National Registry of Home Lenders

Last year, the Secure and Fair Enforcement (S.A.F.E.) Mortgage Licensing Act of 2008 was signed into law as part of the Housing and Economic Recovery Act. This law outlines procedures, requirements, education, testing, and standards for mortgage loan originators. 

Part of the law includes mandatory registration and state licensing of loan originators through the Nationwide Mortgage Licensing System in order to give consumers easy access to a loan originator’s employment history, and any disciplinary or enforcement actions taken against him or her.  This is great news for consumers, since a national registry will help stop fraud, giving regulators the ability to more efficiently track bad actors.

The registry was begun in January 2008 with a handful of states, and to date, 26 states are actively participating, tracking 66,469 individual originators and 11,459 mortgage brokers and lender companies.  An additional 20 states will register by the end of this year.  Three states — California, Pennsylvania and Massachusetts — have not yet passed bills but have legislation pending, and Minnesota is expected to address the issue in 2010.

The law defines a mortgage loan originator as someone who takes an application and negotiates the terms. What hasn’t been decided yet is whether that definition should include servicers and loan modification officers.

Confused About Mortgages? You’re Not Alone

Another government agency? No way!

Before you groan about more regulation, please read this recent article in the New Yorker titled “Caveat Mortgagor.” It was an excellent piece that explained the proposed Consumer Financial Protection Agency, an Obama Administration plan designed to regulate consumer financial products, which would hopefully prevent another Wall Street meltdown that also caused a Main Street meltdown.

The article made some compelling arguments and offered examples of other federal regulations that were put in place to save consumers from danger and death (e.g., “Food, Drug, and Cosmetic Act,” and “Meat Inspection and the Pure Food and Drugs Acts“).

Death from mortgages?

C’mon! How can a consumer die from a bad mortgage? Unfortunately, it has happened — perhaps indirectly as a result of a mortgage the borrower couldn’t handle, but it did happen. There was the Pasadena woman who took her life when faced with foreclosure and then the unforgettable national story of 91-year-old Addie Polk who tried to take her life when she learned she would lose her home to foreclosure. Two sad stories of which there are probably many more.

Mortgages just plain confusing

What was most striking about the Caveat Mortgagor article was how many people are just plain befuddled when it comes to mortgages and finances.  Federal Reserve economists Brian Bucks and Karen Pence issued a paper “Do Homeowners Know Their House Values and Mortgage Terms?” and wrote:

In particular, borrowers appear to underestimate the amount by which their interest rates can change. … borrower confusion also appears to be a factor, as a sizable number of adjustable-rate borrowers report that they do not know the terms of their contracts.

The FTC turned out an executive summary “Improving Consumer Mortgage Disclosures” in 2007 that concluded:

If consumers do not understand the costs and terms of their mortgages, they may pay more for their mortgages than necessary, obtain inappropriate loan terms, fall prey to deceptive
lending practices, and experience unpleasant surprises and financial difficulties during the course of their loans.

And lastly, back in 2003, economist Susan Woodward wrote a paper “Consumer Confusion in the Mortgage Market.” Even though it was written six years ago, all of the same issues are still apparent now: Buying a home and getting a mortgage is complex, the language is difficult, and shopping for a mortgage is not easy.

Do you know the True Cost of your loan?

While we can’t change the actual language used in the mortgages world (an ARM is an ARM is an ARM), we can try to make it easier to shop for a mortgage. That’s why a few weeks ago, Zillow Mortgage Marketplace rolled out True Cost Calculation, which is an apples-to-apples comparison of mortgage quotes. True Cost is the sum total borrowers will pay in interest and fees during the expected time they plan to keep the loan.  So, if you think you will stay in a home for five years before moving, you can see how much you will pay for that entire time.

Read more about how True Cost Calculation works. Better yet, look at the graph below to see it displayed.

Click Here to Get Great Rates And A Speedy Approval From Lending Tree Without Any Hassels.

More Support for Loan Modifications

The Obama administration met yesterday with mortgage companies who are participating in the Making Home Affordable loan modification program to identify ways to improve and accelerate the program.  They set a goal of initiating 500,000 loan modifications by November 1, 2009.  To date, roughly 200,000 borrowers have been enrolled in three-month trial loan modifications, out of about 370,000 who were offered modifications by mortgage companies.

To help reach this goal, the administration plans to:

1. Publicly report the number of trial modification offers each servicer has extended, the number of trial plans that are underway, and the number of final modifications. The first report is expected to be released by August 4th.
2. Set more specific metrics to measure the performance of the program, such as average borrower wait time for inbound borrower inquiries, the completeness and accuracy of information provided applicants, document handling, and response time for completed applications.
3. Have Freddie Mac audit a sample of MHA modification applications that have been declined, with the goal of addressing weaknesses in the program.

These plans seem to rely on publicly disclosing servicers who are making progress in this program and then comparing them to those who are not.  It will be interesting to see if this type of incentive works to significantly move the needle.

The Challenge…..

I for the life of me cannot understand why the Government or Consumers care about YSP (yield spread premium) or broker compensation!

The Challenge—-Can anyone name a product or service that the consumer buys based on the profit margin and not the cost to them?

Why Consumers get hung up on what the par price is or what the YSP or SRP just baffles me!

Knowing what the profit margin is, may help you negotiate better with a loan officer that is trying to take advantage of you.  I would bet most if not all good loan officers know what they charge and the rates and terms they offer will change not based on how much they can get from an unsuspecting borrower, but by how the market moves. A loan officer that is willing to negotiate is a loan officer you want to avoid!

Personally I would be wary of any lender or broker that tries to Spin the compensation positively or negatively in order to convince you to choose to work with them. Cost and service will vary between lenders….What you the consumer value most will vary so the lender/broker you choose will be different based on what you value most.

Click Here to Get Great Rates And A Speedy Approval From Lending Tree Without Any Hassels.

How to Get & Use First Time Homebuyer Tax Credit Money

How Does the Buyer Use and Take Advantage of the First Time Homebuyer U.S. Income Tax Credit?

See and download form 5405 from IRS website  ~ 

Form 5405 “First Time Homebuyer Credit” (click here).

The credit is for up to $8,000 or 10% of the purchase price of the new home with an $8,000 maximum.

For a 2009 purchase the buyer has the option of claiming the credit on their 2008 return or their 2009 return.  This is a fully refundable credit, so there isn’t a reason to wait.

This IRS form 5405 (click here)is to be filed with form 1040X Amended 2008 US Individual Tax Return.

When you finish with filling out the forms, you will see that the credit ends up on line 15 of form 1040X, which reads “refundable credit only” and references form 5405.

Even if you didn’t pay $8,000 for income tax for that year, you get that $8,000 back as a refund if all other requirements are met.

And if you as buyer live in this home for 36 months after purchase, or will never have to repay it.  This credit is good for all purchases between April 9, 2009 and December 1, 2009.

For questions and answers on whether you will qualify for this tax credit, see IRS site (click here).

For other information, see the Internal Revenue Service web site (click here).  

You must determine for yourself whether you will qualify for this tax credit.  So contact the IRS directlyor your CPA or local income tax professional.

Don’t miss this approaching deadline that you must buy this home and close escrow by November 30, 2009. 

Now is the time to take advantage of your $8,000 First Time Homebuyer Income Tax Credit.

If you want to buy a home in Orange County, CA, and want to use this Homebuyer Tax Credit, please contact us.  Thank you.  

____________________ 

Harrison K. Long, Explore Group, Coldwell Banker Previews, Irvine, CA.

Click Here to Get Great Rates And A Speedy Approval From Lending Tree Without Any Hassels.

Now Is Indeed an Excellent Time To Buy a Home

Now is an excellent time to buy a home here in California.

Why is now the time? 

See Marc Roth article at BusinessWeek.com ~ “Now’s the Time to Buy Your Dream House” ~ click here for article. 

This makes sense and is encouraging news for homebuyers, especially first timers (or those who have not owned a home for the past three years) who can take advantage of the $8,000 income tax credit.

The National Association of Realtorsrecent article supported this further ~ Housing Experts: Now is the Perfect Time to Buy (click here) .

So we have good real estate news and lots of things to talk about.

Harrison K. Long, Explore Group, Coldwell Banker Previews, Irvine, CA.

Click Here to Get Great Rates And A Speedy Approval From Lending Tree Without Any Hassels.

Mortgage Market Update

So, let’s take a look at what’s happening in the markets today.   A couple of key reports have come out this morning:

• The Case Shiller Home Price Index for June came out.    There’s already been a lot of miscommunication and misinformation about the report.   If you compare June to May, there were some areas that were up.   If you compare June 2008 to June 2009, prices were down 17+%.   That number is actually less than it was the month before, but it’s only a 1% change and the margin of error is closer to 5% (from what I’ve read.)   So what do we take from this report?   Frankly, not nearly as much as the talking heads on CNBC and others would like.   The bond market pretty much shrugged off the report.
• Consumer Confidence came in lower than expected.   The main reason for the drop in consumer confidence is because, surprise, people are concerned about jobs.

The mortgage market has basically shrugged off both of these reports and essentially said that we already knew that house prices were dropping and we already knew that people were concerned about their jobs.   

Recommendation:  My recommendation remains to lock all loans.   Why?  A couple of reasons: 1) there are some big Treasury auctions this week yet that could impact the mortgage world.   2) The “good news” that we’ve been hearing about lately all has an “asterisk” to it and could reverse itself.

Loan Modification and the Boiler Room Effect – Don’t Get Burned

I just caught an Inman News story on the wire where author Matt Carter referenced a Southern California Loan Modification Company alleged to have used “high-pressure, cash-up-front” telephone sales business tactics to target distressed homeowners.

This is amazing, though I shouldn’t be surprised.  Folks are desperate out there right now, and to make matters worse – there’s a legitimate predatory risk of gran proportion lying in wait for unwary homeowners who are simply trying to do the right thing by staying in their homes and maintaining mortgage loan payments in the most responsible manner they possibly can.

I remember watching the movie Boiler Room, where a former back room gambling runner enters into, succeeds with, and subsequently exposes a high-pressure stock trading firm who used the same high-pressure, over-promising practices we see in some of these loan modification companies.

Click here to view the embedded video.

Boiler Room Meets Loan Modification Company

The story of  H.E. Servicing, the California Loan Modification in question, an individual who was shut down as a loan modification company owner by the State of California.  He then went out, found a fresh out of school attorney via Craigslist (they have to be loving this attention by the way), and started all over again. The hubris alone here is staggering.

Official Loan Modification Resource

Folks, there’s really only one place to go should you find yourselves in need of loan modification services, and that’s the official Making Home Affordable website.  There, you’ll find information designed to inform and educate you about the mortgage modification process.  Some key facts you’ll learn there include the following:

• There is never a fee to get assistance or information about Making Home Affordable from your lender or a HUD-approved housing counselor.
• Beware of any person or organization that asks you to pay a fee in exchange for housing counseling services or modification of a delinquent loan. Do not pay – walk away!
• Beware of anyone who says they can “save” your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
• Never submit your mortgage payments to anyone other than your mortgage company without their approval.

Have You Fallen Victim to Fraudulent Home Loan Modification Practices?  We Want to Know…

Have you or someone you know fallen victim to a loan modification organization who promised to save your home, only to have cost you thousands?  Drop a line here to let us know.

The more we talk about these back alley boiler room operations, the better informed the general public will be.

Mortgage Market Update

This is going to be a very brief update for a couple of reasons:

• It’s a summer Friday and not a lot is happening.
• The markets are basically treading water today.
• The only “news” is that consumers aren’t very confident.

My recommendation remains to lock all loans.   The downside potential of lower rates is vastly outweighed by the potential of higher rates due to perceived inflation risk going forward, the amount of money the government is borrowing, and the additional risk perceived in mortgage backed securities due to increasing defaults.

I’ll have more with my mortgage market week in review later today.   If you’d like to know what an “Exit Strategy” is and why it’s important to the housing market, check out what I wrote up yesterday at “Exit Strategy and the Housing Market.”

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