Just this morning, I was reading an article that I came across regarding a couple things that are going on with the Federal Housing Administration (FHA)….and it wasn’t pretty.

Basically what’s going on right now is that there are justifiable rumors that the FHA’s reserves (capital) are hovering around dangerous levels.

Congress requires that the magic number FHA needs to be at is 2%. At the moment, its speculated to be down to about 3% (down from 6.5%  in 2007) and if it falls below that mark, Uncle Sam has to come in and save the day once again. (Is it just me, or is this a never-ending cycle? Has anyone seen AIG’s stock quote recently?)

At the moment, FHA’s defaults (90 days+) are nearing 8% and depleting a good portion of FHA’s reserves. While that number may not seem that HUGE,  you have to see how all this links together.

Several high-cost areas in the US got hit pretty hard the past couple of years. What goes up,  must come down, right?

Well because of those declining markets, FHA decided to increase their loan limits and availability to accommodate the supply/demand in those areas to as much as $729,000. Who has $140,000 for a down payment stashed under their mattress in CA to buy that $700,000 home? Not too many people. Well, who has around $25,000? Get the point?

Hopefully we do not see FHA thaw this much!

And while this WAS needed to help stimulate buyers, you have to think of what happens on the flip-side. When that $5,000 (est) payment can’t be made anymore, and its time to jump ship, and who gets stuck with the bill? FHA.

FHA then has to tap into their reserves to make good on this.

Think about this for a moment:

In Texas, about 4-5 homes have to foreclose to match that ONE home in California. The odds of 4-5 consumers simultaneously defaulting is not that likely, unless they’re Madoff’s advisors.

The point I’m trying to make is that the high-cost areas are affecting FHA a little bit more than other more stable areas. While I am not saying that FHA lending shouldn’t be available here, I think it would be a good idea (especially now) to implement some more stringent measures before approving every Tom, Dick, and Harry that apply. Last thing we ALL want is to wave bye-bye to FHA.

The remainder of the year will be quite interesting. An important incentive is coming to an end ($8k Tax Credit), and as for interest rates, well, let’s just hope they keep steady. Too many good things coming to an end is not a good thing.

Bill’s 2 Cents

I would safely venture to say that FHA credit score requirements will be going up here in the upcoming months- last week 2 lenders raised minimum credit scores to 620 from 640 and another lender raised criteria all the way to 660! We may even see larger down payments later down the line. While FHA loans have been the hot product, I wouldn’t be surprised to see Conventional loans start to SLOWLY creep back in and create a “2nd hand FHA loan” if capital continues to diminish as it has.

Remember what happened with Sub-Prime loans? High Demand, High Supply, POOF- they’re gone! History always repeats itself, let’s just hope we’ve learned our lesson the first time, and we don’t screw up FHA.

So once again I am trying to offer some advice to pass on to the people on the fence- “What is available today as far as programs and rates may not even be available tomorrow and the sooner they can get pre-approved the sooner they can have a roadmap to become a homebuyer.

Bill Black CMP

Branch Manager- Vancouver Branch

Loan Network LLC

Mortgage Banker

Click here for Bills Blog

LinkedIn: Bill Black

Bills Blog

Homepath Homes- No Appraisals, No MI, 90% NOO!

360.326.8891 Office

360.910.3290 Mobile

360.326.1861 Fax

My core business is based upon trust and honesty with it’s clients; we feel that this is the most important component of any business relationship. We constantly measure our business processes to ensure that our clients receive the highest level of service possible.

Wa #520-CL-49546

The $8,000 tax credit cannot be used as down payment-

Out of these 3 buyers one was already pre-approved via an online lender at Quicken Home Loans but after our 20 minute phone consultation he was not told that his tax credit was not available as a down payment! I only hope the application taker “forgot” to ask where the down payment was coming from but this should have been apparent when his assets in the bank equaled less then 1% of his overall purchase price- so no 3.5% which is a red flag proving that we have no seasoned down.

So just to be clear- THE $8,000 TAX CREDIT IS NOT AVAILABLE FOR ANY PORTION OF THE 3.5% FHA REQUIRED DOWN PAYMENT.

What if I buy a duplex?

You can only get 10% of purchase price or $8,000 max. So a $70,000 house you would only earn $7,000 in credit. With a duplex you own half as an owner occupied and the other half as an investment so depending on the price makes all the difference- so a $160,000 duplex- half would be $80,000 and 10% of that is $8,000 so you get maximum credit. A duplex under $160,000 would only get 10% of half of the price.

Now to fully disclose I am not a CPA and certain things could affect this answer but if you ever have questions I refer all my accounting questions to the smartest CPA in the County- John Caughell CPA at 360-573-9800 or johnc@golden-cpas.com he is truly the best.

Timeline to qualify-

So as we go down one of the biggest unknowns to first time homebuyers we ask will the $8,000 be extended another six to 12 months? Could it be possible to have it increased? We have 14 weeks left for the $8,000 tax benefit with the buyers required to be fully closed by Nov. 30^th.^th and not just under contract. I have a feeling that short sale offers will see less activity as a result of this timeline and the fact that SO many of us have been burned by playing the hurry up & wait game while the servicing agents and banks fumble the ball and make up new rules as they go. That means funded and wired by Nov. 30

What is Happening Today-

The two biggest housing trade groups- the 1.2 million-member National Association of Realtors and the National Association of Home Builders- are spending the month mounting unusually intense grass-roots lobbying campaigns to make case for extending the credit, and maybe even expanding it. The effort is targeted first at the districts of members of the house of the two tax writing committees- House Ways and Means and Senate Finance- this is very strategic and could have been beneficial if we had that support for the HVCC issues we are now dealing with instead of a 1 page document that basically stated to suspend the HVCC until further review.

Economic “Ripple Effect”

According to Economists at National Association of Realtors 300,000-350,000 additional houses will be sold as a result of the tax credit. Each home is forecasted to contribute $63,000 in downstream “ripple effect” elsewhere in the economy, they say- sales of furnishings, appliances, lawnmowers, landscaping, renovation materials, plus moving expenses.

For those who know me understand that I always say “you always have to know where the information came from” so on this bullet point I realize the number seems high but having $8,000 of free money and buying a home at the bottom of the market seems to really make people feel better about spending. Accurate or not I feel it is a benefit that may be one of the only Obama plans that I have witnessed that worked without a flaw.

Path Forward

Bills are already pending in both houses to extend the credit for another year. Some have fantasized about the bill that Chris Dodd, D-Conn., and Chairman of the Senate Banking Committee is co-sponsoring with Georgia Republican Johnny Isakson that would raise the tax credit to $15,000! Meanwhile, both the Realtors and builders are pushing not only for extension but for the credit to cover ALL home purchases in 2010. I forecast some sort of an extension but I would caution spreading false hope and if we can capture the money for clients today that is soon-certain and positive they receive the $8,000 credit.

The MARKET

Pretty Good Day in the Market

Treasuries and mortgages rallied today; see-saw back and forth after the hammering treasuries and mortgages took on last Friday on the jump in existing home sales in July and the strong rally in equities. Today the stock market opened better following the 156 point jump in the DJIA Friday, but by mid-afternoon the equity markets rolled over and ended unchanged on the day.

Tomorrow Treasury will auction $49B of 2 yr notes, beginning three days of new issuances raising a total of $109B. Markets appear to be thinking demand for the new issuances will be strong as they have been for the past two months. Demand for US Treasury debt remains firm from indirect bidders (mainly foreign central banks). The 2 yr note usually does see good demand as it fits well with banks’ assets and liabilities. Banks are hoarding cash these days while telling the media there is little loan demand. Banks have the straight faced ability to paint the picture anyway they like. There is scant loan demand because banks will only lend to those borrowers that can get along without it.

We are currently 24 hours in UW

12 hours in Docs

12 hours in funding….. So let’s go have some fund!

Bill Black CMP

Branch Manager- Vancouver Branch

Loan Network LLC

Mortgage Banker

Click here for Bills Blog

LinkedIn: Bill Black

Bills Blog

Homepath Homes- No Appraisals, No MI, 90% NOO!

360.326.8891 Office

360.910.3290 Mobile

360.326.1861 Fax

My core business is based upon trust and honesty with it’s clients; we feel that this is the most important component of any business relationship. We constantly measure our business processes to ensure that our clients receive the highest level of service possible.

Wa #520-CL-49546

Market- S&P was beat up with the DOW closing down 186 points and mortgage rates rates improved slightly, we are floating over night on all locks. This is a short term deal I believe and will keep my eyes for a quick switch and rates in be steadily increasing.

Question of the day/week/month/year!

Will rates go up/down and if so when…?

Will Homeowners and Buyers Lose $45,000?

Federal Reserve officials met last week and issued a statement saying that their program to purchase $1.25 trillion of mortgage-backed securities will be winding down by the end of year. If you have been an avid reader of my blog we all know that the Fed is the single largest buyer of mortgage bonds in the market today. The way mortgage companies set their interest rates is by figuring out the price that Fannie Mae and Freddie Mac are willing to pay them for the mortgage.  Fannie and Freddie set their price by figuring out what investors on the bond market are willing to pay them for the Mortgage-Backed Securities (mortgage bonds) that they issue. When the Fed stops buying mortgage-backed securities, the demand for these bonds will be much less, and mortgage rates will go higher.

Since the Fed began purchasing mortgage bonds and intervening in the mortgage markets, interest rates on fixed rate mortgages have dropped a full percentage point below where they would be otherwise. Take out the Fed’s subsidy, and mortgage rates are likely to drift back up by at least one percent most analyst believe. A one percentage point increase in mortgage rates – from 5.25% to 6.25% – would cost an extra $127 per month and $45,730 in interest over the life of a $200,000 30 year mortgage. This is exactly what could happen in 2010 once the Fed stops buying mortgage bonds.

Fed officials have been signaling for some time that their unprecedented interventions in the mortgage markets may come to an end or even be reversed once the economy begins to improve. While I don’t believe the Fed will start selling mortgage bonds right away, I do believe that rates will start drifting higher in 2010 once the Fed stops purchasing mortgage bonds.  After all, it’s not every day that the Fed spends a whopping $1.25 trillion to subsidize mortgage rates. If you don’t remember what 1 Trillion dollars is be sure to check out What a Trillion is all about?

If you take out this enormous subsidy, and the average person with a $200,000 mortgage who refinances or buys a house stands to lose $45,000 over the life of their home loan and not to mention first time homebuyers tax credit of $8,000 as well.

That is why homeowners and buyers should really talk to their Certified Mortgage Planner and take advantage of this window of opportunity to refinance or buy a home while rates are artificially low.

With my innovative software we can educate our borrowers on the benefits of each situation as well as identify utilizing the “buydown” strategy to pay less interest over time and ultimately own the home free and clear sooner.

If you or someone you know are interested in our free “TOTAL COST ANALYSIS” report its only minutes away.

Bill Black CMP

Branch Manager- Vancouver Branch

Loan Network LLC

Mortgage Banker

360.326.8891 Office

360.910.3290 Mobile

360.326.1861 Fax

My core business is based upon trust and honesty with it’s clients; we feel that this is the most important component of any business relationship. We constantly measure our business processes to ensure that our clients receive the highest level of service possible.

Wa #520-CL-49546

I encourage everyone to go look at the McDreamy Mansions- made me realize if I work hard enough what I will be able to afford someday…(Well I always was a dreamer)

My $40,000 under appraised issue-

I would like to thank everyone that responded to my question about a client paying $40,000 over appraised value. I was impressed with the input and really learned a lot on this subject and when you read my findings below it is somewhat an opinion or an “ahha moment” for me that I thought I would share. This was a learning experience for me..

I jumped to conclusions that this Realtor was being lazy, taking short cuts and not looking after clients best interest. I even called her and gave my “professional” opinion that this was NOT A GOOD IDEA but in all reality this was based off limited facts.

I have become jaded on what “free will” and pricing opinion means as well as looking at things on a worst case scenario (foreclosure) as the banks now do.

I spent 71 minutes talking to this client today. He was 61 years old and looked at over 100 homes online via county records, Zillow etc. and was moving here from Nevada. His home sold and was one of those UGLY transactions for the buyers….he did not want to experience this on his transaction. He did his research including aerial’s identifying vicinity of the VA hospital as well as airport. When he walked into this one it felt right- he loved every aspect of it and felt 218K was a good price. Being behind my desk I never witnessed the behavior or experience that he felt when he walked the path of this home.

See this buyer had a need- to buy a home with no stress. He had 100K and wanted to spend $200K or so. He was also a Disabled vet that fought the front lines in Vietnam for our country almost 40 years ago. He suffered post traumatic syndrome and just wanted a home he felt at peace with. Due to these bureaucratic HVCC laws that government (aka bank that lobby and control gov’y) put into place the appraiser is now forced to compare a non-hardship, secured, energetic, positive felt, life filled home in perfect “proud of ownership quality” to a short sale or bank owned shack-a lifeless home stressed by the lack of maintenance and care as these may be compared to cancer- a slow death which comes from months of knowing it will never produce happiness. These hardship homes which once offered the American Dream only ended as the American Nightmare for most homeowners. Rates adjusted, values dropped, jobs lost and relationships shattered in the stress. Upkeep was no longer optional as the paralyzed homeowner felt helpless and could only walk away leaving a lifeless structure of neglect. A miraculous recovery is possible- but this calm elderly man did not feel like resurrecting life back into an ill home….

Because of this… market value is what the seller and buyer agree to pay.

To end my conversation with him I thanked him for enlightening me on his situation and to bring a clear picture of the difference between buying a car with 400,000 miles and a car with 20,000 miles that was hand washed and kept in the garage. This has value and must be argued on these appraisals.

Also to dig me out of my initial closed minded opinion I told him his $208,000 purchase just helped stabilize the neighborhood and now with a documented $208,000 purchase it increased the neighbor’s by10-20 percent and maybe now someone can sell or refinance out of a higher rate. He felt good about this and said “see I knew this was right” He invited me to his house warming party and was very grateful for my education and our conversation…but I was the one that was schooled.

Bill- Always learning.

Hello and GOOD Friday to you,

The good news is we have some ROCKIN turn times- the bad news is rates are starting to sneak up on us as anticipated. I have never seen so much volatility. Rates under 6% are still good but it’s hard for me when I just had rates at 5.25 less then a week ago. The market will swing back and forth but now but I think what REALLY needs to be identified is the new TILA regulations and HVCC appraisal issues that will be killing deals as well as slowing down turn times and charging buyers for multiple appraisals if they are dealing with web based brokers or lenders that do not have bank lines.

I have said this before and I will say it again- a Realtor and a lender HAVE to be a team in this challenging market. My phone rings 2-3 times a day to try to “help” a fallout due to a poor appraisal or a poor underwriting decision. Most of these items should have been identified in the very beginning of the transaction and could have had a solution. A majority of these are when the buyer is using web based company such as Quicken Loans or Dietech. They have no idea of the issues and if a client was to only google the lender they would find numerous “ripoff.com” findings about these.

So before I get on my soap box- let’s not forget it’s FIRST FRIDAY and the downtown Vancouver area is booming this evening. There is something from 1220 Main Street restaurant all the way down to 1^st and main at the West Coast Bank that is open house for appetizers and wine. The galleries are full of energy and some very interesting art and to end the evening at the glass shop watching them make hand blown glass objects is a perfect way for an affordable, entertaining Friday night! My 12 year old daughter even has fun with me on this walk about!

Current Turn Times as follows:

Underwriting: 12 Hours

Conditions: 12 Hours

Docs: 24 Hours

Funding Review: 48 Hours

*UW Turn Times start when file submission is complete.

*Doc Turn Times start when file has cleared doc prep and is ready to draw.

Our Current Rates for 8/7/2009 are as follows:

15 year fixed – 25 day lock – 4.875%

30 year fixed – 25 day lock – 5.75% at

*Based on o/o, r/t refi w/80% ltv

The Labor Department reported this morning that only 247,000 jobs were lost last month and that the U.S. unemployment rate fell to 9.4%. It is always interesting to see the “revised” numbers 6 months later that are more accurate but hey- good news is good news. Both of these readings were stronger than expected. Analysts had forecasted a job loss of 328,000 and an increase on the unemployment rate of 0.1% to bring it to 9.6%. In addition, average hourly earnings also exceeded forecasts with a 0.2% increase.

Today’s news was definitely negative for bonds and mortgage rates. It indicates that the employment sector is not as bad as many had thought. While it was still softening last month, it was at a much slower pace than expected. That helps support the theory that the recession may be nearing an end. In fact, some analysts are already stating they think it has ended. This is bad for bonds because economic growth often creates an environment with inflation concerns that make bonds less attractive to investors. The result usually ends up being higher mortgage rates as investors shift funds into a growing stock market.

Next week is another busy one for the markets and mortgage rates. There are several very important economic releases scheduled to be posted in addition to another FOMC meeting that can heavily influence bond trading and mortgage rates. None of them is due out Monday, but there is relevant data or events scheduled for every other day of the week. Look for more details on next week’s events in Sunday’s weekly preview.

If I were considering financing/refinancing a home, I would….
Lock if my closing were taking place within 7 days…
Lock if my closing were taking place between 8 and 20 days…
Lock if my closing were taking place between 21 and 60 days…
Lock if my closing were taking place over 60 days from now…
This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Be sure to say hi if you are downtown Vancouver this evening.

Bill Black CMP

Branch Manager- Vancouver Branch

Loan Network LLC

Mortgage Banker

Click here for Bills Blog

360.326.8891 Office

360.910.3290 Mobile

360.326.1861 Fax

My core business is based upon trust and honesty with it’s clients; we feel that this is the most important component of any business relationship. We constantly measure our business processes to ensure that our clients receive the highest level of service possible.

Wa #520-CL-49546