Category Archives: Industry Talk

Social Media Overload = Un Social Skills.

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No Social Media

Shorecrest High School is doing an experiment.   The staff and students are doing what they term a social media “blackout” for a week.

  • No Facebook.
  • No Twitter
  • No e-mail.

Conversing old school.  Homework is getting done.  Chores are being accomplished.  Mothers and sons are talking more in a few days over the phone than in the past six months.  Relationships are blossoming.   Others are finding it difficult to converse, almost like learning how to ride a bicycle all over again.

I wish people in business and, in particular, real estate would give this a try.   People sometimes  hide behind their e-mail and, in my opinion, much is lost when people don’t call and more is gained when you talk on the phone.   Do agents really need to know every single detail of a file in escrow?  Do you want an e-mail when a minor title issue has been resolved or title has been amended?  Do you need to know when a water bill has been received?  Do I need to know when the oil pan screw has been tightened from the serviceman working on my car?  Should they trigger an e-mail to me or text me?   What is a good balance?

Professionally,  I have found that the more I take the time to call and  talk personally to my clients whether they are in Brecksville, OH. , San Diego, CA., First American Title in Clearwater, Florida, or an Attorney in Washington DC,  I tend to build and foster longer term clients.

Talking things over on the phone is also one of the most effective ways in finding resolutions to transaction problems.  On the other hand, total transactional blackout is also a problem that still occurs: that’s code for agents that never respond or converse with escrow,  no matter what social media tool they have at their disposal.

How To Begin the Home Buying Process

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Unfortunately most agents are trained to have a buyer make a list of everything they want in a home as the first step in the home buying process. Left to their own devices without this “push” in the wrong direction, RARELY does a future home buyer start by making a long list like that. It is a “sales” tool to lock you into a close-able position. Don’t buy into that logic by handing a “salesperson” a big list of what you “want”.

Three of the most common “first steps” to buying a home in my 20 years in this business have been:

#1 – Highly Ranked Schools

There is always a lot of controversy surrounding the topic of “best schools” as determined by a ranking system or online school ranking site. Still, many parents use these sites when determining where they are going to be buying a home. My clients tend to use a combination of these two sites:

GreatSchools.org ranks the schools on a scale from 1 to 10. Yes, I have actually seen a school on The Eastside ranked as “1” on a scale of 1 to 10. Makes you want to go peek in the windows and see what the heck is going on in that school. There is also a “star” system, but that seems to be generated by parents whose children already go to school there, so take that with a grain of salt and read the full comments of the parents vs the “3 star” or “5 star” ranking.

There may not be much difference between a 10 ranked school and a 9 ranked school…but clearly there must be a difference between a 10 ranked school and a 4 ranked one. If you love a house in an area serviced by a school ranked from 1 to 4, at least go to that school to try to determine why it has such a low ranking. You WILL get more home for your money if the school is ranked lower but each buyer has to decide where their priorities lie. For many…it is best school their money can buy vs best home regardless of quality of school, and the price per square foot of the home will often reflect that difference.

Another site my clients use, and they usually use both sites for comparison purposes, is:

SchoolDigger.com I like the 1 to 10 ranking system of GreatSchools.org better than the 1 to 5 ranking system of SchoolDigger.com, but I LOVE the display on a map of the schools with “balloons” showing the school ranking. Gives you a better visual of where that you can then match up to a home search map tool. I wouldn’t use these sites to look for homes though. The best real estate search tool for many, many reasons is Redfin.com, but my guess is if you are reading a real estate blog like this one…you already know that.

Even if you do not have children in school, you need to be aware of the impact of school rankings on home values so that you are using the correct “comps” when determining a fair price for a home. You don’t want to use a 10 ranked school as a comp for an offer to be made on a home in a 2 ranked school! Unfortunately, even appraisers haven’t learned that one yet. Be ahead of the curve. Do not be fooled into thinking that “School District” is the ONLY criteria to be used. There are often major variances within a school district.

Some School Districts like Lake Washington School District have a great online map of each school’s boundaries. Boundaries do change from time to time, so be sure to check with the district once you have found a home. Give them the exact address and know that if you are on the border between two schools vs dead center in the middle of the defined area…well, change happens and likely more near the edge lines. This is most important for people planning to have children or who have very young children who are not yet in school.

#2 – “Close-in”…or not “close-in”.

Wanting to buy a house that is “close-in” is more often a “move up buyer” request than a 1st Time Homebuyer request. Sometimes it is the opposite. They bought “close-in” and now want to be far away from “it all”. Unfortunately some learn the hard way how important it is for them to be close to or far away from…something. Everyone’s something is different. First Time Homebuyers tend to look at the WHAT vs the WHERE, and often end up someplace they hate being, causing them to rethink that where and move “out” if not “up”. In fact going from a bad “where” to a good “where” often means moving UP in Price but DOWN in home quality, size and amenities. The wrong where often results in more home for the money, which is why First Time Homebuyers tend to choose them more than experienced homebuyers.

You will often see “Great ‘close-in’ location!” in a real estate ad. What “close-in” means is different in each area. On the Eastside it could mean close to Microsoft, close to Redmond Town Center, close to Downtown Kirkland. On the Seattle Side it usually means you can walk to a coffee shop (and other shops). For those who don’t expect to walk to work, “close-in” could mean a reasonable bus or drive commute time. NOT “close-in” is a little easier to describe than “close-in”. If you have to drive for a half hour to get some milk…you are NOT “close-in”.

There are many variances on this “close-in” theme, and they are as different as people can be different. It’s a personal decision that you REALLY need to spend a lot of time thinking about. Some people hate the noise level of being too “close in” to shops that can also have very noisy restaurants and bars with drunk patrons very late into the night. Some people like to walk to enjoyable amenities, but be as far away from work as reasonably possible. Some people like to be very close to work, but in a private and quiet location when they get home and NOT close in to noisy businesses.

If there is ONE HUGE MAJOR MISTAKE of homebuyers that stands far and above beyond the rest of the mistakes you can make, it is to look at “a house” and make an offer on it, without adequately discovering what is around it. The MINUTE you think you may want to make an offer on a house, spend as much time as possible around that house before negotiations are complete and the home inspection “out” phase is passed. Park your car in front of the house and take long walks in every direction. Say hello to the neighbors. Don’t be afraid to do that! You don’t need to 3rd degree them with a list of questions, nor should you do that. But you should knock on the door and meet the neighbors to see if there is anything alarming to you about them. Why don’t people do that? No one wants to be “close in” to a problem neighbor…no one.

It’s very simple to get “drive times” now without having to leave your computer. Just put in the address of the home and various destination points into a service like Bing Maps and it will give you the estimated drive time. Be sure to double check that during rush hours IF you plan to be driving to and from during rush hour.

#3 Style of Home

Once you determine your suitable where(s), it is time to study the potential whats of that where that are IN YOUR PRICE RANGE.

IMPORTANT NOTE: Many homebuyers are afraid of Future Home Values. Take note that IF you buy a split entry home for too close to the max price for that style of home, you will not likely be able to get paid back for those improvements when you sell.

Yesterday I posted some rather harsh realities for people who want to be “close to Microsoft Redmond Campus” as in within a 2.5 mile radius of 148th Ave NE and 36th. Of great significance is the age of home possibilities.
microsoft age

As you can see in the chart above, a large majority of the homes available and sold in that area were built more than 20 years ago. So wanting a house not more than 10 years old within a mile or two from work at an affordable price may look great on your “WANT” list…but easier said than done. That is why it is important to study the makeup of the area you choose, before going out to look at homes.

Besides the age of home, the style of home is also an important factor. You may “like” granite counters and stainless steel appliances…but that is NOT “real estate”. Way too many people choose a home by its “finishes”. A newer 2-story home that has laminate counters and ugly carpet MAY be better than a less favorable home style with hardwood floors and granite counters, depending on your needs and price range.

BIG NOTE: IF YOUR BEDROOMS (AT LEAST 3 OF THEM) ARE NOT A FULL FLIGHT OF STAIRS ABOVE YOUR KITCHEN AND LIVING AREAS…IT IS NOT, NOT, NOT A 2-STORY HOME! I have met many a seller in a Split Entry or 1 story with basement who said “we have always called it a 2-story home”. Reverse floor plans, and I have seen several on market recently, are a little harder to define. If the view from the main level on a reverse floor plan is knock your socks off awesome…well, let’s just say it better be.

Here are 3 examples of how to look at the general range of possibilities before going out to look at homes to buy.
microsoft type

In the pie chart above you can see that the majority of homes in that area (within 2 miles of Microsoft) regardless of price, may be a home style that you simply do not care for. It is important to know that before going out to look for your “ideal home” in an area that may not have it in your price range. Do you go further out to find “it”…or do you stick to living near work? A personal decision you should make before going out to look at homes. Have a backup plan!

Besides availability, there is a matter of cost. Below I charted all of 98052 using the current YTD median home price of $540,000 as a guide. This first pie chart below breaks down the style of homes sold so far in 2010 costing $540,000 or less in Redmond 98052. Often 2 story also equals “newer home”. Not always…but often…on the Eastside vs in Seattle proper.

graph (8)

Once I go over the median home price, the breakdown of home style changes dramatically, as shown in the pie chart below. This is VERY important to home buyers in the first group. IF you bought the highest priced Split Entry home UNDER the median home price…note that NO Split Entry Homes were sold above that median price YTD 2010. Future home appreciation is not simply about “the market” as a whole. There is a point at which there simply is no room for upward movement given you simply cannot compete with newer homes and newer home styles regardless of how you may improve that home.

graph (9)

It is pretty simple to graph out your potential and likely choices in your price range in the area you hope to live. It’s OK to look for a needle in a haystack…you just have to know that before you begin the process. What has NEVER happened in the past, is not likely to happen in the near future. If 1% of the people were able to do what you are trying to do, that is important to know the same as it is important to know if 60% of the people were able to do that in recent history.

You clearly will be able to change what you “WANT” a lot easier than you can change the makeup of homes built in a given area. If it never was built, you likely can’t buy it. So do your homework before you step out the door and get caught up in making quick on the fly changes in your overall home buying plan. Be prepared and you will make a wiser choice.

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(required disclosure: The stats in this post and its graphs are not compiled, verified or posted by The Northwest Multiple Listing Service.) They are hand calculated by ARDELL.

30 Year Fixed Hits New Record Low

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Yesterday and so far this morning, you can lock in 4.00% for a 30 year fixed rate (apr 4.147) based on the standard criteria that I use for my Friday Rate posts at Rain City Guide:

  • Priced with 1 point total (origination/discount)
  • 740 or higher mid-credit score
  • $400,000 loan amount
  • 80% loan to value or lower
  • closing in 45 days

If any of the above variables are different, it may impact the pricing of the rate.    

This morning, mortgagae backed securities are in a position for a reprice for the worse so it’s hard to say how long this rate will be available.

I just had to share in case tomorrow’s rates appear to be the unchanged.  Remember rates are a moving target and change throughout the day….sometimes often!

The Fed leaves Rates Unchanged

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The Fed just released their statement that the Fed Funds Rate will remain unchanged stating that current conditions “warrant exceptionally low levels of the federal funds rate for an extended period.”   

From the Press Release:

“…the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated….

…the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.”

Here’s the footnote:  1. The Open Market Desk will issue a technical note shortly after the statement providing operational details on how it will carry out these transactions.

Remember, today’s actions do not directly mortgage interest rates however, mortgage rates may be influenced by these actions since mortgage rates are based on mortgage backed securities (MBS).  

Mortgage backed securites have improved since the release of the FOMC Statement.   DOW is down 38 off of earlier triple digit lows.

New Website to Help Struggling Homeowners

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OptionsFannie Mae recently launched KnowYourOptions.comto help struggling homeowners who may be feeling overwhelmed with their mortgage situation.    The website is gearred towards avoiding foreclosure and warns homeowners not to walk away from their home.   

The site features interactive tabs:

  • Options to stay in your home
  • Options to leave your home
  • Resources
  • Beware of Scams
  • Take Action

There are calculators, videos, checklist and forms for home owners to check out.   

With regards to the refinance section under “options to stay in your home”, know that you may not have to go through your mortgage servicer (who you make your mortgage payments to) with the home affordable refinance.   Your local mortgage originator may be able to help you with your home affordable (or any) refinance.

UPDATE TO POST 10:15PM:   If you are considering leaving your home, before you decide on a short sale, deed in lieu or foreclosure, please contact an attorney.   Fannie Mae’s site insinuates that with a foreclosure  you may have a deficiency judgement–opting for a short sale or deed in lieu of foreclosure does not guarantee that you will not have a deficiency judgement (depending on your personal scenario).

If it stinks, blame it on the dog.

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my old stinky pug, Orson

my old pug, Orson

The term “mortgage broker” has become bastardized in recent years by the media and our elected officials in Congress.   The term is often wrongly used to describe a mortgage originator who’s gone bad or done something wrong.   Mortgage brokers are blamed for what’s gone foul in the mortgage industry when the room was packed with mortgage originators who work for banks, correspondents and credit unions…it’s just so much easier to blame the dog.

Yesterday, when Jillayne wrote a post about Shawn Portmann, the Seattle PI originally has the title to their article incorrectly calling him a “Mortgage Broker”; after the Washington Association of Mortgage Professionals contacted the author, he corrected the title to read: “Feds to mortgage banker: We want your giant bag of money”.    I considered this a small victory for WAMP and applaud them for getting the Seattle PI to correct their title and for defending the mortgage industry.

I wasn’t so lucky last spring when I tried to get the Seattle Times to correct calling a mortgage orignator who worked for Chase Bank a “mortgage broker“…you might remember the story involving stated income loans for hot dog vendors and limo drivers from Russia who were trying to sue Chase for hundreds of thousands of dollars over their lost earnest money.   She refused to correct her article.   How an employee of Chase is a “mortgage broker” beats the heck out of me.

It’s very convenient for big banks to vilify “mortgage brokers” because somehow they believe it makes their mortgage originators appear to be of a higher quality.   And….once the small mortgage broker industry has reduced to almost nothing, consumers will all have to go to one of three banks or a handful of remaining correspondent lenders or credit unions for their mortgage needs. 

The big bank$ have convinced Congress that it is the “mortgage broker” who has smelled up the industry.   Somehow they forgot to mention that:

  • mortgage brokers only sell bank products and programs.   Wholesale bank reps call on mortgage brokers and correspondent lenders begging for our business.    Back in the subprime days, they’d be lined up out my door pushing Countrywide, Washington Mutual or World Savings/Wachovia option ARMs stated income or 100% financing.   These programs were created by the banks/lenders not brokers.   The broker was the street dealer (sales) and the bank was the drug-lord/meth-lab (supply).
  • mortgage banks/wholesale lenders underwrite the loans that brokers originate for the bank.   Brokers do not make underwriting decisions–mortgage banks do and correspondent lenders do can (per bank guidelines).    If a wholesale lender/bank did not want to make a loan sent to them by a mortgage broker–they could decline it!

This morning, I’m reading the White House Blog’s “Top 10 Things You May Not Know About the Wall Street Reform and Consumer Protection Act” and number 2 is:

“Mortgage brokers will be prohibited from making higher commissions by selling mortgages they know consumers can’t afford.”

First of all, I agree that NO mortgage originator, regardless of the type of institution they work for, should earn a higher commission for selling inappropriate mortgages–in fact, they should not originate that loan <period>.    This point is so poorly written — is it saying that a mortgage banker CAN make a higher commission originating bad loans?   Our own White House has joined in on bastardizing the “mortgage broker”!  

My plea is that Congress and the media use the term “mortgage originator” when in doubt of what type of institution the MLO is employed by or if they’re making a general statement about mortgage originators.   The definition of  “mortgage broker” is not an unsavory mortgage originator.   This is reckless to an industry that is fighting to stay alive.

Golf Savings Bank Merges with Sterling Savings Bank

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I just received this email from one of my students, a Golf Savings employee:

There have been some exciting changes at Golf Savings Bank. I wanted to take a few moments and give you a brief update on what those changes are and what will be happening over the next few months.
 
On August 1, 2010, Golf Savings Bank merged with and into Sterling Savings Bank, although we have been sister companies for the last several years. I am excited about this change. We now have access to over 170 bank locations throughout the Northwest, in Washington, Oregon, Idaho, Montana and California including our existing bank office located in Mountlake Terrace.
 
So who is Sterling Savings Bank? Sterling is one of the largest regional community banks in the western United States, headquartered in Spokane. Since opening its doors in 1983, the bank has grown to over $10 billion in assets and has over 2,400 employees. Sterling offers a wide array of products and services for personal and business customers.
 
So what’s next? There will be a number of changes occurring over the coming months. On or about September 1, 2010 you will begin to see our signs changing over to the Sterling Savings Bank name.  You may see information from both Sterling and Golf during this time as we work through the transition.
 
While we have a new name, you will continue to see the same great people you have become used to working with at Golf Savings Bank.

Jillayne here. I’m not so sure “sister companies” is accurate. I always thought Sterling was the parent and Golf, it’s adopted child.  Here’s a link to the Golf press release.

Many people in the mortgage lending industry in the greater Seattle area are familiar with Golf, which started as Lynnwood Mortgage Company with a strong foothold in South Snohomish County and added depository banking later.  This merge seems to be more about helping Sterling raise capital. It sounds like Sterling is 90 percent to its goal of raising needed capital.

Warburg Pincus and THL agreed in May to invest a combined $278 million, for a roughly 40% stake in the bank, bringing the total amount of capital to be raised to at least $720 million. Sterling spokeswoman Cara Coon declined to comment, citing the quiet period around the placement. The company said in its second-quarter earnings release that the “recapitalization process has been challenging and complex.”

“Although there can be no assurance of success, we are leveraging our resources in an effort to bring the recapitalization to a successful conclusion,” it said.  The company posted a net loss of $53.8 million, or $1.12 a share, in the latest quarter, compared with a loss of $29.5 million, or 65 cents a share, in the 2009 quarter.

“We sold a significant number of nonperforming loans as we worked to rebuild and strengthen our balance sheet,” Sterling said.

Golf seems to be doing great on the retail origination side, having recruited many loan origination teams from competitors over the past 18 months.  It will be interesting to see how the two companies merge management teams along with balancing new investor oversights, while keeping the very productive Golf retail origination folks and their customers, Realtors, and builders happy.

Congratulations, Golf and Sterling.  Let’s hope this merger results in a stronger, financially healthy regional bank and mortgage bank.

19 Washington State Lenders Lose FHA Approval

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Today HUD released it’s Administrative Actions from the Mortgagee Review Board. Read the Federal Register PDF here.  There were 905 lenders that failed to meet requirements for HUD’s annual recertification for FHA approval.  The Mortgagee Review Board voted to immediately withdraw FHA approval for a period of one year for each of the 905 lenders.  “The Board took this action because the lenders were not in compliance with the Department’s annual recertification requirements.”

Granted, some of the lenders on this list are no longer in business such as MILA or were taken over by other banks like Washington Mutual. Yet 905 is quite a high number and some of the names on the list surprised me. Out of the 905 here are the banks, lenders, or brokers from Washington State:

Bank of Clark County, Vancouver
Callycorp Financial, Vancouver
Capstone, Inc., Vancouver
Compass Mortgage, Edmonds
First Independent Bank, Vancouver
Full Circle Financial, Kent
JD Myers Financial, Lake Stevens
MILA, Mountlake Terrace
Mortgage Broker Associates, Lynnwood
NHI Home Mortgage, Federal Way
Park Place Financial, Redmond
Pierce Mortgage, Tacoma
Puget Sound Mortgage, Edmonds
Response Mortgage, Bellevue
RTL Financial, Bellevue
Top Mortgage Bankers, Bellingham
View Point Lending, Marysville
Washington Mutual
Western States, Bellevue

To check on the current default rate of your favorite FHA lender, check out the Neighborhood Watch website.

FHA 30 day “public comment” period

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For the next 30 days, HUD is seeking public comment on the following policy changes, each of which are designed to mitigate risk to the Mutual Mortgage Insurance Fund while promoting sustainable homeownership for FHA borrowers:

1) Update the combination of credit and down payment requirements for new borrowers. New borrowers seeking FHA-insured financing will be required to have a minimum FICO score of 580 to qualify for FHA’s flagship 3.5 percent down payment program. New borrowers with credit scores of less than a 580 will be required to make a cash investment of at least 10 percent. Borrowers with credit scores of less than 500 will no longer qualify for an FHA-insured mortgage.

2) Reduce allowable seller concessions from six to three percent. Allowing sellers to contribute up to six percent of the home’s sales price to offset a buyer’s costs exposes the FHA to excess risk by potentially driving up the cost of the home beyond its appraised value. Reducing seller concessions to three percent will bring FHA into conformity with industry standards.

3) Tighten underwriting standards for manually underwritten loans. When using compensating factors in the underwriting process, lenders will be required to consider those factors which are the best predictive indicators of loan performance, such as the borrower’s credit history, loan-to-value (LTV) percentage, debt-to income ratio, and cash reserves.

All of the above is a quote from the HUD.Gov site linked in the first sentence. Anyone who understands what these new measures will or will not do for the public at large should take a few moments to respond to the Government’s request for “public comment”. I know I will. This is a topic that not many fully understand, so it is very important for those who do to respond from the standpoint of “public good” vs self-interest.