If you want to get to the root of the mortgage / financial / housing crisis we currently find ourselves, you have to go back to the CRA.

The Community Reinvestment Act (CRA), was and is a well intentioned program created to help low-to-moderate income earners buy houses.

The problem with the CRA, and many programs like it, is that it creates artificial approvals for home-loans to a group of people who may not be able to afford this debt.  Basically, as it has been cited, the Government stepped in decades ago and told the bank how they were going to underwrite loans.

Borrower’s who weren’t previously able to get approved for a home loan could now qualify under government subsidized programs.

It’s been argued that the sub-prime mess, irresponsible lending guide-lines, and banks acting like they could print money for-ever all stem from these type of Government programs.  Contrary to the anti-capitalist movement (see Micheal Moore), the banks didn’t get themselves into really big trouble until they started to do business with the U.S. Government.  The problem, as we all found out, is that banks require investors who evaluate and price risk.  On the contrary, the Government has an endless supply of money they can create (through taxation).  In the end, banks found out the hard way that they couldn’t operate like the Government… No matter how much the politicians and the people wanted them to.

Attached is an article showing that the Government is ready to devote another $35 Billion to these types of programs.   Have we learned nothing? Read the rest of this entry »

Many politicians, economists, and consumer advocate groups are working feverishly to try get the first time home buyers credit extended and/or expanded.

Attached is an article citing some of the plans on the table, and a point counter-point argument as to why the credit should go away for good. Read the rest of this entry »

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Last Updated: September 23, 2009: 9:17 AM ET

(Money Magazine) — 1. Chances are good that you’ll come across one. During the heyday of no-money-down lending, you were unlikely to have a buyer using a government-insured Federal Housing Administration (FHA) loan, which lets borrowers purchase a home with a down payment of as little as 3.5%. Now FHAs are the only game in town for anyone who can’t put down the minimum 10% many banks require to get a conventional loan.

About a third of buyers have 10% or less saved for a down payment, according to a recent Zillow.com survey. No wonder FHA loans have skyrocketed from 3% to 25% of the market. While you may not need to take out an FHA mortgage to purchase your next home, there’s a good chance you’ll be selling to someone who does.2. Borrowers can qualify with any income.

Borrowing limits may be higher than you think too: Though the max is $271,050 in areas where real estate is cheap, buyers can take up to $729,750 in high-priced markets like California or New York.3. Expect a tough appraisal.

If you’re selling, know that an FHA appraisal stays on record for six months, even if the deal goes kaput or the buyer switches lenders. “Get one low FHA appraisal and you’re stuck with it,” says Dallas realtor Bruce Lynn.4. These loans are pricier than they seem.

If you’re buying, ask if the seller will pick up some of the insurance costs as part of the deal, says Manchester, N.H., realtor Scott Godzyk. According to FHA rules, sellers can pay closing costs up to 6% of the home price.5.They’ve gotten easier to obtain.

FHA loans still require written documentation of income, including pay stubs and tax returns. But stricter underwriting across the board means that you will probably need such paperwork no matter what type of loan you get.

FHAs once had a well-deserved rep for onerous paperwork and a longer, more difficult closing than conventional loans. But thanks to a new automatic underwriting system and the looser repair requirements, FHA mortgages take only a few days longer than conventional loans to close, says Bill Banfield, a vice president at Quicken Loans.

Nominal rates on FHA mortgages are comparable to those on conventional loans. But hefty fees on the FHA variety up the cost. There’s a 1.75% upfront charge as well as a 0.5% annual insurance premium for five years and until the principal balance hits 78% of the sales price or the home’s appraised value.

The home will need a clean bill of health from a government-approved appraiser, and the seller must fix any issues before a buyer can close on the loan. A few years ago the FHA eased up on repair requirements for minor problems like missing handrails or cracked windows. But it still won’t budge on leaky roofs or mold damage.

As always, if you need information on starting a new loan for the purchase or refinance of your home, contact me at TrustYourLender@gmail.com

I thought this article about the affect of taxation during the Great Depression is a great read.  It deals more with the economy and the mistakes we are doomed to repeat more than mortgages… however, I felt it an important read for anyone planning to make a large purchase (such as a home).

If you want the entire story on the real economic factors which caused the 1930 depression; and the Government policies which turned the depression into the ‘Great Depression’, read “The Forgotten Man”.

The attached article is more or less and abridged version of that book: Read the rest of this entry »

Many clients, Realtors, and even some loan agents confuse, or accidentally inter-change the terms “pre-qual” and “pre-approval”.  They are NOT the same thing.

A pre-qualification is basically a brief conversation between a lender and a client.  Sometimes credit is checked or income verified, but generally these steps do not get completed until a pre-approval is initiated.

A pre-approval is a full underwrite, either electronically or by a human underwriter, that completes a full review of a clients income, assets, and credit.

Pre-approvals from a trusted lenders should be as close to a valid loan approval as possible [without having obtained an appraisal and preliminary title report].

Most agents have come to realize over the last few years that a pre-qual letter is worth very little.  What listing agents are looking for in an offer is a full pre-apporval and a banks firm commitment to lend to a certain borrower.

To obtain a full pre-approval, contact a local lender or myself as soon as you decide that purchasing a home may be in your near future (4-6 months out).

As always, if you need information on starting a new loan for the purchase or refinance of your home, contact me at TrustYourLender@gmail.com

There has always been extensive lending guidelines and regulations covering loans on condos.  Conditions like verifying Fidelity Bonds, reviewing home owners association reserve accounts, reviewing budgets, reviewing condo by-laws, and verifying occupany rates within a project have always been part of the lending world.

However, over the past 20 years or so, most of these conditions were ignored or simply rubber-stamped.

In today’s environment, banks are reviewing each condo project they lend on with increased scrutiny.

If you are planning to buy a condo or sell a condo you currently own, I recommend you get in touch with your real-estate agent and a lender like myself who is very knowledgeable about the condo approval process.

Getting full condo project approval can take anywhere from 10-60 days and will delay closing if not addressed up front.

As always, if you need information on starting a new loan for the purchase or refinance of your home, contact me at  TrustYourLender@gmail.com

Recently I have been running into an interesting dilemma.  In the last 6 months I have had several very wealthy, very financially responsible individuals encountering extreme difficulty qualify for a home loan due to a lack of credit history.

Many banks will not lend to a borrower who has less than 3 active credit trade-lines.  A trade-line is a mortgage, car loan, student loan, unsecured credit card, personal line of credit, or unsecured personal loan where you make monthly payments.   These payments must be reported by the lender, bank, or credit card department to the credit bureaus.

Contrary to popular belief, our cable bill, cell phone bill, and rental payments do not positively reflect our credit report, nor can they be used as an ‘alternate’ form of credit for loan amounts over $417,000.00

If you are the type of client who has a limited credit history or likes to pay for everything cash, I recommend establishing a few credit trade-lines at least 6 months prior to the day you apply for a loan.   Having some type of stable credit re-payment history is key in getting a loan in today’s market.

As always, if you need information on starting a new loan for the purchase or refinance of your home, contact me at  TrustYourLender@gmail.com

NOW-  HERA / HOEPA laws are in affect. Longer processing time for loans and appraisals are now Federally mandated.

November 30th, 2009-  Last day to CLOSE escrow for any client wanting to take advantage of the first time home-buyers credit of $8,000. This means eligible deals should really be in escrow by the beginning of October.

December 31st, 2009-  Last day to CLOSE escrow for any client wanting to take advantage of the temporary high balance loan limits of $729,750. Although everyone in the industry is hoping for an extension of these higher loan limits, the current plan is for these limits to decrease back down to $625,500 at the end of the year.

With many escrows taking 45-90 days, we are quickly approaching the point of no return for transactions that qualify for the Government sponsored first time home-buyers credit.

In order to qualify, escrow MUST close no later than November 30th, 2009.

Attached is a reprint from money.com that outlines the entire program and sense of urgency that should be impressed upon buyers who want to take advantage of this credit: Read the rest of this entry »