Keeping Mortgages Accessible

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

Access to mortgages has been a hot-button issue ever since the days of the housing boom. Back then, the issue essentially was loose underwriting that swayed so far in one direction that we ended up with a slew of borrowers who were in over their heads.

Then, as the housing recession set in and regulators started coming down on lenders, we saw a reverse in the opposite direction. For many months, lending became so tight that a lot of people no longer qualified to borrow money for a home.

Low Interest Rates Continue to Fuel Housing

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

Remember earlier this year when interest rates started to rise and everyone worried that it spelled the end of the housing recovery? As interest rates have crept up for long-term mortgages throughout much of the summer, many have speculated the impact on home buying as inevitably negative.

 However, we're not seeing much evidence to support that.

Mortgage rates have continued to be really attractive throughout the year, with rates on the 30-year fixed-rate mortgage averaging 4.32% in Freddie Mac's survey last week, down from 4.5% the previous week. It marked the lowest level for rates since the week ending July 25.

Although rates on long-term mortgages are still higher than they stood a year ago, it's amazing how low they've remained and how it has yet to completely derail buying activity, as some expected.

Mortgage Loan Terms

With interest rates on the rise it may be time for some of us to think about something other than that ever popular 30-year fixed loan. Here’s a comparison that may make your decision easier.

Many Credit Reports Contain Errors

Here’s an Associated Press story bout errors on credit reports.

Study: 1 In 4 Consumers Had Error In Credit Report

by The Associated Press

WASHINGTON (AP) — One in four consumers found an error in a credit report issued by a major agency, according to a government study released Monday.

The Federal Trade Commission study also said that 5 percent of the consumers identified errors in their reports that could lead to them paying more for mortgages, auto loans or other financial products.

The study looked at reports for 1,001 consumers issued by the three major agencies — Equifax, Experian and TransUnion. The FTC hired researchers to help consumers identify potential errors.

The study closely matches the results of a yearlong investigation by The Columbus Dispatch. The Ohio newspaper’s report last year said that thousands of consumers were denied loans because of errors on their credit reports.

The FTC says the findings underline the importance of consumers checking their credit reports.
Consumers are entitled to a free copy of their credit report each year from each of the three reporting agencies.

The FTC study also found that 20 percent of consumers had an error that was corrected by a reporting agency after the consumer disputed it. About 10 percent of consumers had their credit score changed after a reporting agency corrected errors in their reports.

The Consumer Data Industry Association, which represents the credit reporting agencies and other data companies, said the FTC study showed that the proportion of credit reports with errors that could increase the rates consumers would pay was small.

The study confirmed “that credit reports are highly accurate, and play a critical role in facilitating access to fair and affordable consumer credit,” the association said in a statement.

Experian, a British company with international operations, also said in a statement the study confirms that consumer credit reports are predominantly accurate. At the same time Experian said it “is not satisfied with this result and we continue to work toward ensuring credit reports are 100 percent accurate.”

The new U.S. Consumer Financial Protection Bureau has the authority to write and enforce rules for the credit reporting industry. In September the agency began ongoing monitoring of the credit agencies’ compliance. It’s the first time they have faced such close federal oversight.
The CFPB hasn’t yet taken any public action against the agencies. However, it is accepting complaints from consumers who discover incorrect information on their reports or have trouble getting mistakes corrected. The agencies have 15 days to respond to the complaints with a plan for fixing the problem; consumers can dispute that response.

By contrast the FTC can only take action if there is an earlier indication of wrongdoing. It cannot demand information from or investigate companies that appear to be following the law.

— AP Business Writer Daniel Wagner contributed to this report.

Changes to Mortgage Insurance Premiums

This information was just released by HUD, regarding FHA, and in particular FHA’s Mortgage Insurance Program requirements.

FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent. FHA will increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points or 0.05 percent, to the maximum authorized annual mortgage insurance premium. These premium increases exclude certain streamline refinance transactions.

FHA will also require most FHA borrowers to continue paying annual premiums for the life of their mortgage loan. Commencing in 2001, FHA cancelled required MIP on loans when the outstanding principal balance reached 78 percent of the original principal balance. However, FHA remains responsible for insuring 100 percent of the outstanding loan balance throughout the entire life of the loan, a term which often extends far beyond the cessation of these MIP payments. FHA’s Office of Risk Management and Regulatory Affairs estimates that the MMI Fund has foregone billions of dollars in premium revenue on mortgages endorsed from 2010 through 2012 because of this automatic cancellation policy. Therefore, FHA will once again collect premiums based upon the unpaid principal balance for the entire period for which FHA is entitled. This will permit FHA to retain significant revenue that is currently being forfeited prematurely. Read FHA’s new MIP Mortgagee Letter 

Don’t Rock the Boat! Keep the Mortgage Interest Deduction

Congress, as part of negotiations on avoiding the “Fiscal Cliff,” has made direct references to “closing loopholes” and “limiting deductions” as a way to raise revenues. Clearly, the mortgage interest deduction is high on this list of revenue raisers.

Losing the Mortgage interest deduction will disproportionately affect the middle class because a larger proportion of the middle class takes the deduction. In California 89% of those who took the mortgage interest deduction earned less than $200,000. Losing the deduction would cost the average California taxpayer over $3,900.



What you can do to help:

Call Congress. First and foremost, we are urging the public to get involved by calling Congress to ask that the mortgage interest deduction be preserved. The public may reach Congress by calling 202-224-3121 begin_of_the_skype_highlighting 202-224-3121 FREE end_of_the_skype_highlighting. The Capitol switchboard operator will help callers identify their member of Congress and connect them.

The public can reach Congress by calling (202) 224-3121 begin_of_the_skype_highlighting (202) 224-3121 FREE end_of_the_skype_highlighting
Monday-Friday from 9 a.m. – 6 p.m., Eastern Time.

Get the word out. Many people seem to be blissfully unaware that their mortgage interest deduction is in danger. Please do the following to make sure that the message spreads.

1. Forward this message to your family, friends and clients.
2. Post this information on your personal and office websites and blogs.
3. Share this information on Facebook and urge others to share it as well.
4. Tweet about it on Twitter and urge others to retweet. Use the hashtag: #keepthemid.
5. Link to the following web page: www.KeepTheMID.com . This site has information about contacting Congress, more information on the MID and links to articles.
6. As you see new information and articles, share these on all your social networking sites.

Here’s some recent news and commentary on the mortgage interest deduction and fiscal cliff negotiations:
Editorial by Ben Stein
President Obama’s comments on the MID
OTUS story on the MID
Editorial in the Santa Cruz Sentinel
Marin Journal story about the MID

Tax Break Expires, and other Real Estate News from CNN

Home sellers, who sell through the short-sale process currently don’t have to pay federal taxes on the amount of debt that is forgiven because of a bailout-era law knows as the Mortgage Relief Act. That act is set to expire December 31^st and unless it is extended, taxpayers will be taxed on that relief. According to RealtyTrac, the average amount of debt that is forgiven in a short sale is $95,000. See CNN video and article.

Home Prices Trending Up; Mortgage Rates Hit New Lows

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

What better end to the year could housing ask for? Home sales and prices are up on average across markets. Inventory is low, but housing starts are up. Mortgage rates remain at rock bottom – and the Fed said at its meeting this month that it doesn’t anticipate raising rates any time soon.

The stars have aligned. The door to recovery is now wide open.

The September Home Price Index tracked by Lender Processing Services showed a 3.6% year-over-year increase since last September. In addition, the index rose 4.9% since the beginning of the year.
California and New York led the states with a 0.4% month-over-month increase, and Washington, D.C. led metros with a 0.6% increase from August. The largest monthly increases in the home price index took place in Arizona, Washington, D.C., Georgia, Delaware and Maryland, with Arizona holding the largest year-to-date increase at 14.4% since January.

In mortgage rates, we continue to see fantastic borrowing rates for home buyers. Average rates on a 30-year fixed-rate mortgage hit a new low of 3.31% last week, and average rates on a 15-year fixed-rate mortgage also hit a new record low of 2.63%, Freddie Mac said in its latest weekly report.

In its quest to use monetary policy to help the recovery, the Federal Reserve board indicated at its
November meeting that it would not be raising rates in the foreseeable future. In fact, Fed Chairman Ben Bernanke suggested that the Fed will keep trying to push down long-term interest rates through
2013.

As we enter 2013, inventory will be of concern in many markets that have struggled to keep up with demand. But things will be looking up next year in most markets. In fact, Daren Bloomquist of RealtyTrac said at a housing symposium in San Francisco this month that underwater homeowners are more likely to sell as prices rise next year, which will help inventory levels.

At the same symposium, Ken Rosen, an economics professor at UC Berkeley, declared housing is in recovery mode now and through next year, though he’s not anticipating a boom in sales.

Things to watch next year will be jobs and income levels, both of which have the strongest impact on housing than any other indicator.

The forecast, overall, is looking optimistic for real estate. Some markets, like ours here in Silicon Valley are already enjoying near-peak activity and pricing. Others are just starting to pull themselves up. Either way, 2013 is going to be a solid year for housing.

The DONT'S of the Home Loan Process

10 Things to Avoid When Applying For A Loan

If you are going through the home buying process you’ve probably heard a lot about what you should do. But, if you are planning to get a loan to help you buy the house, there are also things you should not do.  Read all 10 of them.

Mortgage Bank Insights

Intero Real Estate Services, Inc. presents the The Intero Insider video series, a candid Q&A session on hot real estate topics with recognized real estate experts. This Insider brings you Rick Soukoulis, CEO of Western Bancorp's insight and projections on 2011 mortgage rates, the effects of the Japan crisis on our market and the potential after effects if the U.S. Government had shut down.

Mortgage Workout Programs for Homeowners

On Wednesday, February 18, 2009, President Obama announced his new Homeowner Affordability and Stability Plan to help troubled homeowners avoid foreclosure. This plan will offer assistance up to 9 million homeowners and applies only to primary residences. The first component of the plan allows homeowners who are current to refinance an existing Fannie Mae or Freddie Mac conforming loan with a loan-to-value ratio up to 105 percent. The second component addresses homeowners who are at risk of foreclosure on their mortgages, but they do not have to be delinquent. The government will work with the lenders to ensure that monthly mortgages do not exceed 31 percent debt-to-income ratio. Furthermore, the government will seek to create clear and consistent guidelines for loan modifications.

Click here for more information about the Making Home Affordable Program.

Government Exiting, Strategically, from the Mortgage Markets

“For more than a year, the government pulled out the stops to revive home buying by driving down mortgage rates. Now, whether the housing market is ready or not, the government is pulling out.” So says The Washington Post in an article.


Some say the government action to pull out is too soon, others say the pull out is the plan, and good for the economy. Read the full story here.

Loan Modificaions Just Aren't Happening

We know that loan modifications just aren't happening in our service area. Here's an article that explains everything!

Mortgage Market Update

Team Patereau's in-house mortgage agent at Intero Real Estate, Dario Liberati, brought us up to date on the mortgage market. Here's his report:

Last week mortgage bonds had their worst one day performance since October, losing an astounding 206 bps. So what happened and what's next?

The main culprit for the selloff is SUPPLY. The Treasury has literally been printing money by way of Treasury auctions to pay for the massive spending. These hundreds of Billions of dollars of new Bond supply have to be absorbed by the market. The additional supply literally weighs on the entire Bond market and drags prices lower.

Also, when you think of SUPPLY, consider all the refinancing we have been doing and that those loans have been bundled, packaged and sold on Wall Street. This additional SUPPLY has now started to hit the secondary market as those loans are now getting sold. While the Fed has been a buyer, they simply cannot buy enough to balance all the selling.

Economics 101: Anytime supply exceeds demand, prices will move lower. As prices move lower, yields rise. That rise in yield will attract new buyers as they get a higher return on their investment. This is how the market finds balance.

Mortgage bonds have lost a staggering 363 bps since last Thursday. All locked loans are getting closed at a great rate. The new market must unfold to settle at its price.

Rates are better today than at close last Friday, and are still at ALL TIME LOWS!!! Don’t give up hope. Buyers, buy your homes. Values are still in the purchase and prices may not be this affordable in the near future.

Loan Modification Information

There's lots of talk with homeowners around Gilroy who are upside down on their mortgages and trying to figure out what to do. HUD (U.S. Department of Housing and Urban Development) has a lot of information. Here's some information from Rick Soukoulis, the President of Intero Mortgage, which is a sister company to our borkerage, Intero Real Estate Services. You may find it interesting.

...Any company offering Loan Modification services must be DRE approved. A lot of supposed Note Mod companies are springing up overnight, many not licensed, and a fair number being run by shoddy and often unethical operators.

There needs to be a Modification officer/originator involved in the process, one who is trained in Loan Mods, and one who will take responsibility for moving your case forward in a timely manner.

Next, the Loan Loss Mitigation Officer needs to be experienced and must be trained, must understand what various lenders want, what they’ll accept and what they won’t accept.

And finally, there should be an Attorney working with the company who understands all the subtleties of Loan Modifications.

Having an Attorney or law firm involved in the process does not change the fact that anyone meeting with a consumer to help with a loan modification MUST be licensed by the DRE. These “Modification Originators” must follow all the same rule as any DRE licensee.

Let’s now go into some greater detail about modification themselves.

First, who qualifies? The simple answer here is that the more dire your circumstances, the more likely you are to qualify. The six commonly acceptable reasons are

1. High loan-to-value, higher than 90%
2. Bad credit due to late payments on credit cards, mortgage, medical bills, ect.
3. Adjustable rate loan has or will adjusted in the future
4. You have a negatively amortizing loan
5. Temporary or permanent financial hardship (i.e. job loss, medical emergency, divorce, income reduction ect.)
6. High debt to income ratio’s.

What kind of modifications can the borrower expect? It could be converting the loan from adjustable to fixed, lowering the rate, extending the term from 30 years to, say, 50 years, or actually reducing the amount owed to the point where there is some equity and the borrower can afford the payments.

There can be variations and there can be combinations of the above.

Interestingly, loans mods have been going on for over a year now, and the banks are finding that the most effective way is to forgive a part of the amount owed. The borrowers who get this tend to perform better than the others.

The next big question is what the heck are the banks trying to accomplish.

As for the banks, their overriding goal is to avoid foreclosing and taking any more real estate onto their books. They’re not being nice guys necessarily. It’s just that they’ve found that their losses on Loan Mods are significantly less than foreclosing and trying to sell the property.

If you or someone you know is having difficulties with their mortgage, it’s a great time to try for a modification. To repeat myself, just make certain you go to a company with trained and knowledgeable Modification Officers and are experienced in Loss Mitigation , one who has an attorney on staff, and one that increases your odds of getting what you want and what you need.

Team Patereau can help you connect with appropriately licensed and capable loan modification companies. Please give us a call to discuss your specific needs.

FICO Scores

We all know how important FICO scores are so here are some basics to enhance your FICO knowledge.

Good borrower credit scores help make it possible to qualify at better rates. This is how FICO Scores are weighted and structured:
35% by Payment History
30% by Balances Owed
15% by Length of Credit History
10% by New Credit
10% by Types of Credit in Use

And the overall calculated ranges:
720 - 850 Excellent, A-paper credit, the "good-guy" rates available
680 - 719 Good, not much of a compromise on rates
620 - 679 OK or Fair, clearly in range for FHA consideration
580 - 619 Low, bottom of the range for FHA consideration, "alternate credit" comes heavily into play
500 - 579 Poor, truly nothing can be done without credit rehabilitation

Just for your information, FICO stands for Fair Isaac Corporation, wtih Fair and Isaac being the last names of the two men who created the corporation as well as the scoring scenario.

If you would like to discuss your FICO score or other real estate mor mortgage questions, please contact us!

Mortgage Lending Today

Mortgage companies have changed the face of home loan lending as we come to the end of 2007. Here’s a look at the emerging landscape:

What’s Out

• 100% Financing: Banks have mostly stopped entertaining home loans where borrower makes no down payment. Earlier this year the California Association of Realtors said 41% of first-time California buyers were getting 100% financing. Now, in the fourth quarter of 2007, lenders won’t make loans without at the very least 5% down, and more likely will require 10% and 15% down payments.
• Adjustable rate mortgages offering 4 payment options: These loans, called Option ARMs, are risky because mot people make the absolute minimum payment. At a specified point after 30 months the loan payment can jumb by hundreds of dollars per month. In 2006, 27% of borrowers buying or refinancing houses in Santa Clara County used this loan.
• Interest only loans: The only way you can get them now is by showing you can pay not only the interest but the full principal and interest load when it becomes due later. Last year an estimated 28% of borrowers in Northern California used these loans to buy and refinance houses.
• Subprime 2/28 loans: Nearly all the biggest subprime mortgage lenders have stopped making these loans. The 2/28 offers low “teaser” interest rates for the first two years, and then resets to higher floating rates that can add hundreds, and many times thousands, of dollars to a monthly payment. Last year 80% of subprime loans nationally were 2/28s. They were typically made to people with weak credit histories. In 2006, 22% of home purchases in Northern California were with subprime loans.
• Stated income loans: Lenders have almost entirely stopped giving money to people who simply “state” their income on a mortgage application.

What’s In

• 30-Year Fixed Rate Loan: The traditional workhorse loan with its unchanging monthly payment across three decades is back.
• Mom & Dad: Parents are offering gifts to their children to reach a down payment of at least 5% (often from the equity in the parent’s home). Parents are making sure their children get a fixed-rate loan, too.
• Saving money and renting for another year or two: It’s old fashioned, but real estate agents say building up savings can be the ticket to buying a house.
• Income verification: Lenders now want to know all the specific details of borrowers’ financial situation. This means knowing their exact salary and other sources of income.
• High credit score: Lenders say a credit score of 700 or higher – and a down payment – will help deliver a mortgage to borrowers who intend to live in the house.