Lenders category archives

If you found this blog, chances are that you are a consumer who is looking for more information about a mortgage. Maybe even more specifically, you are searching for specific information about how to get the best deal on your mortgage.

So I thought I would take the time to list out the Top 10 Reasons Someone Shouldn’t Use Zillow’s Mortgage Marketplace to Shop for a Mortgage.

Number Ten

You much prefer filling out a form on the Internet somewhere that looks like this…

because you wonder what will happen if you do.

Number Nine

When you fill out a form that looks like number ten, you also want to give your personal information - just in case someone needs it.

Number Eight

You sometimes get lonely. You like to get phone calls. From lots of different people. Forget it if they want to talk about your mortgage - you want to tell them all about how your garden is doing. You know that by filling out a form, you will soon have lots of different people to talk to from all over the country. And they sound like such nice people when they call.

Number Seven

Your Realtor’s brother seems like he is so smart about mortgages. You feel lucky that you found the World’s Best Realtor who has a brother who is the World’s Best Loan Officer on the back of the shopping cart at Safeway.

Number Six

You really don’t have all that much time to fill out any forms on the internet. Can’t you just sign a form or two and be done with it?

Number Five

Your sister said that she found her loan officer on MySpace and he was so cute - he even gave her a ride in his BMW to the title company.

Number Four

You can’t find any loan officers on Zillow who are offering you any cash-back-at-closing when you buy your house and you really need to find someone who can offer “creative financing”.

Number Three

Your mom used a loan officer that she liked before - and he said that he could “help you out” even though he has a side job now stocking shelves at Home Depot.

Number Two

You like the fact that you can go to the Realtor’s office and stop by the Loan Officer’s office right there in the Real Estate Office. Having them together makes it so easy.

And finally, the Number One Reason Someone Shouldn’t Use Zillow’s Mortgage Marketplace to Shop for a Mortgage?

You feel sorry for your brother. Who also happens to be a mortgage broker.

Well, today’s mortgage market started out somewhat on the up side.   Not enough to actually change the rates we can offer, but enough to make it a little more expensive to get the same rate as we had yesterday.

So what’s happening today?

• The stock market is recovering some today and actually looking a bit positive.   Remember what I said in yesterday’s Mortgage Market Week in Review - when the stock market is going up, that’s not too friendly for mortgage rates.
• Housing Starts - were up from June of 2009 but down from July of 2008.   The market is looking at that as a good thing.   I’ll have more on the housing starts later today.   Quick take on it:  Seasonality and not enough of a statistical difference for it to be considered a trend - yet.
• Builder confidence - this goes with the housing starts.   If you are a builder who is struggling and you see a pick up in starts, it’s going to make you feel better.

Is it the trend reversal that I was looking at coming?   Too early to tell.   But it’s definitely something to watch for.

My recommendation remains to lock all loans.   I’m still pegging the chances of substantially lower rates at less than 30% and the odds of higher rates at more like 70%.

Well, the trend continues to reverse itself today.  The hammering that the bond market and mortgage rates took last week with the corresponding rise in the stock market is unwinding this week.

What else is happening?  Well, there’s a lot of people who are watching and waiting to see what the Federal Reserve’s Open Market Committee (kind of ironic that an open market committee meets behind closed doors) will announce tomorrow at 2:15.   Expect the overall market to be in a holding pattern for now.

Okay, I apologize for getting this up late, but this week’s schedule is a little chaotic.   If you’re a friend of mine on Facebook, you’d know why my schedule is chaotic, but it’s all good.

So what happened in the mortgage market today?  

• The bond market and the mortgage market got hammered last week.   Not just beat up a little, but seriously hammered.    And the beating that it took was frankly more than the economics of the situation justified.
• I told you on Saturday that mortgage rates go “up on an elevator and down on the stairs.”    That means that they go up a lot more quickly than they go down.
• So we saw a bit of a reversal in the markets today.   The stock market didn’t do so good today and mortgage rates improved.    We actually ended today .25% lower than where things ended on Friday.

How long will that continue?  Hard to say.   I’ve got a post coming up tomorrow that talks about the Fed and their plans for buying more Treasuries.   I don’t believe that will help mortgage rates.

My recommendation remains to lock all loans.   I believe that the risks remain significantly to the upside on rates and while there is downside potential, it’s not nearly as prevalent as the upside risk.

Once again, it’s not starting out to be a good day for the mortgage market.   Let me offer some explanations of what’s happening and how it might play into how to deal with the Jobs Report that comes out tomorrow.   Here goes:

• The markets seem to be spinning every even remotely positive economic news as good news.   Retailers have posted some quite awful sales reports compared to last year but when the market looks at them, they aren’t quite as bad as expectations, so it’s a good thing.   ONLY 550,000 people applied for new unemployment benefits last week, down from 588,000 the week before, so that’s a good thing.   People are buying cars - but they are doing it because the government is giving them $4500 for a $300 clunker.
• Pending home sales were up quite substantially - but many analysts think it’s because of the looming “deadline” for the $8000 First Time Home Buyer tax credit and the fact that it expires on November 30.

With these types of “asterisk” reports coming out and the bond market reacting negatively to them, there are a couple of things that I expect with the employment reports tomorrow:

• The report will not come in really good.    It’s not going to show that jobs were actually created or anything like that.
• The report will not come in really bad.   We aren’t going to see 700,000 jobs lost or something that bad.
• The report will come in very mediocre.   There will be parts of it that will be decent and parts of it that show the job market is very lackluster at best.
• The financial markets will focus on the parts that are decent and ignore the parts that are bad.   This is in line with all of the reports that have come out lately.
• The mortgage market will sell off and rates will go higher.

If you look at the three possible outcomes - really good, really bad or mediocre, there’s really only one of them that could have a positive impact on rates.   If the jobs report comes in WAY worse than what the market expects (and they expect something in the 300,000’s of jobs lost), we could see rates drift down.   All other outcomes will push rates higher.

So, what do you think my recommendation is?   Lock sooner rather than later.   Of the three possible outcomes for the jobs report and it’s impact on rates, I’m estimating there’s approximately an 80% chance that an outcome that pushes rates up and only a 20% chance of an outcome that pushes rates down.

I’ll continue to keep you informed.  I’ve got a couple of meetings scheduled tomorrow morning, so I might not have anything major about the jobs report until the afternoon.

On July 30, 2009 the new Housing and Economic Recovery Act (HERA) regulations will go into effect.

• They require all mortgage lenders and brokers to help prevent deceptive lending practices and protect customers by helping them become more informed.

• These new requirement could impact your closing dates.

The Four key elements you need to know :

1. If the homebuyer is financing the property, these new regulatory and investor guidelines will impact - and could even dictate the closing date
2. Upfront fees cannot be collected by the lender until the initial disclosures are received.  Fees are needed to order the credit report, appraisal and get the process underway.
3. The homebuyer must be provided with a copy of his or her appraisal a minimum of 3 days prior to closing
4. An increase of more than .125% in the APR from the initial disclosures requires the Truth in Lending to be revised and reissued to the homebuyer at least 3 business days before closing.

I’ve had a number of conversations with one of my all time favorite real estate experts, Jeff “Bawld Guy” Brown, about the data that has been moving the markets lately.   A couple of thoughts about the numbers…..

• If you take the numbers on their own, they stink.  Rotten, lousy, bad, any adjective you want, they can fit it.
• If you compare the numbers with the numbers from 3 to 6 months ago, they are pretty good.

And there in lies the problem.  

Do we look at the numbers and say, “Wow, things are getting a lot better, it’s a great time to __________________”  (fill in the blank with your choice).  

Or do we look at the numbers and say, “Hmmm, I’m somewhat skeptical of the numbers I’m hearing.   I hope that they do pan out to showing that the worst is over, but I’m going to take a bit more cautious of a view?”

If you ask Jeff Brown, he’ll say that part of the reason for my taking the second view is because I’m from Michigan.  Remember, Michigan doesn’t even show up on the list of “investment opportunities” for Jeff (according to him) due to our wonderful growing employment base and booming real estate market (okay - not quite).  

If you ask me, I’ll say that my skeptical view is because:

• Many of the people who I talk to and help with mortgage financing look to me for advice and guidance on what’s happening in the market.   That, by it’s very nature, pushes me toward the side of being more cautious rather than less cautious.
• If I’m too skeptical, and this is a real recovery, then the Straight Talk that I’m giving out will work any way.   For instance, most days, if you read my Mortgage Market Updates, you’ll find that I’m recommending that you lock rates.   I’m doing so for two main reasons:  1) I believe that the “bailout” tab that the government is running up is going to come back and bite us eventually and in a big way.   2) I believe it’s a prudent financial strategy to lock in the gains that are available from the current rates rather than gamble them away in hopes of a lower rate.    So what if I’m wrong and rates drop?   Have you ever heard of the term REFINANCE? 

Do I have any incontrovertible data or theories that say that we aren’t starting down the road to recovery?  No I don’t.

But I do want to make a couple of points:

• Every single supposedly “positive” report lately has required an asterisk.   The Case Shiller house prices posted the biggest gains in three years (IF you look at month to month rather than year over year).   New home sales were up (compared to the prior month but down compared to last year).    GDP was better than expected (but it was still 3.5% below what we need to maintain employment).   It’s like every single report that has come out has needed spinning.
• I believe it was Dr. Nouriel Roubini, one of the leading economists with the best track record in the last few years, who summed up his view of the current status of things this way (and I’m paraphrasing)  “The patient was rushed into the ER with life threatening injuries.   The doctors were able to stabilize the patient and he is now resting comfortably, though heavily sedated, in the Critical Care Wing of the hospital.   The extent of the patient’s injuries were enormous and the rehabilitation will take a very long time and the prognosis for total return to health in a relatively quick time frame is doubtful.”
• Credit losses - Whether you look at credit cards, car loans, home equity loans, mortgages, commercial loans or any other type of loan, the delinquencies that are occuring are rising and in many cases rising exponentially.   This says to me that we aren’t done with the problems yet.
• Fannie Mae and Freddie Mac - I spent 2 hours this morning on a conference call going through the coming changes with Fannie Mae and Freddie Mac.   A couple of main points:  1) They are obviously still struggling to keep their books clean because every single one of the changes is either a clarification or in most cases a tightening of the rules.   2) If everything was going well, they would be looking to make things easier and grow their book of business.  

Is this the Mother of All Head Fakes?   I’m afraid it is, but I’ll be honest with you, I don’t know.   I also know that anyone who tells you that they KNOW what’s going to happen shouldn’t be trusted.

But I do know this - make your real estate and investing and mortgage plans assuming that it is the MOAHF and if we’re wrong and things are indeed heading up on a V shaped recovery, you’ll be sitting just fine either way.

In case you noticed, I haven’t said which side of the discussion Jeff comes in at.   There’s two reasons for that:

1. I know he’s going to be reading this and I’d like you to hear it from him directly.
2. Jeff and I have a very unique professional relationship in that we will quite often disagree on issues but both know that we have substantative and quantifiable (how are those for big words?) reasons for it and can respect the differences.

I’d rather go down in the books as a mortgage lender who called it the way he sees it and helped people navigate the most difficult market in decades than I would blend into the crowd as just another lender who gets people further in debt.

Housing Bottom No, the Mother of All Head Fakes: Tech Ticker, Yahoo! Finance

From The Business Insider, July 31, 2009:

Housing bears immediately tried to poke holes in the surprisingly good numbers in the May Case Shiller report.

The most widespread bear argument, that the rise was just seasonal, is weak: Even the seasonally adjusted numbers were the best in three years.

Two other arguments, however, are more persuasive.

Whitney Tilson of T2 Partners calls the May numbers “the mother of all head fakes.” He–and the two analysts below–think house prices will resume their decline in the fall. We’re in that camp, too…

Bear Case 1: The Seasonal Adjustments Are Too Weak

The first argument against reading too much into the May numbers, made by Calculated Risk, is that the “seasonal adjustment” factor used by Case Shiller is not strong enough. Under this theory, a more appropriate seasonal adjustment would have showed a steeper decline in seasonally adjusted May numbers.

To support this argument, Calculated Risk plots the non-seasonally adjusted Case Shiller numbers (blue) and the seasonally adjusted ones (red). He notes that, during the 1990s, the seasonally adjusted numbers smoothed the seasonal variations to a relatively flat line (as they should). In the nutty 2000s, however, the seasonal adjustments produced wild swings that almost tracked the non-seasonal adjustments–thus defeating the purpose of attempting to “seasonally adjust” the numbers at all.

Thus, in Calculated Risk’s opinion, house prices will start falling sharply again in the fall, when the seasonal boost peters out.

Bear Case 2: It’s Just A Mix Issue

The second bear argument, made by Mark Hanson, is even more persuasive. In a nutshell, Hanson argues that the strong Case Shiller numbers were just due to a temporary seasonal change in the mix of houses sold–with “organic sales” (normal, voluntary, free-market sales) becoming a larger percentage of the overall sales than they were in the winter, when distressed foreclosure sales dominated.

In 2008, Mark’s argument goes, foreclosures climbed steadily through the year. Most foreclosures in 2008 were on lower-end, subprime houses that plummeted in price as banks dumped them at distressed prices. This year, however–at least in California–foreclosures have stayed relatively flat (at a high level).

Meanwhile, the organic sales market–sellers who actually want to sell–picks up each summer. In recent years, with most foreclosures taking place at the low-end of the market, the organic sales market has tended to include higher-priced houses that aren’t sold in distress.

Last summer, rising low-priced foreclosures overwhelmed the seasonal spike in high-priced organic sales, so average houses prices kept falling. This year, however, with flatter foreclosures, the seasonal spike in organic sales is having a far larger impact. Thus, in the past few months, the median sale price has risen.

In other words, Hanson attributes the rise in the Case Shiller index to a seasonal mix issue, not a bottoming in national prices.

Quick view of the mortgage market today.   Rates have softened a little bit on a couple of things:

• Gross Domestic Product for the 2nd quarter came in significantly less bad (but not good) than expected.   That increases the financial markets perceptions that the worst is over.   
• The Treasury Auctions from earlier this week went better than expected.

We are now entering the phase in the market where we’re waiting for the jobs report next Friday.    Expect a lot of volatility and very little movement (market noise) until then.   Expect the market to continue to try to sort out the difference between actual economic improvement and a slowing of the pace of decline.

Until then, my recommendation remains to lock all loans.   The upside risk is worse than the downside potential.

Last year, the Secure and Fair Enforcement (S.A.F.E.) Mortgage Licensing Act of 2008 was signed into law as part of the Housing and Economic Recovery Act. This law outlines procedures, requirements, education, testing, and standards for mortgage loan originators. 

Part of the law includes mandatory registration and state licensing of loan originators through the Nationwide Mortgage Licensing System in order to give consumers easy access to a loan originator’s employment history, and any disciplinary or enforcement actions taken against him or her.  This is great news for consumers, since a national registry will help stop fraud, giving regulators the ability to more efficiently track bad actors.

The registry was begun in January 2008 with a handful of states, and to date, 26 states are actively participating, tracking 66,469 individual originators and 11,459 mortgage brokers and lender companies.  An additional 20 states will register by the end of this year.  Three states — California, Pennsylvania and Massachusetts — have not yet passed bills but have legislation pending, and Minnesota is expected to address the issue in 2010.

The law defines a mortgage loan originator as someone who takes an application and negotiates the terms. What hasn’t been decided yet is whether that definition should include servicers and loan modification officers.