Good news / bad news....

[archery288]

It’s been a while since I have posted anything on here regarding the mortgage and real estate world, so, I figured I should give you all an update!

We’ll start with the mortgage industry.  First off, there have been some major changes in the lending industry over the past month and a half alone.  One big change that is coming down the pipe is a term called – QRM.  What QRM stands for is a, Qualified Residential Mortgage.  What this entails, is the big 4 banks (Chase, Wells Fargo, Bank of America, and Citi) are trying to require every lender to hold 5% of the loan amount in reserve until that loan is paid off.  That may not seem like a big deal, until you think about the hundreds of millions of dollars lenders accumulate in writing loans over the course of a year... Here are some of the guidelines they are looking at imposing during this plan, which are not set in stone yet by the way.  It will require you as the borrower to put 20% down, have debt to income ratios or 28% over 36%, have no 30 day late payments in the last 12 months, and  no 60 day late payments in the last 24 months.  If you fall under any of these categories, such as not having 20% down, you will have to look at other loan programs such as an FHA loan or USDA loan.  However, naturally forcing many buyers to look at those programs, both FHA and USDA are likely going to raise their fees and monthly mortgage insurance premiums as well to capitalize and make profits.  Meanwhile, the lender will most likely have to keep 5% in the game on those loans as well.  Overall, the big 4 are collaborating and trying to impose QRM on the lending industry in hopes to knock out all of the smaller banks / lenders and force all of you as consumers to go to them for your home loan needs.  Behind that, the big 4 will then monopolize the market and potentially “fix” rates and jack up costs and we as the consumer are going to basically take it in the shorts in the end.  We are working with several major advocacy groups across the United States to try and put a stop to QRM before it goes in to affect and hurts us as the consumer.
 
This same thing happened with oil prices and the oil sheiks back in the day…  This is how OPEC was formed.  One oil sheik would charge a less than the others and steal the business.  While another, would charge more, and sell less to make his money.  Then the roles would reverse and he would drop his price and the others would go up.  Then they all got smart and collaborated and fixed the pricing on oil and started raising the price slowly, therefore everyone was making more money and working together.  The big banks are in theory doing the same thing by trying to enforce QRM.

Aside from the QRM news, mortgage rates have once again come back down in to the 4’s on 30 year rates, and remain in the low 4’s on fixed 15 year rates.  For first time homebuyers there has honestly never been a better time to buy than right now!  USDA loans can be achieved in rural areas with 100% financing available, and first time homebuyers can even qualify for an FHA 203K rehab loan to purchase a fixer-upper and make repairs all in one shot with little or no monies down.  The cost of owning a home and making a mortgage payment right now, in some cases, is cheaper than paying rent.
 
As for the real estate side of things, there are large quantities of bank owned properties on the market with some extremely good deals out there.  The bank owned properties are selling at a pretty fast pace, therefore if you are not paying cash, making sure you are fully pre-approved and ready to pull the trigger when the right houses pops up is a must!  If you are considering purchasing a short sale, I personally recommend looking at a bank owned property or a conventional sale as I have dealt with several short sales over the last few months and they are all nightmares for the buyer.  Most of them take two to six months to even get an answer from the bank on your offer in the first place.  If you can find a Fannie Mae owned property there is a loan program called “HomePath.”  Basically this program allows you to purchase as Fannie Mae owned property with as little as 3% down, NO monthly mortgage insurance, and NO appraisal required.  I have done several of these loans over the past few months and they are a great way to go! 

Overall Thoughts –

-Mortgage rates are at all time lows so don’t miss the opportunities while they last
- There are plenty of great bank owned properties out there – stay away from short sales
- First time buyer programs are readily available 
- Down payment assistance programs exist for those with little or no money down
- Last, make sure your loan officer is licensed by the state of Washington DFI

Last - here's our weekly industry news video from last week with some pretty funny comments / predicitons from the news and government.  http://youtu.be/qa-ZAecbqa4


If you have any questions about lending, or real estate in general, please don’t hesitate to give me a call or send me an email and I will do my best to answer your questions.   

Take care,

[BIGINNER]

thanks for the info
hopefully i'll be looking for a home soon. 

[JackOfAllTrades]

Wow.. A handyman can get some deals on some Fannie Mae owned property. I'm not in the market at the moment. (want to pay our primary residence off first. Less than five years.) But I'll keep this in mind down the road for something to flip as the markets get better.

-Steve

[6x6in6]

Good stuff Jon.  I had heard just today about this QRM possibilities coming down the line.

Question....
The HomePath program.  Must it be a primary residence or does a secondary or more likely an investment property meet the guidelines for this program?

[archery288]

Good stuff Jon.  I had heard just today about this QRM possibilities coming down the line.

Question....
The HomePath program.  Must it be a primary residence or does a secondary or more likely an investment property meet the guidelines for this program?

One nice thing about the HomePath program is investors can actually purchase a property with only 10% down!  Usually they need 20 - 30% down.  It's a great program for Fannie owned properties.  One problem we are running in to right now is lending on condo's...  Most condo associations out there have low occupancy rates, and they are past due on there association dues and going behind.  Therefore, FHA and Conventional loans even aren't being done based on these circumstances and investors simply won't buy the loan.  Now HomePath loans, they don't care about any of that!  I just did one in a condo association that was behind on dues and the occupancy rate was to low, and we happened to find a Fannie Mae owned unit in the complex and the borrowers even got it for $15k less than the other one, and didn't have to worry about an appraisal or anything.  However, when they go to sell, it could be extremely difficult if the association doesn't come back around and get their stuff squared away... So they took a risk and they were aware of that, but they got what they wanted and it worked out extremely well.  We even closed the loan in under two weeks! 

I do find it quite humerous though... The government and investors set all of these guidelines we have to follow when writing a loan otherwise they won't purchase them etc.  But then Fannie steps in, a major government entity who sets rules for purchasing loans, and they come up with a program on their own properties that allows you to purchase them with no monthly M.I., and no appraisal?  And on top of that like I found out on the condo deal I just closed, they don't even care about occupany rates, past due association fees, and the property could be upside down in value etc and they don't care?    Doesn't make sense to me...

There are numerous changes coming down the line, and numerous changes that have already occured regarding lending.  Everyday is a new day right now, who knows what tomorrow will hold?

[6x6in6]

When you say occupancy rates relating to condo's, do you mean owner occupied rate?
I know many condo associations have amended their Declaration's for rental caps for the purpose of financing and the perceived renter vs owner "issue" of degrading property values.  Seems like I see predominantly 25% or 30% rental caps number.  The condo project we built 5 years ago just placed a 30% cap via a Resolution to their docs.

What do you run into with lenders and caps, max % wise when the issue comes up?

[archery288]

When you say occupancy rates relating to condo's, do you mean owner occupied rate?
I know many condo associations have amended their Declaration's for rental caps for the purpose of financing and the perceived renter vs owner "issue" of degrading property values.  Seems like I see predominantly 25% or 30% rental caps number.  The condo project we built 5 years ago just placed a 30% cap via a Resolution to their docs.

What do you run into with lenders and caps, max % wise when the issue comes up?

That's correct - I am referring to the owner occupied percentage.  A lot of condo associations are putting caps on the owner occupied vs the amount that are rented out for value reasoning and lending restrictions etc.  With some investors out there we can get away with a 50% owner occupied vs rental percentage.  Soem are upwards of 70% owner occupied.  The problem is a lot of condo associations are behind on dues right now and no lender wants to lend money to an association that is upside down..