Author Archive

With all this chatter about the 4.5% interest rate range, you’d think we were in for some major life-altering, world-saving changes. Well, that’s just NOT going to happen.

Why?

Because the lowest rates in the world won’t do a thing to curb the underlying reason our housing market collapsed.- The unsustainable and over-inflated housing PRICES.

Because you can’t buy a house if you have NO JOB. http://money.cnn.com/2008/12/05/news/economy/jobs_november/index.htm

Because you can’t sell a house when you owe more than it’s worth without ruining your credit. That’s right- lenders will not consider a short sale unless the owner can prove hardship- and that means they have to stop paying their mortgage! With late mortgage payments on a credit report, kiss owning a NEW home goodbye.

Because when 10% of homes are IN (or nearing) foreclosure, that means that housing inventory will soon GROW. http://www.foxbusiness.com/story/markets/economy/home-loan-problems-break-records/

Rates are already fantastic- 5% on a 30 year fixed, with a point or two, of course. But still, very attractive. What will happen if they fall to 4.5%, on OUR dime??? In reality, very little, to nothing. People WILL clamor to refi to 4.5%, but they won’t be able to because the new government subsidized rates will be for PURCHASES only.

Will the people who CAN buy now benefit? Sure. They’ll save some money in INTEREST. But will their purchase price still be over-inflated? Probably. Will they have a job next year???? I hope so, but the way things are going, I wouldn’t exactly count on it.

Lock when you are comfortable, and don’t bet on some miracle plan that might not ever happen.

Jennifer Monastero

A while ago, I wrote a blog about how poor people and certain ethnic groups were being blamed for our current mortgage crisis. ( http://www.zillow.com/blog/mortgage/2008/09/26/glenn-beck-blames-housing-crisis-on-lending-to-minorities/ ) For some strange reason, people felt more comfortable blaming this disaster on one or two small groups of CONSUMERS rather than actual culprits- banks, mortgage companies, investors, deregulation cheerleaders, those sorts of people. Yes, it made sense for some to say that The Community Reinvestment Act of 1977 (And expanded by… gasp! Bill Clinton!) was the real problem. In other words, if we didn’t have to lend to those “pesky, inner-city folk“, this mess never would have happened.

Well, I have to tell you, if you believe that to be true, you would be incorrect.

http://www.reuters.com/article/bondsNews/idUSN0332633420081203

This just came out today, and it follows remarks of some people some might consider to be ‘in the know’. Echoing what I have said on this blog and others, it does show that the assumptions made by a few people are flat out wrong.

But don’t take my word for it, read for yourself.

And, if you were one of those who wanted to blame everything on the CRA, ask yourself why? Why did you want so badly to say that the number one reason we are suffering so much is because of “THEM”? Was it because we have a natural instinct to get ourselves as far away from responsibility as possible??? I hope not. But I hope we can stop this distraction and divisiveness and get to the root of what actually happened here so that it never happens again. If we continue to blame the wrong ‘things’ and the wrong people, well, do you really want to know what happens???

Stop this bitter argument in it’s tracks- it has no merit, and it is based on false pretenses. Period.

Jennifer Monastero

jmonastero@ccbloans.com

With the rates dropping once again to ‘historic lows’, people are clamoring for refinances. I have been bombarded with calls from recently closed clients asking whether or not it makes sense to refinance. We have also seen an increase of such inquiries in the Zillow Mortgage Discussion Boards, as well as the Zillow Mortgage Marketplace.

A “typical” way to determine whether or not you should consider refinancing has always been the rate alone. If you currently have a rate in the 6.5% range, it may be a great idea to give your favorite loan officer a call and see what the rates have come down to. But this is not the only consideration to make!

Usually, people look at monthly savings versus closing costs to determine if a refinance makes sense. Simply divide your closing costs by what your monthly savings will be. If closing costs are $5000, and you are only saving $75, your ‘break-even’ point is about 5.5 years away! Hardly worth the trouble, especially if you only plan on staying in the home 6 years! These are things that need to be discussed with your loan officer- preferably an honest one.

Also, take into consideration the fees and charges associated with your current interest rate. It’s hard to justify refinancing to a lower rate when you just paid two points to buy your rate down 8 months ago. You are throwing money out the window, and for what???

CHASING THE RATE.

That means you feel an emotional tie to your interest rate, and/or you love to brag to people on the street that you have the lowest rate in a two-mile radius. Do not EVER chase the rate. Your ‘favorite’ loan officer will love you, of course, but if they had any scruples at all, they would tell you to stay put! Spending dollars to save dimes doesn’t make sense. Make sure a refinance is in your best interest for today, tomorrow and 15 years from now before signing all those mortgage documents.

As always, I am available to discuss any financing questions you may have. Feel free to contact me at jmonastero@ccbloans.com

Jennifer Monastero

Citizens Community Bank

Just a quick note here-

We’ve been waiting for WEEKS and WEEKS to hear some shred of evidence that some of the big bailout money would be going toward purchasing Mortgage Backed Securities.

Well, it’s finally happening! Kind of.

“In addition, the Federal Reserve, the nation’s central bank, announced it will purchase up to $500 billion in mortgage backed securities that have been backed by Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500), and Ginnie Mae, the three government-sponsored mortgage finance firms set up to promote home ownership. It will also buy another $100 billion in direct debt issued by those firms.”

This means rates should fall dramatically over the coming days, and hopefully STAY LOW for a time so we can get off the crazy roller-coaster we have been on, and feel confident once again in our lending system.

NOTE- this $500 billion purchase is NOT related to the bailout money. This is entirely separate. Meaning, those government printing presses must be getting MIGHTY HOT!

Hold on to your hats, we’re in for an exciting day. Fingers crossed, an exciting and steady few months!!!

Jennifer Monastero

Citizens Community Bank

No, I am not going to go ‘Robert Wagner’ here and spout off about how reverse mortgages are the greatest thing since sliced bread. I’m just going to tell you a story.

When I worked for another lender, probably about 4 years ago now, we had a ‘sales meeting’ a certain lender had their salesperson come in and talk to us about selling reverse mortgages. It seemed that the greatest thing about the reverse mortgage program was HOW MUCH MONEY WE COULD MAKE. Now, I always get a little skeptical about anything that’s first and most discussed reason for it’s existence is how much money someone can make by selling it. What’s in it for the consumer? Why does anyone need a reverse mortgage? What are the benefits and drawbacks? No one seemed to ask these questions, they were too blinded by the dollar signs gleaming out from the bank rep’s shiny white teeth!

On my own, I figured out ONE situation where it would benefit tremendously.

During the meeting, they had discussed the fact that credit scores are NOT taken into account (after all, the agency providing the loan is PAYING OUT the money, not expecting payment), and that the homeowner can be in foreclosure due to missed mortgage payments, or even tax bills.

“Whoa, back up. You can get a reverse mortgage if you are 90 days late on your mortgage and have a 465 middle credit score?”

Yes, indeed you can. Provided you have LOTS of equity in the property, and are over the age of 62.

If someone needs money to pay for their living expenses, and has plenty of  equity in their home, it may be wise to discuss the opportunity a reverse mortgage offers.

It’s very easy to get started- in fact, the lenders that offer these programs ask for your age, your property zip code, your loan balance, and what you think the home is worth. That’s it, very simple.

To learn more about the Reverse Mortgage, visit HUD’s website- http://www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm

Thanks for reading.

Jennifer Monastero

Citizens Community Bank

One thing I have picked up on the Zillow discussion boards is that there is a huge amount of resentment towards consumers who bought into the frenzied ‘must act now! prices are skyrocketing, don’t get left behind!’ marketing ploys. Some of that anger is not misplaced- after all, without the all-too-willing consumer, we would not be in the pickle we are in!

I met people along my winding road in the business who absolutely, positively were abusing the privilege of owning a home. People cashed-out their equity once a year to ‘consolidate’ their debt. From 2002 to 2005, people refinanced as many as 5 times ‘chasing’ the lowest rate and adding thousands to their loan balance each time, not to mention the new car, or the new boat.

As a rule, consumers are not smart. We are not supposed to be. If we were smart, snazzy advertising and ‘bright shiny objects’ would have little affect on us. Let’s build up our defenses so that the next time we are all brought into the ‘money money money- get it while it lasts’ fiesta, we can walk away unscathed!

Here’s a few ways we can ensure that this mess we find ourselves in doesn’t happen again.

1) Cut up your credit cards. I’m just as guilty as anyone of buying something on credit- Idiocy, and this practice should be as limited as possible. If you have very little debt, there won’t be a ‘rush’ to consolidate next time housing prices go up. Many, many people had 30-60k in credit card debt, and felt that refinancing was the ‘magic pill’ to help them out of trouble. That didn’t end well, did it?

2) Don’t EVER go by what a loan officer or real estate agent tells you that you can ‘afford’. Don’t go by underwriting guidelines, go by what is comfortable for YOU to pay. If you make $5000 a month, but take home $2300 and have a lot of unreported expenses- a $300 phone bill, $600 month bill for your electricity (all those hot tubbies add up!), $45 jelly of the month club bill etc, you have much less money to work with. If someone says you qualify for $1800/month, it is up to YOU to determine whether or not that is accurate and doable. No one knows your exact financial situation better than you!

3) Read your loan documents. Even if your attorney says ‘everything’s fine!’, you still must read them. If you refinance your home, you have 3 days (and more if you close before a weekend) to review your documents with a fine-tooth comb. DO IT. If you have questions, ask. Come onto the Mortgage Discussion Boards and ask for free advice, from people who have no ‘stake’ in whether you close or not. If you are purchasing, ask for your loan documents in advance, or take your time at your closing. If you feel rushed, tell your attorney, agent and whoever else is there to relax. If they are not answering your questions, walk away from the table. Sellers these days are willing to work with people, so tell them you want to buy the house, but need more time. Find a new lender and a new attorney if necessary. Is this overboard? Perhaps. But I can’t tell you how many people signed on the dotted line because they felt they ‘had’ to. What were they signing? Pre-payment penalty riders, mortgages for loans they did NOT even apply for, you name it!

4) Don’t get greedy. I’d say one of the biggest reason we are in this situation is the old ‘keeping up with the Joneses’ phenomenon. Your neighbor buys a hot-tub, so you do. Your cousin goes to Cabo, so you do. Living within our means has never been especially easy, but if we aren’t going to be taken advantage of again, and if we feel any remorse at all for where we are right now, we must get beyond this immature behavior. If you cannot afford something, don’t buy it. Just because Chase or CITI or whoever sends you a credit card with a $15k limit doesn’t mean you have to take it and use it.

Whether you want to blame the banks, the brokers, the real estate agents, or the consumers, one thing IS absolutely true- WITHOUT the willing consumer, there is no ‘frenzy’, there is no ‘over-inflation’, there is no ‘market collapse’. So, let’s avoid it next time, shall we?

Jennifer Monastero

Citizens Community Bank

The last blog I wrote, http://www.zillow.com/blog/mortgage/2008/10/25/the-new-breed-of-scam-artists/, was a little on the abrasive side. Why? Because Loan Modification is a new, untested industry and consumers should approach any ‘opportunity’ to better their situation with much caution. Since I am a cynic at heart, it was natural for me to question every little facet of the new “business”.

One example of the abuses that are occurring can be found here: http://www.latimes.com/business/la-fi-scam5-2008nov05,0,7629587.story.

As I explained to a couple of people who felt I was attacking their own credibility, I was merely pointing out what the reality is. People that have no business offering advice are taking people’s money and running! So, consumers, be careful out there.

I have also decided to start offering loan modification because I do absolutely feel that people can benefit from the process, and I DO trust myself to help them. I think my cynicism and apprehension comes from not wanting to ‘refer’ people elsewhere, and have them come back in worse shape than when I sent them out of the door. I have done my homework, and found a company with an actual track record of getting things accomplished (what a novelty!!) and that even offers a money-back guarantee. To me, that’s a good fit.

This is a new thing for me, and I am sure it will be an adventure. I will post here on my first clients- with their permission. It should be an informative few blogs. Of course, i will continue originating new mortgages as well. I have an excellent customer service record, and I don’t intend to squander that.

Good luck to all who are making a REAL effort to help consumers, and good luck to those people who find themselves in horrible situations with very little hope left.

Jennifer Monastero

Citizens Community Bank

With the current economic conditions, it’s no wonder we have seen an increase in many types of scams and ‘too good to be true’ offers. Unfortunately, we live in a world where sociopathic behavior is fairly commonplace, and even rewarded! For some strange reason, tough economic times brings out the worst in some people. Today brings a new breed of scammers to the forefront, and this is a group of people that will be growing in numbers for many weeks and months to come. I speak of “Mortgage Modification Experts”, or whatever fancy term they come up with for their unnecessary business. You know them well- just a year ago they were selling houses, selling mortgages, or selling electronics at Best Buy. Now, all of a sudden, they want to ‘give back’ and help distressed homeowners. Pardon me if I sound cynical, but I think it’s more likely they just need to make a little extra money at any cost.

Some of these people mean well, some are downright thieves. The thieves business model is simple- approach fearful homeowners with promises that their money woes can be fixed- and only THEY (the modification people) can help them! They ask for a nominal up front fee (I have seen fees ranging from $495 to $3000!) and in return promise NOTHING. (that’s right- they make no promises of success!!!) They lead the homeowner to believe that they will work diligently on their behalf to get their mortgage loan ‘modified’, and even make claims such as ‘we can help you keep your home and get you a 2% interest rate!’. The problem is, they do NOTHING, and simply take that money and RUN. The homeowner goes into foreclosure, and now they are out even more money in the process.

Consumers will see ads, hear commercials and be approached by family members who have heard of such ‘teams of professionals’. Don’t be fooled!

Here’s a list of what ANY consumer can do to modify their own mortgage, free of charge!

1) Contact the loss mitigation department or loan modification department of your current lender. You may feel uncomfortable calling them and explaining your situation- but believe me- they want to hear from you.

2) Fill out the ‘loan modification documents’ they require. Wow, that was fast.

It really is that simple. Why? Because if you fit certain criteria, the bank will work with you to help you keep your home- no “help” required. That’s what the new legislation is all about! Typically you need to have one or more of the puzzle pieces to qualify for loan modification:

1) You owe more than the house is worth

2) You have lost your job and can no longer afford the full payments

3) You have an ‘Option ARM’ from a lender like Countrywide or Washington Mutual

4) You have missed two or more payments

What a Loan Modification means for you:

1) They ‘write-down’ the balance of your loan to a percentage of the home’s CURRENT VALUE. That’s right. If you live in an area that has seen dramatic losses, the lender may forgive a portion of your loan balance.

2) A lower interest rate. This is huge- especially for people who are stuck in Adjustable rate mortages like ‘Pay-Option ARM’s’. If you are at 9%, expect a large rate decrease!

If a lender is going to modify your loan, YOU have the power to inquire about it. You do NOT need the help of any ‘team of professionals’, and anyone who tells you that you DO need them is lying. You either qualify or you don’t! No company can negotiate to “make” you qualify- but they can steal your money by telling you so. So keep that in mind.

I cannot stress this enough- do NOT give anyone money up front for loan modification services. Remember that there are always shady characters looking to take advantage of people’s fears. Do not fall victim to the latest too good to be true scheme/scam/waste of money.

If you approach your lender and they are willing to work with you, have an attorney review the documents if you don’t understand them. Be sure to check for what happens when you SELL the home, and other such contractual obligations you may have under the new terms.

The bottom line is simple- banks want you to stay in your home. They see the writing on the wall too- housing prices are continuing to fall, and a foreclosure auction will do them no good! They want your interest payments, that is all they care about. And with the new bailout, they don’t really mind ‘losing money’.

Don’t let your worries and fears hold you back- you can do this! And you don’t need the help of a fly-by-night industry to do it!
For free information, feel free to contact ANY lender on the Zillow Mortgage Discussion Boards.

Jennifer Monastero

Citizens Community Bank

If someone out there is brave enough to venture into home-ownership right now, please please please, make sure that the agent of your choice is A) licensed and B) competent!

How can YOU choose a good real estate agent? Well, for one, try to get a referral from someone you know and trust. Personal experience goes a long way, and if someone you know has worked with an agent that has treated them well, and also represented their best interests properly, by all means- use that agent.

Buying a home will be the largest investment many people will ever make, and the ramifications will last for years to come- so make sure you are well-represented, and taken care of.

Why am I, a lender, concerned with who people use as their agents? Well, it makes my job easier when my clients have a responsive, active, competent agent who knows not only the ins and outs of writing a real estate contract, but also some of the ins and outs of financing, appraisal, inspections- who to use, when to order services, who to go to for emergency issues that crop up- these types of intangibles are HUGE in the buying process. And these intangibles come with either experience, or a healthy amount of common sense. For example, if an agent knows that an FHA appraisal will occur, and they KNOW that there is a faulty railing on the back deck, they can save you time AND money. They can jump on that, ask the owner to fix the railing prior to the initial appraisal, and be done with it. Instead, if they don’t have a clue, you get the appraisal report, then the lender wants to see proof that the railing was fixed. You then have to pay $125 and wait another 3 days for the owner to take care of the issue, and have the appraiser back out to take a second look. See? A ridiculous waste of time and money.

I guess agent incompetence has hit me hard the last few days.

Maybe Andrew Adams will be kind enough to post his most recent encounter as well.

If you take anything at all from this rant, please let it be that buyers need good people working FOR them.

In the spirit of full disclosure, I should let you know that I am also a licensed real estate salesperon. Non-practicing, but still, licensed and very up to date on ‘training’- whatever that means.

Jennifer Monastero

Citizens Community Bank

These days, it’s more important than ever for home buyers to be protected thoroughly by their purchase contracts. When you put a large sum of money in someone else’s bank account, you want to know that you can get it back if things fall through, right? To make that happen, you need contractual protections, but one is becoming so popular and so necessary it deserves some undivided attention:

The Appraisal Contingency- These are getting more and more common in most markets in the country. Declining values mean that a list price from 6 months ago is probably NOT the market value of today. Where the mortgage contingency lacks, this picks up the slack. The protection offered by this contingency is simple- If the house appraises for LOWER than the contract’s purchase price, you have an option or two. One, walk away, or two, renegotiate. Let’s see what happens WITHOUT this contingency.

Let’s say you are looking at home that’s been on the market for 8 months. 4 months ago, they dropped the price to $400,000. You make a full price offer, based on the fact that you want this house and don’t want to argue about price- they just lowered it a few months ago, you say. The appraisal is done, and it comes in at $380,000. What happens? Well, if you have no appraisal contingency, you could actually be forced to pony up the difference. That’s $20,000 out of your pocket! The alternative is that you walk away, and leave your deposit money on the table. That means the buyer either:

A) Invests another $20,000 into the house in the form of a higher down payment or,

B) Walks away and loses their Good Faith deposit.

BLEGH! Neither of those options are very nice, are they???

Why doesn’t the mortgage contingency cover this issue? Well, the mortgage company bases their loan amount on the lower of the appraised value and the purchase price. They actually don’t care much what purchase price you put in the contract- it doesn’t matter, as they lend on the lower figure only. There were times during the boom where people would pay 5, 10 or 15 thousand dollars more than the appraised value just because they could. Now, no one in their right mind would do that.

To keep yourself and your deposit money well-protected, make sure you have contract contingencies that work in YOUR favor. If you have no ‘out’s and no protections, be prepared to lose the deposit money when/if things turn south. Common contingencies include Inspection, Mortgage, Pest Inspection, Septic and Well Inspection. Adding the appraisal contingency is the most important thing buyers can do today.

Be vigilant! The only people looking out for the buyers are usually the buyers!

Jennifer Monastero

Citizens Community Bank