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

by Patrick Whelan

I hope everyone had a good week and even better weekend, I know I sure did.

Last Friday I had the pleasure of attending and sponsoring the Denver Board of Realtors annual Round Table of Excellence Awards for the top realtors at the DTC Marriott. It was a great time for everyone involved and it proved once again that the market is not dead, in fact, it is alive and kicking! Congratulations to all the winners for a great year!

While I was networking prior to this event I heard many Realtors talking about initiative #109 that is being introduced to legislature. This initiative is intended to restrict Realtor commissions on home sales based upon the sales price. The higher the sales price the lower the commission. This is absolutely absurd and will only hurt the relationship between the Realtor and consumer. This initiative actually states it’s ok to make more money on a lower priced home than a higher priced one. Example, if a home is worth 250k you can make up to 6% commission which translates into 15k. If a home is valued at 500k you can only make 1% which equals 5k. What just happened? Is there really a group of people trying to push this through legislation and calling themselves heroes? Who are they kidding? This initiative makes no sense at all and is only being done as a “woe is me” response because this particular group is currently under fire themselves. Somebody please respond to me and let me know who this initiative helping? The answer is nobody!

We have a housing crisis on our hands and we need to sell off the inventory of foreclosures and vacant houses here in Denver to keep the damage to a minimum. This initiative is just another punch to the gut for the Real Estate Community which is working hard to get people in homes and help stabilize the market. There are so many issues right now in the mortgage industry, why don’t we focus on capping the banks YSP on loans and leave the Realtors be. The big banks such as Country Wide, Wells Fargo, Bank of America, etc, gave us the mortgages to sell consumers to start this whole mess, let’s go after them!!

Please read the initiative below and response from CAR:

In addition to the transfer tax proposals, initiative #109 was filed this week concerning the restriction of earned real estate broker fees. In a nutshell, a six percent cap would be placed on transactions up to $250,000; three percent for $250,000 – $500,000; and one percent for transactions above $500,000 (but no more than $500 per hour).

In reaction to initiative #109, CAR has released the following press statement:

First the Colorado Association of REALTORS® believes the ballot initiative process is an unproductive way to deal with consumer and business issues. Second we believe this proposed ballot initiative specifically is bad for consumers. It changes the relationship between the consumer and the real estate agent/REALTOR® by mandating a fixed price whereas, current commission rates are negotiable regardless of the selling price of a property.

The sliding scale is patently unfair, particularly to the majority of buyers who are purchasing homes on the lower dollar value of this scale. For example, using the proposed ballot initiative scale, a family purchasing a $200,000 home would be required to pay a $12,000 commission. A family purchasing a $500,000 home would only pay a $5,000 commission based on the 1 percent mandated rate.

Our current system encourages innovative business models that clearly benefit the consumer. As an association, our desire is to encourage and support our varied professionals in being creative for the consumer and providing diverse solutions to their real estate needs.

Recognizing the fight we have on our hands – transfer tax and broker fees – we need your help! CAR has done an outstanding job influencing the legislative process. We do this by working with, and endorsing, candidates that appreciate our point of view and aren’t afraid to fight for property rights, consumers protections and the integrity of the transaction process. Unfortunately, the ballot process is outside of our control. Therefore, we must work the mainstream media and public as a whole to educate them on the dire effects of these ballot measures. Your contribution to the Political Survival Fund will go straight toward this endeavor. It will help us elect REALTOR® friendly candidates and defeat the unproductive ballot measures. Invest in your profession today!

I encourage everyone to stand up and fight this initiative and do your part to help get the word out!

This bill will not only affect Realtors, but will also eventually affect the mortgage industry too by putting another cap on our commissions. This initiative will only hurt the Realtor community and nothing good will come from it. If you need any information on how to fight this initiative please contact CAR or call me and I will help direct you. We are all in this together and this needs to be stopped!

I will talk about all the changes in the mortgage world next week, this issue was too important not to talk about.

By Patrick Whelan

I’M BACK!

After a few weeks off due to extremely high loan volume my BLOG is back!

Once again, let me take a minute to reiterate the three things I continued to tell everyone for the last nine months, which by the way has been proven to be true. We are in a recession, we are experiencing ridiculous inflation, and the rates are still coming down. I received nasty emails about my convictions by the naysayer’s, quoting to me what they read or heard on CNN or Bloomberg, (never their own thoughts) telling me how wrong I was and that I have no idea what I’m talking about. Well, I was right, they were wrong, get your own original thoughts and get back to me next week. WOW! That felt great, let’s keep going.

The truth is the fact that we are in a recession and experiencing inflation is a travesty, by no means am I happy about it. The fact is a lot of people are struggling to feed their families and quite a few people are losing their jobs and subsequently their homes. My heart goes out to all of them! With that being said, this unfortunate time has continued to help interest rates decrease to help all of us lower our monthly payments by refinancing to help our own cause. This is great for all of us but here’s an idea; what if we all help out others in need by donating the money we have saved. What a concept, if you are safe and secure in your job and have taken advantage of a much lower interest rate and monthly payment by refinancing, how about donating some of that saved money to help a needy family. This may be a very good way to give back and help those that are truly suffering during this time, good hard working people that are struggling do to the mess we are currently experiencing. I will get back to you next week about how we can all get together to do this and truly be a positive force during these times. I am really passionate about this idea and I hope you are too.

Last but not least Congratulations to Denver, it was voted the 7^th best city in the country to open your own business. Please visit this link to read more about it. WAY TO GO DENVER!!!

http://money.cnn.com/galleries/2008/fsb/0803/gallery.best_places_to_launch.fsb/7.html

Thank you to all of you that stopped by our booth at the Realtor Rally on the 19^th of March, it felt good to have all of you come up and talk to us about my weekly newsletter and blog. It’s a great feeling to know you are making a difference in the Realtor Community. Thank you again for all the kind and not so kind words, it really makes me feel the time we put it to our weekly letter is worth it.

If you have not refinanced yet call me the rates are back to 5.625% again, don’t wait!

by Patrick Whelan

I must admit I really put my foot in my mouth! Last week I said rates would stay relatively unchanged and I was wrong, terribly wrong. I guess my crystal ball is broken, and I’ll have to keep my day job as mortgage broker and give up the fortune teller gig at night. The reason I say this is the 30 year mortgage average rose from 5.625 to 5.875 last week and on Thursday it hit 6%, but not to worry we should see some relief this week after we receive he CPI reports on the 20^th.

Although my crystal ball was broken last week it clearly was not broken eight months ago when I cried the “R” word, RECESSION! It is here and will remain for a while; I don’t care what anyone says. If you have a different opinion, then prove me wrong and reply to my blog with your reasoning. I will post it for everyone to respond too, I think it would be helpful for everyone to share there ideas of the state of the current economy.

Since I care about all my friends and clients and I know we are in a recession I have included a link to CNN Money for you to read, the title is “How to Recession Proof  your Life”. It’s a great article and I’m sure you will all learn something from it, I sure did. Just copy and paste it into your browser and take a look, or just click on it, there is something for everybody. Feel free to share this with your friends and clients as it will help them as well.

http://money.cnn.com/2008/02/08/pf/recession_proof.moneymag/index.htm

As always, now is the time to refinance.  Give us a call for a free assessment of your current mortgage.

What a way to start the week! It looks like the government is continuing it’s proactive approach to help the mortgage crisis by recognizing that not just the mid to lower class consumers are suffering from ARM’S adjusting to higher interest rates. They have raised the conforming loan limits to $729,750, thus allowing consumers that have arms coming due in the higher tax brackets to get some relief. I commend the Fed’s for this recent move and it was definitely needed to help stop the madness. I have included some information on this below:

Temporary Increases in Conforming Loan Limits Coming
 
Last week, legislators on Capitol Hill passed what is deemed to be an "Economic Stimulus Package". An important component of the Bill - Section 2 of H.R. 5140, the Economic Stimulus Act of 2008 - directly impacts the mortgage industry by temporarily raising the conforming loan limits in high cost areas across the country.
 

This legislation allows increases in the loan limits from 125-175% of the median house price in the area of the property for the period 7/1/07-12/31/08, resulting in new loan limits from $417,000 to $729,750 for single family properties.

The legislation requires HUD to publish revised median house prices and principal obligation limits to implement the legislation "as soon as practicable", which should be within days/weeks after the bill is signed, expected THIS WEDNESDAY.

Also, interest rates have increased slightly; the 30 year fixed average is 5.625%. This market has been very volatile and on a roller coaster ride since the Fed finally admitted we are in a recession. You will continue to see Wall Street try to fight back against the weakening dollar and cut in consumer spending.  These occasional push backs from them will cause interest rates to rise and fall every day but rates should hover around 5.750% and not go over this anytime soon.

As always, if you or anyone you know is looking to refinance, give us a call for a free assessment of your mortgage. Take advantage of these rates today!

by Patrick Whelan

WOW! Last week the 30 year fixed rate dropped to 5.125% paying a 1% origination fee, which is the lowest rates I have witnessed since right after 9/11/2001. Those rates appeared for a moment on Tuesday night and again early Wednesday morning and then they vanished causing many mortgage professionals and clients feeling a bit queasy. They should have too, rates moved to 5.375% in less than five hours on Thursday. They all thought they had just lost their low rate by gambling and floating instead of locking when they had the chance. Believe me I know this happened; my office was flooded with calls from clients asking me to lock their rate. I said no, this was just a last gasp of air from Wall Street to gain some confidence but it wouldn’t last. Guess what, I was right!

Friday afternoon rates improved back to 5.250% and will continue to move back down to 5% this coming week. How can I be so sure? The reason is we are not going to get out of the recession we are currently in for quite some time, no matter how hard Wall Street pushes. The reason rates soared on Wednesday is because the employment numbers were up for the Country, so the traders thought all the problems were fixed and that was good enough reason to put money back into stocks and pull them out of bonds. The problem is the numbers were slightly better than last month but Consumer Confidence is down, inflation is up and people aren’t spending money, so they were dead wrong. Hence rates came down three times on Friday.

The truth is we are going to be in this mess for at least another year and there is no way out for the Government except to keep rates low and hope we can kick start the economy. I truly hope for the good of everyone the economy turns around but right now enjoy the low rates and refinance why you can.

by Patrick Whelan

Staying successful in today’s market is very simple; you have to take what the bank gives you. Whether you know it or not banks control the real estate market so they control our incomes as Loan Originators and Real Estate Brokers. So, staying successful in this business requires a solid understanding on the financial side of this business and a willingness to change with the market around you.

For instance, banks are the ones that came up with those “Nifty” little things called sub prime mortgages and interest only mortgages, not the originators. The banks gave us these programs to sell and the market took of for all of us, brokers, Realtors, insurance agents, etc…. Everybody got rich, now the same people that got rich are complaining things are slow and they hate the mortgage industry for what it did to their business. Nobody complained when they were making money!

So here is an idea, take what the banks give you! Right now rates are lower than ever and house prices are dropping every day. So if you’re a broker, refinance people out of the horrible arms and sub prime loans they are currently in. Give these people good rates and low costs and make a few dollars while making amends for the loans you sold them in the past.

Realtors, I can’t say that my stomach doesn’t turn when a Realtor tells me that THEY DON’T sell houses under certain prices or work with first time homebuyers. WHAT? If you are struggling to keep your head above water you need to be doing exactly that. Working with first time home buyers and selling them houses under your normal range. Why, because that’s what the banks are giving you, low rates and a declining housing market. Nobody in your database is looking to sell their homes right now but maybe they have children in college, right now is a great time to buy an investment property through the FHA Kiddie Condo Program (call me for details).  Maybe somebody in your database knows a first time buyer that was thinking of buying but is scarred by all the news, reach out to them. There is plenty that can be done generate business if you change with the market and your style of thinking.

I have personally had to revert back to refinances to stay busy in this market. Until recently, I was fully engaged in construction loans and the banks have taken away almost all the programs I once used to approve clients, oh I’m sorry, most of those banks have actually closed. So yes I too have had to change my mind set and throw away thousands of dollars of marketing materials for my construction loans.

I feel your pain; we are all in the same boat. If you need help figuring out the market or how to get back into your database please give me a call and let’s get you some more business.

by Patrick Whelan

Happy New Year Everyone!

Well, it doesn’t look like Santa or the New Year brought the Real Estate and Mortgage Markets any relief from the “crisis” according to the many articles I read this week (Citi Bank is being bailed out by overseas money, mainly China and a Saudi Prince, the big buy out of Countrywide by Bank of America, and Mr. Bernanke’s report of our economy). All of these things are very alarming and are costing taxpayers a lot of money and good, hard, working, people their jobs. Yet, I also read mortgage applications are up 35% the week ending 01/04/2008. Which raises the question, is it okay for us to profit while good Americans are suffering? Let me explain why I ask this question and then hopefully I will hear from you on this topic as it is an important one.

I had a man ask me in the grocery store if I was okay with profiting from the problem I (as a mortgage professional) and the banks have created for America. I was furious! How can he ask me this? I didn’t create this problem; I have a zero default rate on any loans I have originated. Then driving home it hit me maybe he was right, maybe I shouldn’t profit because of what my industry helped create. What a dilemma.

Right now the reason applications have risen 35% and refinance applications 50% is because of the low interest rates we are currently experiencing. Rates have dropped with the Fed aiming to keep this country out of a recession that has already started; one that we feel mainly at the pumps and at the grocery store checkout lines. Funny, we are paying more for a gallon of milk than a gallon of gas, yep; think about that, it’s not that funny. The problem with all of this is that during a recession good people lose jobs, companies close their doors, and we the tax payers help finance Bank of America’s buy out of Countrywide, while Americans are jobless and suffering. Is this ok?

Is it ok that my phone was ringing off the hook last week with refinance applications? Is it okay that I will be profiting while others are suffering?

I can say that we are helping bail-out some clients who were taken advantage of by other brokers and originators. We are helping some good families save a lot of money on a monthly basis to help them defer the inflated costs we are experiencing on many items. We are helping new home buyers jump on low house prices and rates to take some of the foreclosures off the market.

Is it okay…I think so.

by Patrick Whelan

Hello everyone, I am back after two weeks off and I have a lot to say. I am still currently in New Jersey and will be returning to Denver shortly after the New Year with a lot of helpful, information for my Realtors and clients to help them get a great start in ’08.

While here in New Jersey where I grew up for 25 of my 34 years of existence I have been speaking to many of my childhood friends that are Realtors and Brokers to get their perspective on today’s market and share ideas with each other on how to continue to increase business through our current market conditions. As I met with each of my friends every single one of them, I mean it, every single one all said exactly one thing the same, “now is a great time to buy.”  Hmm, I think somebody in Denver has been saying the same thing week after week in his blog, guess who. ME! Yes, it is me the same guy week in and week out that continues to tell everyone to buy homes and invest in real estate today, not in ’09 when rates and prices settle and start to climb again.  Please believe me if you are a Realtor you should be letting your database know that if they want to upgrade now is the time, if they want to buy an investment property now is the time. I continue hear there is a lack of buyers and investors, you know why, you have not told your database now is the time. We are the professional and if we don’t tell our clients the positives of purchasing right now they will stay home scared of all the crap they are reading and watching in the media.

If I wasn’t in the business I would be scared to walk out my front door in the morning and even spend a penny on anything but I am and I spread my knowledge with everyone I meet and help them understand the market and what is truly happening. It’s true, I have made several contacts with builders and Realtors while here in my home state and will start doing business with these new Realtors and clients as soon as I get back to Denver. I am not bragging but letting everyone know if you share your knowledge you will always have business!

I challenge each and every Real Estate Professional to get back into their database and start sharing their knowledge with each and every, past and present client. If you need information; stats, figures, rates, or whatever, call me and I will help you. When I spoke to eight Realtors here in New Jersey they all have been dong this since about June and each have closed 11 transactions since then with this very simple and inexpensive approach.

If you would like more information on this please call or email me and I will be happy to help you with anything you may need to get started on ’08.

I hope everyone enjoyed Thanksgiving last week with their families and friends; I am still sleepy from all the turkey I consumed. This week I wanted to address and stress the importance of personal service and seeing the job through to the end. This topic is on my mind because I failed last week to do this myself and it could have harmed an important relationship with one of my builders. Luckily, I have the opportunity to fix the problem and save an important relationship. I would like to take the opportunity to share this story and really drive this point home because I know this has happened to all of us at some point in this business.

I have a very large residential construction loan that is currently in process and close to making it to the closing table this coming week. This loan has been in process for about five weeks which is the average processing time for a construction loan but the process has been a nightmare for my clients and me with the ever changing underwriting guidelines. I have always been the main point of contact for my builder and have always kept him aware of the loan process and any new wrinkles that emerge along the way. Last week I failed to do that and it could have cost me a great client.

I left last Monday for New Jersey for a few weeks as I always do to spend time with my family from Thanksgiving to Christmas. I usually fly but this year I drove with my girlfriend because she has three dogs and she can’t bring them on the plane. No, we did not kill each other or the dogs. However, never doing this before I did not know how available I would be for my clients and left everything in the hands of my business partner and processor who are more than capable of handing questions or issues. While I was on my trip an issue arose with this particular loan and I asked my processor to handle it which she did but my client did not have my reassurance that this latest wrinkle would be handled and it caused him to feel uneasy.

I received an email from my builder explaining that he had left me two messages while I was driving and that if I couldn’t return his calls in a timely manner he would no longer do business with my company. At first I was angry, don’t I deserve a vacation, and can’t I have few days to myself? Then I thought about it and realized the answer is no, not when you have people that depend on you and bring their business to you, not your processor. My builder made it clear he does business with me because of who I am and the manner in which I conduct business not my processor and when he does not hear from me that it is not the same. He is 100% correct, it is not the same to hear bad or even good news from somebody either than the person you trust with your business. It is a partnership and when you’re on vacation some things take precedence and I lost sight of that for a few days.

Please listen to my advice and always give that personal service especially in today’s market. Relationships are the most important part of our business and losing just one could cost you many in the future. I know everyone will say they already know this but although we know it sometimes we forget and that one time we forget my be the last chance we get with that relationship.

Have a great week everybody!

Hello everyone and thank you again for your responses to my blog last week. What I am about to say will probably cause everyone to scratch their heads amidst all the misleading information in the media but it is getting better everyday for the home buyer and buyers agents.

Interest rates are lower than they were at this time last year, house prices are lower than ever, and I would have to imagine with all the foreclosures, the inventory is there to sell. What more could we ask for to sell homes? … Buyers! This is the answer I get when I talk to Realtors and investors. I scratch my head in amazement when I hear this because mortgage loan applications are up 5.5% this month. Now, some of this is due to refinances but refinances only made up about 6% of overall applications this month. So, somebody must be buying houses somewhere.

I truly believe we are in a great position here in Denver for buying and selling houses. We are no longer listed in the top 25 cities for foreclosures and I am seeing huge increase in applications for purchases in my office. We are getting busy going into the winter, this is GREAT NEWS! Everyone please share in my optimism and get out there and get it done for Colorado! I am tired of hearing the media talk about Realtors and Mortgage Brokers needing to look for employment in another field if they want to survive. I can tell you one thing that will never happen to me or my company. We have never believed it was bad … therefore it’s not. Please remember the only time you see obstacles in your way is when you take your eyes off the path. This is so true!

One last thing before I go; please be patient with your mortgage professionals. We are all definitely experiencing tightening underwriting guidelines on all loans from all banks. While new products and programs are rolling out to the market daily the underwriting is getting more and more strict everyday. Loans that are already in processing are falling victim to these new guidelines after being submitted thus holding up our approvals and causing longer underwriting turn times. I ask that our friends on the Real Estate side of our business make their sellers and buyers aware of this when writing contracts and deciding on closing dates. Quick Closes are becoming a thing of the past for purchase transactions; appraisal and document reviews are making it impossible.