Lenders category archives

I have found that few things in life separate the sheep from the goats men from the boys efficient from the not-so-efficient like the free market does.

Earlier this week, I received an email from the people at Zillow saying that they were making changes to their Zillow mortgage marketplace and were going to start to charge lenders for each contact with borrowers and my first thought was:

“Well, this oughtta be fun to watch”.

I think it might be the social scientist in me that casually enjoys watching people squirm whenever a perceived “big change” is announced - whether it is a global, national, corporate or maybe even just a marketplace change.

It has been my experience that whenever change occurs, there is almost always a group of people who thinks change is “fun” - no matter what it is - and finds a way to adapt to the change and continue on with life. It has also been my experience that there is also a group of people who resist change and can’t figure out why they never end up on the good end of the changes.

If you enjoy seeing both sides (and everything in between), be sure to follow the debate about the recent changes Zillow announced and how people are reacting to them.

What This Change Means For You: The Consumer

If you are a consumer, be sure to put Zillow on your Holiday greeting card list. They did you a big favor by making sure that lenders are valuing your contact - in fact… they are making your interest and qualifications a “market”.

If you are interested in a loan, have good credit, good income, good assets and want to buy a $500,000 house do you think you are more valuable to speak with than someone who has lousy credit, no money and wants to find out how to use the $8000 tax credit to buy a house?

Of course you are.

So now the lenders on the back end are going to be actually “bidding” for that interest and hoping that you contact them.  When you do contact them (hint: if I were you, I would contact one of the ones who has a stellar reputation), then they will be charged.

Just a hunch here, but I wouldn’t be surprised if Zillow doesn’t start out segmenting you as a customer and assigning a different value to you based on certain criteria, they will over time.  Which will only help the process.

I know, I know - it still remains to be seen just exactly how much money Zillow will be willing to pay lenders to talk with people who have lousy credit and no down payment (that was a joke) but one thing is almost certain:

Now that there is a price-tag that lenders are going to be paying each time you contact them - you as a consumer have an even higher chance of getting the best service from your loan officers working right here on Zillow.

Or, maybe I should say it like this: It seems to me that if a lender has to pay $100 for you to talk to him, you have a better chance of getting his/her full attention than if they didn’t have to pay anything for you to talk to them.

Or at least that is where I always try to put my mouth… where my money is.

Sprinkled throughout the Zillow Advice section are mini Zillow Polls that are created by the Zillow community. For example, I just saw one that asked,

“What do you look for most in an online lender?”

The choices were:
–Consumer feedback
–Great service
–Positive reputation
–Positive image

As you can see in the results to the upper left, most consumers want a lender with a positive reputation. Consumer feedback and great service came in second nearly in a tie.

Zillow Mortgage Marketplace depends on borrower reviews of our confirmed lenders, and as you can see from the lender ratings chart to the left, lenders with positive ratings build their business thanks to a good reputation.

Take a look at mortgage lenders on Zillow Mortgage Marketplace where you can see how many years they’ve been in the business, view their ratings, and read their reviews. While finding a lender online might be the new frontier, our customer reviews help paint a pretty clear picture of who you’re dealing with.

You’ve probably heard of the car companies that are offering job-loss protection to induce new car sales: buy a car and if you lose your job in the next few months you can return the car. Some homebuilders have offered job loss payment protection plans too, offering employment assurance programs to spur sales. Now Uncle Sam is thinking about getting in on the act, and is considering leaning on lenders to allow homeowners who lose their job skip some monthly mortgage payments.

With unemployment now above 12% in states like California, Nevada, and Michigan, it’s easy to understand the political appeal of such a proposal. It’s less clear why loan servicers would be willing to do this. After all, they have a contract with the borrower which says they’re owed their monthly mortgage payment. From the lender’s perspective, it’s not their problem whether or not the borrower has a job. As one of Tony Soprano’s guys might say when collecting a debt: “Tell it to someone who cares.”

Alas, despite what you may have read, lenders aren’t bad people. They empathize when their borrowers hit hard times. However, it’s not altruism that’s driving their interest in this potential program. It’s the realization that banks don’t want to foreclose on any more homes than they have to. A bank would much rather have their borrower fall a few months behind on their mortgage, or modify the loan, than foreclose on the home. It’s still too early to know whether the proposals being considered will go into effect, but the advice for now is clear: if you hit hard times and are struggling to pay your mortgage, pick up the phone and call your lender. It’s a difficult call to make, but it just might allow you to keep your home.

It’s getting a little nervous……

Let me explain:

• Retail sales were up and they weren’t up strictly because of the “Cash for Clunkers” program.   That’s a good thing economically but not so much from an inflation standpoint.
• The Producer Price Index was higher than expected.
• A relatively minor manufacturing report came in better than expected.

All three of them are not “market moving reports” in themselves.   But all three of them provide insight into a chain of events that might be building up.   Let me lay out that scenario:

• Retail sales are up.
• Inflation on the wholesale level is up.
• Manufacturing is up.
• All of these could potentially be signs of inflation.
• Inflation brings higher rates.

Have rates changed today?   Very little.   But the nerves are a little more “jumpy.”

So, with the Consumer Price Index coming out tomorrow morning, what’s my recommendation?   I’ve adjusted it a little.   I’m changing from “cautiously floating” to VERY Cautiously floating.   Why’s that?

Basically, the news that came out today is tipping the scales slightly towards higher rates rather than lower rates.   Not enough to make me recommend “lock” but closer than we were yesterday.

So what’s driving the  market today?  A couple of main things are impacting them today:

• Mergers and Acquistions - there are a few deals (mainly involving food) out there that are suggesting that the stock market isn’t dead.   This is pushing money into the stock market and away from bonds.
• On the “flip” side, oil prices, gold prices and other commodities are all higher, predominantly due to the value of the dollar falling.

So we’ve got a “point/counter point” pressure on mortgage rates going on.   One is pushing down, the other is pushing up.    This afternoon there’s another Treasury auction, but it’s the very short term Treasuries, so I don’t anticipate it having much impact on the mortgage world.

Recommendation for this morning is to carefully float.   At any time, the pressures could flip one way or the other and send rates up or down, but my feeling is that today could be a fairly decent one for mortgage rates.

Okay, so far this morning, the market has reacted in a very volatile but not significantly changed manner to the jobs report.   Essentially the jobs report came in pretty much where the market expected.  

So, did I call it wrong by recommending a shorter term lock and a long term float guideline yesterday?   I don’t think so for a couple of reasons:

1. We’ve passed the major economic hurdle for the next few weeks without any news that is going to significantly lower rates.   Between that and the fact that the new Reg Z rules essentially require locking in your rate at least 1 1/2 weeks before closing, it makes sense, if you are closing soon, to grab a rate and be done with it.
2. One of the “big guys” at PIMCO was on CNBC this morning talking about how this is a “sugar high” rally that is based on inventory and cost control and stimulus funding (isn’t that what stimulus is supposed to do?) but that it won’t last.    When reality hits, the stock market will adjust and the adjustment won’t be pretty.    That has two potential options:  1) It would force money into the bond market driving down rates, or 2) It could cause money to jump to cash (remember last fall?) and everything would be really ugly.   So I expect there is still some lower rate potential in the next 60 to 90 days.

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Do you ever get nervous?

Sometimes I do.

And lately, I have found that one of the things that makes me nervous keeps cropping up in the currently-crazy-real-estate-market that is happening in Arizona and other parts of the country as well.

Multiple offers from buyers on a house make me nervous.

Anytime I have a client who “wins” a bidding war on a house and then comes to me to talk about financing options, I get a little nervous.

I want to tell them “congratulations” and be as excited as they are that they just beat out all of the other offers on the house, but I find myself offering words of caution.

Why?

Because if you want to finance a house, your financing is going to be based on the appraised value of the house, not the sales price.

And whenever there are multiple offers involved, I get a little nervous that if you were the “winner” of the bidding war - the property that you just “won” won’t appraise for the sales price.

If you just won a bidding war, and the appraisal on the house is for lower than your agreed sales price, there are 4 common possible outcomes regarding multiple offers and appraised values:

1. Your agent goes to the seller (often it is the lender because the property is bank-owned) and gets them to agree to a lower sales price.
2. You agree to bring in the difference between sales price and appraised value in cash to closing.
3. Order another appraisal and hope the appraisal comes in at the sales price
4. You cancel the contract and go find another house.

Now.

If my math is correct… you have a 25% chance of a positive outcome (the sales price is lowered to the appraised value), a 25% chance of a hail-mary-hopefully-will-be-possible-outcome (order another appraisal and hope it comes in at sales price) and a 50% chance of a less-than-positive-outcome (bring in the difference in cash or cancel the contract and find another house).

25% chance for a positive outcome?

No wonder I get a little nervous.

It’s time to take a quick look at what’s going on in the mortgage world today.   A couple of things that are pushing rates up a bit:

• At the Federal Reserve’s conference over the weekend, no one sounded like they wanted to raise rates soon.    Well, think about it, we’re at best in a very precarious recovery and at worse in what has been called a “dead cat bounce.”   Of course they aren’t going to want to raise rates soon.    But, the markets reacted positively, the stock market is higher today and rates are also higher.
• A couple of relatively minor manufacturing reports came in and showed some improvement as well.   Nothing earthshaking but yet they add to the trend of seeing that things might be rounding a corner. 

Because of these, we’re a bit higher on rates today than we were on Friday.