The Mortgage Consumer Blog

Use FHA to buy a home in Ashland, Oregon

If you are in the market to get Ashland Oregon home loans, then you might want to look into working with FHA. There are some extra benefits and also some drawbacks to such a loan. Briefly, you can borrow up to $422,500, instead of the maximum $417,000 normally allowed by FHA, because Jackson county's average home value allows for loans at this slightly higher loan amount to be approved. Furthermore, you are allowed to put down a mere 3 1/2% of the purchase price, so the down payment is far smaller than other types of loans where 20% is required. Finally, however, you will pay a price for only placing such a small down payment on a home, and that is a 1.75% fee will be added. So, for example if you want to buy a $200,000 home you will only need to come in with $7,000 as a down payment, but $3,500 will be added to the loan amount unless you want to pay this amount along with all of the other closing costs. At least you have the option and you can also ask the seller to help you pay closing costs as part of the negotiated agreement.

Calpers Sues Over Ratings of Mortgage Backed Securities

Finally a large financial entity, Calpers, the California Public Employees Retirement System, worth an estimated $173 billion, has sued those responsible for rating the Toxic Assets that are now decimating our national and global economy. The three primary rating agencies; Moodys, Standard and Poors, and Fitch made “negligent misrepresentations” to the pension fund. The agencies’ ratings “proved to be wildly inaccurate and unreasonably high.” Calpers goes on to say that the methods used to assess these securities were “seriously flawed in conception and incompetently applied”.

 

It has been my contention all along that this group is by far the most culpable in this affair, because they took perfectly lousy financial instruments and slapped AAA ratings on them; the equivalent of United States Bonds. These complicated instruments that only the most sophisticated financial engineers could understand, were pushed onto countries, cities, municipalities and large pension funds as the greatest and safest investment since the United States Savings Bond, yet they were the farthest thing from safe. Most of these instruments have now lost ALL of their intrinsic value.

 

It wasn’t until the three credit agencies set their stamp of approval on these incredibly risky investments that the mortgage backed securities boom on Wall Street exploded. Wall Street entrepenerus sold their new product to anyone looking for a larger annual return.

 

After they were sold, the inflow of money (billions or more likely trillions of dollars) was then funneled back to mortgage lenders like Countrywide and New Century Mortgage, who were busy underwriting these risky, high yielding subprime mortgages. The securities were selling like hot cakes and Wall Street couldn’t get enough mortgages to back them, and so they pushed their lending partners to create more loans no matter how risky. Why….because they already had them sold to China, Calpers, cities in Norway, etc….. and why were they so easy to sell….. because Moodys, and Fitch, and Standard and Poors were slapping AAA ratings on them…. the highest rating possible.

It makes one wonder why Calpers, who has probably some of the most sophisticated financial experts in the industry, could not detect the risk in these securities? The reason was because of their opaqueness. The information about what was inside of them was kept hidden from the buyer under the guise that “the securities in these packages were considered proprietary and unavailable for review”. Hence the AAA rating was the key gauge that the investor used to determine the risk in the product they were buying.

 

Furthermore, Calpers contends in their suit that the rating agencies were not only responsible for inaccurately rating these financial instruments, but that there was an “inherent conflict of interest”, since they were actually paid by the companies issuing the securities. Finally, the insidious behavior of these institutions reached a new ethical low when Calpers revealed in their lawsuit that the agencies themselves actually assisted, for a hefty fee, those who were creating these mortgage backed securities, so that they would produce a product that would receive the prestigious AAA rating.

 

No wonder Calpers decided to sue the rating agencies. My only question is what took them so long? Furthermore, why hasn’t a criminal investigation been initiated? There are people and corporations out there that are undeniably responsible for our financial mess, and in my opinion, should be held accountable. After all, as financial agents they have a fiduciary responsibility to the public, and by issuing AAA ratings on these securities, they not only abandoned their responsibility, but assisted in the meltdown of our global economy.

In this time of re-regulating the banking industry, and trying to create laws that would prevent a similar situation, if we do not address this conflict of interest between Wall Street and the agencies that rate their financial instruments, we are certain to repeat the mistakes that led us to this current financial crisis.

My name is Allen Sayble and I have been a loan officer since 2001. I specialize in hard to find loans for borrowers with less than stellar credit and income situations, but also work with refinances and purchases for borrowers in good standing. I am based out of  Ashland, Oregon and can help you with refinancing home loans in Oregon or with California Home Mortgage Loans. At this time in the mortgage business it is most important for each borrower to work with a professional loan officer. It's also best to work with a broker, like myself, who has access to all of the different lenders so as to not be restricted to one lending institution or bank.

 

What is Wrong With the Current Loan Modification System

As a fellow loan officer I wanted to do loan modifications too, as a part of my business model. If I had clients who were refinancing home loans in Oregon or who were seeking California Home Mortgage Loans and who instead needed a loan modification because they could not qualify for a regular loan, I wanted to be their guy. However, would the mortgage industry let me do that......... NO WAY. Either give up your license and do loan mods or do loans. Well that right there is a huge mistake because who did that leave to do the loan mods? In many instances, a more unscrupulous type of person, the very person who Jerry Brown, the attorney general of California has said he now wants to go after.

Second the problem with the loan modification system is that a loan modification person has to ask the borrower to pay for the modification UP FRONT. The reason they are in the position they are in is because they are financially strapped in the first place and now the loan modifier has to ask for money up front? Why is that?

The reason is that the lender is not willing to put the price of the loan modification onto the loan amount as we do in the mortgage business. Nor is there an escrow company making sure that everyone gets paid properly. Furthermore, if we cannot finish a loan do we get paid. NO. The same should hold true for loan modifications. If the loan modification does not succeed noone has to put up any money. It takes a certain character to ask for money knowing there is a chance that the loan modification might not succeed. Is that the character of a loan officer. I think not. A loan officer wants to help and only get paid if they can perform.

It is these simple adjustments to the loan modification system that would greatly enhance the program. I hope that someone actually thinks to ask a loan officer about how the system could be improved. I think it could only help the loan modifcation crisis that is prevalent throughout our country.

 

HVCC will Ruin the Mortgage Business if it is not Immediately Eliminated

There is no time to lose. The beast is out of the cage and it is eating away at your money. If you are in the marketplace you are most definitely being plagued by the HVCC demon. No longer can a loan officer work with his long time colleague, who he knows will do a good job of putting an accurate value on your home. Instead he is at the mercy of some anonymous group called an AMC whose job it is to rip you off.

Even now, a normal $400 appraisal might cost $575. Furthermore, there is no credibility with these folks. They might go out to your home even if they know that comparable home sales are much lower than the value you are seeking. What do they care, they do not have to worry about their reputation. They are part of the anonymous machine. Programmed to take your money and run no matter what the result.

It does not matter if you are refinancing home loans in Oregon or seeking California home mortgage loans, this problem is nationwide. Appraisers don't like it. They are losing business and taking in less money per appraisal. Loan officers don't like it, they are at the mercy of the lender to pay up front for the appraisal, or never get their loan file looked at. What if an appraisal is ordered and the loan turns out to be impossible to complete? Why should anyone pay for an appraisal before they know if the loan even has a chance of finishing?

What if a loan can be completed one lender and not another, but you don't really know that until the loan goes through the underwriting process. If the lender who you ordered the appraisal from is incapable of qualifying you, and the lender who can qualify you refuses to accept the appraisal, that borrower might have to actually order another appraisal. How do you spell getting ripped off! Two appraisals because your first lender could not finish the loan is outrageous.

Bottom line, HVCC does not benefit the consumer in any way, shape or form. Examples of this disastrous new program are nationwide. Every loan officer already has a story to tell. If you are involved in this industry, sign a petition, call a legislator, let's create a nationwide groundswell of discontent. Such sentiment, if loud enough, will surely rid us of this idiotic new regulation.

Produce the Note

In this time of Mortgage turmoil, when foreclosures are at their highest point in decades, it's ironic that there is one weapon available to the homeowner trying to stave off losing their home. THE PROMISORY NOTE - the instrument that proves that the lender trying to foreclose on your property actually, is the lender that originally lent you the money in the first place.

It does not matter if you are refinancing home loans in Oregon or California home mortgage loans, this is a nationwide event.

In the hustle and bustle and free wheeling atmosphere of mortgage backed securities and credit default swaps, some lenders have actually lost the note on your property. This can be very helpful to you when negotiating with a threatening lender, who is trying to own your property, and kick you out of your home. In court, judges are siding with the homeowner when a NOTE cannot be found.

This story on CNN exlpains this sitaution more accurately than I can here.

http://www.youtube.com/watch?v=YUZdANb6UaY

Please listen and learn.

Interest Rates Rise on the back of a Great Economic Panic

On Friday of last week and Tuesday, Wednesday and Thursday of this week, the bond market went into a level orange panic attack. Suddenly the psychology of the marketplace was sell, sell, sell. Get out while you can, before the crash of the US economy falls down upon us all.

As a result, the bonds started to rise faster and more sever ly than at anytime since the Fall of 2008. The rates for home mortgages climbed from 4.875% to 5.625% for the same type loan; the standard 30 year fixed rate mortgage. Such a rise in rates was destined to create a mortgage climate of  zero refinances, and homes would invariably stay on the market longer, because buyers would no longer be able to afford the purchase price at such higher interest rate levels.

It did not matter if you were refinancing home loans in Oregon or seeking California Home Mortgage Loans this was a national event that not only threatened the home mortgage business, but ultimately the entire US and global economy. Higher interest rates would most certainly have the ominous affect of stopping the economic progress seen during the first half of 2009.

Then came Thursday and the sale of the 7 year bond. Fortunately for all involved the 7 year bond sale went great. Lots of buyers came forward to purchase the debt, thereby allowing the US Government to borrow more billions of dollars, to continue to fund the stimulus package, that has propelled the US economy out from the brink of disaster.

Immediately, the stock market rallied, the yield on the mortgage related 10 year bond dropped, the panic about the economy calmed, and the economic recovery - well it ultimately dodged a near fatal bullet.

So be it for a normal peaceful week in the marketplace.

Refinancing Home Loans in Oregon and California

The other day I was thinking about how so many people are refinancing home loans in Oregon these days because of the lower rates and how that is helping the economy. This is also true for those that are refinancing California Home Mortgage Loans. Every loan that is refinanced, where the borrower is taking advantage of these historically low rates, is putting extra money into the national economy. That $150 per month or whatever the savings is for each home owner is money being spent at the grocery store or the nearby restaurant or on some sports event or concert. It is money being funneled back into the economy.

Primer On The Difference Between an FHA Loan and a Regular "Conventional" Mortgage Loan

It is in every borrower's best interest to understand the difference between a Conventional and an FHA loan, especially if they owe more than 80% of their home's value or are interested in purchasing a home with less than 20% down payment. It does not matter if borrowers are refinancing home loans in Oregon or looking for California home mortgage loans. this knowledge is universal and can be applied anywhere in the nation.

First FHA will allow a borrower who wants to refinance, or purchase a home, the opportunity to borrow up to 96.5% of their home's value. This is also known as LTV or the "loan to value" ratio. If it is a refinance, and they want to borrow 96.5% LTV, then the borrowers are not allowed to take out any cash. The only refinance that will be accepted is one where the borrower benefits with a reduced monthly payment from a lower interest rate.

A borrower can work with a Conventional loan if they only have to borrow 95% or less LTV. It's usually financially better to secure a Conventional loan than an FHA loan because of the 1.75% up front fee that FHA requires. This can be a significant extra fee if the loan amount is three or four hundred thousand dollars. For example, the extra fee on $300,000 is actually $5,250.

So if you have at least a 5% down payment on a purchase, or have at least 5% equity in your home when you are ready to refinance, you might qualify for a Conventional loan and forgo the 1.75% up front fee. If you can afford a 10% down payment, or have 10% in equity when you are ready to refinance, you have an even better chance of securing a Conventional loan. This is because there are several restrictions on Conventional loans between 90% and 95% LTV and many borrowers will not be strong enough financially to qualify. For example, the credit score must be exceptional (over 720 points) to get a loan over 90% LTV.

One advantage to an FHA loan is the cost of their Mortgage Insurance Program. Mortgage Insurance is an extra fee that must be paid alongside the regular monthly Mortgage Payment. Regardless if it is a Conventional or FHA loan, anytime a borrower needs a loan that is over 80%, they will be required to add a Mortgage Insurance Premium to their monthly payment.

FHA's mortgage premium is a standard .50% of the loan amount. In other words it does not matter if you borrow 81% or 94%, if you borrow over 80%, the Mortgage Insurance Premium would be the same at .5%. A .50% Mortgage Insurance premium on $200,000 would be $200,000 x .50%, which equals $1,000. This is an annual premium and so it needs to be divided by 12. Therefore, the Mortgage Insurance Premium on an FHA $200,000 loan would cost an extra $83.33 per month ($1,000 divided by 12 = $83.33).

With a conventional loan there are different percentages associated with different LTV's. For example a borrower who needs a loan that is over 80% but under 85% LTV will have a smaller Mortgage Insurance Premium than someone who needs to borrow 90% or 95%.

The Mortgage Insurance Premium payment under 85% LTV is about the same as the FHA premium, but the Mortgage Insurance Premium (also known as MIP) on a 90% or 95% LTV loan is much higher than FHA. So where as the FHA loan asks for a large upfront fee of 1.75% and a smaller monthly Mortgage Insurance Premium, the Conventional lender does not ask for an upfront fee, but collects a larger Mortgage Insurance Premium during the life of the loan. A good loan officer can crunch the numbers and figure out which type of loan is in your best interest.

I hope that this explanation clarifies the differences between the two loans and shows the advantages and disadvantages of each type.

So What happened to the Mortgage Business? Why did it Fall Apart and How did it Lead to our Economic Meltdown?

It really doesn't matter if you are seeking to refinance home loans in Oregon or you are seeking out California Home Mortgage Loans, you and the entire country have been affected by the shenanigans of a few very rich, very insidious and extremely unethical entrepreneurs in the banking industry.

The old saying goes if it seems like it's too good to be true; it’s probably too good to be true. Although there are plenty of folks who the public can blame, I primarily focus on the lenders who offered such ridiculous loans and the insurers who had the audacity to insure them so the lenders would be covered in case a borrower defaulted.

 

Of these two groups the insurers were by far the more idiotic. It was one thing for a lender to concoct a lending program that would entice first time home buyers to enter the housing market with no or low down payments and inexpensive first year monthly payments. If they could lead such a borrower to bite, well - power to them. Of course there was a horrible insidiousness to these programs, because the lenders knew full well that most of these borrowers would not be able to pay their mortgage payments after the loans started adjusting.

 

Nevertheless, can the lenders be blamed? They were just providing a service to Wall Street who was interested in selling as many securitized bonds as they could get their hands on. Since Wall Street could get these mortgage bonds rated AAA, even though they weren’t, even Wall Street could not pass up such a lucrative opportunity.

 

It's obvious now that the lenders, the executives on Wall Street, and the Bond Rating agencies were living on the edge of legality and ethical behavior, but the insurers, who looked at these products and told the lenders and Wall Street that they would insure these bonds against liability, in order to generate exorbitant profits in insurance premiums, were certainly past the point of ethical behavior and incredibly idiotic in their assumptions.

 

Either the insurers were too stupid to know or too greedy to care, but when the loans started to default and the foreclosures started to rise, the insurers were left holding a large part of the bag. Not only did their idiocy destroy the behemoth insurer AIG, but in the process put the world economy in the precarious place that it is in today.

 

Wall Street asked for the loans so they could create bonds by packaging them together and selling them to rich clients and countries. The Lenders were more than happy to provide the loans for the profits that they would receive. The Bond Holders were happy to rate the loans for the commission on each securitized bond they evaluated, and the Insurers were happy to insure the loans……….. wait a minute for the losses that they were sure to incur? That is where the logic breaks down and that is why I now deem the insurers the most ignorant of the groups involved. In this crowd of misfits, that is really saying something.

The Mortgage Industry is Not What it Used to Be

It does not matter if you are refinancing home loans in Oregon or seeking California Home Mortgage Loans, if you are not a w2 employee you are in for a big surprise when you try to qualify for a loan. Income is all that matters these days and in some ways it's a very good thing. I mean whoever came up with the idea that a person can simply state to the bank what they earn must had one too many margaritas that night.

Furthermore, for the whole industry to just "buy into the idea" is idiotic at best and disingenous at worst. Knowing full well that the huge sums of money they were earning would come back to bite them the great lenders of Wall Street just kept on putting people into homes without even knowing if they could pay for them.