Real Estate Industry
Time is of the Essence
December 2, 2008 by James K Barath, CMPS · Leave a Comment
For real estate agents and attorneys, the phrase “time is of the essence” highlights an unparalleled importance on part of the process that manages the receipt and response to a purchase agreement.Likewise, mortgage professionals also utilize this phrase for emphasizing the critical process of facilitating the loan process within an allotted lock period.
Most banks and consumers commit to a 30-day rate lock so as to minimize the risk of escalating interest rates during the loan process. This is especially true with the historic volatility in the mortgage-backed securities market.
30 days would be ample time to process a loan if we were strictly speaking business days; however, one must remember that the lenders don’t function on weekends and holidays.
Other things that can delay the loan process are stricter lender guidelines which require a greater reliance on the human decision-making process; underwriting departments with insufficient personnel due to a ravaged industry; increase in mortgage applications due to falling interest rates; and seasonal variances on scheduling of all vested parties (i.e. title company, appraiser, survey company, inspector, builder, etc…).
If one would have locked a loan for a refinance prior to Thanksgiving Day, there would only be 12 actual days to process the loan when you account for weekends, holidays and the 3-day Right of Rescission.
Completing the loan process within the 30-day lock expiration is extremely important as lenders are more decisive on declining borrowers who are not committed.
Be proactive and follow the guidance of your qualified mortgage professional so as to minimize and eliminate the risk of costly re-lock and/or extension fees. Time is of the Essence!
If you have been stranded by your loan originator to survive on your own in a maze of changes, The Barath Group gladly accepts stranded clients and their mortgages. Contact us today.
Real Estate Industry
Happy Thanksgiving for Whom?
November 28, 2008 by James K Barath, CMPS · Leave a Comment
On Thursday, November 20th, Fannie Mae (FNM) and Freddie Mac (FRE) made a landmark announcement in regards to a temporary hiatus on foreclosure sales and evictions for a six week period beginning the day before Thanksgiving until January 9, 2009. At first read, politicians and consumer advocacy groups heralded the announcement as a win for troubled homeowners.
James Lockhart who is the director of the Federal Housing Finance Agency (FHFA) was quoted that the suspension would allow “delinquent borrowers…an opportunity to avoid foreclosure and work out terms.” It should be noted that this temporary suspension is an addition to the normal time-line required during the foreclosure process which is estimated by U.S. Department of Housing and Urban Development to be 3 – 6 months (subject to state foreclosure laws and processes).
For the homeowners on the brink of losing their home to the foreclosure process, the holidays will be a festive occasion removed from the reality of the housing crisis. This should bring a smile to their faces. FHFA, FNM & FRE look as if they are the champions to the financially strapped homeowners when they have been greatly criticized for the lack of proactive response to the housing debacle. The attorneys, law enforcement agencies and the judicial system who facilitate the foreclosure process also receive a reprieve from the gluttony of evicted homeowners during the holiday season.
To all of those mentioned, Happy Thanksgiving & Holiday Season!
For those on the other side of the foreclosure process, it is going to be an extended holiday stretch of dwindling business not of our own will. The professionals that will be negatively impacted from this action will be Realtors, appraisers, home inspectors, title companies, escrow companies, mortgage companies, insurance agents & real estate attorneys. This will be extremely hard on states in which stability of the housing market has been on the back side of foreclosure sales such as California, Florida, Nevada & Arizona.
No matter where you look, foreclosures have become a norm of the real estate landscape. The unilateral moratorium will only delay the inevitable flood of foreclosed homes to hit the market. It has taken the real estate industry more than 18 months to adapt to the new reality of the housing market.
Life is not like a video game. We can not press pause and wait for a better opportunity. In the eyes of this Certified Mortgage Planner, we must continuously move forward…good or bad. That’s Life! Happy Thanksgiving.
Real Estate Industry
The Big Scary ‘D’ Word
November 24, 2008 by James K Barath, CMPS · Leave a Comment
I am not referring to Democrats, Detroit or the Depression. The big scary ‘D’ word of the week has been DEFLATION. What is deflation? According to Dictionary.com Unabridged (v1.1) the word deflation is defined as:
- the act of deflating or the state of being deflated.
- Economics. a fall in the general price level or a contraction of credit and available money.
Everyone loves a good deal. I know that I have personally enjoyed the falling gas prices (< $2.00 per gallon) of late. With automobile prices being slashed, automobiles that I would have not considered in the past are viable options now. Even home prices have made once affluent areas more affordable to the average buyer.
You maybe asking yourself, what’s the problem with falling prices? A reduction in prices is a normal part of business and should be welcomed. The real issue with DEFLATION is the contraction of credit and available money. This goes beyond the headlines of bank lending.
You see, when prices begin to spiral downward the cash flow for a business becomes very restricted. This leads to cost savings measure which generally are linked to employment. With record-levels of unemployment, there is even less money circulating through an American economy that is heavily tied to consumer spending.
For those that survive the layoffs and pink slips, the fear factor (VIX) kicks in and also caps spending. This ultimately creates a vicious cycle of deflating prices that could lead to a depression. Deflation can be debilitating on the macro & micro economies of the world as non-rational decision making becomes the norm & fear drives purchasing decisions.
Be scared…be very scared!
Real Estate Industry
Health Care & Mortgages…Not So Different
November 15, 2008 by James K Barath, CMPS · Leave a Comment
As I was reading the article “Employers Offer Workers Fewer Health Care Plans“ posted in this morning’s NY Times, it occurred to me that the article was very reminiscent of the mortgage industry. If you removed all the health care jargon from the article and replaced with mortgage lingo you would come to the same conclusion.
- Increase in Upfront Deductibles – Increase in Fannie Mae Delivery Fees
- Increase in credit-risked base premiums – Increase in credit-risked base add-ons to mortgage rates
- Increase in restrictions on insurance eligibility – Increase in restrictions for mortgage eligibility
- Reduction of health related issues covered by policies – Reduction of available mortgage programs for non-owner occupied homes
- Reduction in health coverage – Reduction in loan-to-value
- Reduction in offered plans – Reduction in mortgage products
- Socialize health coverage – Nationalize mortgage industry
It should be noted that none of the above would be an issue in a robust economy; unfortunately, this is not that time. This is simply to point out that there are other parts of the economy that are just as problematic as the housing market & mortgages.
Real Estate Industry
The Obama Mortgage Effect
November 13, 2008 by James K Barath, CMPS · Leave a Comment
Whether you like or dislike Barack Obama there has been pre-emptive domino effect with Wall Street banks and government agencies that has the markets running in circles. Everyone knows that the subprime debacle, homeownership, foreclosures and devalued real estate markets have been in the headlines and a primary reason that Democrats did so well in the general election. Now that there is a president-elect the entire world has been carefully listening & dissecting the future agenda of the new administration.
- “Close Bankruptcy Loophole for Mortgage Companies: Obama and Biden will work to eliminate the provision that prevents bankruptcy courts from modifying an individual’s mortgage payments. They believe that the subprime mortgage industry, which has engaged in dangerous and sometimes unscrupulous business practices, should not be shielded by outdated federal law.”
It was Obama’s renewed vigor for this portion of his platform that forced the hands of the Federal Housing Finance Agency, Department of Treasury, FHA, Fannie Mae, Freddie Mac, FDIC, HOPE Now participants and major banking institutions to swiftly change the dynamics of their approaches and programs to assist distressed homeowners. These modifications appear to be beneficial to consumers on the surface in the short-term.
Unfortunately, it will be investor appetite for the underlying securities that create the capital to lend that will dictate the long-term effect of this Obama effect. Judicial loan modifications would create an asset that would carry greater risk than equities because a judge could modify the term, interest rate and principal balance. If investors have no guarantee that the assets they are buying have legal terms, they will either leave the market and/or require greater returns for their cash. This would ultimately cost consumers more and not less.
Real Estate Industry
Streamlined Modifications – Will it Help?
November 11, 2008 by James K Barath, CMPS · Leave a Comment
The Federal Housing Finance Agency (FHFA) announced today that a major program designed to simplify and streamline loan modifications for struggling homeowners to prevent foreclosures had been established. The collaboration between Fannie Mae (FNM), Freddie Mac (FRM), Federal Home Loan Banks, HOPE NOW (and it’s 27 service partners), Department of Treasury, Federal Housing Administration and FHFA would be implemented by December 15th.
Who will be eligible?
- Owner Occupied Primary Residences ONLY
- Three or more missed payments (90 day late)
- Has NOT Filed for Bankruptcy
- Loan is FNM, FRM or Portfolio with Participating Investors
- Certify economic hardship/change in financial circumstances
- DID NOT Purposely Default to Obtain Modification
The primary objective of the new program is to make mortgage payments affordable to those who can qualify. The allowable housing debt ratio for the program is 38%. This can be achieved by the reduction in interest rate, extending the term (30 years to 40 years) and restructuring the principle balance payment structure…or any combination.
It must be noted that the main difference between the new program and the HOPE for Homeownership provision in the Home Economic Recovery Act 2008 is that it is not intended for principal balances to be forgiven. This should be more appealing to lenders; however, less incentive to homeowners that have negative equity.
Therefore, who will really benefit from the streamline modification program?
