In Oregon 7.5% of all homes have negative equity (amount of mortgage exceeds value of home). However about 1 in 10 either have negative equity or are with 5% of having negative equity).
Nevada is the worst in the nation with over half of all homes either having negative equity or being withing 5% of having negative equity.
In another sign of the times Wells Fargo announced today that they were eliminating their 30 year fixed mortgage with interest-only payments for the first 10 years.
Because Wells Fargo is a bellwether in our industry other lenders are expected to follow suit.
Home loans made on newly constructed homes differ from home loans made on resale homes in a variety of ways. These include:
→ Closing costs– Closing costs for a newly constructed home are often slightly higher than for a comparably priced resale home. This is because often times newly constructed homes will have additional title insurance provisions (known as Early-Issue Title Insurance), homeowner’s association charges, and additional appraisal requirements that are not applicable for mortgages made on resale homes.
→Prepaid Real Estate Taxes– The amount of estimated real estate taxes collected at closing for borrowers who choose to make their payments with their monthly mortgage payment can also vary drastically between lenders. Often times, lenders who are unaccustomed to providing home loans on newly constructed homes will collect an exorbitant amount even if the original disclosure documentation did not reflect that. Typically the preferred lender has worked with their underwriters to agree upon a more reasonable collection for taxes which is better for the home buyer.
→Appraisal– Appraisal requirements are often more stringent for a newly constructed home that for a resale home. The preferred lender understands this and often works with a consistent group of appraisers who have experience evaluating new homes. The relationships and systems that the preferred lender has built will result in a less stressful closing.
→Loan locks– Preferred lenders are typically more accustomed to managing interest rates over longer escrow periods than lenders who are accustomed to working on resale transactions which usually only have escrow periods of 30 days. Therefore, working with a preferred lender will often result in a better decision regarding your interest rate lock.
It is very common for builders to require that a home buyer complete a mandatory application with their preferred lender as a part of the home buying process. Builders require this step so that they can be confident that buyers are being pre-approved by a reliable lender.
Any builder who has been around a while has certainly been “burnt” buy a home-buyer who was supposedly pre-approved. After accepting an offer to purchase a home the builder commits resources to customize a specific house for a specific home-buyer. If that buyer cannot perform on the purchase because of mortgage qualifying issues the builder is left with a home with custom features that may not be as valuable to other buyers. As a result, they get stuck with a loss.
Therefore, builders have put into place a mandatory application with a reliable preferred lender to reduce the incidence of this occurring.
Often times the builder or seller will offer incentives for using their preferred lender in exchange for the assurance that the mortgage process will be completed in a professional and reliable manner.
These incentives can be both monetary and non-monetary. Monetary incentives can include a credit towards closing costs, a credit for free upgrades, an interest rate buy-down, or a combination of these items.
The non-monetary benefits of using a preferred lender can be equally as valuable. The non-monetary benefits of working with the preferred lender include expert advice that can only come from experience, seamless communication between parties during the transaction, and full disclosure of all upfront settlement fees/ charges.
I have been a user of twiiter.com for almost a year now. I think it’s a great way to stay in touch with family in friends.
However, this morning’s story in the WSJ.com about the professional applications of twiiter.com got me thinking of ways that I could apply twitter.com to business.
Any ideas would be appreciated. You may email them to me @ evan@mortgage-trust.com or comment below.
Also, in case you use twitter please feel free to follow me. My “twitname” is ‘evanswanson’.
Much of the attention regarding the new “bailout bill” has focused on the $700 billion that the Federal Government will allow the US Treasury to use in order to stabilizing the financial system.
However, there were a lot of new tax laws that also found their way into the bill. 2008-emergency-economic-stabilization-act.pdf.
Here are some highlights:
I came across this blog yesterday and started sifting through the postings. This site does an excellent job of providing educational postings covering various topics in the mortgage industry.
Specifically, I really liked this posting which explains the factors that contributed to the development of the mortgage-backed bond market. I also blogged about this topic around the time when speculation over the insolvency of Fannie Mae and Freddie Mac was hitting the news.
Essentially, mortgage-backed bonds were originally developed to “spread risk” among many financial institutions back when the banking industry was made up of many regional banks. The need to spread risk was needed because regional banks were too leveraged to the local economy they did business in.
However, over the years the development of the mortgage-backed bond market (AKA “securitization”) has encouraged bankers to place emphasis on loan volume instead of loan quality. Thus, we find ourselves in the mess we’re in today.
I am happy to see that one of my industry’s trade publications is touting the importance of fiscal literacy in our profession. Maria Valentin wrote an article entitled, “Fiscal Literacy- The First Steps to Responsible Lending” in which she called for increased financial education on the part of mortgage professionals. This is a core piece of my business philosophy and one that I believe is paramount to the future health of our economy.
Apparently Alan Greenspan wrote in an article for Emerging Markets Magazine that home prices would begin to stabilize in the early part of 2009. Specifically, “More conclusive signs of pending home price stability are likely to become visible in the first half of 2009.”
Although many of the prophetic statements he has made in the past have failed to come to fruition maybe this could be an exception. I personally tend to agree with him but I also think homes prices will remain low for another 12 months before any sign of widespread appreciation are evident.