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PSSSST, Here We Go!

It appears that the national media is finally starting to recognize something that many South Florida real estate professionals have know about for months now.  Reporting the doom and gloom of the real estate bubble sells news papers and drives television ratings but it is simply not accurate reporting as illustrated in the July 26th New York Time article “Affluent Buyers Reviving Market for Miami Homes”.

My good friend and Brickell area real estate expert, Michael Shnabel with EWM Realtors put it best when he made the following statement about the opportunities in the South Florida real estate market, “the train has left the station, you can jog and still get on but the train has definitely left the station”.

Construction Loans? Yes!

You or someone you know looking to build your dream home?

In recent months the South Florida market has experienced a significant increase in the number of home buyers that are opting to build their dream home as opposed to buying an existing property.  During the period from 2007 to 2010 residential construction loans were difficult to come by and when available the terms were not great but all that has changed.

Construction loans are available again and the rates and terms are very attractive.  With the drop in the price of vacant lots in prime neighborhoods like Coral Gables, Miami Beach, Pinecrest and Key Biscayne building has become a viable alternative once again.  In general residential construction loans in South Florida are available with the following terms:

30% down payment

Minimum loan amounts $1 million however smaller loans are available on an exception basis

Both fixed and adjustable rate programs are offered

Fixed rates are in the mid 5% range and adjustable rates in the high 3% to low 4% range

Expect to pay .5 to 1% construction loan administration fee

Loans are limited to primary residences

Minimum credit scores are about 680

Interest only payment during construction period of 18 to 24 months

If you or your client are in the market to build their South Florida Dream home feel free to give me a call with questions.

No Title Seasoning – Cash Buyer Advantage

With the influx of foreign buyers and the dramatic increase of cash transactions in the South Florida real estate market the lack of a title seasoning requirement by some portfolio lenders is an advantage to well heeled buyers.  In short most lenders require that a property be owned for at least 6 months before they will allow a cash out refinance.  Some banks do not have a title seasoning or length of ownership requirement for their portfolio loan products which means that if a buyer pays cash for a property they can obtain a mortgage right away for 50, 60 or even 75% of the value of the home.

The ability to provide a cash buyer with 50-75% of the purchase price back in the form of a “technical refinance” is a great way for Realtors to add value.  Many cash buyers are not aware that they can get a significant portion of their funds out of the property at great rates so that the moneis can be deployed in other investment vehicles or even to buy more property.

If you have any questions on how a “no title seasoning” refinance works feel free to call or write.

The Brazilian Invasion

On his “Midnight Ride” Paul Revere warned that “the British were coming”.  I am sure many of you remember the phrase ”one if by land two if by sea” which was the single given by lantern to communicate which route the  British troops were approaching from.

Well I don’t have a horse on which to ride nor a lantern to broadcast the chosen route but in this instance neither is needed as South Florida welcomes the tens of thousands of Brazilians scheduled to travel here over the coming summer months.  The Brazilian economy is red hot and many Brazilians will be seeking South Florida real estate bargains while they are in town.  During a recent conversation with one of the sales managers for Trump III it was purported to me that they expect to sell most of their remaining inventory this summer due in large part to the demand by Brazilian buyers.

The influx of foreign capital into South Florida has been one of the primary drivers of our real estate market historically and has certainly shortened the time frame of the recovery.  Demand for vacation homes and condominiums in our market has been on the rise and should continue its current trajectory as economies in South America recover and thrive.  Many of the foreign nationals that have purchased in South Florida over the past 12 months have been paying cash for homes and condominiums however financing is readily available.  With as little as 30% down foreign nationals can finance their single family home or condominium purchase thus enabling them to deploy their assets in other investments vehicles. 

It is going to be a very busy summer with the demand being created by both domestic and foreign national buyers and I for one, look forward to all the hard work.

49% Say Good Faith Estimate Waste of Time

In 2010 HUD rolled out it’s long anticipated revised good faith estimate that all lenders are required to use in residential real estate transactions.  The new good faith estimate was supposed to add transparency to loan terms and closing costs and was supposed to aid borrowers in shopping for the best mortgage to meet their individual needs.

I can say without reserve that the 2010 good faith estimate is an unmitigated disaster.  It fails to acheive most, if not all of it’s intended goals and she be given the lofty title of “Worst Goverment Form Ever“.  It is not only poorly conceived and designed but doesn’t provide some of the most important information that the consumer needs such as…their total monthly payment.

Most of us in the industry would prefer to spend time in line at the DMV then try to explain this form to a borrower, because it is un-explainable.  Stare at it for a few minutes and your eyes will bleed.  And of course we have the added fun of trying to answer the ultimate question from our clients ”where does it indicate the total monthly payment?”….the answer…it doesn’t!  As indicated in this article from The Real Deal Miami 49% of those surveyed deemed the form “a waste of time” and to complicated.

In my career I have the pleasure of working with many South Florida professionals who have a clear understanding of finance and I have yet to meet one that thinks the 2010 good faith estimate is worth the paper it is printed on.  That being said I would be remiss in my professional responsibilities if I didn’t offer a solution. 

The regulatory bodies that govern the mortgage industry require that we use the standardized form however most seasoned mortgage brokers and bankers will also provide a loan closing cost worksheet that is compliant and provides significantly more detail.  If your mortgage banker or broker does not provide a closing cost worksheet then ask that the settlement agent provide a preliminary settlement statement that you can review with your mortgage banker or broker.  Oh and ask them to calculate the total monthly payment for you, because it might be nice to know how much you have to pay each month…..

Use 401K To Buy Foreclosure Without Penalty

A bill introduced in the U.S. House of Representatives would waive early distribution penalties on certain qualified retirement plans if the funds are used to buy a house that has been in foreclosure for a year or more.

The bill was introduced by Florida Congressman and Realtor Bill Posey and is pending approval.

In short the bill proposes to allow individuals to withdraw funds from qualified retirement accounts such as a 401K without paying a penalty as long as the funds are used within 120 days to purchase a foreclosed home.

For the complete text of the bill click here H.R. 1526

Running The Referral Desk

A few years ago shortly after the inception of the liquidity crisis in the Fall of 2007 the ability of mortgage bankers across the nation to be all things to all people vanished into thin air like the last Mojito at a Cuban pig roast.  There was a time when as loan originators we had access to every loan program under the sun through relationships with multiple lenders to whom we could broker or sell our loans.  Those halcyon days are gone now and most mortgage bankers and mortgage brokers have long since chosen a niche in which they focus their practice.

The Referral Desk Is Born

It was about that time in the Fall of 2007 that I started giving loan applicants that were referred to me free advice about how to structure their loan and which lenders in town could provide them with the best terms.  I would then refer the client to a mortgage banker who could “get their deal done” if I didn’t have access to the right loan product for them.  I gave this free advice so often and referred out so many loans that my coworkers started joking about how I was running “the referral desk“.  I stopped keeping track long ago but to date I would estimate that I have referred out in excess of $150 million in closed loan volume over the past three and a half years.

On Not Getting Paid

And while I receive no compensation for running the referral desk it is in many ways the most rewarding part of my mortgage banking practice.  I am passionate about helping and advising would be borrowers and home owners about how to structure their financing and am happy to do so even if it means referring them to another lender to close their loan.

Gandhi said “action expresses priorities” and in that light it is my priority to remain a source for unbiased information and expert advice to potential borrowers about how to structure and obtain the best mortgage to meet their needs.

I may not get rich in the process but I will be satisfied professionally and wait here for your call at The Referral Desk.

The $10 Trillion Dollar April Fools Joke

Why we are all about to pay more for our mortgages.

Today is the day that the loan officer compensation portion of the Frank Dodd bill goes into effect.  Banks, mortgage lenders and mortgage brokers all over the country have been changing compensation plans over the past couple of months in an effort to prepare for this change.

In layman’s terms what the bill says is that no mortgage originator (defined to include loan officers and brokers) can be paid based on the terms of the loan (i.e. loan program or interest rate delivered) but instead must be paid a straight percentage of the loan amount.  The bill also says that originators can be compensated either by the consumer (in the form of origination fee’s or points) or by a third party (such as the lender in the form of yield spread premium) but not by both.

In short the effect of these rules is that originator compensation plans have been altered in a way that will mean that originators are paid less for the doing the same work they did yesterday.  But while the originator is making less the banks and lenders are maintaining their margins and in some cases increasing them, costing borrowers more.

Those of you that know me may recall that in 2007 and 2008 I was speaking and writing about the possible elimination of true mortgage brokers and the wholesale business model as a result of the sub-prime / liquidity crisis.  But at the same time I always mentioned that the mortgage brokers and wholesale lending would be back.  Mark my words, this dramatic change in the way originators are paid will be the beginning of the return of independent mortgage brokers and a robust wholesale mortgage market. 

Why? Because as a independent mortgage broker with your own investor relationships you can make as much as you want per loan and are not limited by the compensations plans being put in place by the big lenders.  These independent mortgage brokers will be able to deliver lower rates and better terms to clients while simultaneously delivering a higher quality of service and advice.  At the same time big banks will start to see their staff of loan originators become less experienced and the quality of their origination’s will suffer as a result.

If you are a borrower or a Realtor you are going to notice two things going forward:

1. The most seasoned originators who have reputations as true professionals will migrate away from big banks and open independent “one man” mortgage brokerages.  Watch for the formation of groups of these mortgage brokers to form cooperatives to share office and support staff costs (i.e. like a law firm).

2. Consumers will start to see more origination fees and discount points on the quotes they get from banks and mortgage brokers.  This is a result bot the new compensation rules and the new good faith estimate that went into effect in 2010.

As a bank officer I do not receive commissions on the loans I originate so I have no personal vested interest in the new compensation rule however I do see it as a negative change for consumers being disguised under the pretence of “consumer protection”.

5% Down Condo Financing Is Back South Florida!

Low down payment conventional condominium financing….

One of the largest obstacles to selling condominiums in South Florida currently is the large down payment requirements. In a recent conversation with Ruben Aboy of Regions Bank it was brought to my attention that 5% down conventional condominium financing is available for FNMA approved buildings. This financing carries the low conforming interest rates (currently 30 year fixed rates are about 4.625% with no points) and does not include costly upfront fee’s like FHA.
FHA in most instances is not a workable solution….
Many who have tried to utilized FHA financing for condo purchases in our market have been very frustrated by the relatively few FHA approved condo’s and the fees and underwriting requirements associated with FHA.

The availability of 5% down conventional financing for condominiums will have a dramatic and positive impact on the condo market in South Florida and is welcomed news.

For more information contact Ruben at 786-290-0874.
Click here for a list of FNMA approved condos.

Miami Mortgage Market Guide ~ May 3, 2010

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