Juicy Estates: Mortgage Blog
Loans and Luxury Homes
Mortgage Rates and Updates
South Florida's Luxury Homes
For more than a year I have been trying to communicate that the unemployment rate is not the only direct indicator of the soundness of the economic recovery. If fact many of the jobs that were lost in the financial crisis of 2008 are not coming back as companies have learned how to do more with less by utilizing new technologies and creating greater organizational efficiency. That does not mean that the jobs were shipped overseas. While some jobs were in the fact shipped over seas we can not ignore the new reality and the fact that manufacturing in places like China is on a downward trajectory given the increase costs due to demands by workers in that country.
My colleague Michael Schnabel of EWM Realtors who has an extensive background in the financial markets was kind enough to bring this article to my attention “Heading Toward A Cliff” in which the author Barry Ritholtz drafts the single most succinct line on the topic that I have been exposed to. Barry write “ the linkage between monetary policy and employment is very weak in the era of globalization.” There in lies the rub my friends. Globalization changes everything and we need to go back and reexamine the old conventions regarding economic policy and their effect on the economic future….this is not your grandfathers economy.
Mortgage interest rates for the South Florida market dropped below 4.25% again for 30 year fixed rate conforming mortgages. Conforming mortgages are those offered via Fannie Mae and Freddie Mac with loans amounts below $417,000. For a comprehensive survey of rates on all available mortgage loan programs for Miami and surrounding areas send me a quick email at James@ECFLion.com
As I wrote in my blog of June 10th “ Victory Over The Dred 4506” this seemingly innocuous IRS form has caused many home buyers and home owners’ in the South Florida real estate market great pain and in some instances has delayed or even prevented closings. Well to add to the drama when congress couldn’t get out of its own way and the government was shut down the IRS stopped processing the 4506 requests. This as it turns out was actually good news. The fact that the IRS was not processing the 4506 requests essentially forced lenders to close without receiving successful results which sets a precedent.
While we fully expect lenders to return to their former stance of requiring all domestic borrowers to sign a 4506 and that it be successfully executed prior to closing there is a little wiggle room now that may help us continue to accommodate those borrowers with extenuating circumstances.
As of today if you are a W2’d employee the successful execution of a 4506 is not required for those of you that are “self-employed” it is required but the good news is the back-log of request with the IRS is only a couple of weeks.
We are declaring VICTORY over the dread 4506! For those of you that are not familiar form 4506 and/or the form 4506T is a request for tax returns or tax transcripts that mortgage lenders require from potential borrowers to confirm that the copy of tax returns that they provide are the same as those on file with the IRS. Sounds simple enough however by some estimates as many as 300,000 Floridians have recently had false tax returns filed under their names. This causes big problems when applying for a mortgages as the lender can not close the loan until they can successfully exercise a form 4506 or 4506T via a third party provider. Many home buyers and home owners have experienced significant delays in their closings when it is discovered that they can not successfully fulfill this underwriting requirement.
We are please to be able to announce that we have developed a full proof way to address this issue when it arises and have now successfully completed more than 15 transactions in the past 60 days for buyers and borrowers that were victims of tax identity theft and were told by other lenders that they could not close. Elements Capital Funding is regularly closing purchases transactions in 15 business days and refinance transactions within 20 business days. The identification of fraudulent tax return filing, if discovered within the first week of application will only extend these time frames by 5 to 7 business days.
“This proprietary process is being utilized to complete sales and refinances in a timely manner despite the fact that FNMA has not addressed the issue directly”.
If you or your client is experiencing the pain of not being able to close as a result of having their income tax identity stolen give us a call and we will move quickly to get the issue resolved.
We enjoy the luxury of doing primarily purchase transactions and therefore rarely have appraisal issues with our files. That being said we do secure some of the lowest interest rates in the market and therefore do entertain a significant amount of refinance requests. It is always amusing (and simultaneously alarming) that appraisals performed on refinance requests are almost universally more conservative than those performed during a purchase transaction. So the question is, why?
The answer to that question is, in my opinion based more on psychological factors than on accepted appraisal practice. When a property has been listed on the MLS, given adequate market exposure and two willing parties have entered into a binding contract under the guidance of one or more professional Realtors the appraisal of said property tends to be more accurate and thorough. I imagine that this is due on large part to the fact that the appraiser is giving credence to, either intentionally or unintentionally to the weight of the contract and opinions of market value communicated by the other professionals in the transaction. Of course in a refinance transaction the only opinion of market value communicated the appraiser is that of the home owner.
So what happens in a refinance when the home owner is a 20 + year veteran of the real estate industry and regarded as one of the most competent real estate professionals in South Florida? You can only imagine! I will spare you the mind numbing details but let us just say that there were 3 appraisers and only one relatively accurate estimate of market value. Appraiser #1 couldn’t even finish the report and evidently won his appraisal certification at a raffle because he clearly had no experience. Appraiser #2 missed the market value by almost 30% by using comparables located in a warehouse district from outside the subject’s area. Appraiser #3 used the most relevant comparables and produced an accurate and well written report that is supported by the market data.
I make these comments not as a participant in the refinance transaction but as someone who voluntarily forfeited his appraisal certification in 2010 after 20 year as a certified appraiser (12 of those as a full time appraiser in the South Florida market). I forfeited my certification for a few reasons. The first and foremost is so that I could express an opinion about the quality and/or accuracy of an appraisal, speak to my clients about it and keep a watchful eye on appraisers without violating any provisions of USPAP (Uniform Standards of Appraisal Practice). The secondary reason is perhaps more interesting to most. I left the industry after a successful career when I witnessed the advent of appraisal management companies. In short appraisal management companies have had the effect of commoditizing the appraisal industry. As a result of this commoditization the quality of the appraisal reports is lower and the persons completing those reports typically less experienced with less appraisal education. The most seasoned appraisers in the market typically will not complete appraisal reports for the largest appraisal management companies as these companies pay a fraction of the appraisal fee to the appraiser.
In my opinion a well-trained residential appraiser can complete 5-7 reports a week when doing so in compliance with USPAP and giving each subject property the consideration it deserves. Given that appraisal management companies are only passing along $125 – $200 per report to the appraiser…well you can do the math.
In the end the best defense against a low-ball appraisal is data. Having accurate, relevant market data that is not distorted by emotional bias is the only way to get an under paid appraiser to see the light.
If you are having appraisal headaches give me a call and we will see what we can do to get you some relief.
Several times per week I get that frantic call from a South Florida home buyer or home owner asking, “how fast can I close?” In the wake of the sub-prime mortgage mess the federal government has put into place mandatory disclosure time lines in an effort to protect consumers. These time lines must be adhered to and in some instances can cause delays. In short, given the current regulatory compliance environment I have outlined the current turn times we are delivering at Elements Capital Funding and LuxLev Capital for the relevant loan products and transaction type.
Conforming ~ 15 to 20 business days
Jumbo ~ 15 to 20 business days (faster by exception when circumstances warrent)
Private / Hard Money ~ 7 to 10 business days (commercial property only)
Conforming ~ 20 to 25 business days
Jumbo ~ 20 to 25 business days (faster by exception when circumstances warrent)
Private / Hard Money ~ 7 to 10 business days (commercial property only)
The turn times indicated above in large part are predicated on a borrower that provides requested documentation in a timely manner. Working with a seasoned mortgage broker that can provide you with a comprehensive list of the documents that will be required for your loan approval will go along way to helping expedite matters.
If you have questions regarding how to obtain the best rates and terms on your mortgage feel free to call me directly, 305.389.5061.
Current conforming 30 year fixed rates ended the day at 3.5% (3.528 APR) assuming a 720 credit score and 10% down payment. Jumbo Rates continue to improve with 30 year fixed rates with no points standing at 3.875% (3.89 APR) which again assumes a 720 credit score and 20% down payment.
Keeping these 3 common road blocks in mind while buying a home can held you achieve a smooth transition from contract to closing.
1) Provide documentation in a timely manner.
Road Block: Given the new disclosure requirements and stressed underwriting departments it is imperative that all requests for documentation be addressed in a timely manner. In most instances a complete loan file must be submitted before underwriting will begin looking at the file. Submitting trailing documents causes timing issues that delay your closing or even result in a denial of the loan application.
The Fix: The loan application and required documentation should be gathered prior to executing a contract on a property. Meeting with your loan officer and taking some time on the front end of a home purchase will save you hours of time and many headaches. Most mortgage lenders (yes Elements Capital Funding included at www.ECFLion.com) will provide the ability to complete your loan application securely online. Doing so will provide the loan officer with insight to your financials and allow her to generate a comprehensive list of the documents that will be needed to complete your loan file.
2) Provide what is requested.
Road Block: Many times through no fault of their own loan applicants provide what they believe to be what was requested to ultimately be contacted by their loan officer again with a similar request. This is aggravating and time consuming to the borrower, an unpleasant task for the loan originator and can cause significant delays. The most common example of this road block is requests for “complete” bank statements. Given that many of us, me included do all of our banking online we no longer receives paper statements in the mail each month. When presented with a request for 2 months bank statements borrowers log on to their account online produce the statements and send them off to the loan officer. In most instances these online print outs do not include the account holders full name, address and full account number all of which will be required by underwriting. The other most common partial documents received are tax returns. For underwriting purposes tax returns need to include all schedules.
The Fix: Most banks provide the ability to generate a PDF of your complete bank statement online which will provide all the information needed by underwriting. Keep in mind that “complete” bank statements means just that. If the bottom of the statement says page 1 of 7, then all 7 pages will be required even if blank. As far as tax returns go most CPA’s can quickly generate a PDF of your entire return however please be cautious when delivering these to the loan officer. Email is not entirely secure so try an eFax, or document delivery system like Drop box.
3) Change contract terms
Road block: During the course of any real estate transaction there are exists the possibility of contractual term changes along the way. Many times when these changes made the financing contingency and closing dates set forth in the contract are not extended which can cause severe timing issue. The most common these delays is a change in contract price that results in a change of loan amount and resulting yield spread premium or other fee changes. These changes can trigger the need for re-disclosure and a mandatory 3 day waiting period. Changes of this nature can also require that the loan file be re-underwritten which in some instances can take a few days.
The fix: Make sure that your loan officer and your Realtor are in close contact and that before andy addendums to the contract are signed that the effects on the finance process are taken into consideration. Having appraisal, inspections and title work done at the very front of the transaction is a great hedge against these common delays.
If you have questions about the process of obtaining a mortgage for the purchase of your new home feel free to give us a call at 305.446.1948.
“And they called me crazy…..”
In January of 2012 I resigned my position at City National bank to found Elements Capital Funding a licensed mortgage lender. The vast majority of people in my life thought that I had lost my mind which may in fact be true but that’s a topic for a different post. As many industry insiders are starting to realize as illustrated from this article in The Scotsman Guide an industry leading publication, titled “Saddle Up for Lendings Ups and Downs”, alternative lending is filling the huge whole in the credit facilities currently being provided by banks.
Through our subsidiary LuxLev we have been pairing private investors with high quality loan requests on some of South Florida’s best collateral. Our ability to complete transactions in the face of unreasonable bank requirements has proven to be beneficial to our investors and borrowers alike. As highlighted in the article referred to above we have developed a set of guidelines and underwriting criteria that is far more flexible than those set forth by the banks but do not rely solely on equity in the collateral property as the primary determinant in funding. As a result of developing this middle tier product set we can deliver a preferred rate of return to the investor while sparring the borrower the pain of having to pay “hard money” terms and points.
If you or your client needs would like additional information on how we can help facilitate a transaction please give us a call. 305.446.1948.
Now cash buyers of Miami real estate have it made in the shade!
We regularly receive calls from cash buyers asking to refinance their property to recoup some of their liquidity shortly after they have closed. Historically this was only possible using portfolio loans but now it can be done using conforming (Fannie & Freddie) loans which offer very low fixed interest rates (see latest mortgage rate update post). The influx of foreign cash buyers has been a pillar of the South Florida real estate recovery and now we are seeing domestic cash buyers as well.
With conforming 30 year fixed rates around 3.5% there has never been a more advantageous time to borrow money. In the not to distant future as the domestic and global economies recover you will be able to walk into you local bank and earn 3.5% on money market. Of course interest rates are relative so when you can get 3% + on a money market interest rates on mortgages will be north of 6%.
Savvy money managers are borrowing as much as possible in the current environment knowing that creating an arbitrage with those funds will not be a difficult task going forward.