Living In Tucson Blog

The economic crisis is out of control, as Bank of America and the corrupt corporate elite continue to wage class warfare. It’s time we hit back hard. It’s time we fire CEO Ken Lewis.

SEIU have been courageously leading this fight. We need to follow their lead and encourage everyone to demand the resignation of Bank of America CEO Ken Lewis. After all, Lewis works for us now. Tens of billions of our taxpayer dollars went toward bailing out Bank of America, but what have we received in return? More predatory lending, billions wasted on exorbitant salaries and executive bonuses, and corporate lobbying.

Watch the video narrated by former Labor Secretary Robert Reich, and see for yourself why we must fire Ken Lewis.

By: Gibran Nicholas, www.mortgagepress.com

“There are five distinct strategies that can help homeowners, buyers, and sellers successfully navigate today’s turbulent mortgage and housing markets,” said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

Number 1: Understand and utilize the new tax credits

Many home owners are not aware that the latest government stimulus package gives them a special tax credit of up to $1,500 for making certain home improvements.  Also, if you are buying a primary home and you have not owned a primary residence in the last three years, you may qualify for the new $8,000 first-time-homebuyer tax credit.  ”Although you cannot use the credit to help with your down payment, the credit can be claimed on your 2008 tax returns if you buy the home in 2009,” Nicholas said.  ”This means that even if you buy the home after you file your taxes on April 15, you can simply file an amended 2008 tax return and the IRS will send you a refund check for $8,000.”

Number 2: Consider paying points for your mortgage transaction

Mortgage “points” are upfront fees that you pay in order to lower your mortgage interest rate.  One point is equal to one percent of the loan amount.  ”In the past, it almost never made sense to pay points in most situations where you were refinancing your mortgage,” Nicholas said.  ”However, enormous changes have taken place in the mortgage securitization process.  Wall Street investors are demanding higher upfront fees for borrowers with credit scores below 740, and mortgage lenders don’t have as much flexibility when pricing loans.  This means that the interest rate savings can be very significant when you pay upfront points.”

“If you are buying a home, negotiate into your purchase contract for the seller to pay points on your behalf,” Nicholas said.  ”In addition to the significant interest and payment savings you will enjoy, you could also receive a tax deduction this year for points paid by the seller on your behalf.  If you are selling a home, offer to pay points for potential buyers as part of your marketing efforts.  This will make your home more affordable for potential buyers and help your listing stand out from the glut of available inventory in today’s market.”

Number 3: Carefully structure your real estate short sale transaction

A real estate short sale is when a home owner sells their property for less than what they owe on the mortgage, and the lender gives their permission to do this by forgiving the difference and/or releasing the mortgage lien on the property.  ”Short sales are very common in many markets because of negative home owner equity due to the steep decline in house values,” Nicholas said.

“If you are selling your home as part of a short sale transaction, make sure to negotiate for a release and a full satisfaction of the mortgage from your lender.  Depending on the laws of your state and your individual circumstances, lenders may be able to wait a year or two for you to improve your financial situation, and then file a deficiency judgment against you to try and recover the money that you still owe them.  The only way for you to avoid this risk is to have the lender not only release the mortgage lien, but also agree in writing to a full satisfaction of the mortgage.”

If you are a buying a home as part of a short sale, Nicholas advises you to take steps to make sure the deal is closeable.  ”It is estimated that approximately 30 percent of short sale listings are not closeable deals because the lender simply won’t approve it.  In most of these cases that aren’t closeable, the first or second mortgage lender is expecting home sellers that have money to contribute something to the deal.  One way to avoid getting caught up in the middle of this is to have your Realtor verify the status of the seller’s hardship package with their lender.”

Number 4: Utilize the special options available for seniors age 62 or older

“If you are 62 or older, you could use a reverse mortgage to buy a new home without making any monthly mortgage payments,” Nicholas said.  ”This is a fantastic opportunity if you are contemplating a move but are worried about trying to sell your current home into a down market.  Additionally, reverse mortgages can be used to supplement your retirement income that may be declining due to unfavorable economic or financial market conditions.”

Number 5: Carefully interview your mortgage professional

With all the noise, confusion, fear and misinformation in today’s market, it is more important than ever for you to consider working with a mortgage specialist who has the training and experience to guide you through the home buying or refinancing process.  The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way.

Consumer confidence for April comes out Tuesday and it should increase for the second straight month.  Analysts believe it will hit 28.8 — up from 26 in March and February’s all-time low of 25.

One of the most important reports — advance 1^stquarter GDP — will be released Wednesday, and it’s expected to drop 4.9%.  However, two revisions follow and further declines are expected.  Final 4^thquarter GDP fell -6.3%.

Thursday is the busiest day for reports, beginning with first-time jobless claims for the week ended April 25.  They’ve been up and they’ve been down but remain too volatile to establish a trend.  Most economists, however, see job losses rising into next year.

We also get personal income and personal spending for March, which should be little changed from February.  Income is expected to fall 0.2%, matching the previous data.  Personal spending, however, could show slight improvement.  It is predicted to decline 0.1% — a tad better than the previous 0.2% dip.

The 1^stquarter employment cost index (ECI) should make no waves.  This index monitors the cost of wages, salaries and benefits paid by employers.  It is expected to rise 0.5%, just as it did in the 4^thquarter.

Thursday’s final report, the Chicago PMI manufacturing index for April, is expected to rise to 34 from 31.4.  This would be the first increase in several months.  The national counterpart of that index, the ISM report on manufacturing nationwide, follows on Friday and it, too, is predicted to rise to 38.0 from 36.3.  If these reports come in on target they would provide a small ray of hope for the hard-hit manufacturing sector.

Unfortunately, factory orders, which rose 1.8% in February, are expected to turn negative in March, falling 0.7%.  Friday’s last report, the University of Michigan/Reuters’ final consumer sentiment survey for April, should not change much.  Analysts believe it will come in at 61.5, which is a tad below the 61.9 of two weeks ago.

 This last week of the month features a number of key reports and a statement by the Fed after its Wednesday meeting.  Although no rate change is expected, the markets want to hear the Fed’s assessment of economic conditions, its outlook and its plans to buy more Treasuries in order to hold lending rates down.

Here’s my brief commentary on the mortgage industry in Tucson for the month of April, 2009. Refinancings are going strong with record interest rates. Applications have really picked up! As I write this, most of my borrowers have come to the realization that you have to pay an origination fee or 1% of the loan amount as well as closing costs to get a rate under 5% for 30 year fixed rates. I am also in the process of helping a couple of borrowers with their Fannie Mae loans that fall under the new “Marking Home Affordable Program” for folks who owe more than 80% of the value of their homes, but less than 105%. To see if you qualify, go to www.fanniemae.com and enter your address into the form. If Fannie Mae owns your loan, I can help you! The rate will depend on your credit score and loan-to-value ratio (LTV). Your credit score and LTV will also determine your rate for traditional refinances.

For purchases, the lowest down payments are available for FHA loans and USDA loans. FHA loans have a maximum limit for a single family residence in Pima County of $316,250. The minimum down payment is 3.5% of the sales price. The USDA Rural Housing has increased their income limits to $73,600 for a household with 1 to 4 persons and $97,150 for a household of 5 to 8 persons. The loan program features a ZERO down payment with NO MORTGAGE INSURANCE! The properties must be within geographic boundaries that are considered rural, but that would include Marana, Vail and Sahuarita.

Hey, we have the leader of the free world advocating refinancing! “The main message we want to send today is there are 7 to 9 million people across the county who right now could be taking advantage of lower mortgage rates.”

Check out this video:

 http://cosmos.bcst.yahoo.com/up/player/popup/index.php?cl=12894847.

We are getting several calls a week from folks requesting refinances. We can help many of these borrowers especially now that the government has rolled out the Making Home Affordable Program.

We can offer you a refinance with record low interest rates if you fit into any of these categories:

• You have a conventional loan up to $417,000
• Your new mortgage will be 80% or less than the current value as determined by an appraisal
• You can verify your income & assets
• Your mortgage payments are current
• Your credit score is 620 or above

If you do not have at least 20% equity, you may still qualify for a refinance.

• Your first mortgage loan-to-value ratio is between 80% and 105%
• Your existing mortgage is owned by Fannie Mae or Freddie Mac.(These agencies do not collect the payments, but they buy loans for banks that collect payments. In other words, you might be making your payments to Wells Fargo, but Fannie Mae owns the loan).
• To determine if Fannie Mae owns your loan, go to www.fanniemae.com. If not, check with www.freddiemac.com. These agencies own more than 40% of all home loans in the United States.

Be patient, the system is taking longer primarily due to capacity. We are inundated with new files, but as an industry, we have not hired back loan processors, underwriters and funders to approve and fund the new loans. Purchase loans will take priority. However, if you hang in there you will be rewarded with a record low interest rate!

Useful websites:

Are you eligible to refinance or modify your loan?
www.makinghomeaffordable.gov
Does Fanne Mae or Freddie Mac own your loan?

www.fanniemae.com
www.freddiemac.com

 Making Homes Affordable Program

The Obama Administration unveiled the final details of its “Making Home Affordable Program,” which is designed to help up to 9 million American families refinance or modify their loans to a payment that is affordable now and into the future.

One of the initiatives in this program is aimed at helping responsible homeowners “refinance” their loans to take advantage of historically low interest rates. Here are some common Questions and Answers about the Refinancing Initiative in the program.

REFINANCING INITIATIVE

Who is eligible?

You may be eligible if:

• You own and currently occupy a one- to four-unit home.
• Your mortgage is owned or controlled by Fannie Mae or Freddie Mac.
• You are current on your mortgage payments.
• The amount you owe on your first mortgage is about the same or slightly less than the current value of your house.
• And, you have a stable income sufficient to support the new mortgage payments.

How do I know if my loan is owned or controlled by Fannie Mae or Freddie Mac?

Simply call or email me. I’ll help you determine if your mortgage is backed by Fannie Mae or Freddie Mac.

I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program?

Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less, you may qualify. The current value of your property will be determined after you apply to refinance.

If I am delinquent on my mortgage, do I still qualify for the Refinance Initiative?

No. But the good news is, you may qualify for the Modification Initiative. Contact me to discuss your situation and review your options.

I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for the Refinance Initiative.

Will refinancing lower my payments?

That depends. If your interest rate is much higher than the current market rate, you would likely see an immediate reduction in your payment amount.

However, if you are paying interest only on your mortgage, you may not see your payment go down. BUT… you will be able to avoid future mortgage payment increases and may save a great deal over the life of the loan.

What are the terms of the refinance and what will the interest rate be?

All loans refinanced under the plan will have a 30- or 15- year term with a fixed interest rate.

The interest rate will be based on market rates at the time of the refinance. Currently, interest rates are at historical lows, which makes this a good time to examine your refinancing options.

Will refinancing reduce the amount that I owe on my loan?

No. Refinancing will not reduce the principal amount you owe. However, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

Can I get cash out to pay other debts?

No. Only transaction costs, such as the cost of an appraisal or title report may be included in the refinanced amount.

How do I apply for the Refinance Initiative?

Call or email me today to discuss your specific situation and to examine your options. If this plan is right for you, we can begin working on your refinance immediately.

As part of the discussion, we may need to look at the following information:

• Recent pay stubs to help determine your gross (before tax) household income.
• Your most recent income tax return.
• Information about any second mortgage on your house.
• Account balances and minimum monthly payments due on all of your credit cards.
• Account balances and monthly payments on all other debts, such as student loans and car loans.

As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call 520.977.3300 or email me at david@davidwolsky.com to set up an appointment.

With mortgage rates at record lows and credit so tight, it is imperative to have high credit scores to assure the best possible terms for loans. Up until recently, having a 700 FICO score assured you of the lowest rates when borrowing. That paradigm has now changed. 740 is the new 700. The median credit score is 723. FICO scores range from 3o0 to 850. Fannie Mae and Freddie Mac now charge a “delivery fee” for loans with credit scores below 740 that translates to a higher rate or higher points for those borrowers depending on the loan-to-value ratio (LTV). Your rate will be better when you refinance with more equity in your home and if you are purchasing, your rate is better if the your down payment is bigger, especially if your FICO scores are 740 or higher. Conversely, your rate goes up if your scores are low and your LTV is high.

If you need to raise your scores, be patient because it takes time, effort and money! There is no quick fix. Let’s examine the anatomy of a credit score. There are five key criteria that goes into scoring borrowers.

1. 35% — punctuality of payment history (only includes payments later than 30 days past due) and derogatory credit such as bankruptcies, foreclosures, collection accounts and judgements 
2. 30% — the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
3. 15% — length of credit history
4. 10% — types of credit used such as installment, revolving and consumer financing 
5. 10% — recent inquiries for credit and/or amount of credit obtained recently

You are entitled to obtain a copy of your credit report every year. The only place to go is the website www.annualcreditreport.com. This website was set up by Trans Union, Equifax and Experian. The report is free. If you want to get your FICO score, there is a modest fee.  

Here are some tips to improve your scores. Make sure you pay your bills on time! I know it sounds simple, but a late payment on a credit card can decrease your credit score significantly. If your credit report has a late payment, time will heal the wound. Every month from the most recent late payment will continue to improve the score as long as there aren’t any subsequent late payments. If you feel that you have a legitimate dispute with a creditor, you can write a letter to the three credit bureaus to challenge the information. Yes, ALL THREE BUREAUS. A good resource for further information is the Federal Trade Commission. Click here to go to their website. It is full of useful information. 

You can also hire a credit repair company to outsource the task. An initial consultation usually runs about $250 and then expect a monthly fee of $75. It takes about six to twelve months, but your scores will improve by 50 to 100 points. You will recoup the fees through lower interest rates on your car loans, home loans and credit cards. Please make sure that you work with a reputable company. Feel free to contact me for a referral!

Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years once it is paid. If you are having trouble making ends meet, contact your creditors and set up payment plans. This won’t improve your score immediately, but if you can begin to manage your credit and pay on time, your score will eventually improve.

As for the amount of debt compared to the available limit, try your best to keep the balance below 50% of the limit.  Even if you pay down your balance, there may still be complications because banks have been lowering credit card limits lately because credit is so tight. If you pay off a balance, I recommend that you keep the acount open with a zero balance. If you keep switching to new credit cards, you may compromise your score because of the length of time that you have credit accounts. Of course, if you are new to credit, there is not much you can do about the length of time for credit. Time will take care of it. Don’t open a number of new credit cards that you don’t need, just to increase your available credit. This approach could backfire and actually lower score.

Home loans or credit cards are higher up the credit food chain than revolving debt from finance companies, furniture stores or consumer electronics stores. Beware of come ons like 90 days — same as cash! Too many consumer finance credit accounts will hurt your score.

Lastly, don’t apply for lots of credit accounts at the same time. Space out your credit requests over several months. There is a must readcalled Do You Make These 38 Mistakes with Your Credit? How increasing your credit scores will improve your lifestyle.

To see how much your scores will increase click here.

 
Another big move today was made by the Fed….my they have been busy lately! The finally have a plan in place to clear out the toxic assets from the financial sector. It’s a public-private plan that would have private investors and the Treasury put in equal amounts of money that would then be backed by a loan guarantee from the Federal Deposit Insurance Corp. to buy loans and mortgage-backed securities from the banks. Both the taxpayers and the private investors would gain from any profits if the assets eventually gain value. The taxpayer would take most of the downside risk. There has already been interest into the plan by private sector companies such as Pimco. Stocks went through the roof today with the Dow gaining almost 500!

Personally, I share the same bailout fatigue that most Americans feel, but I wonder if the price of doing nothing is far greater. What is it that we do not know?

There has been a lot of talk in the media about mortgages since the Fed announced that they are continuing their scheme of buying mortgage bonds and long term treasury debt. The Fed is determined to keep the rates down this year to help stabilize the housing market to make homes affordable whether borrowers are refinancing or purchasing. With all of the government intervention, why aren’t rates lower? Why is everyone talking about loan rates at 4.5% when the Freddie Mac weekly survey has rates at 4.98%? We saw some some great rate sheets after the FOMC meeting concluded the other day. By the next morning, rates bumped up a bit. Lenders are trying to control the flow of business by raising and lowering rates. Most lenders have not increased their staffs even with the increase in business. When they get inundated with rate lock requests, they bump up rates to slow the flow as if it was a faucet. Because lenders only have so much capacity, raising rates a bit slows down the flow of volume.

Rates are not one-sized fits-all. Amongst the factors influencing rates include credit scores, loan-to-value ratios, taking additional cash-out when refinancing and even the size of the loan. Are you willing to pay points (origination fees and discount points)? If so, you can expect a better rate! If you’re calling a loan officer and asking ”what’s your rate?”, expect your loan officer to quiz you on your qualifications. Don’t expect a quick response.  A professional will ask the right questions and even pull a credit report to get an actual read on your qualifications.

I have been originating mortgages in Arizona since 1994. Sunstreet Mortgage, LLC offers conventional, FHA and VA loans. Call me at (520) 977-3300 for all of your mortgage related questions.