Happy Birthday, Rhonda!
We appreciate you sharing all your knowledge and expertise on the mortgage market. The coming days should be VERY interesting!
THANK YOU for all the time you spend with raincityguide’s readers.
Monthly Archives: March 2008
Proposed RESPA Reform
When I read the news on HUD’s proposed reform of the Real Estate Settlement and Procedures Act (RESPA) I was skeptical. Cathy from Sequim challenged me to read the 96-page federal register document so we could all figure out what’s going on. I am here to tell you that there is one very good change coming out of this proposal. In fact, it’s so good that I am borderline hopeful that this change might do what legislation is suppose to do and what HUD forgot to do when they signed the original version of RESPA in 1974. But first, the changes that will have many, but not all mortgage brokers screaming bloody murder:
HUD wants to make the Good Faith Estimate (GFE) look the same, no matter where homebuyers apply. Right now there are many off-the-shelf (OTS) software systems that make the GFE look different from company to company. Also, some OTS software can be modified. Some fees, for example, the Yield Spread Premium (YSP), are shown down at the bottom of the form, below the “total costs
Used Car Salesmen, Trial Lawyers and Real Estate Agents
[Editor’s Note: It’s been a while since I added a new contributor to our mix here at Rain City Guide, but when Gordon Stephenson showed some interest (after at least two years of requests by me!), I can’t help but be excited to have him on board! Gordon is the Co-owner and Managing Broker of Real Property Associates. I first came across Gordon when Zillow added him to their Board of Directors in July of ’05, and have run into him both online and offline since then. He’s a great guy and a virtual real estate institution in Seattle, so I couldn’t be happier to bring him on board as a contributor!]
When I started selling real estate fresh out of college, nearly 20 years ago, my parents were confused, even apoplectic: “You just earned this degree and you’re choosing to sell real estate? How are you going to pay back your student loans? Couldn’t you have done that with a GED?
Laying Bamboo or Wood Floor on the Diagonal
One of the questions Kim and I are asked most often is which way to lay the bamboo or wood floors. Horizontal? Vertical?
Often the better and best choice is on the diagonal. However I am told this method requires a higher level of craftmanship and produces a larger amount of product waste.
If the home is deep and narrow, you like want to go with horizontal. If the home is wide and shallow in depth, you like want to use vertical. Same goes if you are just doing one room. The room will feel even more long and narrow if you place the wood in a vertical position vs. a horizontal layout.
But don’t overlook that third answer, on the diagonal, particularly in smaller homes.
Another Lender Pulls Out of Fannie/Freddie 100
Lately I’ve felt like Debbie Downer with the information I’ve been sharing here. On a positive note, it’s great that we
have blogs to get this information out to buyers, sellers and real estate professionals…especially since we, as Loan Originators, are given very little notice these days of significant changes. I gave you an example last week, here’s one from today.
Franklin American Mortgage Company issued a revised memo that I received today announcing a reduction in Expanded Approval (EA) loan to values to a maximum of 95% LTV with a minimum credit score of 660. An “expanded approval” is when a loan scenario doesn’t quite fit the pegs needed to receive an “approval” from the AUS (automated underwriting system). There are different levels of “Expanded Approval” and to tell you the truth, I did very few (maybe 1 or 2 ever) EA loans. There’s a price hit, and at the time either FHA, subprime or Alt-A would offer a better scenario for the borrower. If you had an EA approval with First Franklin at 100% LTV, you had until 4:00 CST today to lock the loan and it was also subject to MI availability (good luck). This part of the memo didn’t bother me personally since I didn’t really use this type of loan as much as the next section.
Here was my personal zinger: Franklin American is discontinuing Fannie Flex 100/Freddie 100. The maximum LTV/CLTV is reduced from 100% to 97% including Fannie 100, Freddie 100, My Community and Home Possible programs (you can still do a Flex 97).
I still have a few lenders that are offering Fannie Flex 100 “at the moment”. However, I’m expecting 100% LTV financing with Freddie and Fannie to go the way of the do-do.
What should you do?
If you’re a Listing Agent and have transactions pending with 100% financing, I would confirm with the lender they are still valid. If you have offers on your listings with 100% financing, contact the lender to confirm they can still offer this product. And consider a quick closing.
If you’re a Selling Agent with Buyers utilizing 100% financing, your buyers should consider a “Plan B” (like 3% down for Flex 97 or FHA). I recommend reverifying transactions in process and any preapprovals.
Buyers, if you’re planning on buying using 100% LTV financing, meet with your Mortgage Professional to develop a “Plan B”. It’s good to have options in this kind of market.
Watch for my next post…featuring eeorr.
Major Credit Score Rate Adjustments — The Hits Keep Coming
Fannie and Freddie are implementing new loan level price adjustments (LLPA) based on credit score and loan to value. This is a
change for the worse from my previous post announcing the original LLPA. Now your credit score is even more critical. Some lenders are implementing these changes immediately with terms on when the loans must be locked and closed.
The following information is for purchases and rate/term refinances with mortgage terms longer than 15 years (cash out refi’s have additional hits).
The hits shown below are “to price” and not to rate.
LTV (loan to value) 60.01% to 70%
Credit Score 720 or better — no hit
Credit Score 640 -719 is a 0.500% hit to price.
Credit Score 620 – 639 is a 0.750% hit to price.
LTV 70.01 or More
Credit Score 720 or better — no hit
Credit Score 680 to 719 is a 0.500% hit to price.
Credit Score 660 – 679 is a 1.250% hit to price.
Credit Score 640 – 659 is a 1.750% hit to price.
Credit Score 620 – 639 is a 2.500% hit to price.
These “hits” are in addition to other factors that are used for pricing rates and even though I quoted lower credit scores, don’t count on Fannie/Freddie (conforming) financing…especially if you’re eyeing the temporary conforming-jumbo which requires a minimum 660 credit score.
So if you have a 719 credit score and are putting 20% down using a 30 or 20 year fixed rate mortgage, you are going to pay 0.5% more in fee than your friend with a 720 credit score. If your loan amount is $400,000, this is an additional cost of $2000. Or the “price hit” may be factored into to the interest rate. Typically (but not always) 0.5% in fee would equal about 0.125% – 0.25% higher in rate. A quarter point difference in rate runs around $65.00 per month ($775 per year).
Recommended read: How to Improve Your Credit Score.
I also encourage anyone who is considering buying or refinancing a home to meet with a Mortgage Professional as soon as possible. A little time and elbow grease may save you thousands.
MB Confidential – Should he come out of the closet?
Back in July I wrote this post about my favorite real estate blog(s) not written by people inside the real estate industry.
Manhattan Beach Confidential is written by an anonymous author whom I know as MB Watcher. He was featured in an article written by The Easy Reader and is under a lot of pressure to come out of the closet.
My advice to him was Don’t Do It!!! Stay anonymous. They are just looking for whom to crucify. They’ve got the cross and nails hidden behind their backs. They’ve got the noose all ready over in The Tree Section. They want to know who you are so they can find the chink in your armor. Telling them who you are would be revealing your Achilles’ Heal…we all have one.
I hope to be meeting him in person in the next month or so, and he has agreed to do that without wearing a bag over his head 🙂 Though I have suggested that he do wear a bag over his head and do not want to know his real name. It may be against the code of ethics for me not to tell the Realtors who he is, if I know his name.
What do you think? Should MB Watcher come out of the closet? Is the info he provides less valuable if you don’t know who he is? I don’t think agents are allowed to be anonymous for many reasons. But just a guy writing about real estate? Can he stay a well informed unknown?
Have you heard about Zilpy? New site for tracking rents in cities across USA…
A title rep sent me an email today that gave me a head’s up on a new site I’d not seen before called www.Zilpy.com. It looks a heck of a lot like Zillow but with data on rents instead of home values. I’ve been playing around with it a bit and while I can’t figure out exactly yet how they’re getting the data, I’m intrigued. Most likely I’ll make mention of it to some of our investors to get their feedback on it as well and see if they think it’s a worthwhile site.
Check out the function of “heat maps” for rent levels in Washington. More states and cities are covered so it’s not just a Seattle gig. I believe it’s come to life from Silicon Valley.
Fannie Mae's Jumbo-Conforming Loan Guidelines
I started this post with the plans of announcing the pricing for the Jumbo-Conforming mortgages…however, I just don’t have enough facts to do so yet. It looks like Fannie Mae’s add to rate is 0.25%…however, lenders will most likely have their own add to rate as well. (So far, I’ve only seen a jumbo-conforming rate from one lender which was in the high 6 range for a 30 year). As soon as I have more data, I’ll let you know.
Here is some basic information from Fannie Mae regarding temporary Jumbo-Conforming mortgages (loan amounts from $417,001 – $567,500 for King, Pierce Snohomish Counties):
Purchase Mortgages/Principal Residence
Fixed Rate: Max LTV/CLTV 90%. Minimum Mid-Score LTV>80%: 700 / LTV = or <80%: 660.
ARMs: Max LTV/CLTV 80%. Minimum Mid-Score: 660%
Limited Cash Out Refi (Limited cash out means you can recieve a maximum of $2000 cash back at closing).
Fixed/ARMs: Max LTV 75%/Max CLTV 95%. Minimum Mid-Score: 660
Cash out refinances are not eligible (this includes paying off a second mortgage with a refinance, which is considered “cash out”). Update 4/7/2008: Fannie Mae just issued clarification on this guideline: they will now treat paying off a purchase money second as a limited cash out refinance.
*Full doc only.
*2 months reserves (PITI) are required for primary residence.
*45% maximum DTI ratio.
*ARMS are qualified on the fully amortized PITI at the higher of the note rate or fully indexed rate.
*Limited to four financed properties, including the borrower’s principal residence.
Remember, this coach turns back into a pumpkin on December 31, 2008.
Lenders will start pricing “jumbo conforming” anytime…stay tuned!
Sunday Night Stats – King County
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King County Residential Sales
Active/For Sale – 9,436 – UP 260 – median price $524,050 – UP $450
In Escrow – 2,628 – UP 44 – median price $449,000 – Down $950 (asking prices)
Closed YTD – 2,280 – UP 338 – median price $435,000 – UP $462
King Conty Condo Sales
Active/For Sale – 3,366 – UP 105 – median price $324,850 – DOWN $4,050
In Escrow – 868 – no change – median price $314,450 – UP $5,950 (asking prices)
Closed YTD – 762 – UP 104 – median price $280,000 – UP $1,050
Updated closings for February 2008
Adding late postings
Condos # of sales 394 for Feb. 2008 vs. 635 in Feb. 2007 – DOWN 38%
Residential # of sales 1,171 for Feb. 2008 vs. 1,640 in Feb. 2007 – DOWN 28.5%
Residential priced under $400,000
2,902 on market vs. 3,183 sold in the last six months
Residential priced under $600,000
5,753 on market vs. 5,798 sold in the last six months
Residential priced under $800,000
7,332 on market vs. 6,812 sold in the last six months
Residential priced under $1,000,000
8,090 on market vs. 7,231 sold in the last six months
Residential priced under $2,000,000
9,059 for sale vs. 7,636 sold in the last six months
Condos priced under $300,000
1,512 for sale vs. 1,658 sold in the last six months
Condos priced under $500,000
2,697 on market vs. 2,677 sold in the last six months
Condos priced under $800,000
3,086 on market vs 2,890 sold in the last six months
Condos priced under $1.5 million
3,277 on market vs. 2,929 sold in the last six months
“Statistics not compiled or published by NWMLS.