Category Archives: Investing

Moving to Seattle – Bridges and Traffic

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Feb2006Storm4185

Thinking about moving to Seattle? Wondering what the traffic is like around here? Before you look at homes on the internet, I strongly suggest you study the Transportation Layout of the Seattle Area.

Often where you live, involves which side of “the bridge” you work on. This Seattle Area Traffic map gives you an excellent broad overview of how you get to and from. Study the “black traffic clog points” on that map for a two week period at various times each day during that two week period. That will give you a pretty good idea of normal traffic patterns, except for the few times each year when the bridge is closed.

Take a long hard look at Lake Washington. It’s HUGE and worthy of due consideration as to how you are planning to get over or around it.

My perspective centers more around the 520 bridge, and around the north side of Lake Washington, with occasional travel over the 1-90 bridge. Locals always refer to this bridge as “The 520 Bridge”, but if you are looking for info on it,  you will find it under “Evergreen Point Floating Bridge” in wikipedia, even though the name was officially changed to “The Governor Albert D. Rosselini Bridge-Evergreen Point” in 1988.

Sometimes people will simply say “the 520”, but more often they will say that when referring to the part of that road that is on The Eastside, vs the floating bridge portion of that “road” going over Lake Washington.

One of the reasons I decided to write on this today, is because I was reading updates to the Pontoon Construction Project posted on The Washington State Department of Transportation website. On a good day, travelling back and forth across the 520 Bridge is not a huge deal. On a bad day (when the bridge is closed or partially blocked by a stalled vehicle) one would have been wise to consider the alternative travel options, when deciding where to buy a home.

My general advice is to buy a home on the side of the bridge where you work, unless there is a really good reason not to do that. Very often my first question of someone who calls me about buying a home here in the Seattle Area, especially if they are moving here for a new job, is “Where are you going to be working?”

The Federal Reserve’s proposed changes to Regulation Z (Truth in Lending)

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benb

If you’ve been following Ben Bernanke’s testimony on the Hill this week, you may have noticed him hinting about significant proposed changes to Reg Z and changes in how mortgage originators are compensated, leaving many of us in the industry wondering “what now”.   Don’t get me wrong, Reg Z could use some tweeking…it’s just that the mortgage industry is in a state of constant change (evolution?) with a deluge of new forms and/or regulations including MDIA, HVCC and the new Good Faith Estimate which goes into effect on January 1, 2010.

From this morning’s Press Release:

“Our goal is to ensure that consumers receive the information they need, whether they are applying for a fixed-rate mortgage with level payments for 30 years, or an adjustable-rate mortgage with low initial payments that can increase sharply,” said Governor Elizabeth A. Duke. “With this in mind, the disclosures would be revised to highlight potentially risky features such as adjustable rates, prepayment penalties, and negative amortization.”

Closed-end mortgage disclosures would be revised to highlight potentially risky features such as adjustable rates, prepayment penalties, and negative amortization. The Board’s proposal would:

  • Improve the disclosure of the annual percentage rate (APR) so it captures most fees and settlement costs paid by consumers;
  • Require lenders to show how the consumer’s APR compares to the average rate offered to borrowers with excellent credit;
  • Require lenders to provide final Truth in Lending Act (TILA) disclosures so that consumers receive them at least three business days before loan closing; and
  • Require lenders to show consumers how much their monthly payments might increase, for adjustable-rate mortgages.

The Board will also work with the Department of Housing and Urban Development to make the disclosures mandated by TILA, and HUD’s disclosures, required by the Real Estate Settlement Procedures Act, complementary; potentially developing a single disclosure form that creditors could use to satisfy both laws.

In developing the proposed amendments, the Board recognized that disclosures alone may not always be sufficient to protect consumers from unfair practices. To prevent mortgage loan originators from “steering” consumers to more expensive loans, the Board’s proposal would:

  • Prohibit payments to a mortgage broker or a loan officer that are based on the loan’s interest rate or other terms; and
  • Prohibit a mortgage broker or loan officer from “steering” consumers to transactions that are not in their interest in order to increase the mortgage broker’s or loan officer’s compensation.

Clarity and transparency for consumers is a must with the mortgage process.   I’m not sure what to make of this line:  “Prohibit payments to a mortgage broker or a loan officer that are based on the loan’s interest rate or other terms“.     Mortgage rates are increased or decreased based off of paying points which includes the mortgage originators compensation.    Perhaps the FOMC would like to see mortgage originators be paid hourly instead of based off of rate…I’m all for that!  🙂

Collaboration: The important DNA in any small business

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Collaboration:  Do you have this DNA in your small business?  Is it part of your mission statement or mantra?

This is not so much an insight into how a successful real estate transaction comes to fruition as much as it is a testimony of what makes any task, job, objective or goals conclude with a positive outcome.  Whether you are in the military and command a small unit of soldiers or, what I commonly describe the role of  a Realtor as,  “the Conductor

Mukilteo Real Estate: #10 best community in America by Money Magazine

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This past week I retrieved my latest issue of Money Magazine from the mailbox and was pleasantly surprised to find that Money Magazine ranked the seaside community of Mukilteo as among the very best communities to live in.   Ranked number ten in the country by the magazine,  the town offers spectacular views of the Puget Sound, the Olympics, and the Cascades if your home is situated to look east.   Among the reasons to consider living in Mukilteo were the good schools and lower property taxes when comparing to other communities in the study.

In today’s market, when you consider the housing price pullback, community, schools, employment and intangibles, Snohomish County offers some of the very best real estate in the Northwest.

I can certainly attest to the spectacular setting in Mukilteo.  While waiting for the Ferry to sign some clients on Whidbey Island this past Spring (one of the perks of being in the escrow business is traveling to different communities)   I took some pictures of the “glass-like” water scenery (can be very rough) in the morning.  I’ve never seen any portion of the Puget Sound water so calm.

Mukilteo Ferry Landing

Mukilteo Ferry Landing & Lighthouse -Photo Copyright Tim S. Kane 2009

Mukilteo Ferry & Ivars

Mukilteo Ferry at Ivars Fish Bar - Photo Copyright Tim S. Kane 2009

Mukilteo Ferry & Fishermen

Mukilteo Ferry & Fishermen - Photo Copyright Tim S Kane 2009

Loan Mod Firms: Attorney “Backed” or Attorney Representation

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A story today in the NY Times contains interviews with salespeople who worked for an attorney-backed loan modification firm in California that is now under state investigation for defrauding desperate homeowners. 

“Despite making promises of relief to homeowners desperate to keep their homes, FedMod and other profit making loan modification firms often fail to deliver, according to a New York Times investigation based on interviews with scores of former employees and customers, more than 650 complaints filed with the Better Business Bureau, and documents filed by the Federal Trade Commission in a lawsuit against the company. The suit, filed in California federal court, asserts that FedMod frequently exaggerated its rates of success, advised clients to stop making their mortgage payments, did little or nothing to modify loans and failed to promptly refund fees…For fees reaching $3,495, with most of the money collected upfront, they promised to negotiate with lenders to lower payments on the now-delinquent mortgages they and their counterparts had sprinkled liberally across Southern California.  “We just changed the script and changed the product we were selling,

Seattle – What’s Happening “today”?

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newsseattleTwitter is fast becoming the best source of “What’s Happening?” in any given area, on any given day. If you are one of those people who thinks it is “silly” to record “What are you doing?”, think about it from the perspective that you might be doing what someone else would consider doing, if they knew it was happening.

You become the “news” source for local events, when you report your whereabouts at a local event. You become the restaurant critic when you tweet from a local restaurant about the food and service.

Like it or not, the collective “we” values real information from people on the street, having the experience and noting that experience in “real time”.

So what IS happening in Seattle? Twitter has a “search box” into which I will now put the word “Seattle” and this is what we learn:

@MyWashingtonSt tells us “The Bite of Seattle” Open til 9pm tonight!! Premier Food Fest FREE ADMISSION www.biteofseattle.com

Now that we know that there is an event today called The Bite of Seattle and that it is open until 9 p.m., we might want to know if it is “worth” going to? What do people who are actually there have to say about their experience?

To dig deeper into real time info on the event, change the words on the search box to the event title. In this case I change “Seattle” to “Bite of Seattle” and find:

@Mr10K: We will be reporting to you live from the bite of seattle today people. The Neema taste tests will show no mercy on any booths today!

Maybe you and Mr10K don’t have the same tastes in food, but at least you know you can get a “merciless” review of the booth offerings by him throughout the day, so you can try to hit the “best” booths when you head out to “Bite of Seattle” later today before 9 p.m.

“Using Twitter” is not simply about telling people what you are doing at any given moment. It’s a huge and growing way for people to get the news THEY want at any given moment in time, and pretty much just about any where.

Using Twitter is not all about “I have an appointment at 2 to show a house in Bellevue” from @ARDELLd 🙂 It’s a way for people to use search terms to help them get a glimpse at what other people are doing, that they themselves might like to join.

Twitter has become my news source. Twitter reported that Michael Jackson passed, before CNN could “confirm” that. Twitter told me that Walter Cronkite passed away. Twitter told me that I could catch a radio show with Jeff Turner @respres, 5 minutes before it aired so I could turn on the audio while continuing to work.

Twitter can make you more productive and keep you on top of everything that is happening. You can control how much or how little “noise” you want, by limiting the people and news sources that you choose to follow, or by using a “sort” application like TweetDeck (just one of many).

The search box opens a door to over 2,700,000 people talking about…and you choose which topics are of interest to you, when you pick a search term.

If you have never, ever been to Twitter and have decided you are not going to…it may be time for you to think about why…and what that says about you vs. Twitter.

Snohomish Kla Ha Ya Days festival this weekend

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If you like any of the following then make time to visit Historic Snohomish this weekend during the Kla Ha Ya Days Festival:

  • Music
  • Friends, people watching
  • 80 degree weather
  • Parades
  • Historic downtown shops and eateries
  • Hot-Rod cars (Sunday event)
  • Food (Salmon, Fish n Chips, Burgers, Ice Cream, Pizza, Thai food etc…)
  • Aircraft
  • Hot-Air balloons
  • Skydivers
  • absolutely gorgeous Snohomish Valley
Snohmish Car Show

Car Show - Photo by Brian Thompson Photography

Harvey Airfield

Harvey Airfield

Tonight (Friday) offers a treat for family night at Harvey Airfield featuring “Balloon Glow-Fire in the Sky” event with live Bands and a fireworks show at 10pm.   So, pull out the Harley Davidson from the garage and bike on over to Snohomish for the Kla Ha Ya Days  (schedule) festival going on full throttle this weekend.  It’s a great community and one that residents and future residents are sure to enjoy.

Saturday is the grand parade sponsored by my friend and fellow Seattle Pacific University Alum, Brad McDaniel of Snohomish’ McDaniel’s Do-It-Center.

Snohomish Valley Summer 09'

Snohomish Valley Summer 09' - Courtesy Snohomish-Today.com

Tonight watch the Fire in the Sky Hot Air-Balloon event at Harvey Airfield and at 10pm you will be dazzled by a fireworks show.

Snohomish Skydivers - Courtesy Snohomish-Today.com

Snohomish Skydivers July '09 - Courtesy Snohomish-Today.com

Mortgage Disclosure Improvement Act: New Waiting Periods on Mortgage Transactions

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In an early post, Ardell wrote about the significance of a buyer being able to close quickly…new regulations may put a damper on that.   With mortgage applications taken after July 30, 2009, waiting periods will go into effect with regards to when and how disclosure forms are provided to the consumer.   The Mortgage Disclosure Improvement Act (MDIA), which modifies the Truth in Lending Act (TILA), was originally going to become effective on October 1, 2009, however the effective date was moved up two months which may catch some real estate professionals by surprise.

Here are some of the details:

Good Faith Estimate and Truth in Lending Disclosures….required waiting periods.

Under MDIA, early disclosures are required for “any extension of credit secured by the dwelling of the consumer.”    Three business days from application, the consumer must receive an initial Good Faith Estimate and Truth in Lending (unless the borrower is denied at application).   

The earliest a transaction can possibly close is seven days after the initial disclosures have been issued by the lender (delivered in person, mailed, emailed, etc.).    This is assuming no re-disclosure is required.

Re-disclosure (waiting periods after the early disclosure and corrected disclosures) of the GFE/TIL are triggered if the fees and charges are more than 10%; if the APR is more than 0.125% or a change in loan terms.   Three business days must pass in the event of re-disclosure.   Re-disclosing is nothing new, it typically happened at closing–this will no longer be acceptable.    Mortgage originators “should compare the APR at consummation with the APR in the most recently provided corrected disclosures (not the first set of disclosures provided) to determine whether the creditor must provide another set of corrected disclosures”.   Double check those APRs prior to doc!

From MortgageDaily.com:

“The Commentary added by the MDIA Rule expressly provides that both the seven-business-day and three-business-day waiting periods must expire for consummation to occur.  The seven-business-day waiting  period begins when the early disclosures are delivered to the consumer or placed in the mail, and not when the consumer receives the disclosures.  The three-business-day waiting periods begin when the consumer actually receives or is deemed to receive the corrected disclosures.  If corrected disclosures are mailed, the consumer is deemed to receive the disclosures three business days after mailing.  If a creditor delivers corrected disclosures via email or by a courier other than the postal service, the creditor may rely on either proof of actual receipt or the mailing rule for purposes of determining when the three-business-day waiting period begins to run.”

Consumers have the right to waive or shorten the MDIA if “a consumer determines that an extension of credit is needed to meet a bona fide perosnal financial emergency”.  

No monies may be collected from the borrower with exception to a “bona fide and reasonable” credit report fee until they receive the initial disclosures.   This may cause a delay of when an appraisal is ordered.  Most lenders require an upfront deposit to cover the cost of the appraisal.    The collection of fees rule may also cause potential issues if a borrower is doing a certain type of lock (some with float down or extended lock periods require an upfront deposit).   NOTE:  HVCC requires the borrower receive a copy of the appraisal at least three days prior to closing.

Tim Kane can attest that there is nothing worse than a borrower learning at signing their final loan papers that the fees are significantly higher than what was originally disclosed.  I’d like to think that all mortgage originators redisclosed WHEN modifications to the transaction/fees take place…obviously, this has not been the case.  

DFI covers MDIA here. 

Re-disclosures could become a “holy hand grenade” to quick closings.

Are We Facing A Housing Shortage?

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In looking at the latest Northwest MLS statistics for King County, it would be tempting to say that our housing market is recovering.  But it is an odd mix of data.  Single family home sales volumes are up (even better than last year), inventory is down sharply from last year, prices seem to be starting to rise again, and average days-on-market is dropping.  That all sounds pretty good.  (larger residential stats charts)

Residential stats 750

(Note that the Northwest Multiple Listing Service neither prepares nor is responsible for these charts – the interpretation is my own.) 

But condominium sales are still slow (though rising some), inventory is staying high, and median prices are not rising.  That doesn’t sound quite as good.  (larger condo stats chart)

Condominium stats 750

What are we to make of this seemingly conflicting data?

 What it looks like to me is that we are in the early stages of a housing shortage.  While Seattle and the west side have been built out for decades, Bellevue and the east side communities have been absorbing most of the region’s growth for the past 50 years or so.  But we passed the Growth Management Act in 1990, and then we added the Critical Areas Ordinances.  As a result, it has become harder and harder to get permits for housing developments of any significant size.  In fact it appears that over the last 10 years or so it has become far easier to get a permit for a 100-unit condominium high-rise than for a 100-home residential development.  The rate of application for new building permits “fell off a cliff

Everyone Does Not Qualify for a Loan Mod

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Loan modification fever is here. Families all over the U.S. are struggling to make their mortgage payments and many are expressing frustration that their lender won’t modify their loan.  Any of us could try to make a rational argument that a lender is better off modifying a mortgage loan instead of foreclosing but this is a simple answer to a complex problem.  This blog post will help homeowners understand who is not going to get a loan mod.  Hopefully homeowners will be able to then move forward toward other solutions.

Loan modifications are not for people in temporary financial distress. Temporary financial distress is when a homeowner missed a payment for one or two months because of a temporary hardship.  Lenders can and do help these folks with a forbearance and repayment plan where the missed payments are made up over time or tacked on to the end of the mortgage.  This is not a loan modification, it’s a repayment plan. If your financial distress is only TEMPORARY then asking for a full-on loan mod is wasting your time and everyone elses time.  New research out this week from CR shows us that 30% of all delinquent borrowers self-cure without receiving any kind of loan modification. This means lenders who can effectively triage out borrowers likely to self-cure are behaving rationally by setting aside pleas for loan mods.

Long term financial hardship means homeowners need long term financial solutions. A loan modification is only ONE of MANY long term solutions. In order for a homeowner to receive a loan mod, the homeowner must be able to document stable monthly income.  Lenders have to re-underwrite the file to make sure that the loan modification will not result in further loss to the lender.  This takes time. If a homeowner’s monthly income has dropped so low, to the point where they really can’t qualify to repay the modified loan, this loan modification will not be approved nor should it.  (Note: Lender guidelines on qualifications vary and change often, just like the retail side of lending.) This homeowner should consider other options which will be outlined below.  It should be beyond clear by now that lenders are not going to voluntarily start reducing principal balances unless forced by gunpoint.  The government can try to shame them into it but let’s face it: most corporations are shameless and nothing any of us say and do is going to change this.

Long term financial hardship cases do happen. Case in point. I received an email last night from a homeowner who is on permanent disability. Her husband just got laid off.  They are seeking a loan mod.  In no way can they afford the $4500/month payment on their interest only loan so they’d like the lender to lower the payment (lower the interest-only rate, extend the term).  They are $100,000 negative equity.  Sounds rough, doesn’t it?  However, they happen to have $250,00 in the bank.  This is not a case of financial hardship! A lender would be wasting time and money modifying this loan. These homeowners HAVE MONEY in the bank to continue to make their existing payment for many more months.  Besides, looking at the amount of money coming in the door each month, once their money runs out, chance of a re-default is sky high.  The only thing a loan mod does for these homeowners is it keeps them in their home for a little while longer. If the husband can become re-employed at his same rate of pay, maybe the chance of default drops a bit, but  no lender will modify this loan if there’s literally zero money coming in every month.  This lender is making a good business decision to put this file on ice while they continue to pay as agreed each month using their $250K.

I agree with CR: “If it became widely known that lenders routinely reduce the principal balance for delinquent borrowers with negative equity, this would be an incentive for a large number of additional homeowners to stop paying their mortgages.” It would be rational for negative equity homeowners to make the decision to trash their credit score in exchange for a shot at wiping out $50K, $100K+ negative equity if they wanted to keep their home.  We shouldn’t hold our breath for lenders to make principal balance reductions en masse.

I have not worked in loan servicing for many years but when I did, there was a triage system of making sure cases that were going to cost the bank the most money were prioritized over cases that could wait longer.  We already know that loan servicing departments are far understaffed for the tsunami that’s hitting them full on.  If we want banks to beef up staffing and spend money hiring and training more loss mitigation underwriters, the expense for these costs is going to be priced into new mortgage loans made tomorrow and in the future.  Even so, this will take time.  Working in loan servicing is a very high stress job. Imagine what it’s like to work 8 to 5 every day with a 1 hour break from lunch and 2, 15-minute breaks…with the rest of your day spent being yelled at by Realtors asking for their short sales to be approved RIGHT NOW. High stress = high turnover. I could never do that job today because I’d yell back and surely get fired. 

Homeowners with bonafide cases of lender law violations or predatory lending can and should be prioritized in getting help modifying their loans.  These homeowners are better served by hiring competent legal counsel to represent their interests in negotiating fair and just mortgage terms.  But that’s not what’s happening today.

Today, it seems that the masses believe they deserve a loan mod based on whatever is going on in their lives.  Job loss, reduction in hours, on and on….I know I may sound heartless here but lenders need to make sure you are able to repay a modified loan and that you are eligible for a loan modification under their specific guidelines.  Not everyone will qualify.

Options beyond a loan modification:

Move out of the house
If you don’t want to sell the home, perhaps you will be able to rent out your home and cover or almost cover the mortgage payment. Then you can seek out other living arrangements that comport with your ability to pay. When your income adjusts upward again, you can move back in.

Take on a tenant
Maybe you can rent out your basement or spare room to a tenant.  I know several people who are doing this just so that they can make their own mortgage payment.  Check your local city or county rental guidelines.

Sell the home
If you have negative equity, interview at least three real estate agents who are COMPETENT in the practice of listing and selling short sales. Do NOT hire an agent who has no experience in short sales.  If you decide to hire a Realtor who’s your friend or relative and that person has no experience listing and selling short sales, you get what you deserve.

Hire an attorney
Some homeowners seek out a loan modification only to find out that the real problem was far beyond just the mortgage but instead was an abundance of consumer credit card debt.  Maybe an appointment with an attorney who represents debtors is in your future. An attorney can fully explain all the reasons for and reasons against letting the home go to foreclosure, as well as all the legal consequences.  News today suggests a foreclosed homeowner might even be able to rent back their home from the lender!

Whatever you do, do NOT pay ANYONE cash up front for services before the services are actually performed (with the exception of when you hire an attorney.)  If you part with cash to pay a loan mod company, you are setting yourself up to become re-victimized.  They will tell you anything you want to hear in order to get your money because they know you are desperate. If you have money, hire your own attorney who will represent you directly. If you do not have money, contact your state’s bar association for a referral to free legal aid. 

Also worth saying: Avoid any third party who claims to have a solution to all your problems and asks you to sign anything.  Especially if they say, “This is perfectly legal.”  Before signing anything hire your own local legal counsel. Foreclosure rescue scams continue to be on the rise nationwide. 

Not everyone will qualify for a loan mod and not everyone is going to get their loan mod processed in a timeframe that the majority would consider anywhere near “good customer service.”  Loan servicing doesn’t have to provide you with good customer service because you have no where else to go.  There is no automated underwriting slam dunk approval system for loan mods.  There’s no stated income program for loan mods. Real humans underwrite the file and this takes time.  It’s going to take many, many years to work all the bad loans out of the system. We are in for a long ride.  If you don’t qualify for a loan mod it might be time to move on to other solutions.