2007. We don't want Aurora to tank, but if it does and you see it hit large Mortgage Media, you might expect another drop in rates.

More Major Players in Banking World Troubled Still

The Mortgage Lender, Implode - O - Meter talked about Washington Mutuals troubles today in their blog and also mentioned the Lehman Brother's filing for bankruptcy. Those are two more very large financial establishments. Since May of 2006, 1 year and 4 months, there has been reported 283 failed mortgage lenders "close their doors".
Last week, a CBS news anchor said, "...is there hope for the housing market? Interest rates are down...etc". This is some of the first hope I've seen on national media in some time. Cross your fingers and say your prayers. We all hope for the best.

FHA Down Payment Requirement Increases...Effect First Time Home Buyers in Frisco

It's been talked about and it's not necessarily brand new information, but FHA down payment requirement is going up to 3.5%. No longer will closing costs be considered as part of the amount of money they have to have involved in the transaction. They will have to have 3.5% down payment...3.5% is from the lesser of the sale price or appraised value.

The Housing Slump Isn't Over for Dallas Real Estate Buyers

You know, it was only a couple weeks ago or maybe even 4-5 that "Old School" (my nickname for Allen Greenspan) used a phrase similarly tothis, "the housing turn is in sight". Then he went on to say that "in sight" meant 8 months or so. I hope Old School is right! The Dallas Morning News's Steve Brown reported that the DFDub saw an 18% fall in preowned homes this August compared to last year this time. Ooops! I guess it's got to hit rock bottom before it takes a turn for the better.

Additionally, Steve mentioned that the average sales price fell by 3%. That could happen without the price per square foot falling, but I bet that is not the case.

I had a client looking to buy more rental property. She owns 4 properties now, that are all financed I might add. At the time GMAC/Homecomings was the only lender I knew of that would lend money on a borrower that had four or more financed properties, so she'll have to pay off some mortgages before we can get her another with traditional loans. Anyway, they asked me, "is this just a bad time to buy rental property"? Now I should have just said, "I'm sure if you send that question into the Rain, you'll get a number of different answers"...I didn't. I told her and I believe my answer is right on. Now is a tough time to buy. Some of the good deals aren't as good by comparison to 3-6 years ago, and if you have intentions of buying, fixing up/rehabbing, and them selling, then you probably aren't in a timely buying window. On the other hand, if you are looking to build a portfolio, like they were, then for the long term goal you are great. Where the same home 3-6 years ago that in good shape was worth $120k, and foreclosed or had foundation issues and so forth it could be sold at $108k. That same deal today in good shape is probably worth $115k and under duress sold at $106k. So 3-6 years ago you had $12k to play with for profit and costs. Today that same home in this example is only $9k. This example should show that for buying and selling, right away it doesn't look like the profit margins are as available, but since we all know that Real Estate eventually always appreciates, this example would say that buying homes for your long term rental portfolio makes this the best time to buy them. Buy low and sell high.
See more on Active Rain or me on Active Rain.

Fannie and Freddie Go Govie

It seemed like only a matter of time. CNN reported this weekend about the major change of leadership in our American financing department. The government stepped in to take over Fannie and Freddie, the governing bodies of home loans in America. The old saying goes, "I brought you into this world, and I can take you right back out of it". At least $5 Trillion in home loans are currently backed by these monster companies. With additional $200 Billion being added into treasury support, Washington needs a little "home team" management before they feel comfortable for America's future when so much is riding on their shoulders. So, Treasury Secretary of Washington is placing both companies into a conservatorship. (define conservatorship- appointing a guardian over someone for financial reasons typically when said person is incapacitated or disabled). The plan will be to return Fannie and Freddie to it's original administration once balance and control is regained. So, this conservatorship is only temporary.
Are Americans and advisers "down with this"? Bush, and just about anyone else that has commented on the change are satisfied and believe it is necessary to get our housing market under control. Just since last summer, $12 BILLion$ dollars (said like Dr. Evil from Austin Powers) has gone lost between the two companies.
What does this mean to you? You won't feel the change, it's just hopeful that our economy who's economic foundation is our housing market, will see a faster turn for the better.

Wall Street News Provides Hope for Frisco Real Estate and Mortgage

There was a story out this week about Fannie & Freddie not needing an injection of capital from the US government, and that they have enough saved to weather the current problems.


Wouldn’t that be nice? I imagine that government and finance officials have found out that these companies, and their financing, are so much more complicated than anyone ever imagined. The public and banks own huge numbers of shares, with the banks holding preferred stock. If the preferred stock’s value goes to 0, it would put many of these banks out of business. So news like this morning’s is welcome.

Housing Fall! "Will the Real Slim Shady Please Stand Up"

W A R N I N G, opinion release!
I read an article in the Dallas Morning News of a realtor who got out of the business because of the housing fall of 30% from the peak in 2006. They didn't have their business set up and efficient like they should. Let me ask this, "where IS the REAL Slim Shady". When I read this article, it brought my simmer to a little boil...I'm exaggerating a little for your blog reading enjoyment. It also reminded me of the Eminem song that blasted the charts years ago where there was and always has been a lot of "wanna bees" in the rap world just like the "wanna bees" we all see on American Idle, and he was calling them out. This market is culling the people in this industry that were faking it and getting by on the "ride" of the market. These times call for only the "real Slim Shadys". Honestly, the previously established Realtors and Lenders in this industry didn't see this 30% reduction in housing and tuck their tail and start licking their wounds. When I was young, I frequented a local water park that had a diving board and most water parks didn't have them because of the liability reasons. I was a dare devil and still enjoy the more risky jumps from cliffs and flips on wakeboards that some might think is not perfectly safe.
Well, they also had an air system from the bottom of the pool that released high volumes of air so that as you jumped off the diving board and hit the water, you couldn't sink and would easily make it back to the surface or if you hit your head and got knocked out, the bubbles would bring you to the top...call them liability bubbles. It's a stretch for another metaphor, but Realtors and lenders couldn't hardly drown in the housing market leading into 2006, because the market was so lush the "liability bubbles" would keep you a float. OK, so Texas has lost 3,000 real estate agents just since last summer. As far as loan officers, we have lost a large population as well. Now, real estate and lender offices are downsized running lean and mean and even if the majority of the Realtors and Loan Officers that still have a heart beat in this market don't have the best knowledge and experience walking into client appointments, I can promise you the most of them at this point have the work ethic at minimum to make up for it...better for the clients too. If you have the work ethic, you'll find the right answer if you don't have it. From an industry partner to another, we are "The Real Slim Shadys".

Looking in the mirror, DO YOU SEE "THE REAL SLIM SHADY"?