Patrick Whelan's Straight From The Hip - a realistic view of today's mortgage marketplace

Thanks To President Bush, Mr. Bernake, and Our Realtors, the market is taking a step in the right direction!! 

Two very promising pieces of information were announced this week which will definitely help solve our mortgage and real estate slump. The first piece to this puzzle was that home sale prices were up 3.2% higher than this time last year!  My blog last week thanking all our realtors for the hard work, seems to really be paying dividends! Way to go Realtors!!! Keep up the great work; you are really making a difference.

The next enormous piece of the puzzle was President Bush and Mr. Bernake  making a push for FHA guidelines to be customized to help out homeowners that are ready to be foreclosed on due to their sub-prime arms that are adjusting, who have no way to refinance. I must commend both men on making this decision to help save the quickly slumping housing market. If you’re not sure how this decision will help the market, let me explain. By helping out borrowers that need to refinance their sub-prime loans with FHA loans, the Government is going to attempt to stop the all the foreclosures which are bringing down all the house prices across America. When a house is foreclosed on by a bank and resold at a lower price than normal in a neighborhood it brings down the price of all the other homes in the area. How? When an appraisal is required for a sale or refinance, the appraiser most use comparable home sales within the last six months. If there too many bank owed homes sold at reduced prices from foreclosures in the same area, the appraiser has no choice but to use them. This can stop a refinance or sale in its tracks if the value is not there. This offering of FHA loans from the Government will take a while to make a huge difference but believe me, it will. Regardless of any mistakes we think President Bush and Mr. Bernake have made during their terms, this is a great decision and should be commended.

In addition, these broader guidelines will also assist all buyers in receiving easier approvals through the FHA. We have seen this change coming for the last two months and our office is prepared to assist all our clients and new clients refinance or purchase under these new guidelines. I specialize in FHA and VA loans, if you have any questions about them please call us anytime.  Together we can all make a difference and keep the Colorado housing market strong. I hope you all enjoyed your Labor Day weekend and look forward to assisting you in the future.

Hurray! Rates are down on everything right now - credit cards, prime rate, mortgage rates, and overnight lending - but please don’t get too excited yet. Let me explain my view of what is happening and hopefully you will all agree…because as I always say, “This is only my opinion, but I am hardly ever wrong!” 

Everyone seems to be unsure as to why the rates were lowered and why investors everywhere are extremely uneasy with the current rate cuts. Let me explain the best I can. Mr. Bernake did the right thing by cutting interest rates twice. He is trying to accomplish two things, to help fix the mortgage and real estate crisis, and to help infuse money back into the economy. This is a very noble effort but it has the potential to be a very disastrous one.

The reason I say this is because of the greed of big business and, sorry to say, the ignorance of the American consumer, which by the way, big business counts on. So, Mr. Bernake lowered rates on everything with the main purpose being to help the mortgage crisis and hope that consumers don’t start overspending and big businesses don’t inflate prices. Unfortunately it is going to happen anyway.  This is a guarantee because consumers have not been spending money the last few months and their money is burning a hole in their pocket. Combine this with low interest rates, and we have a disaster. While consumers are spending money because they think they have the extra cash now, big business will begin to slowly inflate prices on domestic goods because they can. If you don’t believe me ask the Saudi’s who pulled huge chunks of money out of U.S. Treasuries last Wednesday, causing bond rates to sky rocket. The Saudi’s fear the economy is unstable; we will experience inflation and eventually head into a recession. I hate to agree with them, but I do.

So what will happen if I’m right? Once inflation kicks in, Mr. Bernake will raise rates quicker than he lowered them to cut or even sever consumer spending. Please understand when the Government raises rates on interest it is NOT to punish us, it is to control our spending because we apparently can’t do it on our own. This will put an end to Mr. Bernake’s efforts to fix the mortgage crisis, which would be a huge smack in the face to him by the American consumer, when he is trying to help everyone out of their financial issues. When the rates are adjusted higher this time around, it will be so drastic that nobody will spend money and we WILL enter into another recession.

Please don’t take my words lightly this week; I feel this is the most important piece of information I have written thus far. Pay down your credit cards, refinance if you must, don’t spend money on unnecessary material things, and put away your money. You will need it in upcoming months. It is going to get expensive to live around here and you will need every dollar. With that being said, while the window of opportunity for low mortgage rates exist, buy or refinance as soon as possible.  Rates are great and will get better over the next few months. All good things unfortunately will come to an end.

Good Morning everyone, I hope you had a relaxing and prosperous weekend. I also hope it ended with your favorite NFL team winning their game on Sunday.  I have tonight to look forward to see if my hometown Philadelphia Eagles can bounce back from last week’s loss to the Green Bay Packers.  I have a very important point to make that I hope everyone pays very special attention too. I brought up football because this blog was inspired by watching the NFL games yesterday.

Yesterday as I sat and watched the Bengal’s/Browns game, I was so impressed by the Browns and their failure to give up or give in to the mighty Cincinnati Bengal’s.  The Browns started a new quarterback against the Bengal’s and nobody gave them a chance in heck to win this game. It was almost like the Story of David and Goliath, only the Browns used a football instead of a slingshot. Those Browns came out and used resourcefulness and the fact that the Bengal’s thought they owned the Browns. Well, let me tell you, the Browns outplayed, out smarted, and never gave up to powerful Bengals they just won.

This brings me to my point today. When all the news was handed down to us in the mortgage world about all the loan programs going way, the big banks such as, Countrywide, Wells Fargo, Bank of America, Wachovia, World Savings, and all the local banks like, 1^st Bank, TCF, the credit Unions, etc… thought they had the mortgage world locked up. They would stand strong while the small Broker Shops would fall around them. Not so fast, just like the Browns, we as Brokers continue to outsmart, be more resourceful, and continue to exploit the fact that the banks listed above are almost all strictly full documentation lenders with very limited loan products. As a Broker we have the ability to continue to sign more banks to our team to stay ahead and offer more programs at better rates than the big boys.  Better rates?, you might ask. Yes, as a broker we always get better rates than retail originators from the large bank can offer.  The reason for this is their own bank wants our business as brokers and they don’t have to pay to get it. This allows us to receive wholesale rates usually a .250% lower than the bank offers their own clients. Also these banks have become very vanilla in their lending; meaning, their guidelines now only fit certain types of clients and if you are working with a large bank originator as a Realtor or Client you may not be getting what you need in a loan.

I have received many leads last week from clients and Realtors who you have said their banker had been dragging their feet and not returning phone calls on these particular deals. Why do you think that is? They can no longer get that loan approved and are calling all their broker friends to see if they can do it for them. I also received two leads from clients last week on refinances asking me to help friends who were of course turned down by the local bank. All this supports that fact that Big Banks are no longer in the best interest of the client and the Realtor. Stop wasting your time with the big banks for now it is not looking good for them, this is the time for the Broker. We are more resourceful, with more options and lower rates, for you and your clients. The secret has been let out, it is your choice to take advantage of it or continue to lose deals as Realtors or think you are not able to purchase a home as a client, because the big bad bank said so. I promise you, you will have more options and better service right now from a Broker.

We at Priori Mortgage have over 150 banks with every product available in the market. If I can’t get it done, nobody can. Please call today to feel the difference.

I hope everyone enjoyed the short and relatively quiet week.  This week I wanted touch on a subject that most clients and realtors are getting to experience firsthand during the processing of their transaction … the appraisal review.  The client gives the loan officer a complete application and documentation, the realtor alerts us as to what title company we are using, faxes us the contract … and these days…BOTH pray to the “Big Guy” upstairs that this loan makes it to the closing table. What neither the client nor Realtor see is the additional torture we are being put through by the banks during appraisal review.  The new laws put in place regarding appraisals were necessary to stop the inflating of appraisals that have caused a large number of these foreclosures.  The problem is it has scared the appraisers to death, even the good ones that always to a good job. They are afraid they may over appraise a home and lose their license. Well the problem is they should be afraid, the banks are scrutinizing every appraisal they receive, with a desk review, a field review, and asking the appraiser for additional comps. I mean, I understand the reason, but this is causing loans to miss closing dates.

Most banks will not order the desk or field review until the loan is approved, pending appraisal review, and this really STINKS! The banks have their own time table on when this should be done and they usually tell us they have three days from when it is ordered to complete it. Now if it is just a desk review, it will take seventy two hours, if they are not backed up. If it is a field review – which is where they send their own appraiser out to the property at the clients or brokers expense, which can take as long as a week. This is out of our control and they generally do not tell us this until we are three days away from closing. The banks don’t care if we miss the closing date; right now they are more worried about being able to sell the loan. Rightfully so, I mean the client, broker and Realtor, were not hurt as bad as some of these banks in the last six months or so. 

So we just ask that everyone be patient with your broker, we are doing what we can to make sure we leave plenty of time for the appraisal review.  A couple of tips for our
Realtors to make sure their loans close on time:

1. Check with your broker when writing a contract if the closing is going to be shorter than 3 weeks.
2. Please make sure your client is providing the broker their documents in a timely fashion.
3. Schedule the home inspection as soon as possible and let the broker know right away so they can order the appraisal.
4. If your broker tells you the appraisal is under review, please be patient, if the broker tells you it will be three more days, amend/extend for five more.  We can’t control the review and pushing us to pressure the bank does not work. In fact it will aggravate them.