My Mortgage Plan

Mortgage Commentary in its new home

2009-02-18T16:07:00.000-08:00

Greetings -- I have made the transition to the new home of my blog but in case you haven't followed me over, here's the link again:

http://activerain.com/blogs/jameswirth

As always, thanks for reading and I hope to see your comments on ActiveRain!

--James Wirth

OOPS!!!

2009-01-07T23:25:00.000-08:00

I'll just blame it on the Holiday Season. Yeah, that's it.

Well, whatever the reason and/or season, I haven't been keeping this blog up. I have, however, been actively posting on the new home of my blog: ActiveRain.

Nothing against Google or their Blogger platform, but the opportunity to participate in a Real Estate-centric online community was just too perfect.

Well, at least perfect enough.

Please check me out in the new digs: http://activerain.com/blogs/jameswirth

And as always, thanks for reading!

--James Wirth

Mortgage Rate Update -- Unchanged from Friday

2008-12-22T10:10:00.000-08:00

Today's one of those days where the mortgage market wakes up slowly, doesn't get right in the shower, leafs through the paper while sipping some decaf coffee, and slowly gets around to work. Not unlike many of us this morning after seeing the traffic reports and seeing all of the snow here in the Greater Seattle Area.

There are no economic releases of note today, and a treasury auction this week, so bond traders are aware of that and despite the stock market generally in negative territory there's not really any reason for rates to do anything but, well, hang out.

Anyone up for a game of Pictionary?

4.75% Rate / 4.899% APR

P&I payment: $2,175.27
Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed

Rates as of 12/22/08, subject to change without notice. Though I'm not holding my breath on this one...

--James Wirth

Mortgage Rates -- Baby Steps...

2008-12-18T09:17:00.000-08:00

Just a month ago our youngest was taking his first steps. A little later than our other kids but hey, we all beat to the rhythm of a different drum, right? He would take those cautious steps with the wide stance that made him waddle back and forth and he'd have that wide-eyed look in his eyes. Very adorable.

The mortgage market is cautiously improving today, taking some cautious steps of its own. If the stock market pushes lower, rates may go lower as well. Here's where we are so far:

4.75% Rate / 4.899% APR

P&I payment: $2,175.27
Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed

Rates as of 9:07am on 12/18/08 and are subject to change.

As always -- I'll keep you posted!

Rates are Up, Up, AND AWAY!!!

2008-12-17T12:44:00.001-08:00

Now that I have your attention... we've basically given up the gains we made yesterday and today so the rate I posted yesteday should be current, as of 12/17/08, 12:33pm PST:

4.875% Rate / 5.026% APR

Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed

So we're still under 5% but hang on to your hats ladies and gentlemen, it's going to be a bit of a wild ride as the market responds to yesterday's aggressive move by the Fed, profit-taking from the short-term gains, and lenders being forced to raise rates just to stem the tidal-wave of rate lock requests from the incredible rates we've been experiencing!

As always, I'll keep you posted --James

Rates -- YOU HAVE GOT TO SEE THIS!!!

2008-12-17T08:59:00.001-08:00

Good morning all -- When I logged on this morning I almost couldn't believe it! Rates PLUNGED late yesterday and this morning to the lowest I personally have ever seen:

4.375% Rate / 4.520% APR

Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed

Rates are as of 12/17/08 and subject to change. This rate is for a 10-day lock.

TO ALL BACK SEAT RATE WATCHERS: Previous major improvements where rates dropped .5% in a very short period were extremely short-lived. If you are 'waiting for the bottom' this may very well be it and at the VERY LEAST I highly recommend completing the application process TODAY. The processing/underwriting capacity of the mortgage market is significantly reduced; to avoid being caught in the MAD RUSH that will follow on the heels of rates going up, the best advice I can give you is to apply now. You can always float the rate until you're ready to lock.

It's snowing! Happy Holidays everyone!

James Wirth

Mortgage Rates Suddenly Steady as She Goes?!?

2008-12-15T09:37:00.000-08:00

After months of extreme volatility under a looming cloud of uncertainty (waxing poetic for a moment there), we have suddenly found ourselves comfortably settled around 5%.

Who woulda thunk it?!?

4.875% Rate / 5.026% APR

Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed

Rates are as of 12/15/08 and subject to change.

BUT WHAT DOES IT ALL MEAN?!?!? If this is for you as it is for many, a burning question, let's consider the following:

~ Bonds have once again become a safe haven from the fluctuation of the equity markets;

~ Though 4.5% or even lower has been mentioned numerous times in the media, government representatives have also indicated that there was not a direct target rate that was the end-all-be-all. Maybe this is the bottom?

~ If you are buying or refinancing (or considering either), it's best to get the process well under way. Rates have been known to shoot up 1/2 percent or more in a matter of hours so keep your Loan Originator's phone number on speed-dial because you're definitely going to want to stay in close-contact.

Here's mine, by the way: 425.519.3281. Call anytime! -James Wirth

Good morning rates. MUST-READ!

2008-12-12T10:54:00.000-08:00

I received a call from a past client this morning, interested in refinancing his home. With 5% equity I didn't think we'd have much of a chance at getting a good rate. Boy was I wrong!

Home value: $285,000
Loan amount: $270,750
RATE: 4.625%/ APR: 5.382%
30 Year Fixed Rate Loan
Paying 1 Discount Point

Rates as of 12/12/08 and subject to change yadda yadda yadda.

4.625%. Need I say more? My phone should be ringing right... about... now...

Mortgage Rates are still sleeping zzzZZZzzzZZZZzzZ

2008-12-12T09:24:00.000-08:00

Apparently mortgage rates have been repeatedly hitting "snooze" this morning. We're still where we were last night:

4.875% Rate / 5.026% APR

Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed

Rates are as of 12/12/08 and subject to change.

But hey -- rates staying the same is better than rates getting worse!

-James Wirth

Mortgage Rates -- can I get a Wahoo?!?!?

2008-12-11T20:31:00.000-08:00

My apologies for the delay today, we suddenly lost power (not that it's ever not sudden) right when I had been preparing the blog posting on rates!

Here's where we ended up today:

4.875% Rate / 5.026% APR

Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed

Rates as of 12/11/08 and subject to change.

Where is the bottom? No one knows, although there has been a media blitz pointing to discussions around a 4.5% 30-year fixed rate and if we use the improvements over the past 3 weeks as any gauge as to the likelihood of that coming about, it's seems very reasonable. We may even be there in the next week or so!

My advice to you is this: Write that offer or apply for the refinance. When rates start going back up it's going to be a MAD DASH so let's get the paperwork in and just float the rate until you're ready to lock. It will save everyone hassle and avoid unnecessary delays.

Sound good? --James

Mortgage Rates Improve!

2008-12-10T13:51:00.000-08:00

Greetings all -- here's where we are so far today:

5% Rate / 5.152% APR

Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed

Based on rates as of 12/10/08.

If you are a potential buyer or a Real Estate Agent working with one, what a tremendous opportunity to lock in a rate at historic lows!

--James

Mortgage Rate Update

2008-12-09T10:35:00.000-08:00

Good morning all, it's a lovely Tuesday with a nice light rain falling. Unfortunately rates haven't followed suit and they're still sitting at where they were yesterday:

As of 10:44am on 12/8/08

5.125% Rate / 5.279 APR

Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed

Have a great day everyone!

--James

I'M TWITTER-PATED!

2008-12-08T20:27:00.001-08:00

Check out my Twitter profile: here. I will use this service to alert folks of new posts and breaking news.

Get twitter-pated with me! Send me your profile when you join so I can follow you too!

See you online! --James

You mean you want to know what the actual mortgage rate is?

2008-12-08T18:21:00.000-08:00

*sigh* Fine!

After intense negotiations with our company's RESPA guru who will remain nameless -- and when I say negotiations, that is to say she... or I mean that person... told me exactly how I must present the information if I wanted to live -- I have gained permission to periodically post the day's rates.

I am open to feedback as far as the type of loan program, etc. but I'm going to start with the basic ol' vanilla 30-year fixed conforming loan:

And without further adieu (drum roll please)

As of 6:05pm on 12/8/08

5.125% Rate / 5.279 APR
Loan amount: $417,000
Loan Program: 30 Year Fixed

Wahoo! Not so painless after all, ay?!? As always, thanks for reading!!! --James

NEWS FLASH -- New Loan Limits for 2009!

2008-11-07T09:53:00.000-08:00

The new Fannie Mae and Freddie Mac loan limits for the coming year have been announced. As was the case for last year, the conforming loan limit has remain unchanged at $417,000.

In addition, the "high-cost" loan limits have been announced and for the Seattle-Tacoma-Bellevue Metropolitan Area (which includes King, Snohomish, and Pierce counties) has been set to $506,000. As was the case since the announcement and implementation for the high-cost loan limit of $567,500 based on the Stimulus package, there are likely adjustments and additional guidelines for the new amount of $506,000; however, once things were up to speed the adjustments really weren't bad at all!

Here's the official press release.

To my Realtor Partners: Please touch base with your clients. This is breaking news and there is precious time to still close under the higher $567,500 limit.

To my clients and prospective clients: NOW is the time to call, complete an application, and consider your options. Oh who am I kidding -- NOW IS THE TIME TO BUY!

As always, thanks for reading!

Home Sales Rise -- that's BAD news?!?

2008-10-29T18:15:00.000-07:00

Apparently a contributor to MSN Money and I are not on the same, well, page. This is going to sound odd, but please glance at this article and then come back. My comments will make more sense that way. I promise.

The premise for the article in question is that a jump in home sales isn't necessarily a good thing.

Huh?

Southern California– arguably one of the hardest hit markets by foreclosures and falling values – is up 60%. That level of increase is more than banks trying to off-load foreclosures (as the aforementioned article would have us believe) -- homes are simply selling for current market value.

In other words, a good percentage of the Southern California homes being purchased are REOs (REO= a property bought back by a bank or lender after a foreclosure sale) simply because a good percentage of the homes in that market are REOs. The fact that they’re REOs is inconsequential; that people are buying them, there’s something to write ‘home’ about.

As far as the second page of the article – I don't know where the writer is getting any of that. This idea that once a bubble is pricked it doesn’t come back again just isn’t supported by history.

In the last 50 years nearly every peak was followed by an equal or greater peak within 10 years. The 1960 bubble popped and grew back by 1970 for the next bubble; there was a HUGE bubble that popped after 1980; it grew back even bigger by 1989; that one burst, leveled by 1994 and stayed flat for about 3 years before beginning the most dramatic climb we’ve ever seen.

So even if someone bought at that cycle’s absolute pinnacle they would recover within a decade. And not everyone bought at the absolute peak -- if they timed it just right and bought at the bottom they made a substantial return in only a few years and even if they bought too early they were in a much shallower hole and their recovery time was substantially less.

And by the way -- isn’t it good for home values to outpace inflation and income? We just compensate in other ways -- net proceeds from the sale of a home become our down payment when we buy up; underwriting guidelines change over time (within reason) to help (legitimately) compensate as well. And when it gets too far out of control, the market peaks and the system resets.

Let’s go back to the ‘40s and look at a similar housing cycle: from 1942 to around 1948 home values increased by probably 60%. Sound familiar so far? But when that bubble burst and home values declined, values remained well above the start of that cycle and that created a new plateau that led to future booms in the ‘70s, ‘80s, and the one we just experienced.

To make a short story long... I couldn't disagree more with the conclusions drawn in this article (in case you haven't picked up on that).

I think if you’ve already pre-determined your point, you can slant the data enough to make it work in your favor. But by doing so, you’re probably missing the point.

The reason for the change in momentum doesn’t matter as much as the change in momentum itself.

REOs today, private sellers tomorrow, new construction the day after that.

Is everybody as confused as I am?

2008-09-23T16:59:00.000-07:00

Maybe not the confidence-instilling phrase you want to hear from the guy you're trusting to finance the largest asset you'll likely ever own, representing roughly 70% of our net worth (on average). But in the current topsy-turvy financial market where the next big announcement is anybody's guess, it really is just that.

Instead of focusing on what I don't know, let's consider what I do:

"Now" continues to be an incredibly smart time to buy a home. Many of the reasons are real estate related and I'll let you talk to your Real Estate professional for those points while I touch on the financial reasons:

For first-time home buyers, there are down payment assistance programs; a $7,500 tax credit; an opportunity to contribute substantially toward retirement. And there are a lot of homes to choose from.

For move-up buyers, there are HUGE benefits to buying up in a down market -- I did say I was going to stick to the finance questions but this one is such a huge benefit it at least deserves honorable mention. And there are a lot of homes to choose from.

Contrary to many of the messages in the media, there are plenty of mortgage lenders out there! And, surprise surprise, they want to make new loans, that's what they do! They're being more cautious these days, justifiably so with the increase in loan defaults. That may translate into borrowers putting more focus on their own credit history, spending habits, and maintaining a comfortable "debt-to-income ratio" and less focus on finding out the absolute maximum they can qualify for, but maybe that's not such a bad thing...

The long and short of it is that there are good loans to be made, there are people who want to buy homes, and there are people who want to sell homes so they can also buy. Our local economy is healthy, our housing market is stable. Let's keep the national statistics in perspective and take the local headlines in stride, and rely on trusted professionals in real estate, lending, accounting, financial and retirement planning to give us the real story.

If you don't have a professional in one of those areas, ask another professional who they would recommend, because our referrals carry our names, too.

By the way -- it really is the best time in many, many years to buy a home!

Fortune-Telling 8-Ball says: "The Outcome is Uncertain..."

2008-09-22T13:47:00.000-07:00

That's a big "DUH!"

Rates have climbed over the end of last week and again today... I would say to around 6% with a point for loan amounts <$417K or 6.125% with a point for up to $567,500 – both 30-year fixed with 20% down.

The market is in a hyper-reactionary state at the moment; the fuel for the increased rates-- and I don't mean oil *ba-dum CRASH* -- at the tail end of last week and was directly related to some level of confidence in the gov’t’s actions to stem the losses in the financial markets related to Lehman Brothers, AIG, Merrill Lynch, and others. And today, the increase in rates was caused by a lack of confidence in the same. So we get excited about it, money flows into the stock market (out of bonds/mortgages), and forced rates up; we get worried about it and money flows out of the stock market, out of the bond market, and into oil? Good grief!

There's still a chance that bonds will get last-minute bids and will be set up for some relief tomorrow... assuming the market gets neither-excited-nor-fearful of any changes or rumors of changes going on currently. They would also have to resist any desire to push gold to some new record in either direction.

Clear as mud? I guess the 8-ball was right...

The long and short of it is this: buckle your seatbelts, it’s going to get bumpy in the short-term. There are some economic releases toward the end of the week that may give the market some more useful guidance but until then we’re probably going to bounce around directionless…

"He didn't fall?!? Inconceivable!"

2008-09-16T15:50:00.000-07:00

One of my favorite movies, "Princess Bride." Following the title line is Inigo Montoya's infamous rebuttal: "You keep using that word. I do not think it means what you think it means."

Either of those phrases could be applied to a lot of things in the current financial market, but today it was the fact that the Fed didn't lower the prime rate as many had expected them to; Lehman Brothers and AIG also seemed to find a little light at the end of the tunnel... at least if you squint real hard and cock your head to the side...

With this bag of news, the DOW gains almost 150 points and mortgage rates give up almost .25%. That's right you fence-sitters, monthly payments just went up about $60/month or so.

So here's your kick in the pants, we can draw on one of the songs from "High School Musical" with the words, "You gotta gitcha gitcha gitcha gitcha head in the game!"

Oy-vay, what a day!

2008-09-15T16:34:00.001-07:00

It was a whirl-wind day in the media with Lehman Brothers (bankruptcy), Merril. Lynch (bailout acquisition by BofA), and AIG (cry for help to Uncle Sam) Driving a 500-point loss in the DOW. All just one week after the greatly anticipated federal gov’t takeover of mortgage giants Fannie Mae and Freddie Mac. WOW!

I’m touching base with you to let you know that in the midst of all of this, the mortgage market is holding steady. Sure, we’re experiencing some growing pains – guideline changes continue to keep us on our toes – but we are rolling with the punches, I am here and accountable for you.

I imagine in the short-term mortgage rates will be volatile but in the mid-term, the restructuring of Fannie and Freddie should even things; hang in there and I’ll do my best to keep you updated!

Come on in, the water's fine!

2008-09-08T09:05:00.000-07:00

Basically the message the markets seem to now be getting, with the announcement of the government takeover of Fannie Mae and Freddie Mac.

WIIFY, you may ask? (that's "What's in it for you" by the way)
Well, if you own stock in one of the companies, not much I'm afraid... but Uncle Sam (or more accurately Treasury Secretary Henry Paulson) decided it was the best course to restore public confidence to the battered companies and the economy. And of course, there's the fact that several major banks are heavily enough invested in the "preferred stock" of Fannie and Freddie that were the two companies to go under, they'd almost definitely pull the banks under, and the banks would pull their investors under, and we're looking square in the face of a world depression. Or so they say...

The short and long of it...
It's difficult to say what will happen next, although the conspiracy theorist in me wonders if this isn't just a ploy to get me to think that something was horribly wrong with Fannie and Freddie and now Uncle Sam has come in to save the day. But if these were "Government Sponsored Enterprises" (or GSEs as they are... or were... often referred to) in the first place, isn't more like their covering their own you-know-whats?

Here's my two cents, and you can give me change back if you'd like: as I've been predicting for a few months, this increase in perceived supply will likely drive interest rates... wait for it, wait for it..... UP!

SO GET OFF THAT BIG COMFY FENCE WITH YOUR EASY CHAIR AND YOUR UNIVERSAL REMOTE! At least flip over to the Reality Channel and see that rates will soon be a-climbing and a .5% increase will drop your purchasing power by 5%! Not so comfy anymore, eh?

Give me a call to chat: Operator is standing by! 425-501-4749.

As always, thanks for reading!

Captain's Log -- Supplemental

2008-08-27T15:08:00.000-07:00

My mission... to boldly go... where no... mortgage BLOGGER has gone before...

Ok, you get the idea.

So here's the deal -- I'm seeing some additional activity as far as borrowers getting pre-approved, shopping for rates, etc. But the majority of buyers are still on the fence. And there's A LOT riding on this: low interest rates that have all kinds of pressure pushing on them to go up; the $7,500 tax credit for first time home buyers; a down market that is showing REAL signs of recovery (at least for Washington State), and many others!

And I can give them all of the facts --

that rates have been going down for more than 25 years and at this point it's hurting the economy (ergo they'll be going up soon, mark my words);

that just .5% increase in interest rates will take away 5% of their purchasing power;

that the conforming/FHA/VA higher loan amounts are going to go down at the end of the year;

that "buying up" in a down market means that you're getting free equity (let me know if you want this explained);

that if they wait, they will either pay more in price or pay more in rate. Either way they pay more!

If you are one of those buyers and you're kicked-back in that easy chair on that nice wide, cozy fence... if you don't get back in the game here, the only kicking you will be doing is kicking yourself for not acting!

Let's remember the immortal words of one of my personal heroes, Abraham Lincoln (I mean the guy lost many many more elections than he won but he kept trying): "Good things may come to those who wait; but only the things left behind by those who hustle."

Let's see some hustle out there people! Pick those knees up! MOVE IT MOVE IT MOVE IT!!!

Special post: A Tale of Sir James Wirth-a-Lot

2008-08-04T19:52:00.000-07:00

The following is a fun story written by a Real Estate Agent after I was able to rescue a buyer whose financing fell through at the last minute. We completed the transaction from start to finish (application to funding) in 2 business days! We should celebrate our successes, yes?

Once upon a time in the high country of Sammamish lived the Quiet Couple in the Cul-de-sac. The Quiet Couple in the Cul-de-sac loved their little home and their helpful neighbors. But the Quiet Couple in the Cul-de-sac soon became the Quiet Family in the Cul-de-sac, and found their tiny domicile bulging at the seams with nary a nook and cranny for the many little feet abounding from their lovely children. So one day they called Lady Barbara of the Woods in the Lynn, their friendly and always at the ready Signage and Signage Representative (i.e. yard signage and document signage)...:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

The Lady Barbara happily shouted from the hilltops about the tiny domicile and quickly another fine Signage and Signage Representative of similar Bain descendancy gathered up a domicile seeker and made a hearty agreement with the Quiet Couple in the Cul-de-sac to exchange a very weighty piece of paper for the tiny domicile. Next the Lady Barbara journeyed hither and yon with the Quiet Couple to seek a roomier domicile. And behold! The very perfect much roomier domicile appeared and the Quiet Couple made a hearty agreement with the Rightful Owner of the Roomier Domicile. This south moving couple in a hillside cul-de-sac had a Signage and Signage Representative also of Bain descendancy. The Lady Barbara of the Woods in the Lynn was very happy.

Enlisting the aid of the other Signage and Signage Representatives, Lady Barbara aligned the moon and sun and stars and other galaxies so that all the signing of the very weighty pieces of paper would occur in proximity of calendar, so that all the moving of possessions and taking over of domiciles would happen within three days of each other, and the Quiet Couple in a New Cul-de-sac would be able to wing their way to the Windy City on the day after all the domicile possessioning happened.

Alas! The Quiet Couple in the Cul-de-sac listened very closely to their Signage and Signage Representative on all matters -- except for one very important matter: the Weigher and Giver of the Coins. While the Quiet Couple thought they were doing a good thing, this Weigher and Giver of the Coins was dastardly. Mere days before the carefully timed signing and closing of the weighty papers, the Weigher and Giver of the Coins sent chills down Lady Barbara's spine by declaring: "We have technical difficulties. The Quiet Couple's coin countage is good but we cannot print out the weighty pieces of paper."

"This cannot be true," cried Lady Barbara. "Bring in the Tapper of the Keys and produce the papers in the olden manner." It was not to be.

Hours, a day, and two days passed. Still the Weigher and Giver of the Coins declared themselves unable to print out the papers. The Rightful Owner of the Roomier Domicile cried, "Foul!" The Signage and Signage Representative cried, "Foul!" But since the Representatives were both of the Bain descendancy, many heads and honchos were assembled with the battle cry, "There must be a way!"

The many heads and honchos determined they must inquire of the Knights of the Land-of-all-Over, who were much better at weighing and giving the right coins in a timely fashion. In the meadow they caught sight of an enormous white horse, and the sight stopped most of Lady Barbara's trembling. For seated upon the steed, with sword and shield at the ready, was the Great Sir James Wirth-a-lot!

Sir James lifted high his fist, and shouted, "Let me slay the dragon!"

Sir James swooped down on the Quiet Couple of the Cul-de-sac and the Lady Barbara of the Woods in the Lynn, took hold of the documents and rode off to his special hiding place. Magic made Sir James as large as the legendary Superman. Sir James hunkered down to cast a spell. He sent heralds to alert a bevy of fairy godmothers from the Land-of-all-Over and the E-Pow-wow. Then Sir James toiled day and night. And behold! The Great Sir James gathered plain documents on Friday evening and magically turned them into the weighty pieces of paper for the Quiet Couple to sign by the unbelievable evening of Monday.

Hoorahs were heard throughout the land—all over the land in fact, which is probably why Sir James resides in the Land-of-all-Over. The Quiet Couple made a few adjustments, but were now able to wing their way to the Windy City for their long-planned clan event. Lady Barbara of the Woods in the Lynn now trembled for joy.

Lady Barbara lauds and bows to the Great Sir James Wirth-a-lot!

May the deities shine upon his head and bless him with many children.

--Barbara Tennis, Coldwell Banker Bain

(posted with author's permission)

The Housing and Economic Recovery Act of 2008 (queue the music: Dun Dun DUN!)

2008-07-30T17:48:00.000-07:00

On Wednesday morning, President Bush signed into law what has been deemed as the most significant housing-related legislation we've seen in more than a generation. Sounds big, and let me tell you -- it is. In fact, the 600+page bill was short only on brevity.

Here are a few highlights that will likely affect consumers most directly, compiled from press releases by the National Association of Realtors (http://www.realtor.org) and the Mortgage Bankers Association (http://www.mbaa.org).

Hey, did I mention the bill was over 600 pages?

Highlights:

FHA to the (Foreclosure) Rescue! FHA would insurance borrowers with problematic subprime loans. Borrowers would share future appreciation with FHA but they get a 30year fixed FHA loan and get to keep their house! May be a good alternative to foreclosure.

FHA: Permanent increase of the FHA loan limit. My estimation is $522K for the Seattle/Bellevue/Everett MSA -- that is not confirmed but if I'm right I get to say 'I told you so.' Would become effective January 1st, 2009.

The minimum down payment requirement for FHA is bumped up .5% to 3.5% but it is not clear to me when this would become effective (hopefully not retroactive 10 years ago when I bought me first home on an FHA loan).

FHA Seller-funded down payment assistance (often referred to as Nehemiah, one of the 3rd party facilitators) would be prohibited, effective October 1st 2008. That is already being contested but HUD has been after this program for years, so stay tuned on that one, may be too close to call.

Fannie Mae/Freddie Mac loan increases to the same level as FHA, effective Januray 1st.

VA loan limit temporarily increased to $567,500 for our area, through the end of this year.

Tax incentive -- this one is interesting: a $7,500 re-payable credit for those who qualify on home purchases between April 8th, 2008 and June 30th, 2009. If you qualify and take the credit, you would pay it back over the next 15 years. For those of you who don't have a calculator handy, %7,500 divided by 15 equals $500. No, I didn't perform that calculation in my head. Although if they had made it repayable over 10 years I would've been all over that one.

There is much more to it of course (Fannie Mae/Freddie Mac reform and oversight, Truth in Lending Act additional disclosures, Loan Officer Licensing to name just a few and I really mean just a few), but those were the highlights that caught me eye.

So how does this all apply to you? Depends on whether you're buying a home. If you are (and you should be), chat with your Loan Officer (which should of course be me) about any potential impact on your loan scenario.

As always, my comments are purely my opinion and shold in no way be taken as fact or the opinion of others. Thanks for reading!

James Wirth is a Senior Loan Originator licensed by the Washington State Department of Financial Institutions under Loan Officer License Number 510-LO-34536. His Blog can be found at http://mymortgageplan.blogspot.com and he can be reached directly at:

James Wirth
Landover Mortgage

Cell/Direct: (425) 501-4749
Office: (425) 977-2244 Ext. 1002
Fax: (866) 215-1749

Email: Jameswirth@landovermortgage.com
Web: http://www.landovermortgage.com/jameswirth/

Making Sense of it all

2008-06-09T12:26:00.000-07:00

First a shameless apology for lack of recent posts. Ok, enough of that.

I have heard conflicting messages with economic data releases and general news about the status of the economy, recession vs. slowdown, housing slump or crash, mortgage crisis, credit crunch, and so on.

For those of you who have been living in a hole lately (good for you, by the way), here's a quick update:

Comparable retails sales were reported up 3% in May by UBS-International Council of Shopping Centers (I couldn't find a Web site, but go here for the Google search), and orders for manufactured goods surprised analysts by increasing; in the same breath (or gasp as the case may be), unemployment hit 5.5%-- up .5%, the single-largest one month increase in 22 years-- household net worth fell almost 3% for the 1st quarter of 2008 and 49,000 jobs were lost last month.

In general news, the US Bureau of Economic Analysis released 2007 numbers for gross domestic product by state, considered a measure of local economy. I looked through the dizzying report personally, and even the explanatory notes need explanation. But if you've a hankerin' for a light read, go here to see for yourself. I'll take the Seattle PI's word for it (because everything that we read in the newspaper is always accurate), we tied with D.C. for 3rd place. Forgetting the Benjamins, Check out the Washingtons!

Everyone seems to have an opinion. Even me. But what does it all mean, you ask?

Truth be told it seems rather difficult to categorize just how 'we' are 'doing.' I could have told you that... oh wait, I just did...

For Washington State we can look to local statistical reports (here's some commentary if you've got the notion), and according to bea.gov -- the dizzying report I mentioned earlier-- we're in the 'highest quintile' so that should be good for something. Not cheaper gas at $4/gallon or a job with unemployment is the highest it's been since 2002 (gas and job being national numbers), though. Add housing supposedly imploding and the economy alledgedly tumbling into a recession, and what's a father of 6 to do? We have to sleep and eat somewhere and get everybody around somehow!

Here's my remedy:

1) Stop paying so much attention to the news. After all, it generally tells us what has already happened and there's no sense living in the past. If it weren't for the direct correlation to my job, I think I'd ignore it altogether. I'd still paruse the ads to oogle over the latest tech gadgets though, so all is not lost.

2) Rely on meaningful sources of information for direction:
For consumer spending data, that would be my wife who manages our household budget in addition to the myriad of other daily tasks involved in running our household of 8 (thanks honey, sure do love you).
For housing information, that would be date from the NWMLS and local experts. 'Trust real sources, take others with a grain of salt' is the old addage. Well, a few minutes old at least, by the time this gets posted.

3) Sit down with my wife in her copious spare time, and re-evaluate the family budget to see if there are any adjustments that can be made to compensate for changes in the economy/market/cost of milk and gas, as appropriate.

4) Realize that housing prices are fair and mortgage rates are at historic lows. And you know, it's really not that difficult to get a home loan, contrary to popular concensus. If you know someone who is considering buying or refinancing a home, have them call me so I can help them work through their options.
"Cause Knowledge is Power!" -- Schoolhouse Rock

These four steps will hopefully give us all a little nudge toward meaningful and realistic sources of information. Especially number 4 - that one's my favorite.

As always, thanks for reading!

Final Reminder for: Real State of Real Estate Town Hall Forum

2008-03-19T21:45:00.000-07:00

For some of you it may be the first reminder but I'm making one final push none the less, to fill the room to capacity.

Which room, you ask?

Embassy Suites in Lynnwood of course, for our open forum discussion on the current state of Real Estate in the Greater Seattle Area.

We're getting off of our duffs and we're doing something about the fear that seems to have caused home-buyer-paralysis!

Organized by Diedre Haines, Managing Broker of the Lynnwood/Edmonds Coldwell Banker Bain offices, the evening will include a keynote address by Aaron Reardon, Snohomish County Executive who will join myself and Nathan Gorton, Executive Director of the Snohomish County-Camano Association of REALTORS(r) on a panel to address current issues and field questions from the audience.

For more information, go here and I look forward to seeing you tomorrow night!

Oh by the way -- if you can't make it tomorrow, they will be streaming the event live on the Internet! Go here to check it out!
(http://www.ustream.tv/channel/town-hall-meeting-lynnwood)

--James

Fed Drops Rate by .75%!

2008-03-18T15:21:00.000-07:00

For those of you who aren't members of PRSA like I am and haven't seen or heard the news, The FOMC has reduced the Federal Funds Rate by .75% today. This rate is the target rate is uses to 'suggest' to banks the amount they should charge each other for borrowing funds. You can read the full press release here: http://www.federalreserve.gov/newsevents/press/monetary/20080318a.htm

Acronym Index
FOMC = Federal Open Market Committee, often referred to in these matters "The Fed."
PRSA = Perpetual Rate Shopper's Anonymous. Ok, I made that one up, but you get the idea.

As a point of clarification, this does not mean that 30-year Fixed rate loans dropped by 3/4 of a percent. Actually, 30-year Fixed Rates went up Today, which is consistent with the last two "Fed" rate drops.

Why, you may be asking?

The short answer is there are many, many factors that drive interest rates. In Today's case, IMHO (in my honest opinion) the biggest factor is the stock market, which closed today after adding a 400-point gain, the largest single-day gain in 5 years. That money has got to come from somewhere, and today it came from the bond market. Pulling money (selling) in the Bond market translates into lowering the demand for bonds, which in-turn lowers the rate investors are willing to pay, and that raises rates. In short, weak demand for a particular bond raises interest rates on that bond.

More than you ever wanted to know? Maybe; more than you ever needed to know? Quite ossibly. For those skinless cats out there (e.g. the ones with curiosity), here's a Web site that has some nice basic information about bonds. Some nice bed-time reading for you. http://money.cnn.com/magazines/moneymag/money101/lesson7/index.htm

The good news is that 30-year Fixed rates are still under 6% for many scenarios and it is a really, really, REALLY great time to buy!

I'll keep you posted and as always, thanks for reading!

--James

FHA Down Payment Assistance -- they're back?!?

2008-03-13T14:39:00.000-07:00

The buzz on new Fannie Mae, Freddie Mac, and FHA loan limits (as reported previously here and here) seems to have muted the trumpets of victory for FHA Down Payment Assistance organizations such as Nehemiah, HART, AmeriDream, among many others. Said victory was announced earlier this month.

What is this FHA down payment assistance and what was the victory? Well, I'm glad you asked.

In a nutshell, here's how the FHA down payment assistance works: A buyer agrees to purchase a home. The buyer wants to do this through an FHA loan but they don't have the required 3% down payment. So the home seller 'donates' the 3% to a non-profit 3rd party organization (see above), and the 3rd party 'grants' an amount equal to 3% in the name of the buyer. Effectively, the home seller pays the 3% down payment for the buyer.

What often happens is the seller increases the purchase price by the amount of the down payment, effectively 'financing' the amount in to the buyer's loan. Some say this artifically inflates home values. Others say it's downright fraud.

The US Department of Housing and Urban Development (affectionately referred to as "HUD") who oversees the FHA program (go here for more info) has at least twice now attempted to end these programs, stating concerns that the programs increased the risk of foreclosure for those who were already at-risk, and inflated home values.

These claims HUD says are supported most recently by a report released in June 2007 by the Government Accountability Office, or GAO. For some light bed-time reading, go here.

IMHO ('in my honest opinion' for those of you who aren't heavy texters), HUD was throwing out the baby with the bath water, just as Senate Bill S. 2452, the Home Ownership Preservation and Protection Act of 2007 was trying to do with Yield Spread Premium. Read my rant about that one, here.

Apparently Judge Friedman (alledgedly, of course) is a fan of my blog and took my comments about Yield Spread Premium to heart and applied them to the HUD case, stopping the rule that would have ended the down payment assistance programs. Your Honor, I am, well, honored. Next time I'm in DC, coffee and bagels on me.

For what FHA said (very briefly) about the ruling, go here. For some additional light reading, the court order can be found on AmeriDream's Web site, here.

Nehemiah has a timeline displayed on their Web site to give us an idea of how things unfolded (or more accurately unraveled) in HUD's rule from their point of view, right up to the final ruling. I guess they've been so busy celebrating they forgot to post the final ruling (although it is posted elsewhere on their site). Let's all enjoin hands and sing a campfire song, shall we? A little legal jargon humor for you there in case you missed it.

I would assume since they weren't able to remove the programs altogether, HUD will tighten its grip on them. The likely next step would be to ensure sellers don't raise the home price as an attempt to off-set the 3% donation -- this is also a common practice with conventional loans that involve a seller concession to pay for all or part of the buyer's closing costs. Uh oh, now we're really stirring up the bees....

And now with the temporarily increased mortgage limits (FHA has a pretty nifty map to find the new limits in different areas), that 3% 'contribution' can be as much as $22,000, though not quite that big for folks in these here parts). That's big bucks.

I'll keep you posted as things develop, but sounds like the down payment assistance program is going to be around for a while and at least until the end of the year is available for a whole new set of buyers (larger loan amounts). Technically the program actually never went away...

If you are in the market to purchase or refinance a home, let me know.

As always, thanks for reading!

Conforming Loan Limits match FHA

2008-03-07T11:19:00.000-08:00

The rumors have been confirmed -- the conforming loan limit for the remainder of 2008 will be the same as the FHA mortgage limit for the Seattle/Bellevue/Everett Metropolitan Statistical Area: $567,500.

So now what?

Now we wait for lenders and FHA, Fannie Mae and Freddie Mac to prepare to begin accepting these loans. The estimate is April 1st for Fixed Rate loans such as the 30-year fixed and the 15-year fixed, and May 1st for ARMs such as the 3/1, 5/1, and 7/1 ARMs.

As a sidenote, they have announced more stringent guidelines for these higher loan amounts. I imagine things will continue to be adjusted but they've announced a maximum 45% debt-to-income (DTI) ratio, and a maximum Loan-To-Value (LTV) and Combined Loan-To-Value (CLTV) percentages of 90% on purchases for a Fixed Rate loan; and 80% for purchases on ARMs. The maximum LTV/CLTV for a second home or investment property is 60%.

Sounds more like guidelines from 20 years ago! Of course, the loan amounts are a tad higher...

At this point it's still somewhat unclear what the adjustments to the interest rate will be for these "Jumbo-Conforming" loans, other than there will be adjustments -- both by Fannie Mae, and most likely by the lender as well. Stay tuned...

And as always, thanks for reading! --James

FHA loan limits for Snohomish, King, Pierce Counties

2008-03-06T08:10:00.000-08:00

After much speculation and the Department of Housing and Urban Development dragging it out almost to the last minute (ok, they're a week ahead of the deadline), the new FHA mortgage limits have been announced.

Keep in mind that lenders will still need to prepare to fund loans at the higher limits. Just because the limits have been established doesn't mean we can close tomorrow; having said that, this is a huge step in the right direction and at least on an emotional level should open the flood gates on the housing market.

Of course, we all knew there was no reason to stop buying in the first place.

Ok ok, without further adieu, to you and you and you...

The new FHA loan limit for Snohomish, King and Pierce Counties:

$567,500.

Have I mentioned I do FHA?

Applications accepted here: http://www.landovermortgage.com/jameswirth

And for my out-of-town readers, here's a link to the FHA Web site where you can search by county or other parameters to find out the loan limit in your area: https://entp.hud.gov/idapp/fhagov/hicostlook.cfm

Fannie Mae and Freddie Mac loan limits have yet to be announced but I will keep you posted!

As always, thanks for reading --

James

"Come Again?"

2008-02-19T09:57:00.000-08:00

Re-posted from contribution made to Seattle Avenue Newsletter.

As I was ferrying my two youngest back home on my lunch break the other day after picking them up from my wife at her Dentist appointment, I tuned in to AM 1000 to catch some financial news and see how the market was responding to the 1/2 point move by the Federal Reserve.

To my dismay and utter bewilderment I sat staring blankly at a red light, perplexed by the mortgage market commentary being offered by an Economics guru from one of our state universities. I really couldn't believe my ears.

Asked a series of questions by hosts Manda Factor and Bill Yeend, the Economist's responses were dismal at best. Here's my recollection of his comments (in a nutshell, referred to below as "IANS"), and my response to each:

Question: Is now a good time to refinance?
Economist (IANS): Well, maybe, IF you can qualify, but most people won't, based on the credit crunch.

James: Come again? The 'credit crunch' is not even applicable for many borrowers. There have been changes to loans that allowed for no or low down payment, low credit scores and no or low-income documentation; however, for the majority of borrowers, if you qualified 12 months ago you qualify today.

For programs that have been affected, it usually means that I sit down with the borrowers and we put a 2-to-6 month game plan in place to help them prepare. We put a budget together; we identify ways to improve credit profiles. We put the horse squarely in front of the cart.

I don't mean to sugar-coat changes in the credit and mortgage markets, but in all too typical fashion they have been grossly over-exaggerated.

Question: But aren't rates a historic lows?
Economist (IANS): Well maybe but banks just aren't making the loans. They are advertising low rates but when you go into to lock the rates you don't qualify.

Come again? Humor me for a moment, but why would banks spend hundreds of thousands of dollars advertising rates if they didn't plan on offering those rates to customers? I don't even know what else to say to that.

Question: What about the FOMC lowering the Fed Funds Rate, won't that help borrowers?
Economist (IANS): Well, the banks are just going to sit on those funds to increase their liquidity, so it won't help the consumer.

Come again? I may be oversimplifying this, but the whole point of the Fed lowering that key rate is to pump additional funds into the system so the banks WILL make more loans. The reason banks get one rate and charge a higher rate is so they can make a profit. If they don't lend it out, they lose money because they are paying interest on those funds and that doesn't help the banks or us.

Someone once said you can't believe everything you hear. Well shucks, I guess they were right!

We're throwing out the baby with the bath water!

2007-12-18T16:00:00.000-08:00

As a father of 6 I see the need to know the difference between the baby and the bath water.

Many of you may have heard about Senate Bill S. 2452, the Home Ownership Preservation and Protection Act of 2007.

There are some good points to this bill -- raise the FHA maximum loan limit; make the down payment requirements more flexible.

However, nestled in there not so discreetly is the opposition of Yield Spread Premium. Here it is in a nutshell:

As a Loan Officer, my job is to originate new home loans. My company asks me to build in to the transaction a certain amount of revenue -- that 'revenue' goes to operating the company and paying me. Generally in Washington State, the 'revenue' that is charge is 1-2%.

There are two types of fees that can be charged in order to generate this 1-2% of revenue: up-front fees typically paid at closing, often shown as an Origination Fee; and premiums paid by the lender an above market interest rate, referred to as Yield Spread Premium (or YSP). Generally the revenue is derived from some combination of these two ways.

At face-value it may appear that Yield Spread Premium is harmful; however, please consider this:

The average life of a loan is somewhere around 4.17 years last time I checked. The difference between a par interest rate (no cost to the borrower and no YSP to the originator) and an interest rate with 1% YSP is typically a quarter of a percent. Translated into break-even, bottom-line numbers, it generally takes about 5 years to break even on the additional costs charged up-front when going with the par-rate. That's longer than the average life cycle of a loan! See the issue?

This most directly affects first time home buyers who may not have a lot of funds to cover closing costs or down payments, and military personnel who want to own a home but know they may need to sell within a few years if they are transferred.

As credit guidelines tighten and require larger down payments to qualify, this would put pressure on consumers by increasing closing costs.

Why do we want to do this again?

Eliminating YSP will create a higher level of instability in the housing and real estate markets and act like a mudslide toward the ever-increasing likelihood of a recession (yes, I dabble in poetry, that was nice, eh?).

Ahead of this new bill, The Washington State Department of Financial Institutions has stepped up this year and required licensing of Loan Originators which paves the way for controls to make sure consumers are not being taken advantage of and we're getting there. But we need time to make necessary changes and we need to push for those changes! Clearly there are issues regarding YSP. But LET'S WE DON'T WANT TO THROW THE BABY OUT WITH THE BATH WATER!

(I apologize for yelling, I'm calm now. Really.)

Instead of eliminating YSP, here's my thought:

Create higher disclosure standards to make sure the consumers understand their options This will empower borrowers to make an informed decision on how they want to pay for their loan.

If YSP is eliminated, it will effectively put that much more power in the hands of large banks who already have lesser disclosure requirements and are not required to have their loan originators licensed.

This would result in fewer financing options for consumers, unfavorable market conditions to mortgage brokers who are the only ones currently required to disclose YSP, and create very little need for the remaining lenders (the big banks) to be competitive.

You might think that giving the big banks more business might make them more competitive -- here's the real irony though: the big banks get most of the business anyway! The brokers just originate the loan and send it to the banks to underwrite through their wholesale business instead of walk-in retail customers. So they're getting the business anyway but then they'll cut out the little/middle, um, person, and charge whatever they want for a home loan!

I believe Sen. Christopher Dodd (D-CT), who authored this bill may not have had that good of an experience last time he financed a home. He may possibly have been taken advantage of -- maybe the loan officer did not disclose up-front the YSP he was being charged and he only found out about it at closing. The irony is that Sen. Dodd was one of the first to speak up when the credit crunch/housing/issues/mortgage meltdown began to pick up steam earlier this year. Frankly Senator, I'm stumped. Befuddled. You Sir, have befuddled me.

Certainly there is fraud and under-disclosure and people out there who are taking advantage of the system, but the YSP is not the issue, it's the lack of disclosure. YSP is a legitimate charge that 7 out of 10 of my clients knowingly choose. I just want us to call this what it is and work to provide MORE options for home owners, not less.

Will anyone second that motion?

Respectfully,
James Wirth, WA Lic #: 510-LO-34536

Straight-talk on the ‘Mortgage Credit Crunch’

2007-11-23T22:51:00.000-08:00

While many recover from tryptophan-induced food comas over the next few weeks, the looming question is bound to return:

What’s going on with the mortgage market?

Realistically we may see a few more after-shocks but most analysts agree that the major changes to the home loan industry have likely run their course. For homeowners and buyers in the greater Seattle area, where does that leave us?

Now that the days of 100% financing without proving any income or assets are behind us for the foreseeable future (maybe ever), it's time to get back to the basics. From the qualifying perspective, there are three areas to analyze: income/assets, credit, down payment. Below are some considerations for each (subject to change without notice of course).

Income/Assets: This is more of a priority than it has been for the past several years and revolves around the extent to which the borrower can document your income. The more income you can satisfactorily document, the more flexible the underwriting guidelines will be on credit score and down payment.

Especially if income is not easy to document, asset verification is playing a bigger role than in recent history. There are still programs that will allow for no down payment AND no money left over in the bank (which is known as 'reserves'); however, income documentation will be required. In addition, if you want to qualify for more loans regardless of income, having at least 2 months worth of the mortgage payment (and in come cases more) will help. Plus it just makes sense to have something to fall back on before you finance hundreds of thousands of dollars...

Credit: This is now more significant than in recent years as well -- in fact, one of the reasons why changes in the mortgage and banking markets have been referred to as a 'credit crunch' is because qualifying credit scores have gone up moderately. This impacts qualifying on multiple levels, and is the primary reason for reviewing your credit immediately, even if you are planning to buy some time in the future.

Down Payment: The biggest change to zero or low-down payment loans revolves around 2nd mortgages -- the "80/20" loan is no longer an option (with a few exceptions). Private Mortgage Insurance (or PMI) is still viable at this point and there are a number of different programs to consider. If a down payment is an option, even 3% makes a substantial difference in the number of loans available. 5% or 10% down are the next milestones from a qualifying perspective so if that's an option or if you have a direct family member who is willing to provide a gift for the down payment, it's worth considering.

A note for current homeowners: if your adjustable rate mortgage is not immediately up for its first (or next) adjustment, with fixed rates hovering around 6% it's crucial to consider the timing of a potential refinance if that's something that is going to be a priority in the next few years.

Final Note: If you haven’t taken a close look at the information on your credit report within the past 6-12 months, make it a priority to do so right away. The time to make positive changes to your credit profile is prior to qualifying for a home loan. Some changes take longer than others to result in a benefit.

You can request a copy of your credit report from each of the three major credit bureaus online at www.annualcreditreport.com once per year. I’m also available for a free ‘mortgage check-up,’ which includes a copy and analysis of your credit report.

The Real State of Real Estate in Washington State

2007-09-25T15:54:00.000-07:00

Before anyone gets their scruff in a huff, I'm not practicing Real Estate, just wanted to grab your attention with a snappy title :-)

So here's the disclaimer: The contents of this post (and every post I make on this blog) are the opinions of the writer (that's me) and are my opinions, wholly my opinions (unless otherwise stated, er, written) and nothing buy my opinions (even though they may occasionally come across as law). (Also please forgive the use of parenthesis in this paragraph.)()

This entry is an amended re-posting from a posting that will hopefully soon be posted in a very nice blog entitled Seattle-Avenue, written managed and directed by Denice Rochelle Brameus. Denice, 10,000 thank-yous for including me in your blog (which can be found here or by pointing your browser to seattle-avenue.com).

So what the heck is going on in the mortgage world anyway? Well, I'm glad you asked.

While the vanilla Fannie Mae and Freddie Mac loans we often hear about have avoided any sweeping reforms, if the loan scenario didn't fit inside that 4x6 box the national 'credit crunch' actually has some bearing, much more so at least than the blazing headlines of bubble-bursting, spontaneously combusting real estate recessions.

“Huh?”

What I mean is, the nay-saying media’s spin on the national devastation in Real Estate values just plain doesn't apply to our local market! Can I get an "Amen?"

In contrast, the mortgage market has been affected more directly because the majority of lenders licensed in our state sell the loans on the national secondary markets. Because of this, our local loans are directly affected by the state of the market generally. There are exceptions to any rule but basically that’s how it works.

So if you're saying to yourself "What about this $1M condo, should I really be buying now?"

I don't know of a single savvy Real Estate investor who would let a 'right-ing' of the mortgage market get in the way of making a right decision, regardless of the price range. Ultimately that’s a question for your Agent -- if you don't have one I am happy to recommend one -- and if the answer is yes, then we sit down to see what programs are available.

Does financing look the same as it has over the past few years? No, it's changed and we're going to structure things a little differently than we have been.

That’s all I really have to say about that.

Speaking directly to interest rates, a loan that meets the ‘conforming limit’ (currently capped at $417,000) is generally at a [slightly] lower interest rate than a loan amount that is non-conforming (over the $417,000 cap). This difference in rate based on the conforming loan limit is an historic trend we have found ourselves following once again.

So to re-cap: The sky is not falling and the Greater Seattle market is not going to pieces.

Have we even considered the net job growth that is projected for the next ten years? The affect of that on growth for our state? The real burning question should be, “Where are all those people going to live?!?” Wouldn’t that be GOOD for Real Estate?

Granite Falls just may become part of Greater Seattle after all…

In all seriousness, those of you that are really in this market I'm sure are more focused on the value of your investment than on the interest rate (which is enough in and of itself for a separate article). If you're concerned about value, that's a question for your Agent; if you're concerned about that interest rate, it's time for us to chat. How about over coffee – I’m buying!

Update on the "Mortgage Crisis"

2007-08-27T10:49:00.000-07:00

As per numerous requests, here is an update on the current status of the mortgage market:

-----NEWS FLASH-----
For the most part, everything is fine!

Some loan programs currently are not available due to the suddenly risk-adverse secondary market (where mortgages are bought and sold), but in almost all cases there are work-arounds that may actually be better programs in the first place!
(end news flash, begin commentary)

Consider for a moment the potential size of the "subprime collapse," which is what brought us down this road in the fist place: most estimates suggest that as much as 20% of current subprime mortgages may end in default.

What does that really translate into? Let's put things into perspective:

The bond market, which includes the secondary markets where mortgages are typically traded, is approximately $27 trillion. It is by far the largest securities marketplace in the world, and is roughly twice the size of the U.S. stock market.

You read that right, it is two times larger than our stock market. That makes the U.S. a 40 trillion dollar economy based on our stock and bond markets.

(By the way, these aren't my numbers -- go here for the Financial Industry Regulatory Authority, Inc. 's Web site.)

By comparison, the total amount of outstanding subprime mortgages is estimated at 1.3 trillion, equal to approximately 5% of the bond market. If 1 out of 5 subprime mortgages defaulted, that would be $260 billion. That is less than 1% of the U.S. markets. The entire subprime market is 3% of the total markets.

In all fairness to the doomsday'ers, we're beyond just the subprime market now, into other areas of the mortgage market and beyond into local retail economies; however, based on the numbers above do we throw in the towel at the mere "possibility" of a collapse or loss equal even to the entire subprime mortgage market?

I've heard it too, all this talk of a crisis and a recession. I have decided not to participate... care to join me?

If you disagree, let me know because I'm happy to sell you a band uniform and the instrument of your choice.

'Cause there's TROUBLE (trouble, trouble) right here in River City...

What? Foreclosure increases and fraud-- THE LENDER'S FAULT?!?!?

2007-08-07T16:16:00.000-07:00

Recently award-winning author and debt collection expert Michelle Dunn posted a blog entry about the current adverse changes in the mortgage market, laying the blame of the current challenges in the mortgage industry squarely on the shoulders of the mortgage lenders!

Ms. Dunn went on to explain in no uncertain terms that the looming spill-over (some of which has already spilled over) into other lending areas is all caused by over-zealous mortgage lenders trying to capitalize on over-eager lenders ready to bite off more house than they could chew.

Well Ms. Dunn, I cannot let your post go unanswered. As a Mortgage Planner I have been in the trenches over the past several years, doing my best to recommend that borrowers consider not what they qualify for, but what they can afford when considering a mortgage payment. But I am only one man and at 5' 10 1/2 " not even a very tall man. There's only so much I can do.

In direct response to your blog post.... I in large-part agree.

There has been huge demand, both from borrowers and from the secondary markets where mortgages are sold. It has been a feeding frenzy! In a(nother) phrase, it's been out of control. As the lender, there should have been a greater deal of control over making sure that individual borrowers really had the ability to repay -- especially borrowers who had demonstrated that it was often a challenge for them to repay even a much smaller loan. Too loose also were guidelines on which stated income and asset loan programs had no check and balance system.

And now the lending industry is reacting once again -- no longer to demand but the lack thereof. Now suddenly no one wants to buy many of the loans that borrowers want to close, regardless of credit score, risk-factor, down payment, etc. There seems to be no rhyme or reason to the lack of interest in certain types of loans... but, we brought this on ourselves I suppose. With record low interest rates and record high appreciation, the industry gave in and we wound up here.

In all fairness, much of the foreclosure issues were brought on by fraudulent loans that did not meet lender guidelines, but were also due to the things you mentioned -- adjustable rates with an initial rate that was discounted and was sure to go up (and now have gone up), and lax qualifying standards that allowed borrowers to take out a home loan with a payment that was much higher than they could ultimately afford.

Now that we're here, I for one am looking forward to a controlled pace of business. Many of the guideline changes are long overdue -- I just hope the markets don't overreact to the point where well-qualified borrowers aren't able to finance the home they deserve and can easily pay for... we're already seeing some of this and as you mentioned I'm sure it's not over yet. But a right-ing of the market is prudent and the changes are welcomed by those of us who really do our best to look out for the interests of our clients.

Michelle Dunn's posting can be found here: http://blog.myspace.com/index.cfm?fuseaction=blog.view&friendID=30359901&blogID=293592890&Mytoken=7B52D6EF-E43D-4806-95FF12A75CA7EB1783616320.
In addition to her MySpace blog, she has two Web sites: http://www.credit-and-collections.com/ & http://www.michelledunn.com/

--James Wirth
http://myspace.com/mtgplanner
http://mymortgageplan.blogspot.com

Will anyone 2nd that mortgage? Anyone? Anyone at all?

2007-08-07T14:08:00.000-07:00

When I was a kid I remember being out in a dinghy in a shallow bay off of Camano Island where I spent several of my 'growing up' years. It was a pretty calm day and the sail tapped lightly on the mast (well, don't know if a dinghy really has a "mast" per se, but the pole that held up the sail).

After a while of staring down into the murky waters the wind started picking up, as did my excitement at the thought of crashing o'er white caps, leaning out of the boat just to keep it from capsizing against the ferocious wind. Well, it was a thought anyway.

I did get a bit of a chance to lean out slightly against the pull of the sail, but the next instant the wind had died, and with no resistance, my shoe slipped (earlier I had imagined I was taking on water and splashed some into the bottom of the boat for dramatic effect), and with a frantic wave of my arms -- right out of the Calvin and Hobbes comic book I had been reading -- over I went splashing into the water. After a dazed/confused/embarrassed moment, I grabbed the lead rope and waded back to shore, pulling behind the dinghy that had evicted me.

So it has been over the past couple of weeks, a strange wind had begun to blow that on Monday, August 6th, 2007, effectively halted nearly all 2nd mortgage activity beyond 80% financing.

Black Monday? Not in my opinion, but a very clear change in direction and for those who were leaning out of the boat riding the once-powerful wind current, many Loan Officers are finding themselves with more than soggy bottoms.

Welcome back to the good ol' days of residential financing. Private Mortgage Insurance, whether they covertly lead a conspiracy to overthrow 2nd mortgage financing or not, is back in lead position when it comes to a down payment of less than 20%.

I of course do not have anything against 2nd mortgage financing, and there are, believe it or not, some options still available. The same goes for 'stated income' loans, nothing against them although they are definitely getting harder to find. Wade cautiously into those waters, however, because me thinks the wind has yet to calm a little more...

--James Wirth

Current state of (Home Finance) affairs

2007-07-26T12:29:00.000-07:00

MARKET UPDATE

The roller coaster ride that is today's real estate and mortgage market continues to loop, turn and spiral in unexpected (or expected, depending on which site of the debate you listen to) ways.

Is "Mortgage" becoming a bad word? IMHO (in my honest opinion, according to my kids), the answer is an affirmed "no."

Mortgages above 80%, however, are changing dramatically and we may very quickly find ourselves without 2nd mortgages as we know them.

For those that are a little newer to the home buying market: 2nd mortgages in their most recent iteration have allowed home buyers to pay a little higher interest rate on a separate mortgage above the traditional 1st mortgage that went up to 80% of the value of the home.

The good ol' days saw the remaining 20% (or even more if we stretch back a little further in time) as the required down payment in order to qualify for home financing. More recently, Private Mortgage Insurance often called MI or PMI (for one company's site, go here, or a general definition, go here) and the aforementioned 2nd mortgages have been available to provide the means to finance a greater percentage of the value of a home, up to- and sometimes over- 100% of its value.

Well times they are a-changing. The news has been replete with the shake-up of the subprime (trickier, unconventional loans or lower credit scores) market and the affect has 'trickled up' into the conventional market affecting how borrowers qualify for loans and the options they have with regard to financing more than 20% -- regardless of income or credit score. The latest change that's happening even as I type, is with regard to 2nd mortgages being, in many cases, pulled completely off the table.

The "why" for this is tricky to summarize because there are a number of things affecting this. The short answer is that the majority of lenders out there sell the loans they make on the secondary market, and the buyers willing to purchase those loans have stopped buying them.

Are 2nd mortgages completely gone? Let me set the stage, and then I'll answer that question:

The term "mortgage" (for the definition, go here) loosely means that it's a loan secured by a house -- there's a 'lien' on the property for a certain amount. The lender is extending financing terms in exchange for a secured interest. When the loan is paid off, the 'lien' is removed and full ownership interest is transferred to the homeowner. In the case of a 2nd mortgage, the lien is in 2nd position, behind the 1st mortgage.

So now we have a firm grasp (or possibly we're just holding on by our finger tips but at least we're holding on) on what a mortgage is and the difference between the 1st mortgage and a 2nd mortgage. The 2nd mortgage is more exposed in the event the homeowners stop paying the loan -- the reason it's even allowed is because of the historical average appreciation level of 6% per year. If the homeowners (who have turned the interest over to the lender so they could finance the home) stop making payments, the lender can auction the home off and even if there were two loans on the property, the home would have hopefully appreciated enough to recoup the amount financed by both lenders.

Enter Stage Right, a slowing market and rising foreclosure- or at least default- rate (go here for a June Seattle Times article about why to distinguish the two). That higher level of risk for the lender in 2nd position, and in this market with many loans over the past few years going to higher-risk scenarios has created a severe lack of interest in buying these 2nd mortgage loans. By higher risk I'm referring to lower credit scores and higher debt-to-income (DTI) ratio borrowers (borrowers who had more of their money going to their monthly payments than was traditionally accepted), with little or no money in the bank to fall back on. And don't even get me started on all of the ill-advised adjustable rate mortgages

The panic has now set-in, founded or not, and we're experiencing a mass exodus from the largest portion of the 2nd mortgage market: loans involving a loan-to-value or LTV (for a def. go here) of more than 80%, regardless of credit score, income level, etc. Bar-none.

How about some good news, yeah? The long and short of it (ok, maybe more the long) is that now is still a great time to buy. So what if loan programs are moving around -- this is a dynamic marketplace and lenders are reacting to the changes in the market in order to remain competitive.

There are still options that will allow you to finance more than 80% of the value of a home. PMI that I mentioned earlier will still do it, and there are still some 2nd mortgage companies that, for the time being, offer higher LTV financing. AND, interest rates are still historically low, sellers are motivated and at least in our market here in the greater Seattle area, current appreciation has cooled slightly giving buyers a chance to catch their breath.

Now that you've had a little rest and are prepared with a better understanding of current conditions courtesy of yours truly...

What are you waiting for?!?!? Give me a call so we can discuss your options and get you pre-approved and out there buying a house.

Operator is standing by. --James

Home Buyer Beware

2007-07-11T18:03:00.000-07:00

Or more accurately, be aware, that there is a tremendous amount of hype in the mortgage and real estate markets right now.

Rising interest rates, bubble-bursting, rent going through the roof.

The real truth is when we lump everyone in every circumstance into something that's tied to a certain geo-or- demographic, it's just not going to be true for every circumstance.

Has the housing market changed? YES. It definitely has changed, and there are some areas of the country who are experiencing that change more than others. Here in the Puget Sound area and probably throughout Washington state, our economy (lead by continued net job growth) is still very healthy and as long as there are additional people moving into the state, we have a good level of buffer from the challenges that face other parts of the country.

Have interest rates gone up? YES, by 1/2 of a percent in some cases, and the loan programs that support those rates have also changed dramatically. Much of this is a result of the recent changes in the subprime mortgage market and increased foreclosure rate, and that's spilled over into other areas as well. But there are still a LOT of loan programs available with historically low rates and now is an incredibly great time to buy.

Consider this:
There has been much talk of dramatically increasing rent in the greater Seattle area (like the article featured recently in the Seattle Times). If this is happening to you, the amount you are paying in rent may be pretty close to a home loan payment. And somebody PLEASE get me started on the benefits of owning vs. renting! Please!

This could be the catalyst to push you into making the leap into home ownership. I'm certainly willing to help you make the transition. And with almost a 10-month supply of homes currently for sale, well, let's just say there are lot to choose from.

If you would like to "buy-up" into a larger/more expensive/etc. home but are concerned about selling your starter or second home for lower value because of the "cooling" market, why not consider buying your next home and keeping the existing home as a rental? Sounds like you could get pretty good rent right about now, and it's a great way to double your equity-building over the long-term.

The first step is the phone call to me so we can get to the bottom line and you can be prepared with enough information to make the best decision for your financial future. Operator is standing by!

I am Quality Service Certified!

2007-06-01T16:04:00.000-07:00

(re-posted from a separate blog)

As part of my ongoing effort to provide a higher level of accountability to my clients, I have taken steps to become Quality Service Certified. Here's the press release for additional information. --James

PRESS RELEASE
Contact: Leslyn Stewart, Director of Services
Quality Service Certification, Inc.
Phone-941-346-5316; email – Leslyn@QualityCertified.org

FOR IMMEDIATE RELEASE
Wirth Earns Quality Service Certification®
For the first time a standard of service and accountability is being offered to consumers in the area of the quality of mortgage service delivery. James Wirth of Landover Mortgage, LLC
has completed the requirements to earn Quality Service Certified® professional recognition. Holding the Quality Service Certification® requires a mortgage professional to follow a well-defined and prescribed process of service, to present that process in writing to every customer and client, and to guarantee its delivery.

According to Larry D. Romito, President, CEO of Quality Service Certification, Inc.,
"James Wirth has joined a growing number of mortgage and real estate professionals nationwide who are committing to the delivery of a defined service process and a higher standard of accountability in service delivery and customer satisfaction. This is a breakthrough in these industries, with the establishment of a measurable standard of care and service."

An integral part of the mortgage professional's ability to maintain Quality Service Certified status rests with service evaluation feedback from every borrower served. Following the closing of each home purchase, an independent research company sends the consumer a Quality Service Assurance Surveyã asking tough questions about the details and overall satisfaction of service provided by the mortgage professional.

"Mortgage professionals are highly motivated to protect their Quality Service Certified status by delivering better service satisfaction, more service value and higher accountability," Romito adds. "The Quality Service Certified total service system offers a predictable, accountable, reliable, and consistent service outcome. The financing of what for most of us is our most valuable asset deserves the serious attention and accountability of a defined, written and communicated service process with measurable standards, and that's exactly what a Quality Service Certified® professional must deliver."

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Quality Service Certification, Inc. of San Juan Capistrano, California is the leading firm in service process delivery and measurable quality control in the mortgage and real estate industries.
( http://www.qualitycertified.org/ )