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Why it’s important to find the right mortgage lender partner – Now. June 1, 2010

Whatever we are waiting for - peace of mind, contentment, grace, the inner awareness of simple abundance - it will surely come to us, but only when we are ready to receive it with an open and grateful heart." ~ Sarah Ban Breathnach

In an article written by Doug Smith of Douglas Smith & Associates on May 5th titled: “Thinning the Herd: The mortgage business is shrinking. Why that is good news for those who remain” www.dougsmithonline.com. He stated that there are now 70%-80% fewer loan officers in the business than there were five years ago.

What this means to borrowers and those who counsel them is a change in how home mortgages will be done in the future. For those who regularly read my emails you have already read about many changes including HVCC, MDIA, the new HUD, new FHA rules, new USDA rules, new Condo rules, Etc… Currently there are estimated to be 50-75K loan officers in the US down from the peak of 250K and the number is expected to continue to drop. The main reasons are:

  1. New state licensing requirements. Many independent brokers will not be able to pass their background checks or pass required exams.
  2. Changes in regulations and tighter compliance are forcing brokers to go to work for banks and other mortgage bankers (we have been seeing this since summer 2008).
  3. Most large banks are not hiring inexperienced people and teaching them the business. There will be fewer new entrants into the business.
  4. Due to mergers and consolidations within the banking world loan originators are being let go by the hundreds.
  5. Forecasts are for lower loan production this year than last year. Lenders will trim their lower producing loan officers who do little business.
  6. Most large internet and 1-800 mortgage telephone centers have shut their doors
  7. There is not as much money in the business – tighter regulations will keep loan officers from making large profits on a small number of loans (this is a good thing).
  8. New mortgage shops and lenders have stopped getting into the business.
  9. Compensation plans at banks have been changed and have resulted in much lower income per loan. The result is only high volume producers will survive. This is why more banks have “loan specialists” who are required to offer cross-sell banking services.
  10. Many long-term mortgage lenders, who have fared well in the past, are choosing to retire over staying in the business. They feel the business is too hard or they are unwilling to adjust with the new regulations.

Experience and knowing all the options remaining for borrowers will differentiate the best mortgage professionals from the “teller” type mortgage originators. Know your lender. Make sure they will be around when you need them and make sure they know how to implement recent changes. Now more than ever it is important to team with originators who are knowledgeable, accessible, and can close on time in this changing environment.

Economics:

The economic data took a backseat to events in Europe again this week. Improved sentiment about the troubles in Europe influenced the willingness of investors to purchase riskier assets such as stocks, hurting bond markets. As a result, after dropping to the lowest levels of the year, mortgage rates ended the week a little higher.


 Accessible | Program Expertise | On-Time Closings    

@ The Valeo-Croy Team, we are here for you.The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421                     
 
The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.


Your Appraisal Comes In Low, Now What? June 7, 2010

It's a sign of mediocrity when you demonstrate gratitude with moderation. - Roberto Benigni, 1952-present

Borrowers looking for lower rates may be missing this recent refi boom because the appraised value of their home doesn't support a rate/term refinance. In other cases home values for purchases are coming in short as well. Some say the Appraisal Management Companies (AMCs), which were formed due to Home Value Code of Conduct (HVCC), are lazy. That they have no incentive to care whether or not the choice of comps accurately supports value due and the reduced fees the appraisers get for doing the work. Remember three of the largest lenders in the U.S. own the three largest AMCs. The AMCs were formed as profit centers and often negotiate low appraisal fees, then charge an "underwriting review" fee which is passed on to the borrower as the total “appraisal fee”.

While some blame HVCC and the AMC systems; others are a bit more quantitative in their approach and point toward an increase in foreclosure rates as the true culprit. Indeed banks are foreclosing on more properties and putting that supply on the market.

Appraisers must know their market, they must research each active listing and sale to determine what is driving home prices in that specific area. If short sales and foreclosures are predominant, we shouldn't be criticizing the quality of appraisals. If the appraiser simply used the last four sales in the market as comps or just missed recent sales that were not a foreclosure or a short sale, then a loan originator is justified in questioning value.

WHEN An Appraisal Comes in Low What Can You Request from the Appraiser?

(A) Asking an appraiser to consider additional information about a consumer's principal dwelling or about comparable properties;

(B) Requesting that an appraiser provide additional information about the basis for a valuation;

(C) Requesting that an appraiser correct factual errors in a valuation;

(D) Obtaining multiple appraisals of a consumer's principal dwelling, so long as the creditor adheres to a policy of selecting the most reliable appraisal, rather than the appraisal that states the lowest value;

(E) Withholding compensation from an appraiser for breach of contract or substandard performance of services as provided by contract; and

(F) Taking action permitted or required by applicable federal or state statute, regulation, or agency guidance.

At Cunningham and Company our originators hand selected our pool of lenders. We do not use outsourced services to get the appraisals in the major markets we serve. Our appraisers are a paid the full fee they have earned and the result of our efforts have been quicker turn times and better level of appraisals. We always fight for the value on our clients' properties. We will interact on your behalf and with your help to make sure the value supported by comparables are realistic. Remember we are an advocate for you and your clients.

Economics:

The big economic news this week was Friday's Employment data, which fell short of Wall Street forecasts and pushed mortgage rates lower. Investors continued to watch the situation in Europe, but there were no major market moving developments. Due to a rally on Friday, mortgage rates ended the week lower.
 

@ The Valeo-Croy Team, we are here for you.

The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings                             
 
The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.


What can a seller pay for? Will the closing deadline for the tax credit be expanded? June 13, 2010

Recently I was asked if seller concessions can be used to buy out the rental contract for prospective buyer. The answer unfortunately is no. Seller concessions can only be used for closing costs or pre-paid expenses listed on the HUD.

Additionally repair costs cannot be considered as a seller concession. If the contract is listed with $5000 concession for repair the end result will be a lowering of the purchase price (for lending purposes) of $5000.

To handle repair issues make sure to negotiate this in the contract and put contingent upon certain repairs being completed. The repairs must be done prior to closing. Only actual payments to contractors can be on the HUD and only for actually completed repairs. For example if ABC Carpet was to install new carpet in all the bedrooms the work must be completed before closing and a payment could be put on the HUD to ABC Carpet for the expense.

Make sure you work with your lending partner to be certain the contract is written to allow your client to get the loan they want based upon the purchase price. A contract error could cost your borrower more funds to close.

Possible but not a promise:

On Thursday, lawmakers introduced a proposal which, if passed, will extend the "close-by" deadline to receive the homebuyer tax credit from June 30 to September 30. The legislation doesn't affect who may qualify for the tax credit. To qualify, you still must have signed a contract by April 30, but it will relieve some of the pressure to close by June 30. Buyers who had not expected to close by June 30 may now be able to qualify.
 


The secret to closing your loan on-time... June 21, 2010

"A happy person is not a person in a certain set of circumstances but rather a person with a certain set of attitudes." - Hugh Downs 

Rates are the lowest we have seen since the beginning of the low mortgage rate period.  Helped by the economic uncertainty in Europe and the US Mortgage Backed Securities continue to mirror the low yields of US Treasuries.  During these low interest rate periods it is important to work with a lender focused on closing your loan on-time.  Good systems allow this to happen.

The secret to closing your loan on-time and quickly is three fold:

  1. Find a lender that has span of control over the loan process; make sure they have access directly to underwriting, processing and the closing department.  Ask you lender if they can call each of these departments directly and discuss your loan and if necessary work to get your loan through the system quickly.
     
  2. Make sure the property is in good condition.  A mechanical inspection that finds multiple repair items or a home that has visual repair issues may delay closings  Even-though an appraiser's main focus is not on repair items they are required to disclose an visible concerns on the report.  Once an appraiser makes a notes on repair issues these items must be either repaired, cleared by a mechanical inspector, or cleared by another expert contractor before closing can take place.
     
  3. You must get all necessary paperwork in your lenders hand immediately.  Does your lender have a prepared list of items you need to provide him or her to get your loan closed on time?  The list below will outline what we need to get your loan closed on-time.

ITEMS TO BRING FOR APPLICATION

  • Most recent Pay stubs covering a 30 day period
  • Most recent bank statements covering a 2 month period: all accounts, all pages
  • Most recent asset statement from retirement (CD, Money Market, IRA, etc.)/ 401(k) accounts: all pages
  • 2008/2009 W-2 forms (or) 1099 forms
  • Retirees: Copies of current Social Security, pension, etc, letters
  • If you receive more than 25% of your income from commission, OR are self-employed, please provide 2008/2009 tax returns with all schedules

Other: Information we may have discussed on the phone that would not be included in the above documentation

  • Residence history: landlord, address, telephone number, dates lived there (must cover a minimum of 24 months)
  • Employment history: Company, address, telephone number, dates worked (must cover a minimum of 24 months)
  • Homeowner’s Association: contact person, address, telephone (if applicable)
  • Homeowner’s insurance agent: telephone number
  • Closing Attorney: telephone and fax numbers
  • Gift Letter: if receiving gift funds for down payment
  • Credit Explanation letter (if there are any credit issues in your past)
  • Proof of collections paid
  • Proof of identification: drivers license/ passport/ ID card

For Purchases

  • Copy of Offer to Purchase Contract with all addendums and all signatures
  • Contact numbers for Real Estate agents and/or sellers
  • FHA and VA loans required additional addendums
  • VA only: Certificate of Eligibility and DD214

For Refinances

  • Copy of Promissory Note and Settlement statement from initial closing
  • FHA or VA case number if refinancing a FHA or VA
  • FHA: Proof of Social Security Number, i.e.: pay stub, W-2, Social Security card
  • VA only: Certificate of Eligibility and DD214
     

At the Valeo-Croy team we are accessible, we have extensive program expertise and we are committed to close on-time.  With our span of control "on-time" for us means closing your loan when we committed to close your loan, not when we decide you can close.
 

@ The Valeo-Croy Team, we are here for you.

The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings                             
 
The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.

This information is for illustration only. It does not constitute an application for a loan or an offer or commitment for Cunningham and Company to make a loan on these terms. Interest rates are subject to change until an application is completed and you lock in your interest rate. The figures noted are estimates and may vary depending on discount points, taxes and insurance. Programs, terms and conditions are subject to change without notice. Mortgage loans are subject to credit qualifications. Normal credit standards apply.   Date: 6/21/2010

 


Gift Funds for Down Payment: how much and what loans? June 28, 2010

The requirement for down payment when first time home buyers enter the market has seemed to present an obstacle after years of 100% financing options and down payment assistance programs. Another challenging area is when children want to assist their aging parents purchase a home. The rules for down payment and gift funds are not 100% clear and they do vary based upon the loan type FHA, VA, USDA (Government loans) all have different rules. Conventional financing has its own set of requirements for down payment and gifts.

For Fannie Mae and Freddie Mac a buyer must have 5% of their own seasoned funds into the transaction. By "seasoned funds" we mean funds in an account that do not show up as a large deposit within the most recent 60 days of bank statements. For example a couple is buying a $200,000 home and the parents are willing to give $20,000 towards the purchase of their home. The couple will still need to have $10,000 of their own funds to get loan approval. The only exception to this rule is if 20% or more of the purchase price is gifted in which case the buyer does not need any funds of their own. In our above example of the parents and grandparents donated $40,000 then the couple would need $0 of their own to close.

Government loans have different rules: 100% of the down payment and closing costs may be gift funds and the borrower is not required to have any of their own funds into the transaction. These loans often have higher closing fees that will need to be covered. In most cases these will have monthly mortgage insurance premiums as well (resulting in higher monthly cash flow requirements). The good news is this type of loan does provide an opportunity for first time buyers and retired borrowers to get into a home without the large upfront cash outlay.

In general gift funds must come from a direct relative. There are exceptions on a case by case basis when the gift can come from a individual that is very close to the borrower such as a foster parent or fiancé. Funds can come from churches and other non-profit groups.

Gift funds may be the perfect way for someone to take advantage of the record low interest rates and begin home ownership now.

As always Deanna and I are here to answer any gift fund questions you may have. All our best to you for a great week!

All our best for the upcoming week.
@ The Valeo-Croy Team, we are here for you.

The Valeo-Croy Team - (704) 366-7711
Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings


The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.
This information is for illustration only. It does not constitute an application for a loan or an offer or commitment for Cunningham and Company to make a loan on these terms. Interest rates are subject to change until an application is completed and you lock in your interest rate. The figures noted are estimates and may vary depending on discount points, taxes and insurance. Programs, terms and conditions are subject to change without notice. Mortgage loans are subject to credit qualifications. Normal credit standards apply. Date: 6/28/2010