Category Archives: Investing

When it was a “Mid-Century Modern” bank, Washington Mutual served my clients well.

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It provided market rate mortgages which it held in the branch’s own portfolio. (WaMu advertised that its “WM Mortgage Loans” were never sold). Your home is a place to live, raise your family- not an investment.

Whether it’s a MCM (Mid-Century Modern) or other, that’s the way it should be regarded, loved and cherished. And a good home mortgage, preferably locally held and serviced made all this possible for me and my clients. As did many other Seattle natives, I started with “School Savings” pictured as a mural on the wall of a branch.
wamu20muraljpg
WaMu and many other of the troubled banks and mortgage lenders got off on the wrong  foot when they went after the derivative bundled mortgages that were in demand by big operative builders like Toll Brothers as covered in this very inclusive 10/16/05 NYT Magazine article- Chasing Ground.

Seattle Sounders and the Space Needle

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seattle-soundersWhen I first saw the pictures below taken by Damon Cortesi who I know as @dacort on Twitter, it was St. Patrick’s Day.  I thought the green “hat” on the space needle was a Lepruchan’s hat 🙂 I didn’t know why it wasn’t all green.

Kim told me that the blue and green colors on the Space Needle are for the Seattle Sounders Football Club. Tickets for their inaugural game were sold out well ahead of time, and they WON!

But this is a post about the fabulous night shots taken by Damon, and I appreciate his permission to post them here for everyone’s enjoyment. Thanks @dacort !spotlight-on-seattle-space-needle1

space-needle-soundersdowntown-seattle-at-night

Distressed Property Law Changes Pass the Legislature

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Proposed changes to the Distressed Property Law have passed both branches of the Washington State Legislature and the bill is headed to Governor Gregoire’s desk for her signature.  You can read the changes here. Real estate agents and Realtors are now exempt “from the definition of “distressed home consultant” when the broker or salesperson is providing services governed under the real estate brokerage laws and the services do not result in a distressed home conveyance.”

I have mixed feelings about the passage of the exemption. Real estate agents and Realtors were raging mad last summer when their liability increased under the original Distressed Property Law.  All through the summer and fall of 2008, agents swore up and down that they were going to avoid listing or selling short sales in order to limit their liability.  In a way, the Distressed Property Law had some good consequences: Only experienced agents were allowed to take short sale listings at some firms, and it became extremely important to make sure the homeowner was referred to legal counsel.  Short selling homeowners are often better served when their listing agent knows what they’re doing.  The home buyer is also better served when the seller’s listing agent is short sale-competent.  The Distressed Property Law brought this to everyone’s attention.  There were many agents who were very, very worried about increased liability.  So far, I haven’t heard about any lawsuits.

Something interesting started happening toward the end of fall, 2008.  November and December of 08 saw a remarkable increase in the number of real estate agents attending the Short Sale class.  Attendance went from, say, 15-25 agents all summer to 50-70 by December of 2008.  When I asked why they were in class, agents all agreed: “Short sales are becoming more and more of the percentage of available inventory.  We don’t have a choice anymore; we HAVE TO take these listings, even with the added liability. We need to pay our own mortgage and we also like to eat, Jillayne.”

So now real estate agents are exempt from the DPL (provided they’re not going to engage in a distressed home conveyance.)  This means we will see an increase in agents listing short sales left and right, whether or not they are short-sale competent. 

KLK and other agents have said that foreclosures would increase because of the Distressed Property Law.  I argued that it’s not the DPL that will result in more foreclosures but the normal unwinding of mortgage lending gone wild and that higher foreclosure rates will be with us for some time as homeowners who cannot afford their home loans sell or default and return to the housing market as renters.  As time moves forward through the rest of 2009, it will be interesting to see if, in fact, foreclosure rates decline.

FOMC leaves rates unchanged

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There’s really nowhere to go but up with the target Fed Funds rate.   From the Press release:

“To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion.”

As of the time of writing this post, I have yet to see lenders issue new rate sheets for the better in spite of significant improvements with mortgage backed securities.    We should be seeing improved rates soon. 

If you are in the market for a mortgage, whether you are buying a home or refinancing, be sure to provide your Mortgage Professional with all the required documentation needed.   We are all ready in the midst of a “refi boom” and this will compound the delays.   

Real Estate Agents: I highly recommend that you make sure the mortgage companies you have transactions with prioritize purchases over refinance business. 

Homeowners who are considering refinancing:  watch out for mortgage originators who are promising quick closings.  Every aspect of the refinance transaction will become clogged.

Everyone needs to be patient.

Nice Caller Wants to Modify My Mortgage

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I just received a very official sounding recorded message informing me that President Obama has a new program to help save my home–it’s NOT a refinance.  If my rate is over 7% or if I’m falling behind on my mortgage, I can be helped.  If I press 1, I’ll be connected immediately to a Restructure Specialist.  I’m feeling feisty…so I press 1.  

Immediately a polite gentleman boldly answered my questions.

Are you or do you represent my mortgage company?

No.  We’re a loan modification company.

If I understand Obama’s plan correctly, shouldn’t I call who I make my mortgage payments to for a modification?

Well you can, but the clients help receive better results.

Great!  Do you do this service for free?

No.  We don’t. 

Why would I pay you for this when I can call my mortgage servicer and do this for free?

Because you charge for our expertise.

How much does your expertise cost?

We have two convenient mortgage plans.  You can either pay $1899 or three installments at $699 each.

How did you get my phone number?  I’m on the do-not-call list. 

Our marketing department is calling everyone across the country with mortgages.

I couldn’t take it anymore.   I let him know that I was a Mortgage Originator who is versed on The Affordable Home programs and that I don’t condone this type of soliciting.    He told me he’s a mortgage originator too and then slammed the phone down in my ear.

There must be significant money in this industry to allow these companies to employ these solicitors.  I hope our State is agressive in regulating the loan mod industry to protect home owners from predatory actions.  

The recorded message on this phone call sounded so legitimate, I believe that people who are in desperate need of help would think it was coming from the Government.   If I didn’t have my background, and would not have known what to ask the gentleman on the phone, I’m sure he wouldn’t do anything to change that image.

ING Bank suing under RICO statutes to recover losses by alleged local real estate fraud ring.

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Here is the article from the Seattle Times.

Excerpt:

In one deal, the bank loaned a borrower $935,000 to buy a Tacoma house for $1.35 million — a house that, according to the real-estate Web site Zillow, is valued higher than 99 percent of homes in its ZIP code. Nationwide Home Lending was paid nearly $30,000 in fees on that loan.

I’ve just dropped an entire commentary I wrote within this post regarding the fantasy idea some people believe that our local area is somewhat insulated from the garbage and degenerates destroying our markets and economy due to greed and fraud.

In essence, my post can be wrapped up in these questions:

  1. Ethically, is this industry too far gone to recover any resemblance of credibility, trust and moral foundation?
  2. How will the real estate brokers weed out the bad actors? We know DFI is going after loan officers and others.

Fortunately, I know and work with quite a few agents and loan officers who genuinely try to do their very best for their customers. Unfortunately, many of them and others who work in real estate are caught in the enormous wake of the problems the fraudsters have created.

Homebuyer Credit – Simplified

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Pretty simple stuff. For most people it’s just A,B,C + 1,2,3
A. Address of New Home
B. Date you bought it
C. IF claiming 2009 purchase on this 2008 form, check here
+
1. Enter $7,500 or $8,000 unless married filing separately
2. Enter modified adjusted gross income
3. If 2 is not more than $75,000 ($150,000 if filing jointly), skip to line 6 and put amount on line 1 on line 6.  Ta-dah!
You can get Form 5405 and Instructions here:
http://www.irs.gov/pub/irs-pdf/f5405.pdf
and it looks like this:

Form 5405 First-Time Homebuyer Credit

The Making Home Affordable Program

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The Treasury has revealed their plans as promised which address helping responsible home owners with higher loan-to-values refinance and home owners who are facing financial distress (and may not qualify for a refinance) modify their existing loan.

It appears that the High Balance Conforming Loan Limits will apply to “high cost areas” such as Seattle and Bellevue.   This morning, I’m seeing that banks and lenders are now implementing the new higher loan balance of $567,500 (vs $506,000) which was announced two weeks ago (I’ve received one notice this morning stating this will take place effective March 6, 2009).  Update 4/23/2009:  It looks like banks/wholesale lenders may not adopt the revised 2009 High Balance limits until closer to May 1, 2009 when Fannie will officially begin to purchase these loans.  The few banks who did step up to the revised limit early on, either never did or quickly retracted back to the $506,000 loan amount.

From FHFA Director James B. Lockhart:

Fannie Mae and Freddie Mac will also undertake Home Affordable Refinance, a program that is designed to reduce mortgage rates for 4 to 5 million people whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. The refinance option will allow borrowers that currently owe between 80 and 105 percent of the value of their home to refinance their mortgages.

With the refinance program, it appears to be along the lines of a streamline refi where an appraisal may not be required.  This is not uncommon for “well qualified” borrowers to have an appraisal “waived”.  They have disappeared in recent times…it looks like the waiver is back.    The Home Affordable Refinance program ends on June 2010.

I’m especially pleased with the Home Affordable Modification program which I’m hoping will put an end to unsavory loan mods that were predatory.   This program is geared towards home owners who are at “imminent risk of default” and are in “financial hardship”.   It only applies towards owner occupied residences and this is a “full doc” process where the home owner will have to provide two most recent paystubs, most recent tax returns and sign a 4506T.   Second liens holders will receive compensation when they extinguish their lien rights (mortgage).

Loans to be modified must have been originated on or before January 1, 2009 and this program will run until December 31, 2012.

What now?

Home owners in financial distress should contact their mortgage servicer (where the mortgage payment is sent to) right away.

Home owners looking to refinance should gather their income documents and contact their preferred mortgage originator…and please be patient.   Refinances are taking longer to process and close.  Every aspect of the real estate industry has reduced staff.   Hopefully these programs will recreate a some jobs in the real estate lending industry.

Treasury has doubled it’s buying of Preferred Stock in Fannie and Freddie to $200 billion each in an attempt to keep mortgage rates low.   What needs to happen is to have some of the price hits (LLPA) removed or modified so that these efforts will work “in concert”.

Twas the Night Before March 4: Mortgage Eve

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Twas the night before

more information to follow

about the new refinances and cram downs

…almost too much  to swallow. 

Okay…I’ll stop with the rhyme simply because I can’t keep it going!   There are a lot of Mortgage Professionals and Homeowners waiting to hear if they will be helped tomorrow. 

According to the White House Blog, responsible upside down home owners with good credit may qualify to refinance with a loan to value up to 105% with a conventional 30 or 15 year amortized mortgage.  (I’m guessing most would and should opt for a 30 year amortized mortgage)…tomorrow:

  • When can I apply?

Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009. 

I’ve heard nothing as of yet…    I have a lot of questions that I hope will be answered soon.

This from Kenneth Harney’s article on Sunday:

In a letter to private mortgage insurers Feb. 20, Fannie and Freddie’s top regulator confirmed that there would be no requirement for refinancers to buy new mortgage insurance, despite exceeding the 80 percent LTV threshold.

James B. Lockhart III, director of the Federal Housing Finance Agency, described the new refinancing opportunity as “akin to a loan modification” that creates “an avenue for the borrower to reap the benefit of lower mortgage rates in the market.” Lockhart spelled out several key restrictions on those refinancings:

• No “cash outs” will be permitted. This means the new loan balance can only total the previous balance, plus settlement costs, insurance, property taxes and association fees.

• Loans that already had mortgage insurance will likely continue to have coverage under the existing amounts and terms, thereby limiting Fannie and Freddie’s exposure to loss. But loans where borrowers originally made down payments of 20 percent or higher will not require new insurance for the refi, despite current LTVs over the 80 percent limit.

• The cutoff date for the entire program is June 10, 2010.

The “no cash out” factor is concerning.  Refinances where a second mortgage and/or HELOC is included (being paid off) that was not obtained when the home was purchased, is classified as “cash out”.  Even if the second mortgage was refinanced as a rate-term (only to reduce or fix the rate–the home owner never saw a dime of equity from their home in the form of cash).    It appears as those home owners with second mortgages will only be able to subordinate the second mortgage…and good luck with that!  

Banks have yet to adapt the higher conforming loan limitseven though it’s been announced by HUD and FHFA…I’m hoping we’ll see this tomorrow as well “in concert” with the unveiling of Obama’s mortgage plan.

Obama’s plan promises lower mortgage rates…butthese rates are fighting Fannie Mae and Freddie Mac’s LLPAs (huge price hits, such as the 0.75% hit to fee with condos over 75% loan to value).   Why not just get rid of some of these adds that are making rates unactracting…or atleast consolidate some of the brackets.  Is there really a difference between a home owner with a 739 and 740 middle credit score?

We’ll know tomorrow if there is a Mortgage Santa Claus and if he left any goodies under the tree.

Dow dips below 7,000

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It’s an historic event that takes us back to 1997.  Below is a chart showing the history of the DJIA from 1929 to present, courtesy of msn money central. the first thing I look at every morning when I wake up.

When I started working in 1972, the Dow was at about 950.  When I switched to real estate in 1990, the Dow was just under 3,000.  It’s interesting to read some of the rationalizations of the 2002 low point. 

Dow Jones Industrial Average History

Dow Jones Industrial Average History

Dow Jones Industrial Average 10 year

Dow Jones Industrial Average 10 year

 

“The ‘game changer’ will be the housing market, and whether (or not) it can stablilize”