Posts Tagged ‘mortgage’

Mortgage That Matters: A MORTGAGE IS NOT A COMMODITY

By Rick Soukoulis | February 9th, 2010 0 Comments

From time to time I hear people saying that the mortgage loan officer is a dinosaur.  The reasoning is that a mortgage is commodity, that every mortgage has the same criteria, and that they are, therefore, mere commodities.

By extension, the argument goes, borrowers do not need humans involved in the process, and that they can benefit from reduced costs by eliminating the human element from the equation.

When I hear this argument, I wonder if the person ever got a mortgage.

If they had, they’d know that the “human element” is critically important and that many, if not most, borrowers would never be able to buy a house without assistance from the Realtor and the loan officer.

As an example, think about all the subtleties of various loan programs.  Let’s assume a borrower goes online and choose Program 1-A and gets turned down.  He then applies for Program 2-A, Program 3-A and Program 4-A, getting turned down at each of them.

At this point, does he get so discouraged that he simply gives up?

Had their been a loan officer and Realtor involved, he’d have known that of the ten programs offered, he only qualified for the tenth one.  A knowledgeable loan officer could have steered him right away to program 10-A and made certain he chose the right loan program to match his individual situation.

One argument for eliminating the human element also has to do with the reduced number of programs. The argument is that loan officers were needed 2-3 years ago when there were hundreds of programs, and the borrower needed help choosing among all these choices.  Now, they, say, it’s either a conventional 30 year fixed or an FHA 30 year fixed, and anyone can choose between these two.

Again, no one would say this if they’d tried getting a loan recently.  Awhile the number of programs has, indeed, shrunk, it’s a heckuva lot more than two.  And more importantly, while there maybe be fewer programs, they’re all much harder to qualify for.

A good loan officer can help borrowers choose the right program and help them qualify for that.

And no computer program can ever do that as well.

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Intero Insider: Is California Rebounding? Is It Really?

By Gino Blefari | January 27th, 2010 0 Comments

Last month, home sales in California were up almost 17% over November, and more than 10% over December 2008. This would indicate that progress is being made. Indeed, lots of people are predicting (as many do at the beginning of each year) that there will be a marked turnaround in market value and that things will do nothing but get rosier.

But there’s a problem that not a lot of people are talking about.

Raise your hand if you’ve heard of Strategic Mortgage Default.

No? Let’s talk about it.

Strategic Mortgage Default occurs when a homeowner, finding his home worth less than he owes on his mortgage, intentionally allows it to go into foreclosure. Let me repeat that: intentionally. Right or wrong, lots of people have done it. And many, many more are considering it. The thinking, typically, is that throwing good money after bad will just lead to … nothing. Many people believe that their homes will never again be worth what they paid for them. As such, they think, “Huh. No more property taxes, maintenance, insurance? That sounds good.”

In 2010, based on when many parts of California saw their real estate markets “top out”, many homeowners will have adjustments in their mortgages kick in. One saving grace here might be that interest rates are quite low, so payments mightn’t change all that much. But these adjustments, coupled with new taxes just passed in the state and the realization that their homes aren’t worth close to what they paid might be enough to have many people throwing in the proverbial towel.

While all of this might sound bleak, it would be naive to issue feel-good platitudes and not face the reality of the situation head-on. Strategic Mortgage Default will do its part to radically raise the number of bank-owned for sale in California. And there are lots already.

If you’re planning on selling your house this year, these homes — part of what we call “shadow inventory” — could play a big role in where you can, realistically, set your price. If you’re planning on buying, you’ll want to know how to position yourself to get the best price possible on your purchase.

Strategic Mortgage Default is going to be something you’ll hear more and more about in 2010. Like “short sale”, “REO”, and “foreclosure”, it’ll become part of the daily vernacular.

Pretending that the world is draped in sunshine and rainbows won’t solve anything. It might make people feel better for a while, but it won’t solve anything. Facing reality is the only thing that gets the job done. Your Intero Real Estate professional is ready to deal with reality. Let us know how we can help.

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Bringing A Little Clarity To The Mortgage Business

By Gino Blefari | January 20th, 2010 0 Comments

Since the dawn of time (or at least since financial institutions have been issuing mortgages to consumers), a shroud of confusion has lain over the process. Questionable fees, questions that don’t really have concrete answers, “best guesses”, and a morass of paperwork have been the norm in a business that ought to have been crystal clear.

As of January 1, 2010, much of that changed.

Under the Real Estate Settlement Procedures Act (RESPA), HUD has instituted rules and regulations that require all lenders to use standardized, simple-to-understand good-faith estimate forms. In addition, closing agents are now required to use settlement statements that show — in black and white — any differences between original estimates and actual costs.

I say that it’s about time.

One of the major problems leading to the mortgage crisis that began in late 2007 and which continues today was the fact that many borrowers didn’t fully understand the terms of a mortgage. Now with standardized good-faith estimate forms, which are easy to understand, are being used with all lenders and allow people to compare loans and legitimately shop around for the best deal.

When you ask, “How much does this loan cost?” someone should be able to answer the question. It’s a question to which there should be a concrete answer. Now, most fees cannot increase from the time of the original estimate. Those that can cannot, increase more than 10%. Any increases over and above these levels will have to be covered by the lender. No ifs, ands or buts.

The new forms don’t fix everything, of course.

One thing that the new good-faith estimate does not show consumers is what their monthly payments will be under the terms of a mortgage, nor the funds that they need to bring with them to settlement. It is imperative that buyers have this information, so that they can effectively prepare for what lies ahead.

If you’re thinking of shopping for a mortgage this year — and there are certainly many, many reasons to do so — be sure to talk to your Intero Mortgage lender, your tax advisor or your Intero agent, so that any and all questions you may have are answered before you get to the settlement table. The good-faith estimate forms may have made it easier to compare mortgages, yet within our economy the lending criteria has become more strict and harder to decipher. Now it’s more important than ever, to not only choose a competitive lender, but choose the lender you have the utmost confidence and trust in.

Be informed yet be well guided.

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Intero Insider: Making Sense of Loan Modifications

By Gino Blefari | January 5th, 2010 0 Comments

Losing one’s home is a gut-wrenching experience. It’s something no one should have to go through. Now, sadly, many, many people are having to do just that. In many cases, however, there is another answer.

The Home Affordable Modification Program, or HAMP.

Part of the Federal Government’s economic stimulus plan, HAMP is an option that has yet to pick up a head of steam. It’s possible that it hasn’t gotten the necessary publicity, which is a shame, because keeping homeowners in their homes is vital not just to their well-being, but to the well-being of our economy.

Here’s how HAMP works:

Not a refinance, which replaces your loan with a brand-new mortgage, a loan modification happens when your lender reworks the terms of your existing loan. Generally speaking, this lowers payments and makes the home more affordable for you. Often, the lower payments are the result of a lower interest rate, an extension in the loan term, a reduction in principal, or any combination thereof.

If your home is your primary residence and the balance of your first mortgage is less than $729,750, then you may qualify for the program. Additionally, you’ll have to demonstrate that you’re facing hardships that are affecting your ability to make payments on your mortgage. From there, your lender will ask for documentation about your income, bank statements, as well as other financial data. You’ll also be asked to complete a Hardship Affidavit, in which you’ll describe extenuating circumstances with which you’re dealing.

“I’m doing just fine with my mortgage payments. Why is this important for me?”

Why? I’ll tell you why. The prospect of tens of thousands (yes, that many) homes suddenly appearing on the market is a pretty gruesome specter for our economy. Part of the problem of “shadow inventory” that we mentioned several weeks ago – a tidal wave of foreclosed homes entering the marketplace – would be a crushing blow to a real estate market that is only just showing signs of recovery.

Also, unoccupied homes are blights on communities. Too many can splinter a neighborhood, driving down everyone’s property values — not just those that are empty. And make no mistake: this isn’t just a problem of lower-income communities. No. Foreclosure is just as much of a problem in higher-end neighborhoods.

As Bloomberg reported late December – Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate. This brings the rate of default for these considerable loans up to a skyrocketing level of 12 percent as of September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages. This is quite a jump from the year prior where the rate for default on the $1 million dollar plus mortgages as only 4.7 percent.

So, take a look at HAMP. HAMP is offering distressed homeowners a second chance. A chance to keep a roof over their family’s head. A chance to keep the sense of pride instilled by owning your own home.

It’s not a cure-all. But it’s a place to start.

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Top 10 Silicon Valley Real Estate Trends for 2009

By Dawn Thomas | December 16th, 2009 0 Comments

As 2009 draws to a close – you’ll soon be reading lots of  top 10 lists for the movers, shakers, and trends of the year and the decade!   In the spirit of being just a little ahead of the crowd, here’s our list of the top Silicon Valley Real Estate trends of 2009:

1. Low Interest Rates – with More Strings –  Interest rates have been low this year, with periodic dips into historic record  ”low” territory.   These great rates, though, come with seemingly ever-changing requirements and conditions.  Selecting a great financing source who can get you great rates AND help you navigate through the process has never been more important.

2. We’ve Got to Keep It Together For Longer – With the changing lending guidelines, it’s been taking longer for properties to close escrow and having a signed purchase contract did not automatically mean a closed escrow in 2009.   Having a black belt negotiator on your real estate team has been critical this year.

3. “Turn Key” is Hotter than Ever – A few years ago – buyers could purchase a property & count on some quick appreciation to pay for a remodel in just a little time.  Now – buyers can’t count on home appreciation to finance a remodel in the near term & are looking for great condition, move-in ready homes to buy  (as if location and condition ever go out of style in the world of real estate!).  On the other hand – for buyers seeking to purchase a property in a high-demand area like Palo Alto or Cupertino – it may pay to look for properties needing some work.  If you can see the potential in a fixer – you may have fewer competing bids from other potential buyers.

4. Buying a Silicon Valley Foreclosure is not as Easy As It Sounds - Some of the busiest agents in any real estate office are the ones listing “Real Estate Owned” or REO properties for the banks.    Buying one of these properties means navigating a maze of bank-specific requirements for making the offer, competing against multiple offers (some properties are getting 20, 30 or even 50 offers), and positioning your offer against “all cash” investors.  Finding a deal & making sure it stays a “good deal” through the process is not for the faint-of-heart!

5. No Shortage of Short Sales – over the course of 2009 – we continued to see properties listed for less than what is owed to the lender(s) – resulting in a short sale requiring lender(s) approval to go through.   We’re starting to see short sale listings where the lender has approved a short listing price – allowing the whole process to go smoother and quicker.

6. The Year of the First-Time Buyer – with more affordable home prices, the First Time Home Buyer Tax Credit, and sweet interest rates – many of the homes sold in 2009 went to first time home buyers.   In the final months of the year – we are starting to see more and more “move up” buyers rousing the mid and higher-end price points.  Welcome!  Please bring friends!   This is a trend we want to see continue & grow in 2010!

7. Deal Hunting in Palo Alto – Where’s the deal on a single family home in Palo Alto for less than $300,000?  The media in 2009 did a fantastic job of painting the picture of real estate in free fall, and we went through a period in the spring where every day brought Internet inquiries looking for the extraordinary deal in Palo Alto.  According to the MLS – the least expensive Palo Alto single family home sold so far in 2009 went for $703,000 for a 67 year old, 703 square foot cottage with foundation issues.

8. Your Home May Have a Bigger Electronic Footprint than You Do - Social media sites like Facebook and Twitter are 2009 Trendsetters above and beyond the world of buying and selling dirt.  In real estate, though,  the savvy home seller now ensures that their Real Estate agent is marketing  their property through multiple Internet channels.    Wouldn’t  you want 30 million visitors at your open house – especially the ones who can’t leave foot prints on your new carpet?

9. Welcome to California! – We are working with an increasing number of clients who are relocating to Silicon Valley for a new job.  It looks like both our job market and our real estate market are picking up!   Welcome!

10. Less to Pick From, More Competition – And finally, in many areas of Silicon Valley – we are seeing fewer homes on the market.    In fact, for Silicon Valley overall – more homes are “pending sale” than are actively for sale.  For buyers – this means that there are fewer homes to consider and more competition to get  your offer accepted. For sellers – it means that there are fewer competing properties.  This sets the stage for an even brighter 2010!

We wish you the best holiday season & look forward to serving you and your referrals in 2010!

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What the heck is the Fed up to?

By Rick Soukoulis | November 13th, 2009 0 Comments

The Federal Reserve Board may be the least understood institution in America and about which people know the least.  But in these trying times, their role has not only been big.  It’s been critical.  The Fed has probably done more to get the economy moving again than all the government spending and bailout programs combined.

 About 85% of all mortgages made today are being put into mortgage backed securities. These securities are being created primary by Fannie Mae and Freddie Mac. Both of which are now 80% owned by the government.  In past, these securities were bought by banks, mutual funds, insurance companies and pension funds.  These same investors are still buying, but in general, they are buying a whole lot less than they did before the credit crunch of 2008-09.

In order to drive rates lower, the Fed has stepped in and been buying massive amounts of mortgage securities.  As a matter of simple supply and demand, massive buying will drive bond prices up, and as bonds prices rise, rates drop.  Thus, the Fed made a conscious decision to buy mortgage securities to drive mortgages rates downward, largely to keep pressure off the American homebuyers and to stimulate housing markets in general.

 The Fed has stepped in as the buyer of last resort, and they are now authorized to buy up to $1.2 trillion in these MBS’s.  They’ve already bought $975 billion, with $225 billion more to be bought.

 They have been buying at a rate of $25 billion a week; just enough to keep rates relatively low, allowing people to refinance at lower rates and for homebuyers to afford new homes.

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Is There An “Up” Side To All Of These Foreclosures?

By Gino Blefari | September 23rd, 2009 0 Comments

The California Real Estate Market has been hit, and hit hard. That’s no secret.

Statewide, the percentage of mortgage holders in California who have either missed several payments and are in the early states of foreclosure climbed to 9.5%. Combine this staggering figure with job losses and the recession, in general, and the state is likely to see a huge increase in the number of foreclosures.

But is there an “up” side?

Certainly, no one wants to capitalize on anyone else’s misfortune, but there is another perspective. If you’re in the market to buy a house, the news is almost entirely good.

Let’s take a look.

First off, inventory levels may be at all-time highs, and in all price ranges.

Second, sales prices are nothing short of terrific. Case in point: in August 2008, the median price paid for a home in California was $301,000. By August 2009, that number had fallen 17.3% to $249,000. For buyers, this has “good” written all over it.

Mortgage rates are at their lowest levels since the 1960s. Lower rates greatly increase a buyer’s purchasing power. Buyers will be able to get more home for their dollar — more “bang for the buck”; for families looking to upsize, this is the perfect opportunity.

There are fantastic incentives for buyers right now. Last week, we told you about the CAR Mortgage Protection Program, and we hope every home buyer knows about the First Time Home Buyer’s Tax Credit (which is set to expire on December 1st). Your Intero agent can answer any questions you might have about either of these groundbreaking programs.

Last, but by no means least, home ownership has real, sustainable value. Not just financially, but from a personal standpoint, as well. Owning a home gives you a greater sense of well-being and gives you a real sense of investment in your community.

So, yes. While it might be difficult to look at the current data on foreclosure and see a bright side, there really is one. Talk to your Intero agent today about what this can mean for you.

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