Great Podcast hosted by Mike Lyon discussing the pros and cons of social media with Loan Producers from Wells Fargo and their Joint Venture teams.  Much of the information pertains to the loan business specifically, but a lot of the information can cross over into any business venture looking to use social media as a tool. Read the rest of this entry »

NBC and the Wall Street Journal have run a few news pieces and articles over the last week noting that blatant and rampant fraud in regards to the $8,000.00 first time home-buyers credit may ruin it for us all.

The $8,000 first time home-buyers credit was designed to stimulate the economy by attracting new buyers to the housing market.  Many first time buyers, especially FHA borrowers, could offset all of their closing costs and some of their down payment by receiving a year end tax credit for buying a home prior to November 30th, 2009.

Although the credit was set to expire at the end of next month, legislation had been introduced to extend this credit, and possibly expand it to a $15,000 credit for all buyers (not just first time buyers).

Unfortunately, the WSJ and NBC are reporting that many politicians will not endorse a new bill due to IRS findings from last week.  The IRS is estimating that $500 million worth of credits have been extended to tax filers who did not qualify for the credit, are not first time home buyers, and in many instances didn’t even buy a home. 

Additionally, many existing home buyers have illegally structured their transactions to try to qualify for this $8,000 credit.   In one reported instance, an unethical tax filer claimed that their 4 year old child was a first time buyer and the real owner of the house.

Unfortunately, the IRS is further stating that the only way to catch this fraud is to request an audit of the filed tax returns.  Not wanting to penalize and automatically audit all first time home buyers in America; the IRS, the Government, and the American tax payers may just lose out on this money that has been obtained by unethical tax filers.

As is so often the case, a good intentioned Government program was abused and now has little chance of being extended.

Attached is an article which should be very encouraging for buyers and real-estate agents.  Sales volumes have returned to 2007 highs.  Although prices continue to fall… inventory is moving, and in several desirable areas, the market is turning around quickly.

Check out the article reprinted from money.com: Read the rest of this entry »

9,000 miles a year in non-reimbursed business miles driven as a graphic artist?

$14,000 a year spent on a home office as a police officer?

$2,000 a year spent on uniform dry-cleaning as a bank teller?

$10,000 a year spent on non-reimbursed art supplies as a school teacher (making $42,000 a year)?

These are just a few of the ‘creative’ 2106 expenses that get claimed on personal tax returns.  Unfortunately, these creative deductions, and some peoples desire to reduce their Income Tax Burden at any cost, make for some very ethically ambiguous tax returns.

Bank underwriters who use tax returns to qualify a borrower must take these deductions into consideration when approving a loan.  If a borrower makes $90,000 on their W2, but has a history of taking $22,000 a year in 2106 non-reimbursable business expenses; the underwriter has no choice but use a base figure of $68,000 per year in income to qualify for that loan.

Many clients feel these expense and deductions should be over-looked due to the fact that everyone exaggerates on their tax returns.  However, in our current lending environment, underwriters are not over-looking anything.

If you and your tax professional consistently go to the fringe of available tax deductions, it is important you complete full pre-approval prior to starting your housing search.  The money you ‘make’ may not be the money you will have available to ‘qualify’.

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

Many of my clients are very tech savvy with the Googler, understand the value of comparison shopping, and obviously want to get a second opinion on a decision as important as their mortgage.

Being informed and not being taken advantage of during the loan process is very important.  Getting 4,5, or 10 opinions and quotes on your mortgage is time consuming, will do little to actually save you money, and can complicate the situation.  Additionally, rates change daily and sometimes multiple times in a day.  If you are like most of my clients and do your “rate shopping” throughout the week, you are not getting a fair evaluation of rates between various lenders.  You may feel that the 3rd bank that you contacted during your week long search had the best rate to offer.  The truth may be that bank #3 was the bank you called on a day that rates dropped a bit.  Unless all rates are obtained from all banks you are shopping on the same day… you are not making a fair comparison.  

The dirty little secret is that in today’s mortgage markets, the rates from bank ‘A’, to Credit Union  ’B', to broker ‘C’ are going to be virtually identical.  The days of niche products and pricing, bank portfolio lending, and hybrid interest only products are a thing of the past.

Two years ago it was important to do as much loan shopping as possible.  Every bank, loan broker, and credit union had their own speciality product.  If you searched long enough you may have been able to find a rate 1% lower than the competition, or loan terms that were much more favorable to your individual scenario.

However, here and now in late 2009, there are basically two mortgage products available to the average consumer… a 30 year fixed mortgage, and a 5 year interest only mortgage.

Each bank has a different method for advertising their rates on these two products.  Some lenders, like myself,  quote our rates with no points or hidden fees.  Many banks, and an overwhelming majority of Brokers, quote their rates with 1% point built into the transaction (a point is a fee charged up front to get you a lower rate, and designed so that the bank or broker can advertise a more appealing loan).  Some lenders, being aware that consumers are becoming more informed, advertise their ‘low’ rates with ‘no’ points - but charge you thousands of dollars of junk fees on the back end to substitute for the 1% point they should have quoted up front.

It’s because of this manipulation of “points”, “fees”, and quoting techniques that Lender “A” can make their rate appear so much more attractive (or lower) than Lender “B”.

Just recently I lost two deals to other lenders who I know, for a fact, were lying to the client.  If the going rate at no points for a 30 year fixed rate mortgage is at 5.50% with Bank ‘A’, there is NO chance you can get that same mortgage, at no points and the same fee structure at Bank ‘B’ across the street for 4.75%. 

30 year fixed rate mortgages are based on publicly traded mortgage backed securities and demand for treasury instruments.  At this point in time, all banks and brokers are working from the same pool of money in the secondary mortgage markets.  In my example above, there is no way Lender “B” could afford to extend the significantly lower rate of 4.75% without charging a “point” (1% of the loan amount in fees), or some other garbage fees used to obtain this lower rate.

I have seen it to many times to count where a client gets wrapped up on finding some amazing deal.  An unethical lender promises them a rate that cannot be delivered or hides the fees associated with the obtaining this lower rate.  The consumer signs on to do business with the unethical lender and usually finds out that they have been lied to when it is to late in the purchase transaction to start over with another lender.  Sometimes the presentation from the lender of the available rate and fees is simply fraud.  However, many times it is a matter of consumers only hearing what they want to. 

Many consumers get fixated on the rate and jump to apply with the lender who has the lowest “rate”.  What that consumer has failed to do is verify the cost of obtaining that rate.  Then, at the closing table, the borrower is shocked and appalled when they realize their lender has charged them several thousand dollars in points or fees in order to obtain the low rate they fell in love with.

The morals of the story are that a well informed consumer is great, and over-zealous consumer is dangerous.  Make sure to compare all three components of the mortgage before you choose – compare Rates, Points, and Fees.  Most importantly, you can shop for rates until you are blue in the face…  all you really have to do is pick a lender you trust that came with good references and the rate will take care of itself.

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

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

As I’ve discussed in several previous posts, the U.S. Government and the Federal Reserve have been playing a manipulation game over the last 12 months to help keep mortgage rates low.  It looks like the momentum is starting to stall and the Government may be pulling back on their desire (or financial ability) to manipulate the markets.

Without going into a boring econ lesson in this post, the news from the last few days has been drastically unfavorable for mortgage rates.

The treasury auction yesterday was not well received and mortgage rates have gone up twice in the last 24 hours.

In addition to my own opinion, the Wall Street Journal and independent mortgage rate tracker Barry Habib are speculating that Wednesday October 7th was possibly the absolute bottom of the mortgage market for the foreseeable future.

If you have a deal in escrow, lock in a rate THIS morning.  I can virtually guarantee a price change for the worse by lunch time.

Also, if you are still looking for a home, review your terms of pre-qualification.  If you were comfortable with a purchase price and loan amount at 5.00%, there is a good chance you may not be comfortable with that same mortgage amount at 6.00% (a rate which could very well be standard within the next 90-120 days).

Additionally, if you have friends, family members, or past client who are thinking about refinancing… they should do everything possible to get in a new application THIS weekend and lock in an interest rate before Monday.

As always, rates will continue to rise and fall on a daily basis… so there will always be “good” days to lock in.  However, for the first time in a long time, the consensus is that the trend line on mortgage rates will be going nowhere but UP from here on 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

At our office meeting yesterday, we had the pleasure of having the regional manager for our appraisal management company visit and speak in depth about the changes in our appraisal system and how to best prepare for an upcoming appraisal.
 
Prior to the mortgage market crash in August of 2007, appraisers had worked directly for the loan officers whom ordered the appraisals. Since the appraisers relied on these lenders and brokers to hire them in order to make a living, they may have had some inappropriate influence to appraise the subject properties at the values these brokers needed. This problem was a key component to the crisis we find ourselves in today and has now led to a reform in our appraisal system.
 
Today, banks have sought to cut off all communication between loan officers and appraisers by establishing a process where an appraiser is randomly selected from a pool.  By using these third party appraisal management companies, that hope is that his prevents brokers from influencing an appraiser’s valuation.  However, new problems have come to light to do this new system and the guidelines enacted by the HVCC (Home Valuation Code of Conduct).  What we are now seeing more often is when an appraiser comes from out-of-area, they are not always able to determine the “true value” of a property. Due to their unfamiliarity with the area, the appraiser may not know that the house is located in a fantastic school system where buyers are willing to pay an additional $100,000.

With this challenging new appraisal system in place, we advise our Realtors to be at every appraisal and to prepare factual information about the area prior to the inspection date. Preparing recently sold comps that best match the subject property or providing interior photos showing the defects of a property that sold at a lower price in the area is key to having a successful appraisal. After all, our Realtor’s are more often the most knowledgeable party to the transaction is informed about the area they work.