Fort Thomas, KY Mortgage Specialist: December 2011

COST OF PAYROLL TAX CUT IS REAL

HOORAY!!!!!!!!!  It appears the payroll tax cut has been extended for two months. The bad news is as I mentioned in an earlier blog the Senate bill had provisions for increased fees at Fannie, Freddie and FHA to "pay for" the tax reduction. The House has agreed to this.

As an example on a FHA loan the monthly MIP is 1.15%. To pay for the tax cut, it would go up 10 basis points to 1.25% a month. On a $100,000 loan this makes the monthly MIP $10.00 more, $120 more annually, and over ten years $1200.

Take this times the numbers of people who will get FHA loans and in ten years that is a lot of bread!  I don't see how Fannie and Freddie won't look similar when it comes down to it. They are not going to pay the government funds they can't recoup, especially when they are broke.

Everyone should give the home buyers and refinance-rs a big old pat on the back for putting the extra dough in their pockets.

PAYROLL TAX CUT

This week we are met with a Senate bill that antes up a two month extension to the payroll tax cut at the expense of homeowners!

The bill continues the reduced payroll taxes to particularly the middle class and extends unemployment benefits to others. It moves on to the House where hopefully it will NOT pass.

If the bill does pass the way it is now, then give the home owner who refinances next year, or buys a home a big hug.

Orchestrated by Kentucky's own Mitch McConnell it grants a mere two month extension to the payroll tax bill, and it is being paid for in large part by extra fees to Fannie Mae and Freddie Mac. In the past perhaps this was not so meaningful to most of us because we did not pay so much attention. Now,  those of us in the housing industry snap to attention at the mention of Fannie and Freddie.

Prior to the mortgage meltdown if one was not doing a special program, or investment property there were no extra Fannie Mae fees. Now since the meltdown, even those with credit scores over 740 can be subject to extra fees, called loan level price adjustments,  with a 620 credit score the fees are outrageous. It is the agencys' way of getting on the road to solvency again.

It does not take a rocket scientist to realize fees charged to Fannie and Freddie will be passed on to home owners when they buy or refinance. What are our Senators thinking? Do they not realize we are in a HOUSING CRISIS in this country? 

There are plenty of well qualified home owners right now who do not get to take advantage of the record low interest rates because the loan level price adjustments make it not feasible. Meantime, another Senator, David Vitter, LA,  is asking FHA to up MI to the highest level allowed.

How does this help housing recovery? How can our Senate be so out of touch with reality?

PAYROLL TAX HOLIDAY

Just when you are beginning to wonder if they will EVER get it in Washington, they come up with something new. The payroll tax "holiday" is under pressure to be extended.

The President and most Democrats and Republicans agree extending the payroll tax holiday would be a good idea. The problem is how to pay for it.

The President believes putting an extra $1000 a  year in the hands of the citizens would be a good thing especially in this economy. Who are we to disagree? Who couldn't  use an extra $1000?

The Dems want to tax the wage earners more who NET more than $1,000,000 a  year. The House, controlled by Republicans has passed a bill that ties the tax holiday to a Keystone Pipeline, Oil, that is, from Canada to Texas.

One idea both parties support is having Fannie and Freddie charge lenders MORE for the loans they buy. Yep, and what do you suppose would be the ultimate end to that folly. Consumers would end up paying for it. Consumers who are refinancing or purchasing a home would get that fee passed on to them through loan level price adjustments.

In the lending world, Fannie and Freddie charge lenders fees for delivery of loans. Lenders in turn charge borrowers fees for delivery. How near sighted of our senators and congressmen to THINK most of us would not recognize this for what it is. A price hike to those borrowing money. A further detriment to housing recovery.

While Washington is looking for some common ground, I believe more and more every day the middle class is finding common ground - we do not need representatives in Washington who are so far removed from our every day struggles.

CINCINNATI ZOO FESTIVAL OF LIGHTS

My family and I went to the Cincinnati Zoo Festival of Lights Monday night. As expected it was a lot of fun. We have a little one who was comfortably warm with layers of clothing and a blanket.

If you are expecting to see animals, there will be minimal sightings. Some of the "houses" are open such as the reptile house and manatee. The polar bear was sleeping, which was disappointing. There was a random sighting of a lynx. One of the handlers had an owl out.  I'm sure at different times there are different experiences in this regard.

One of the best parts of the experience was a puppet show. I would highly recommend this to any visitor.

Some concessions are open with hot drinks and food. As one would expect, eating at the zoo for humans is pretty expensive. We ate before we went, but could not resist the hot toasted cinnamon almonds.

The hours are 5- 9 nightly until January 1, 2012. There are 2 million lights and many great spots for pictures among the lights. Normally we purchase tickets ahead of time, but this time around we did not. I'd highly recommend a pre purchase to avoid the line once you get there. We had coupons for half off, which could not be used in the automated machines, so we had about a twenty minute wait. It was well worth it.

Visit the link below to get information on pre purchasing tickets and how to get coupons. Coupons are not valid every day.

If a visit to the Cincinnati Zoo Festival of Lights is in your plans, it is a great way to spend a few hours with family and just as important, all the visitors were in great Christmas mood!

http://cincinnatizoo.org/events/festival-of-lights/

WHO IS RUNNING THE CFPB?

Since the senate failed to confirm either Elizabeth Warren or Richard Cordray as director of the CFPB (Consumer Finance Protection Agency), then who is running it in the absence of a director? In the interim the acting director is Raj Date. His resume includes Capital One and Deustche Bank.

I wonder when I read that what he thinks now and thought then about his employer's credit card activity?

As this drama goes on and on in Washington, it makes me pause to consider the persons who are employed by the CFPB, the rules they are writing, the money spent to pay them, and how enforceable the rules are they are writing? My understanding is that rules regarding non banking entities are not enforceable without a director.

The CFPB is an agency that writes it own budget, answers to no one and cannot be restrained except in the case of a threat to national financial well being.

A quote from Timothy Geithner:

"The longer we wait to confirm a director, the more we’re leaving millions of Americans who aren’t doing business with banks vulnerable to the kind of predation and abuse that caused so much damage in this crisis,” Geithner said, quoted in the Treasury blog post. “That’s not something we find acceptable.”"

I understand this quote was directed toward the pay day loans.

Why even consumers may not be 100% behind a CFPB: So far every act that has come from Washington or the Feds to "help" the consumer has:

1) Hamstrung the consumers ability to get home financing,

2) Caused devastating financial loss to countless appraisers and mortgage professionals,

3) Driven up costs for the consumer for housing financing,

4) Reduced the sources of financing.

5) Not only  made the mortgage loan documents more difficult to understand, but doubled the physical size of the loan package.

Given this track record, many are "underwhelmed" with the prospect of another government agency having more powers.

The CFPB is to have a budget of a half million dollars a year. The Republicans are fighting accepting a single director vs a board for the agency, and they want an agency like FDIC to have the ability to override the CFPB . I would not prefer a board over a single director, and certainly the CFPB doesn't need to be set up with another agency having a power of veto.

My take on the CFPB is that there is not enough money in the budget to have one group stick its nose into every consumer transaction in this country. There is not enough money to enforce the rules imposed by the CFPB. With all the changes that have been made by the Feds and Washington, it has not stopped appraisal or loan fraud. Every time I speak with a consumer who tells me the interest rate they are quoted and I know they are being lied to I am further convinced the government cannot save us all, nor should they.

Will a director ever be named. Probably, maybe even during recess.

WHAT AM I GOING TO MAKE MYSELF DO TODAY?

I have that conversation with myself some days. Inside I'm screaming, "you can't make me!" but I KNOW that to be successful I must make myself do something I may not really enjoy.

Some things come easily like sending out thank you cards/letters, along with applicable information.

I know blogging is a good thing. I know actually getting the newsletters in the mail is a good thing, heck, even paying the bills is a good thing. We don't enjoy every aspect of a task and we often put off doing them.

I am not a natural born sales person. Especially in this area when I wake up and consider my to do list; there are things that I must make myself do. Money does not motivate me, doing a great job for someone does. Perhaps if I were more motivated by money I would find the "selling" task more enjoyable.

Today, I am going to make myself go to a Christmas party. I am going because there are people there I need to see and in the end, I'll enjoy it. 

HARP II  (HOME AFFORDABLE REFINANCE) CHANGES

Changes were announced last week for HARP II (Home Affordable Refinance). I am including a link to the FannieMae website. It details the changes and has a Q&A section that is worth bookmarking. Many of us will need to refer to it frequently.

How will the HARP II changes affect those seeking to refinance a home mortgage?  

There are several changes, some won't go into effect right away, and as always, it will vary somewhat from lender to lender.

For instance, a big change is lifting the limit on the LTV (loan to value) of the property. The first mortgage was limited to 105% LTV on HARP I. On the downside this change is not widely available until March 2012.

Current servicers will have the ability to do manual underwrites vs using automated underwriting.

The onerous LLPA's (loan level price adjustments) are a little less onerous with this change. The good news is that this goes into effect immediately. For instance the credit adjustment for a score of 620 was 3 POINTS prior to this change. Those with better scores won't see as much improvement, but those with lower scores will see the maximum for this adjustment .750%.

Total LLPA is limited to 2 points now. The LLPA changes will allow more people to refinance. Previously by the time the LLPA's were calculated it simply was too costly to justify a refinance. I will be going back through my refinance opportunities for Northern Kentucky to see if some are now more doable.

If I had a genie lamp and my wish(es), I would have wished for no loan level price adjustments if the loan received automated approval and I would wish any secondary mortgages be automatically subordinated, Period!  For now, we have somewhat of an improvement. Check out the changes and all 100 Q&A's below.

For now, we'll see  how this unfolds, what lenders will acutally do with it, etc. Anyone who has considered refinancing previously and determined it was not worthwhile, just may want to check in again to see how things have changed for them.

https://www.efanniemae.com/sf/mha/mharefi/pdf/refinancefaqs.pdf

What Will The 2012 Northern Kentucky Real Estate Market Look Like?

It is that time of year when Realtors and Mortgage Loan Originators begin planning for the 2012 real estate market. We'll take time to analyze our results for this year, measure that against projections and attempt to come up with a plan for 2012.

For many 2011 is turning out much worse than 2010. The reasons are varied. We've seen many changes in the lending industry this year. It has been difficult for us to conduct business with constant changes. The biggest difference in closed loans is two fold. One is the appraisal problems. The second is increased costs to borrowers due to credit scores. I really do mean credit scores, not a question of whether one pays bills on time, but what score that person has.

When a borrower pays all their bills on time, yet has recent inquiries, or open new lines of credit, has high usage of revolving credit, he will score lower and costs to refinance or purchase a home goes up.  Recently there was a change announced that will reduce the costs somewhat, but perhaps not enough to get these borrowers refinanced at the lowest possible rate.

We mortgage originators began to see failed closings due to appraisal problems increase in 2010. Increasingly this year it is reported that appraisals are wreaking havoc with pending sales.

  At this point in time, I think 2012 will look a lot like 2011 as to volume.

In 2012 we are not going to see a big increase in loan products we can offer. I don't think we will see a substantial improvement in appraisal problems. We will most likely see a continuing shrinkage of products as well as sources for the consumer as more lenders leave the business. We see wholesalers announcing they are pulling out as well as there are fewer independent mortgage brokers in our market.

The biggest issue affecting housing recovery is that unemployment will continue to be a problem. As long as people are not working, they cannot buy homes. Workers who are being laid off, particularly those older workers will be hard pressed to find new work. On top of this the problems in Europe will be a long time getting settled. Add to these two things the foreclosures on the market and it is really hard to expect a vastly improving housing market.

These are the reasons I expect 2012 to not be a better year than 2011. I am hoping it will at least not decline further. Another factor is that consumers are not feeling comfortable enough about jobs to change their housing situation. Many will sit pat until they feel the worst of the storm is over. That will be a while yet.

Overall if 2012 is at least as good as 2011, it will be the best that can be expected. There is still an oversupply of homes on the market in Northern Kentucky. There will always be really good deals on a case by case basis. As always it is important to do your homework before considering a purchase or a refinance.