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.

“Feds to local mortgage originator Shawn Portmann: We want our money”

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From the Seattle PI:

Alleging a long-running fraud involving a cash-packed safe and a garbage bag stuffed with money, federal prosecutors have asked that a mortgage broker be forced to hand over $102,000 to the government…
Since June 2009, Lord argued, investigators came to believe “that Portmann and two other principals at (Pierce Commercial Bank) Home Loans had devised a scheme involving … materially false representations to induce financial institutions to fund and/or purchase loans.”

Portmann was the loan officer on 5,253 loans, amounting to nearly $1 billion in lent money and about 46 percent of the home loans issued by the bank, the federal prosecutor told the court. Federal investigators contend about half of those loans were obtained through fraud.

In addition allegations that he falsified application information, Portmann is accused of drawing cashier’s checks from his personal bank accounts to show that would-be loan recipients could pay their debts. The checks were printed, but the funds were quickly returned to Portmann’s accounts, Lord told the court.

Federal investigators claim 85 checks totaling about $899,000 were cut from the account between 2006 and 2009, according to the July 30 court filing. For securing the loans, Portmann was paid at least $813,000 in premiums from 2006 to 2008.

Speaking with IRS and FBI agents earlier this year, Portmann’s personal assistant said she withdrew about $500,000 from Portmann’s savings account and deposited the cash in a safe at his home, according to the civil complaint. Another person allegedly involved in the scheme turned over a large garbage bag filled with $102,000 in cash, telling investigators that Portmann had given him a backpack in late January or early February containing $100,000 in bundled $100 bills.”

An avid Rain City Guide reader tipped me off to this story. Thanks also to the PI for the update. My students in the south end ask me about this case every week.

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.

This Week in Seattle Real Estate

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Short Sales and Bank-Owned property as a percentage of the total market is a very important topic. One worthy of tracking on a week to week basis. There seems to be a false sense that these are “evenly distributed” throughout the County. Rather than get into a “yes they are; no they’re not” spitting match, let’s look at the actual data.

King County as a whole:
7-12 kc

In the graph above we see that 25% of all property sold in King County this week were “distressed” sales. For those who like the break down, 49 of those 94 were Bank-Owned properties and 45 were Short Sales. Not a significant imbalance one to the other. Not a significant difference in % of total sales on those that went Pending this week. I’m counting Pending Inspection and Pending since that will not duplicate the stats and will capture those that went straight to Pending with no inspection requested. That total is almost 24%…so not a big difference between closed sale data and pending sale data.

BUT when you look at some of the break-downs by area…HUGE DIFFERENCES!

7-12 sold

4 out of 6 of the closings in Auburn were distressed property, but only 1 of the 14 in Bellevue was distressed. 9 of the 14 sold in Renton were distressed property, but only 2 of the 12 in Redmond were distressed. Kirkland’s results are over-stated here and usually look more like Bellevue and Redmond’s numbers. You can see that in The Pending Sale Chart which for some reason would not post here, so I put it over on my blog.

I will try to run the stats every Monday so that we can combine them in 4 week comparison blocks. The results will vary somewhat from week to week, BUT some areas are clearly 50% or more distressed property, while others are only 10% to 15% distressed property. Looking at valuation factors for all of King County as a whole will not tell you enough. You could clearly be overpaying for a home in some areas, if you are using a County Wide % as to how much the market is up or down. There is a HUGE variance, as you can see in the graph here and the one over on my blog.

Again, apologies for not putting that 3rd and final graph down here and diverting you elsewhere to see it. When Dustin gets back from having fun, maybe he can figure out why it wouldn’t take.

(required disclosure – the stats in this post and graph were not compiled verified or posted by The Northwest Multiple Listing Service)

Oil Spill Wildlife Rescue Event – Columbia Tower

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oil spillThursday
*
July 15th
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there will be a charity event at The Columbia Tower Club at 6:30 p.m. to benefit The Nature Conservancy and help with their Wildlife Relief efforts.

Tickets are $35. Ticket purchase and full event info can be found at the Oil Spill Wildlife Rescue Event site.

For the ticket price of $35 participants will get:

1) Flavor of Seattle local dining cards – normally retailing at $35 (up to $500 in savings).
2) Complementary hors d’oeuvres
3) 10 raffle tickets good for the chance to win some fantastic donated prizes

The 10 raffle tickets alone offer an amazing array of potential side benefits of assisting in this cause:

AUCTION and RAFFLE Items are coming from the below local establishments (list not all inclusive) and the $35 entrance fee gives you 10 raffle tickets toward the drawing.

The Four Seasons
The Hyatt
John Howie Steak
Sea Star Restaurant
Dulces Latin Bistro
Le Gourmand Restaurant
Ray’s Boathouse
Cafe Campagne
Toulouse Petit
Swinery Meats
DeLille Cellars
O-Wines
Secret Stash Seasalts
Chef Amadeus
Liberty Bars
Fresh Seafood
Herban Creations

A great night out in the clouds at The Columbia Tower Club (business casual dress required), a great cause AND a great deal! Hope to see you all there…6:30 p.m. Thursday, July 15th.

Oil Spill Wildlife Rescue Event - Columbia Tower Club

Oil Spill Wildlife Rescue Event - Columbia Tower Club