MARKET UPDATE

MAY 2011

HOW LOW CAN THEY GO


Home prices (national average) fell another 3.3% in February. This was the eight month in a row that home prices have dropped. (cnnfn.com)


Home prices in Maricopa County (Arizona) fell slightly, but home sales are up nearly eight percent in the first quarter of 2011. 16,535 homes sold in the first quarter of 2011 in Maricopa County. The median home price for existing home sales is $125,175. (azcentral.com)


INVEST IN PHOENIX


So it is a bit self-serving; but when talking to people that do not live in the Phoenix Metropolitan market, they are astounded when I discus the types and prices of homes we are selling here. You would be amazed at what you can buy for under $100K; for that matter, under $50K.


There are over 2,100 properties (excluding manufactured) actively listed on the MLS in the Phoenix Metropolitan market (Maricopa & Pinal Counties) under $50,000. There are over 6,000 properties listed between $50,001 and $100,000. There are another 4,600 listed between $100,001 and $150,000.


People are purchasing these homes as primary residences, second homes, and investment properties. Phoenix is a great market, if you are in the market for a home. Low prices, low rates, and good loan products. And by the way, it will be in the high 80s all week.


Please contact me if you are interested in some of the great values currently being offered in the Phoenix Metropolitan market.


NEW HOME SALES BEGIN TO SHOW STRENGTH


Although new home sales remain near all-time lows, February new home sales were up 11%. (cnnfn.com) That number is going the right direction, but new home sales were down nearly 28% from February of last year.


QUALIFED RESIDENTIAL MORTGAGE (QRM) – CONGRESS IS AT IT AGAIN


Congress is in the process of improving the quality and lowering the risk of mortgage lending. “To discourage excessive risk taking, Congress required securitizers to retain five percent of the credit risk on loans packaged and sold as mortgage securities. However, because across-the-board risk retention would impose significant costs on responsible, credit worthy borrowers, legislators also created an exemption for “Qualified Residential Mortgages,” defined to include mortgages with product features and sound underwriting standards that have been proven to reduce default.” – Proposed QRM Harms Creditworthy Borrowers and Housing Recovery


Borrowers that could not qualify for a QRM would fall into the high cost, and potentially higher risk, non QRM market; regardless of credit worthiness.


Consumer Impact


Increased Down Payment Requirement

20% down payment would be required on purchase transactions.


Research from the Center for Responsible Lending estimated that it would take the average family 14 years to save up 20% for a down payment on a home.


Increased Equity Requirement

20% equity requirement on refinance transactions.
25% equity requirement on cash-out refinance transactions
Increased Interest Rates

Estimates have shown up to a 3% rise in interest rates. – Report by JP Morgan Securities Inc. (Securitization Outlook 12/11/09)

Less Market Competition

· Most mortgage lenders do not have the capital to maintain the 5% proposed risk retention. Reducing the number of lenders will drive up costs and rates while reducing lending turn times and program choices.


Under the current proposal, loans insured or guaranteed by Fannie Mae, Freddie Mac, FHA, VA, and USDA would be “exempt.” What loans would have the “exempt” status is still an ongoing debate. If the Republican Party is successful with “unwinding” Fannie and Freddie, a large segment of the population would be eliminated from being able to purchase a home with less than 20% down at low interest rates, or force homebuyers to government loans (i.e. FHA and VA). The QRM may prove to be counterproductive for the Republicans that are pushing for the government to diminish its involvement in mortgage industry.


WALL STREET SPENDS MILLIONS TO STOP DODD-FRANK


“Wall Street and the financial industry spent more to lobby Washington in the first quarter of this year than a year ago when Congress was writing sweeping financial-overhaul legislation, according to a Wall Street Journal review of lobbying reports released Thursday. The disclosures show that 26 of the financial firms and trade associations that spent the most in 2010 collectively spent $27 million in the three months ending March 31, a 2.7% increase from the $26.3 million spent in the comparable period in 2010. Wells Fargo & Co. shelled out more on lobbying than any other financial firm, surpassing J.P. Morgan Chase, which had the top spot in 2010. Wells Fargo's lobbying expenditures nearly doubled to $1.9 million during the first quarter from $1 million in the same period a year ago.” (housingwire.com)

BROUGHT TO YOU BY:

Chris Tiller
via: The Brett Tanner Team
Keller Williams
Phone: 602-561-1346
Fax:602-595-5450
Email: tiller34@hotmail.com

APRIL 2011 - MARKET UPDATE

REPEALING FINANCIAL REFORM ON THE FASTTRACK

On April 1st, Republicans introduced a bill, “The Financial Takeover Repeal Act of 2011,” to repeal the Dodd-Frank Act.

The Dodd-Frank Act’s goal was to: “To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘‘too big to fail’’, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes,” (Dodd-Frank Act) was signed into law on July 21, 2010 by President Obama.

Some estimate that the initial cost to the federal government to implement the Dodd-Frank Act at almost $1 billion.

Former Federal Reserve Bank Chairman Alan Greenspan says extensive new rules contemplated by Dodd-Frank “would be impossible to implement, distortive to markets and a possible threat to US living standards.” Mr. Greenspan writes that the financial reforms will create “the largest regulatory-induced distortion in the United States since the imposition of wage and price controls in 1971.” The Financial Crisis Inquiry Commission report stated that “more than 30 years of deregulation and reliance on self-regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan...stripped away key safeguards, which could have helped avoid catastrophe.” (suite101.com)

THE FEDERAL RESERVE BOARD SUCEEDS IN LIMITING CONSUMER CHOICE

The Federal Reserve Board’s final Rule of loan originator compensation finally goes into effect on April 6th. The two mortgage broker associations, NAIHP and NAMB sued the Fed last month over the Rule, which will drive up consumer costs and limit choice. The court ruled in favor of the Fed, which was appealed. A stay was issued on March 31st, just hours before the Rule was to go into effect. On Tuesday, April 5th, the Circuit Court denied the appeal and lifted the stay.

This was a blow to the industry, and to the housing market. NAMB and NAIHP continue their battle to protect the mortgage industry, and the consumer. The CFPB takes away the Federal Reserve Board’s authority on July 21st. The CFPB will have even greater authority, at the hands of just one person, Elizabeth Warren. It is critical that Elizabeth Warren and the CFPB do not make the same mistakes that the Federal Reserve Board has.

Go to www.namb.org or www.naihp.org to support consumer choice and housing.

GREAT RENTAL MARKET FOR LANDLORDS

Rental vacancy rates have dropped below the 10% level where they have been for years. With lower vacancy rates and greater demand, rents are going up. Rent hikes on average have increased less than 1% per year for almost 10 years. Peggy Alford, president of Rent.com, anticipates an increase in rents at a rate of 7% in each of the next couple of years. (cnnfn.com)

Financing guidelines for those with a foreclosure are tightening. Homeowners that have been forced from their homes due to a foreclosure or short sale, may not be able to obtain new financing for as long as 7 years. There will be a lot of renters for the foreseeable future.

FORECLOSURES RULE THE HOUSING MARKET

“Foreclosure sales continued to account for more than 20% of all U.S. home sales in the fourth quarter and fiscal year 2010, foreclosure data firm RealtyTrac said Thursday. The Irvine, Calif.-based data firm said foreclosure sales made up 26% of all home sales last year, down from 29% in 2009, but still higher than 2008 levels when foreclosures accounted for roughly 23% of all home sales. Buyers who acquired foreclosures in 2010 also benefited from a steep discount, with foreclosed homes selling 28% below the average price of non-distressed properties.” (housingwire.com)

DOUBLE DIP

“January home prices fell for the sixth month in a row, edging closer to a double dip. The S&P/Case-Shiller home price index covering 20 major markets fell 3.1% year-over-year, hovering near the market's bottom set in April 2009. The dismal report followed other negative housing market indicators recently. Sales of existing homes were off nearly 10% in February and new homes sales were at a record low.” (cnnfn.com)

UNWINDING THE WHOLE SYSTEM – THE END OF THE 30 YEAR MORTGAGE

“This entire housing crisis is because of Fannie Mae and Freddie Mac.” A quote from an Arizona Representative (name omitted to protect the guilty). “We are going to unwind Fannie and Freddie and everything else these Dems have done.” On March 29th, Republicans introduced eight bills to do just that.

Proposed legislation is as follows:

Equity in Government Compensation Act: Suspends the current compensation packages for all employees at Fannie Mae and Freddie Mac, and establishes a compensation system that is consistent with other senior executives in the federal government. "The failures of Fannie Mae and Freddie Mac helped precipitate the deepest economic decline since World War II," the bill reads.

GSE Mission Improvement Act: Aims to end all affordable housing goals set by Fannie Mae and Freddie Mac. This bill would essentially repeal The Federal Housing Enterprises Financial Safety and Soundness Act of 1992.

Fannie Mae and Freddie Mac Accountability and Transparency for Taxpayers Act: Further regulates Fannie and Freddie by requiring the GSE Inspector General to report to Congress on a regular basis.

GSE Subsidy Elimination Act: The guarantee fee or g-fee would steadily increase in order to eliminate Fannie and Freddie's government subsidies.

GSE Portfolio Risk Reduction Act, to cap the current portfolios of Fannie Mae and Freddie Mac and increase their annual attrition rate.

GSE Risk and Activities Limitation Act to prohibit Fannie Mae and Freddie Mac from engaging in any new activities or businesses.

GSE Debt Issuance Approval Act: Requires formal approval by the Treasury for any new debt issuance by the GSEs.

GSE Credit Risk Equitable Treatment Act of 2011: Prohibits the exemption of GSE securities from the risk-retention requirements of Dodd-Frank. (housingwire.com)

A Brief History:

The Federal National Mortgage Association (Fannie Mae) was created in 1938 to increase the supply of capital from the federal government to local banks to increase affordable home ownership. The Federal Home Loan Mortgage Corporation (Freddie Mac) was establishing by Congress in 1970 to compete with Fannie Mae.

Fannie Mae and Freddie Mac goal is to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment... and the continuous availability of mortgage credit under a wide range of economic conditions." (HUD 2002 Annual Housing Activities Report)

President George H.W. Bush signed the Housing and Community Development Act of 1992 which forced Fannie Mae and Freddie Mac to meet affordable housing goals established by HUD. In 1999, the Clinton Administration applied additional pressure on Fannie Mae and Freddie Mac to lower underwriting guidelines to better serve low and moderate income borrowers. In 2000, HUD instituted anti-predatory lending laws that restricted high risk loans. In 2004, those rules were dropped. In the mid-2000s, due to sweeping deregulation of the financial system, Wall Street aggressively entered the mortgage backed securities market and began to take market share away from Fannie and Freddie; with exotic mortgage products and low underwriting standards. Shareholder pressure forced Fannie and Freddie to lower underwriting guidelines to compete with the large investment banks on Wall Street. On September 7th, 2008, due to the housing crisis, Fannie and Freddie were put under conservatorship of the Federal Housing Finance Agency.

Unwinding Fannie and Freddie would put entire mortgage industry in the hands of investment banks and Wall Street. Without government guarantees, Wall Street would be unlikely to offer long term fixed mortgage products, i.e. 30 year fixed mortgages. Fannie Mae and Freddie Mac are the sole reason the United States is one of the few countries in the world with long term fixed mortgage products. Adjustable rate mortgages will become the primary financing tool for housing.

Fannie and Freddie are part of the problem. Wall Street and deregulation was the cause of the problem. Unwinding Fannie and Freddie will drive up borrowers costs, interest rates, and one’s ability to purchase a home; further stalling the housing recovery. Wall Street did such a bang up job with home loans in the recent past, why don’t we just give them the entire market, with no government involvement? Unwinding Fannie and Freddie could unwind the entire housing market.

MARKET UPDATE brought to you by:

CHRIS TILLER

Cell: 602-561-1346
Email: tiller34@hotmail.com

MARKET UPDATE- March 2011

SIGNS OF HOPE FOR HOME SALES IN 2011

“National home sales increased in January, breaking a six-month streak of home sales declines, with some markets experiencing double-digit increases, RE/MAX said Friday in its latest National Housing Report. Last month, home sales were 0.7% higher when compared to January of 2010. The move to positive territory hinged on the recording of double-digit sales increases in key markets, including Miami, Tampa, Richmond, New Orleans and Phoenix. All of these markets saw home sales rise by at least 16%.” – housingwire.com

WHY PROTECTING COMPENSATION PROTECTS CONSUMER CHOICE

Should a gallon of milk or a gallon of gas cost the same for everyone in every market? Do you think the price of goods should be fixed for a specific period of time, regardless of cost, service, and demand? Should the profits generated for selling a product have a federally regulated minimum or maximum dollar amount or percentage, or should the free markets decide? Price fixing drives consumer costs up and limits choice. The cost of money and/or debt works the same way as the cost of most consumer goods. In just over a month, the Federal Reserve Board is determined to limit consumer choice and drive homeowner / homebuyer costs up; unless we can stop them.

A Brief History:

At the height of the housing boom, mortgage brokers accounted for approximately 65% of mortgage origination in the United States. Mortgage brokers are an inexpensive way for Wall Street to delivery mortgage products to the market. Mortgage brokers have unlimited options because they are not tied to just one investor, but have access to hundreds. Mortgage brokers are very competitive. The great housing crash changed the perception of the mortgage broker.

Initially mortgage brokers were blamed for the collapse of the housing market and the global financial meltdown. The initial blame was flawed. Mortgage brokers did not create a single high risk mortgage; Wall Street did. Mortgage brokers delivered products created by Wall Street to the consumer that demanded those products. Mortgage brokers are not free of blame. There were many brokers and loan officers that coerced (or worse) homeowners into mortgage products they had no business purchasing; and most of those brokers and loan officers are no longer in business. Mortgage brokers were not too big to fail. Wall Street was. Mortgage brokers that broke the law went to jail; Wall Street executives did not (name one). Mortgage brokers’ market share fell to approximately 15%, as the “Big Banks” made a killing by overcharging the consumer due to the public’s misperception and misdirection. To add insult to injury, Wall Street and the “Big Banks” benefited from the Government’s implementation of new rules and regulations created to protect the consumer.

Government Regulation (2009-2011):

The Federal Government has made a staggering amount of errors in an attempt to regulate risk out of the market and prevent another financial crisis. All mortgage regulation to date has been to the detriment of the consumer.

Home Valuation Code of Conduct (HVCC): Appraisal fees skyrocketed. “Big Banks” cashed in on the increased fees charged by the Appraisal Management Companies (which in most cases are owned by the banks). The industry is now forced to use appraisal management companies due to Federal law.

Mortgage Disclosure Improvement Act (MDIA): Increase closing timelines. Delayed countless closings increasing consumer costs.

RESPA Reform: Sought to add transparency but turned a one page Good Faith Estimate that clearly outlined consumer costs into a four page disclosure that removed important information like, total monthly payment and cash to close. Mortgage brokers have to disclose all compensation. “Big Banks” do not.

S.A.F.E. Act: Forced all loan officers to be licensed (a good thing). Except for one thing; the “Big Banks” did not have to comply. Forcing the “Big Banks” to comply would put and undue burden on large financial institutions and cost too much money.

Regulation was needed. The tragic implementation of mortgage regulation to date has only hurt the consumer and small businesses; and benefited those (i.e. Wall Street, Big Banks) that created the problem to begin with.

The FED’s Final Rule on Loan Officer Compensation:

The Federal Reserve Board’s Final Rule on loan officer compensation is the latest attack on small business and the consumer. The Final Rule which goes into effect on April 1st, 2011 is nothing more than price fixing and an assault on your local mortgage company.

The Rule will mandate that loan officer compensation is fixed for all loans and for all borrowers, for set period of time (i.e. 90 days); at which time the compensation can be changed for the next set period of time.
Compensation can come from the borrower or the lender; not both.
Compensation cannot change based on loan terms or product.
Loan officers will no longer be able to use their compensation to credit the borrowers closing costs to help close a loan (a common practice).
The Rule goes against HUD’s 2010 RESPA reform on loan officer compensation.

And yes, once again, “creditors” (i.e. Big Banks) are exempt.

With just over a month to comply with the Fed Rule, an entire industry is at a standstill. Violations on the Fed Rule have dire legal consequences and because the Fed lacks any clarity as to how to comply with the Rule, the industry is frozen; unable to implement any policies, procedures or compensation plans. Mortgage companies currently do not know how to legally pay their employees or charge fees for their services.

Currently the SBA Office of Advocacy is challenging the Fed Rule sighting that the lack of clarity of the Rule and the burden it places on small business may prove that the Fed is operating outside of the law. The House Oversight Committee is also reviewing the Rule and its impact on small business and the consumer. The National Association of Independent Housing Professionals (www.naihp.org) and the National Association of Mortgage Brokers (www.namb.org) are both preparing lawsuits against the Fed.

The fight for loan officer compensation is a fight for consumer choice. The Fed Rule should be deemed illegal as it is anti-consumer, anti-business, and do I dare to say, anti-American. Without consumer choice, costs will go up.

Mortgage brokers will always have a competitive advantage over large banking institutions. We will always offer more mortgage products at a lower rate with greater customer service. Our loan officers are educated and licensed. We thank you for supporting your local mortgage companies. Your continued support allows us to provide you options, service, and amazing pricing. We will continue to fight for your ability to choose.

Coming soon: Regulation of Real Estate Agent commissions.

HUD INCREASES MORTGAGE INSURANCE ON FHA MORTGAGES… AGAIN

HUD announced this month that all FHA 30 year fixed mortgages with a FHA case number assigned on or after April 18, 2011 will have increased Annual Mortgage Insurance Premiums.

This is the second time in less than twelve months HUD has raised the Annual Mortgage Insurance Premiums in an attempt to increase revenue.

HOME SALES SLIDE IN 2010

“U.S. home sales totaled 3.6 million in 2010, a 12% drop from the year before that pulled prices down with it, according to data provider CoreLogic. In November, the latest month of data available from CoreLogic, home prices dropped 5.1% for the fourth straight month of decline. "The downturn in home prices is clearly being driven by weak sales, an excess supply of unsold homes and larger impact from distressed sales," CoreLogic said in its report. The number of homes sold in 2010 was at its lowest point since the housing market collapsed. Sales were more than 50% below the level seen before the crisis in 2005 and 33% below the level measured in 2000.” – housingwire.com

HOME VALUES GET WACKED IN 2010

“National home prices fell 4.1% during the last three months of 2010, compared with 12 months earlier, according to the latest report from the S&P/Case-Shiller home price index, a closely watched indicator of market trends. They were down 1.9% compared with three months earlier. The decline was widespread, with 18 of the 20 large cities covered in a separate S&P/Case-Shiller index recording losses for the year. The only gains were posted by Washington, which was up 4.1%, and San Diego, which saw prices climb 1.7%.” – cnnfn.com

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RATE WATCH
Mortgage Type Interest Rate APR

30 Year Fixed 4.750% 4.799%

15 Year Fixed 3.875% 4.088%

5/1 ARM 2.500% 2.900%

Interest rates as of 02/22/10. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.

MARKET UPDATE brought to you by:

Chris Tiller, Realtor/Investor
602-561-1346
tiller34@hotmail.com

MARKET UPDATE

FEBRUARY 2011

HOME SALES ON THE RISE AGAIN

The housing market continues to show signs of recovery. For the fifth consecutive month, existing home sales are up.

“Previously-owned home sales climbed 12.3% in December…” – cnnMoney.com

As employment continues to strengthen, so will the housing market. Home sales should rise gradually through 2011 but “shadow inventory” (foreclosed homes owned by the banks that are not yet on the market) will put pressure on home prices.

SBA OFFICE OF ADVOCACY VS THE FED RULE

The Federal Reserve Board’s final rule on loan officer compensation is set to take effect April 1st, 2011. On January 13th, 2010, the Small Business Administration Office of Advocacy has requested that the FED delay the implementation of the final rule.

Advocacy is concerned that the Board may not have published a compliance guide as required by the Small Business Regulatory Enforcement Fairness Act (SBREFA)(2). Advocacy recommends that the Board publish a compliance guide in the immediate future and extend the time for small entities to comply to reflect the delay in the availability of the guide…

To date, the FED has not issued any guidance on the implementation of the FED rule with regards to loan officer compensation.

As stated in the preamble to the final rule, this rulemaking requires small entities to “alter certain business practices, develop new business models, re-train staff, and reprogram operational systems to ensure compliance with the final rule.”(5) Without proper guidance, a small entity could develop new business models, reprogram equipment and re-train staff only to learn that the steps taken do not comply with the new regulations. In such a situation, the small entity would incur additional costs that could be avoided if they have the compliance guide…

Without clear guidance from the FED, the final rule may in fact be a violation of the law. Regardless, with a little over two months before the final rule goes into effect, both large mortgage banks and smaller local mortgage brokers are still uncertain how to compensate loan officers and how to disclose to the consumer, loan officer compensation.

The FED final rule goes into effect just 15 months after HUD already reformed loan officer compensation with RESPA 2010. Can we just leave it alone?

FHA TO SUSPEND ANTI-FLIPPING RULE

“The Federal Housing Administration will suspend its anti-flipping rule for a second year in 2011, a spokesman confirmed to HousingWire Friday.” – housingwire.com

This is great news for investors and homebuyers alike. The suspended FHA anti-flipping rule will allow investors to buy and immediately sell (flip) the property to a buyer using FHA financing.

If the property is being resold for more than 20% over the initial purchase price by the seller, two appraisals will likely be mandated by the lender. The second appraisal cannot be paid for by the buyer. Most lenders will not allow property flipping if the sales price has been inflated by more than 20% over the price the seller paid; regardless of improvements.

FINANCIAL REFORM TO BE REFORMED

President Obama has come under fire from businesses over financial reform. In an attempt to improve the President’s relationship with Wall Street, some financial regulations may get an overhaul.

“The president, in an op-ed piece in the Wall Street Journal, wrote that his order will prompt "a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive." "It's a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades," Obama wrote.” – cnnMoney.com

FORECLOSURES SET RECORD IN 2010

Nearly 3 million foreclosure notices were filed in 2010. That resulted in over 1 million foreclosures, marking a record high for 2010.

“For the fourth consecutive year, Nevada led the nation in the rate of foreclosures with one of every 11 households there receiving at least one filing in 2010. Still, that constituted a 5.3% improvement from a year earlier. In Arizona, one of every 17 households received a filing in 2010, down 4.5% for the year. Florida's 2010 foreclosures (one in 18 households) dropped 6.1% year-over-year, and California (one in 25) fell 8.5%.” – cnnMoney.com

U.S. DEBT – FOREIGN INVESTORS JUST CAN’T GET ENOUGH OF IT

“Foreign investors bought $93.9 billion in long-term Treasuries in November, increasing their net holdings after purchasing $56 billion the month before, the Treasury Department said Tuesday.” – cnnMoney.com

China remains the largest holder of U.S. debt, owning nearly $900 billion in U.S. Treasuries. Japan sits shotgun with $877 billion in U.S. debt.

RATE WATCH

Mortgage Type Interest Rate APR
30 Year Fixed 4.500% 4.548%
15 Year Fixed 3.750% 3.832%
5/1 ARM 2.625% 2.935%

Interest rates as of 01/24/10. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.

Conventional Refinance: If you have a conventional mortgage (must be owned or guaranteed by Fannie Mae or Freddie Mac) without mortgage insurance, you may be able to refinance up to 125% of the home’s value. Owe more than 125%? With enough compensating factors (i.e. credit, assets, etc.), you may be able to get an appraisal waiver and slip into the 125% range you need to be in. Rates are slightly higher than a standard conventional loan, but with good credit, they are still quite low.

FHA Streamline Refinance: FHA streamlines do not require an appraisal. It does not matter how much you owe verses the value of the home. Anyone with a 5% interest rate or more should look into a streamline refinance. A streamline refinance allows the homeowner to lower their rate with little or no closing costs, and no appraisal. It will not solve your value issues, but it will lower your payment. Streamline refinances are applicable for owner occupied and non-owner occupied properties.

THE SOCIETY FOR FINANCIAL AWARNESS

Geneva Financial, LLC has recently joined of The Society for Financial Awareness (SOFA), which is a 501c3 non-profit, educational speaker’s bureau. In our ongoing commitment to help inform and educate people on homeownership, through our newly formed association with SOFA, we will be giving free workshops to companies and organizations whose employees and members can most benefit.

“SOFA is a non-profit corporation, comprised of various financial professionals (CPA’s, Estate Planning Attorneys, Financial Advisors, Insurance Professionals, Realtors, Health and Wellness Experts, Mortgage Brokers, and other specialized persons) who provide financial and health education to various companies, family businesses and organizations.” - www.sofausa.org

The educational workshops are free to companies and organizations that wish to participate. Please contact me if your company or organization would like to find out more about The Society for Financial Awareness.

MARKET UPDATE brought to you by:

Chris Tiller, Realtor
Phone: 602-561-1346
Fax: 602-595-5450
Email: tiller34@hotmail.com
via: Geneva Real Estate and Investments

MARKET UPDATE – JANUARY 2010 HAPPY NEW YEAR!!!

FED RULE INCREASES BORROWER COSTS

A message from the National Association of Independent Housing Professionals:

On August 17, 2010, Bankrate reported, closing costs jumped 36.6% year over year, (2009-2010).

For the past few years, Congress and several federal agencies, have been imposing new rules, regulations and laws, all designed to reduce real estate closing costs and protect consumers from being steered into more expensive loans.

Recently, the Federal Reserve Board (FRB) finalized a new rule on originator compensation. According to the FRB, the rule affects “all originators.” It specifically mentions originators who work for brokers, broker businesses and originators that work for banks. However, banks (as a business), were exempt. Once again, it appears our government is in the business of picking winners and losers. Originators and broker businesses have expenses too. It’s not all about profits. Moreover, many of these expenses were created by the government, IE: The Safe Act.

Some have “applauded,” or are “satisfied” with the new rule, because it includes “all originators.” I’ll let you draw your own conclusions as to why these statements were made. However, if you’re a broker, or an originator, you understand there’s nothing to applaud about, or be satisfied with.

A few years ago, brokers originated almost 67% of all residential loans in this country. Last year, that number dropped to about 17%. This huge reduction can be attributed to a campaign to blame brokers for the housing crisis and the over regulation of the brokerage industry. These factors created substantially less competition, which is directly related to the increase reported by Bankrate. Another factor is the government itself. Government is the biggest offender of steering, by way of the implementation of rules, regulations and laws that favor the deep pocket, industry participants.

Competition reduces consumer costs, NOT Financial Reform, RESPA Reform, or FRB Rules. HUD claimed RESPA Reform would reduce a borrower’s closing costs by $700.00. That never happened! Need more proof, look at HVCC. Consumer costs increased, along with valuation fraud.

NAIHP pledges to continue fighting for restoration of a competitive market place and level playing field for all consumers.

Marc Savitt, President – NAIHP

Thank you again for supporting your local mortgage broker. We are still here because we offer the most competitive loan options, rates and fees, and we offer a higher level of customer service than large banking institutions. We work nights, weekends, and holidays. Ultimately, we would not still be here if it were not for you. Thank you.

MORTGAGE TALES (NEW EDITION)

Every month we will be adding a story of a mortgage / real estate transaction that actually took place. Some of these stories will be painful and some will give you faith that banks are still lending money. I will start the New Year off with one that is more promising.

FHA Flips and Splits

The application was taken on the 3rd of November. Our close of escrow date was the 9th of December. We were competing with a big bank (i.e. Bank of America) which is generally easy to beat, but this time they came out guns a blazing. Because we go through wholesale channels, we still came in lower.

The seller had purchased the property and was flipping it to our buyer. A flip is a a property that is purchased and resold within 90 days of initial purchase. This is allowed by FHA, but frowned on if the property is resold for more than 20% of the initial purchase price.

The seller was selling the property for the same price that the seller had purchased it for so the 20% price increase was not a factor; or was it. The seller had subdivided the lot prior to our buyer’s purchase. Although the price did not change, the asset had.

The first lender approval was actually a “SUSPENSE”, due to the appraiser listing the wrong seller on the appraisal; which was easily corrected creating only minor delays. On the morning of the 8th, one day prior to our close of escrow date, we received a “DECLINE” from the lender due to property flipping. As it turns out, the splitting of the property was a non-issue. The “decline” was issued by the underwriter because she simply misunderstood the FHA guideline with regards to property flipping. After educating the lender, a final approval was granted. My nervous first time homebuyer would close on the house; just a few days late. The loan funded December 14th, 2010.

On a side note, this loan was locked and closed, with no discount points (a percent of the loan amount to buy the interest rate down) on a 30 year fixed mortgage, at 3.875%. I am quite certain that was the lowest rate for a 30 year fixed mortgage I have ever closed a loan at. I wish I could credit it all to skill.

Unforeseen delays are all too common in today’s lending environment. Loan officers are generally the ones blamed for such delays, whether they are at fault or not. Delays are typically due to tight underwriting guidelines and everyone’s fear to fund a loan that is not insurable or saleable. The public demanded tougher guidelines, and got them. Many will now complain that they are too tight, especially if you are currently in the loan process. Have patience; your loan will fund; it just may take a little while longer. Despite longer turn times, we fund nearly every file submitted to underwriting.

TAX CUT EXTENTION CAUSES INTEREST RATES TO SPIKE

Last month the Federal Reserve announced that it would continue to purchase hundreds of billions of dollars’ worth of Treasuries in an effort to keep mortgage rates low, now coined as “quantitative easing.” The announcement alone would typically have been cause for interest rates to fall, but due to a public backlash by conservative politicians and economists raising fears of runaway inflation; rates started to move up.

In December the President announced plans on passing an $858 billion dollar proposal to extend the Bush era tax cuts for all income levels. The move to extend the tax cuts “while not perfect, will help grow our economy and create jobs in the private sector,” said the President. The Republicans demanded the cut for all income levels, while the Democrats were overwhelmingly pushing to extend the cuts to just the lower and middle income classes. The announcement by the President caused the 10-year bond yields to spike up and long term mortgage rates to follow suit.

NEW CREDIT SCORE DISCLOSURES

Yes, another mortgage disclosure is on the way. Starting January 1st, 2011, lenders will have to disclose when a factor on the borrower’s credit report has an adverse effect to the interest rate on a given loan. Risk based pricing, which can cause an increase to a borrower’s interest rate, due to the actual credit score, will now be disclosed to borrowers prior to close.

PHOENIX HOMES SALES POST UNEXPECTED GAIN

“Phoenix-area home sales in November increased 2% from the previous month, a time when sales are usually on the decline, according to real estate data provider MDA DataQuick. There were 7,127 new and existing homes and condos sold during the month. Since 1994, home sales fell an average 7.3% from October to November in Phoenix. But this year's gain shows some buyers are taking advantage of more affordable homes and historically low mortgage rates. Still, Phoenix home sales remain down 16.6% from a year ago, taking median home prices down with it for the fifth consecutive month. Buyers paid a median $127,500 for all new and resold homes in November, down 10.7% from a year ago and down 1% from October. More than 36% of all homes sold for less than $100,000, up from 27% the year before.” – Housingwire.com

Nationally existing home sales rose 5.6% in November, with the median home price of $170,600, according to the National Association of Realtors.

A DOUBLE DIP FOR HOUSING

Prices in 20 key cities fell 1.3% in October from a month earlier, an annualized decline of 15%, according to the S&P/Case-Shiller index. Prices were down 0.8% from 12 months earlier. "The double-dip is almost here," said David Blitzer, chairman of the Index Committee at Standard & Poor's. "There is no good news in October's report. Home prices across the country continue to fall."– cnnfn.com

Banks are still holding an estimated 2 million housing units which will eventually need to be released to the market. A drastic increase in units for sale on the market will put exponential pressure on an already unstable housing market.

MORTGAGE APPLICATIONS SINK

“Mortgage application volume continues to decline with a huge drop last week, as interest rates remain on an upward swing and demand for refinancings plummets. The Mortgage Bankers Association said its market composite index decreased 18.6% for the week ended Dec. 17 on a seasonally adjusted basis. Unadjusted, the index fell 20% from the prior week. Refinancing applications have decreased for six consecutive weeks and volume is at the lowest point since the end of April after another 24.6% drop last week. The seasonally adjusted purchase index fell 2.5% last week. The unadjusted purchase index declined 4.9% and was 8.4% lower than a year earlier.” – Housingwire.com

RATE WATCH

Interest rates are on the rise. Rates are currently 0.625% higher on a 30 year fixed mortgage than they were only 30 days ago. Industry speculation is that interest rates will be in the high 5%s or low 6%s by the end of 2011.

Mortgage Type Interest Rate APR

30 Year Fixed 4.500% 4.548%
15 Year Fixed 3.750% 3.832%
5/1 ARM 2.750% 2.979%

Interest rates as of 12/28/10. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.

Conventional Refinance: If you have a conventional mortgage (must be owned or guaranteed by Fannie Mae or Freddie Mac) without mortgage insurance, you may be able to refinance up to 125% of the home’s value. Owe more than 125%? With enough compensating factors (i.e. credit, assets, etc.), you may be able to get an appraisal waiver and slip into the 125% range you need to be in. Rates are slightly higher than a standard conventional loan, but with good credit, they are still quite low.

FHA Streamline Refinance: FHA streamlines do not require an appraisal. It does not matter how much you owe verses the value of the home. Anyone with a 5% interest rate or more should look into a streamline refinance. A streamline refinance allows the homeowner to lower their rate with little or no closing costs, and no appraisal. It will not solve your value issues, but it will lower your payment. Streamline refinances are applicable for owner occupied and non-owner occupied properties.

MARKET UPDATE brought to you by:

CHRIS TILLER
602-561-1346
FAX: 602-595-5450
tiller34@hotmail.com

MARKET UPDATE - DECEMBER 2010

HAPPY HOLIDAYS!

MORTGAGE APPLICATIONS ON THE RISE

Mortgage applications increased by 2.1% for the week ended November 19th. The most notable increase was in purchase transactions, which was up 14.4%; the largest increase since May. – Mortgage Bankers Association

"The increase in purchase applications last week aligns with other incoming data suggesting that consumers are feeling somewhat more confident with their financial situation," said Michael Fratantoni, MBA's vice president of research and economics. While the increase was magnified somewhat by the comparison to the holiday week, the level of purchase applications on a seasonally adjusted basis is now at its highest level since the expiration of the homebuyer tax credit." - HousingWire

Mortgage applications for purchase transactions, although up, are greatly outweighed by refinances which accounted for almost 80% of all mortgage transactions.

HOME SALES FALL ONCE AGAIN

October existing home sales showed another sign that the housing market is not yet on the mend. Existing home sales fell 2.2% from September according to the National Association of Realtors. Home sales are down nearly 26% from October of 2009.

LURKING IN THE SHADOWS

Banks are managing their portfolios of homes that have seriously delinquent mortgages. Failing to foreclose on these properties prevents the properties from going vacant, and minimizes reported loses on their balance sheets. This “Shadow” inventory will come to market eventually.

“Adding the shadow inventory (estimated at 2.1 million) to the visible supply of homes on the market boosted the total housing-market supply to 6.3 million units from 6.1 million in August 2009. At the current sales rate, it would take 23 months to go through the entire visible and shadow inventory of homes -- more than three times the normal rate of six to seven months.” – cnnfn.com

The increase in housing inventory will continue to weaken home values unless demand surges.

INTEREST RATES RISE FOR FOURTH STRAIGHT WEEK

Interest rates rise for the fourth straight week despite the FED’s $600 billion bond buying spree to keep mortgage rates low. Conforming 30 year fixed mortgage rates jump from 3.875% a month ago to 4.250% to close out the month of November.

Are rates on the way up for good? Maybe. At the end of the year four of the Federal Open Market Committee’s voting members will rotate out. Three of the four new voting members that will be rotating in have been outspoken about the risk of inflation under the FED’s current monetary policy.

“The move -- known as quantitative easing -- is meant to keep interest rates low and stimulate spending, but has recently come under fire, as some economists think the plan could boost inflation, and even create asset bubbles. The backlash is so widespread, it includes not only outspoken politicians like Sarah Palin and conservative economists, but even internal Fed officials.” – cnnfn.com

Although inflation is currently nonexistence, a shift in monetary policy (i.e. the winding down of the FED purchasing bonds) could send mortgage rates soaring; and fast. If you are one of the few homeowners still able to take advantage of these historically low interest rates, you may not want to sit on the fence any longer.

THE FED’S MOVE TO PRICE FIX

Unless deemed illegal, the FED’s “Final Rule,” which goes into effect April 1st, 2011, will fix mortgage pricing and potentially increase rates and fees for borrowers, while decreasing consumer options. If you wanted regulation, you got it; and it will cost you dearly.

“Is the Federal Reserve Board price fixing the mortgage business in violation of law? The Fed has a rule that they are making active on April 1 where each mortgage brokerage and banker (excluding banks) set a fixed percentage that they can charge each and every customer regardless of loan amount.”

Technically, the Fed is violating many laws and even their own mission. Why are they doing this? According to Marc Savitt, President of the National Association of Independent Housing Professionals (NAIHP)*, “In my opinion the why is because they want to help the banks. Stronger banks, less time and (more) money for them. Plus, it makes them look like they’re doing their job.”

Savitt goes on to say “the fact the Federal Reserve Board doesn’t have the authority to restrict compensation, we at NAIHP knew for over a year. This has been long planned and it will make mortgages harder to come by and much more expensive.”

“NAIHP is fighting this with everything we have, including a strong grass roots network” Savitt added. ”Since we represent everyone in the real estate industry including mortgage brokers, real estate agents, appraisers, title insurance, small banks and consumers, we must make sure that mortgages are provided in a fair way to the person buying a small starter home in Missouri and a mansion in Beverly Hills.”

The solution? Savitt has met with Elizabeth Warren, talked directly with the Fed, looked for guidance from other industry professionals and has had discussions with attorneys to possibly prepare a case or an injunction to stop the Fed from implementation.

“It stinks that we as hard working small business people have to waste our time volunteering to stop the banks from doing what they did to us in the past decade all over again,” said Savitt. “You would think they would want to get their mortgage business from the (now) NMLS licensed mortgage people that have been scrutinized more than a patted-down airline passenger! But no, they keep attacking.”

Savitt continues, “They have even started trying to limit what real estate agents can charge for commissions. I wouldn’t be shocked if they wanted to try to get Congress to let them be in real estate business.” – agentgenius.com

With only four months before the FED Rule takes effect, there is not much time to defeat it. As an active member of the Arizona Association of Mortgage Professionals and the National Association of Mortgage Brokers, we are fighting to protect consumer choice. Geneva Financial, LLC thanks you for supporting your local licensed mortgage professionals.

RATE WATCH

Mortgage Type Interest Rate APR

30 Year Fixed 4.250% 4.294%

15 Year Fixed 3.375% 3.598%

5/1 ARM 2.625% 2.975%

Interest rates as of 11/28/10. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.

Conventional Refinance: If you have a conventional mortgage (must be owned or guaranteed by Fannie Mae or Freddie Mac) without mortgage insurance, you may be able to refinance up to 125% of the home’s value. Owe more than 125%? With enough compensating factors (i.e. credit, assets, etc.), you may be able to get an appraisal waiver and slip into the 125% range you need to be in. Rates are slightly higher than a standard conventional loan, but with good credit, they are still quite low.

FHA Streamline Refinance: FHA streamlines do not require an appraisal. It does not matter how much you owe verses the value of the home. Anyone with a 5% interest rate or more should look into a streamline refinance. A streamline refinance allows the homeowner to lower their rate with little or no closing costs, and no appraisal. It will not solve your value issues, but it will lower your payment.

MARKET UPDATE brought to you by:


Chris Tiller, Realtor
tiller34@hotmail.com
602-561-1346

Market Update - November 2010

MORTGAGE MONOPOLY

“Today 90% of the $14 trillion in outstanding residential mortgages is controlled by the Federal Housing Administration (FHA), the Department of Veterans Affairs, or Fannie Mae and Freddie Mac—with the latter two under government conservatorship.”- Wall Street Journal

SALES RISE – VALUES DROP

Existing homes sales gain momentum with a 10% increase in volume, marking the second month in a row for an increase in home sales. Of those homes that were sold in September, nearly 35% were in foreclosure. – cnnmoney.com

The increase of sales volume in existing homes was likely influenced by the drop in home prices. We are not at the bottom yet. Home prices experienced another 1.5% drop in August.

HISTORIC NEGATIVE YIELD FOR THE TREASURY

“The Treasury sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction as investors bet the Federal Reserve will be successful in halting deflation. U.S. debt gained even after data showed sales of existing homes rose 10 percent last month, more than forecast, the National Association of Realtors said today in Washington. Purchases increased to a 4.53 million annual rate from 4.12 million in August, the data showed. Economists in a Bloomberg News survey forecast sales would rise to a 4.3 million pace.” – Bloomberg.com

BANK OF AMERICA SHUTS DOWN MORTGAGE WHOLESALE DIVISION

Bank of America announced this month that they are exiting (once again) the wholesale mortgage business. Bank of America surprised many in the industry by re-entering the wholesale mortgage business shortly after acquiring Countrywide Home Loans. Bank of America will no longer accept mortgage broker business. This will create great opportunities for other wholesale mortgage banks as the world’s largest bank throws in the towel.

"Bank of America remains committed to purchasing and financing loans from Correspondent Lending clients, including those approved to originate loans from brokers. We intend to build upon our leadership position in the market to provide enhanced liquidity to the smaller financial institutions and independent mortgage companies that supply mortgages as our correspondent clients." – Statement from Bank of America

Bank of America will still offer mortgages at inflated rates at any one of their thousands of “retail” banking locations.

THE RACE FOR THE MOST FORECLOSURES

TAKE OUT A LOAN AND PAY FOR YOUR MORTGAGE

Having trouble paying for you mortgage? The Federal Government will soon be issuing loans up to $50,000 for homeowners that qualify, to pay for their mortgage. Not making this up. The loan will be forgiven if the home owners stay in the property for at least five years.

“The federal program, however, is relatively small. Congress gave the Housing Department $1 billion to spend, meaning it will help at least 20,000 people. But that's just a small fraction of those who need assistance.” – cnnmoney.com

RATE WATCH

Mortgage Type Interest Rate APR

30 Year Fixed 3.875% 4.005%

15 Year Fixed 3.375% 3.598%

5/1 ARM 2.625% 2.975%

Interest rates as of 10/27/10. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.

Conventional Refinance: If you have a conventional mortgage (must be owned or guaranteed by Fannie Mae or Freddie Mac) without mortgage insurance, you may be able to refinance up to 125% of the home’s value. Owe more than 125%? With enough compensating factors (i.e. credit, assets, etc.), you may be able to get an appraisal waiver and slip into the 125% range you need to be in. Rates are slightly higher than a standard conventional loan, but with good credit, they are still quite low.

FHA Streamline Refinance: FHA streamlines do not require an appraisal. It does not matter how much you owe verses the value of the home. Anyone with a 5% interest rate or more should look into a streamline refinance. A streamline refinance allows the homeowner to lower their rate with little or no closing costs, and no appraisal. It will not solve your value issues, but it will lower your payment.

MARKET UPDATE brought to you by:
Chris Tiller
Geneva Real Estate and Investments
tiller34@hotmail.com
602-561-1346
fax:602-595-5450