Juicy Estates: Mortgage Blog

Archive for September, 2009

This Post Says It All….

There is nothing that I can add to this post to make it any better. Katherine Clase author of The Key Insider hit it out of the park with this one.

Read her compelling post by clicking here.

ps: Did I mention that rates are low and down payment requirements have been relaxed?

Lower Down Payments For Jumbo Loans

I love the smell of  liquidity in the morning….smells like, victory.  Ok so clearly that is a rip off / paraphrase of Robert Duvall’s line from the epic 1979 file Apocalypse Now but you get the point.   As I alluded to in my post of August 13 liquidity is returning to the Miami and South Florida mortgage markets for luxury homes and as a result the down payment requirements for jumbo mortgages have been relaxed.

There are many buyers in the current market that want to buy but do not want to sell equities (stocks) or other assets in order to raise the capital needed to make a 20 or 25% down payment for a new home.  Relief for this issue has come in the form of 10% down financing for purchase prices of as high as $1,650,000.  In fact for the right client we have been securing financing with less than 20% down for purchase prices as high as $4,500,000.

The most encouraging thing is that this down payment relief is not limited to just the private banking world.  Several other local and regional banks are offering jumbo financing with less than 20% down.  Ruben Aboy is a mortgage banker with Regions Bank and has advised me that they too are offering a 15% down program for purchases as high as $1,500,000.  Other local banks are offering Doctor and Lawyer loan programs that provide financing for new professionals with just 10% down financing.

The Miami mortgage market is changing rapidly and this time it’s for the better.  If you or your client is in need of jumbo financing with less than a 20% down payment have them contact me and I will ensure that we get them to the right lender.

FHA Down But Not Out

As I mentioned in my post of September 9th, 3 Alarming Facts About FHA, a recent report in the Washing Post confirms that the program will violate it’s federal charter as reserves fall below the mandatory floor enacted by congress.

“It’s very serious,” FHA Commissioner David H. Stevens said in an interview. “There’s nothing more serious that we’re addressing right now, outside the housing crisis in general, than this issue.”

What this will mean for potential home buyers is tighter underwriting guidelines including 660 or 680 minimum credit scores, maximum debt to income ratios of 48% and even the possibility of increased down payment requirements.

There is a very narrow window to take action for those marginal buyers who don’t have the strongest credit scores or who may be carrying to much debt.

For those of us that work in the luxury home market and dont’ regularly use FHA financing this is still a concern.  The foundation of the housing recovery in South Florida is based, in part, on the selling off of inventories in all price ranges.  These developments with FHA will eliminate a large pool of potential buyers from the market.

If You Disagree With Me It’s Because You Are Wrong

The aptly described “most interesting man in the world” has yet again, through the use of narration, coined a new mantra for the current generation.  ”If you disagree with him it is because you are wrong” is a most succinct description of the current socio-political environment.  Regardless if you are discussing the massive amount of tax payer dollars spent on the bailout or the pros and cons of health care reform it is clear that the national discourse on all major issues has deteriorated into a school yard game name calling and general disrespect.  The major political parties have both taken the stance of “if the other side proposes it then we oppose it”.

I am certain that the most interesting man in the world wouldn’t discuss money or politics in mixed company but then again he enjoys of the luxury of being a work of fiction.  We on the other hand do not enjoy this luxury and therefore must wallow in the proverbial mud if we want to express an opinion on topics usually reserved for talking heads and the lunatic fringe.

What does this have to do with Jumbo mortgages or South Florida real estate….actually a good bit.  You see we are entering into a regulatory environment where the compliance threshold will be so high that it will preclude many from engaging in otherwise good business and at the same time we are entering into an economic environment where the expansion and inflation will be the order of the day.  Don’t misinterpret this to mean that I do not support increased regulation of the financial markets, I do as the markets have clearly illustrated that left alone they will run amok.  However increased regulatory thresholds need to be sensitive to how business gets done not how partially informed politicians think business should get done.

In my opinion the new regulations being put in place regarding the real estate and mortgage industries are not only ineffective but damaging.  The vast majority of the new Reg-Z and HVCC regulations not only fail to defend the consumers interest but in many cases hurt it.

For example Reg-Z’s focus on APR disclosures when anyone with an understanding of how APR is calculated will tell you that it is in most instances a meaningless calculation devised by politicians not mathematicians.  This issue could be resolved by incorporating a time element into the Truth In Lending/APR disclosure.  Given that the average lifespan of a mortgage in the US is only 4 or 5 years I would suggest that the APR be calculated and disclosed in 3, 5, 10 and life of loan time frames to give the consumer a true indication of loan cost.

And HVCC  a real gem ensuring the delivery of inferior quality appraisal reports through a process that forces appraisers to cover a larger geographic area in order to make a living.  A possible fix here would be to repeal the misconceived HVCC in favor of actually enforcing the rules and regulations set forth by USPAP.  A national appraisal certification standard should be put in place under the underfunded yet watchful eye of the Appraisal Foundation.

I think that the most interesting man in the world, while sipping a cold Dos Equis, would be interested in what you have to say on these topics so I invite you to share your opinions free of the fear of retribution.

ReBarCamp – Miami

ReBarCamp Miami is a gathering of some of the most forward thinking real estate professionals from South Florida and around the country.

Early adapters like Riley Smith, author of The Real Estate Coconut realized the important roll that social media is playing in the success of any real estate agent and how it can be leveraged to dominate your market place.  ReBarCamp is akin to a think tank for real estate professionals that “get it” like Riley did more than a year ago.

One of ReBarCamp’s sponsors , Altos Research provides market data for the Institute of Luxury Home Marketing.  ILHM provides those of us that work in the luxury home space great tools like the graph below which clearly indicates that activity in the luxury home market in South Florida is on the rise.

Don’t fret if you were not in the loop and will not be attending ReBarCamp in Miami as there are future dates in cities all over the country.  If you have recently “got it” and are looking for mortgage content for your blog or would like to promote your luxury listing on Juicy Estates give me a call.

30 Yr Fixed Rates Below 5%…Again!

As a result of the Fed’s manipulation of the mortgage backed securities market coupled with international appetite for U.S. Treasury obligations conforming 30 year fixed rates have fallen below 5% again.

My fear is that both the public and real estate professionals across the nation have become accustom to conforming interest rates in the 4% range.  When the government stops buying mortgage backed securities in an aggressive manner rates will return to levels not seen since early 2008 and many buyers will have missed a great opportunity.

Jumbo rates have also fallen and with just a 20% down payment rates are now in the high 5% range.  This biggest challenge I see for those buyers of luxury properties in South Florida are down payment and reserves  requirements both of which have been relaxed in recent weeks.

The planets are aligned but they won’t stay that way for ever.

3 Alarming Facts About FHA

Fact: since 2005 FHA’s share of the mortgage market has increased by almost 1000%

Fact: the FHA loan default rate has more than tripled soaring to 7.8%.

Fact: Federal law states that FHA’s reserves, after expected losses, must be greater than 2% of the loans it insures. This ratio has decreased dramatically currently standing at 3% down from 6.4% in 2007.

The writing may be on the wall for FHA.  While a Federal bailout of the program may not be necessary we will definitely continue to see lenders tighten underwriting guidelines for those who hope to take advantage of the program.

Some of the recent changes in FHA requirements are the minimum of a 640 credit score (some lenders require 660) and debt to income ratios not exceeding 50% (some lenders have a ceiling of 42%).

FHA financing with just a 3.5% down payment was one of the primary ingredients in the recipe for the housing recovery and as the program becomes more restrictive more and more potential buyers may be squeezed out of participating in the dream of home ownership

90 Day Seasoning Rule, a Ghost In the Machine

By now most real estate professionals are familiar with the FHA requirement that a seller of a property be on title for 90 days before they can sell to a new buyer.  What many are not aware of is that by the end of this past August most lenders adopted this same rule for conventional financing as well.   One of the most compelling aspects of being a real estate professional is that you learn something new every day and my recent experience with the 90 day seasoning rule was a great example.

I have the privilege with working with many successful and talented Realtors and recently had the opportunity to provide financing for a family member of one of South Florida’s best.  In an effort to be proactive regarding the 90 day seasoning rule for conventional financing I emailed a copy of the Miami Dade County tax roll for the subject property to the underwriter on the file.  The closing date for the current owner was reflected as on the tax roll 5/28/09 and as confirmed by the underwriter in writing we should be fine to close any time after 8/28/09.  What I and no one else in the transaction were aware of was that the investor/owner had originally closed on the property on 5/28/09 but had subsequently transferred ownership to another company that he owned.  The result of this transfer that did not show on the tax roll is that the continuity of title date from an underwriting perspective was the transfer date and not the original sale date pushing the earliest possible closing date back a full 30 days to 9/28/09.

The transparent transfer was only revealed by the title search and not being aware of the 90 day seasoning requirement the title agent did not think it would be an issue as it never had been in the past.  When we were informed that this would be an issue for underwriting we made every effort to obtain an exception on the 90 day rule even going as far as asking the attorney in the transaction to write an opinion on the subject but to no avail. 

In the end my incredibly supportive employer agreed to portfolio the loan at the same low 30 year fixed rate as originally promised to the client and close right away as opposed to waiting for the conventional financing to be available at the end of the month.

The lesson in this scenario is that when it comes to the 90 day seasoning rule for FHA and Conventional financing you CAN NOT rely on the tax roll to determine when the clock starts ticking.  In my opinion if you notice the sale or transfer of a property you or your client has under contract at any point in the last 12 months you should investigate further and call your title agent immediately.