2011 a defining year for brokers

If I were to conduct a survey on rating 2011, my guess is most would give it a big zero. With the housing market still central to the sluggish economy, last year was certainly difficult. However, I believe that the challenges mortgage brokers and consumers faced brought new beginnings with regard to transparency, lending practices and consumer protection.

There were many changes in 2011 as to the way mortgage brokers worked. Rules got tough on ethics and disclosures, and as a result, many brokers left their independent business to join banking institutions. Why? Because the new laws don’t apply to banks. It’s much easier to conceal hidden fees rather than to tediously document every piece of information, which brokers must now do. Hidden fees imposed on consumers result in rebates for the banks, which they don’t need to divulge.

With regard to banks’ exemptions to the disclosure regulations, I discussed this in a previous blog, “Mum’s the word at banks.” It’s also important to know that a bank’s loan agent doesn’t need to tell consumers how much their compensation is for the loan and that they are paid regardless whether or not the loan closes. This inhibits you from shopping for the best rate and program suited for your individual needs.

Since the stricter disclosure rules apply only to brokers, it’s understandable why so many took the easier path by joining a bank. For those of us left in the field, we have risen to the top of our game. Last year brought the unique opportunity for us to demonstrate our depth of knowledge and expertise in the lending industry. Unlike the bank, we don’t get paid until the transaction is closed, which motivates us to be more responsive to you and ensure your needs are met on every level.

Additionally, last year brought historic low interest rates plus an array of new, never-seen-before programs for purchasing and refinancing. Low and zero-down payments, Down Payment assistance programs, better refinancing programs (check out last month’s blog on the new HARP), new VA assistance program and there’s more to come. 2011 allowed us to be of better service to you, and we are excited about the possibilities that 2012 holds for working and helping you.

HARP II – the sequel

In an effort to help homeowners underwater with their mortgages, the Obama administration introduced HARP, Home Affordable Refinance Program, in March 2009. The program is essentially a bust as it failed to reach those who needed it the most. There were problems with mortgages that had a second mortgage holder, complications with mortgage insurance, lenders preferred “regular” refinancing, and perhaps most significantly, our economy didn’t pick up.

Two years later, the pool of struggling homeowners who are not able to quality for refinancing has deepened, and new efforts are underway to make it easier to save them from drowning.  The revised HARP Phase II is anticipated to roll out on April 1, 2012, and while final details haven’t been publicized yet, we do know of some key enhancements:

• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May 2009.
• The current loan-to-value (LTV) ratio must be greater than 80%.
• The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.
• The new change also cuts fees for those who do shorter-term mortgages.

So how do you know if you’re eligible for HARP II? The first step is to know who owns your mortgage. If it’s Freddie Mac or Fannie Mae, call us to discuss how we can help. It’s important to note that not all lenders offer the HARP program (another reason why the first phase failed).  Delta Home Loans is one of the few with the life line to keep you in your home, and we are here to help.

Prepare yourself to buy a home again

Home is where the heart is, and with millions of Americans losing their homes these days, many are wondering if they’ll ever realize the joys and benefits of homeownership again. With foreclosure, short sales and bankruptcy increasing, I’m frequently asked how long one must wait to buy again.

The short, simple answer is that you can buy a home as your primary residence three years from the date the major credit event is completed. It’s also worth noting that it’s possible to buy with a mere 3.5% down payment! Zero down payment is offered in Nevada County and through VA financing.

So what does that mean for you? It means that the major event of losing your home won’t keep you out of the home-buying market forever. It also means that preparing for that day is important. Getting ready is key!

1) Document everything that caused the event to happen. Loss of a job, major medical situations, death of a loved one and other extenuating circumstances are used for consideration in the loan process. The more information you can log and document, the better. We like big files!

2) Stay on top of the timing and process of the event. If you moved out of your home before it is officially foreclosed, make sure you find out the finalized date. This is when your wait time begins. A word of advice if you move out prior to the foreclosed date – you are still liable for anything that happens at the house. Keep up your homeowner’s insurance. You’ll get good points for this.

3) Start today to rebuild your credit score. Have a minimum of two new credit accounts that are all paid on time. Your credit is only temporarily broken – it can rebound in a short period of time.

You can become a happy homeowner again, and it is our job and desire to make this happen. Three easy steps toward a three-year goal. Let’s do it together!

FAQ- Most asked question #1

How does $0 application fees sound?

I don’t understand why mortgage brokers, like me, are so misunderstood. I am always getting feedback that borrowers stay away from us because they believe our fees are higher than going through their bank or online. Perhaps it’s all those mortgage television commercials, telemarketers or the banking giants that are giving us a bad image, but it’s time to set the record straight.  There is ZERO cost for you to use our services and we offer the BEST service.

Zero cost, you ask? That is a true statement as it’s the law. The new, amended “Truth in Lending Act “(Regulation Z which relates to loan originator fees) went into effect on April 1. The regulation was created to remove the ability for a lender to increase or set high-priced compensation for services. To accomplish this, consistent compensation is paid by our lending institution (typically a bank) for loans for all sizes.

In other words, regardless of your loan amount, our compensation comes from our lending source, and is based on a set percentage. You don’t pay us any money for putting together your loan and if you do pay an origination fee, that fee is used to reduce your interest rate only.

At the heart of this amendment, I believe, was the common practice among banks and some unscrupulous brokers to “steer” borrowers into loan programs or high interest rates in order to increase their compensation.  Consumers were often steered into loan programs that were not in their best financial interest. Moreover, banks didn’t and still don’t have to disclose fee-related information where brokers are required to disclose everything as it should be.

As mortgage brokers, we’ve long been under stricter scrutiny while banks don’t have to adhere to the same disclosures as us. This new rule makes the playing field more even, and it’s about time. We go the extra distance for you – even help with your credit score and help you prepare to purchase again after a Short Sale, foreclosure or bankruptcy. We do so much more at absolutely no cost to you.

How does that sound?

Have you heard of short payoff refinancing?

If you haven’t heard of short payoff refinancing, you’re not alone. Not all lenders offer it, so it’s not a program many homeowners are aware of. However, if you’re one who is feeling the financial pressure of high mortgage payments that exceed the value of your home, this refinancing program could be the discovery of the year for you.

Traditional refinancing provides a lower interest rate to your existing loan, which is based on the value of your home at the time of that loan. Home values today, as everyone knows, have plummeted, leaving homeowners paying more than their home is worth. Combined with our economic hardship, it’s also leaving homeowners struggling to stay in their homes.

Short payoff refinancing helps homeowners to stay in their home by negotiating a lower loan amount with the existing lender. Once agreed, that opens the door for a new, re-financed loan that pays off the reduced loan with your existing lender. The refinanced loan is through FHA with a 97.5% loan-to-value amount. The current home loan payments cannot be behind.

With the economy not improving as predicted and more homeowners facing foreclosure, the short payoff refinancing can be an appealing option for a bank or mortgage company. By agreeing to a reduced loan, they are not left with a larger short-sale debt or sizable foreclosure on their books. The short payoff refinancing helps lending institutions as well as homeowners, as it is far more advantageous than traditional refinancing. But only if it’s not too late and you haven’t fallen behind with payments.

Delta Home Loans is one of the few lenders offering this unique refinancing program. With this program, a good negotiator is critical in getting your existing lender to agree to a payoff at a lower amount. This is where our expertise and negotiating skills can be of utmost value to you. Don’t wait. Save your home, give us a call! (530) 478-8383.

Cash is king … especially when you can get to it

In today’s housing market, who wouldn’t pay cash for a new home if they could? Prices are affordable, there are plenty of homes to choose from, and, perhaps more importantly, you don’t have to go through the stringent lending process. Plus, investing in a home with growth potential can be more appealing than riskier options that are out there.

While it’s hard to believe in the midst of our tough economic times, many people are doing just that – paying hard-cold cash for a home. Whether it’s an investor with access and resources to money, first-time buyers getting help from family, or equity-rich homeowners realizing a windfall after selling, many of today’s homes sales are paid for with cash.

The downside to this in the past has been the requirements in applying for a cash-out loan, including a waiting period of six months after purchasing a home. You had to wait six months before you could even apply. Just recently, however, Fannie Mae suspended this requirement making it quick and easy to get up to 70% of what you paid for the home back out in cash to pay yourself back or invest again.

This is great news! Let’s say you recently made an all-cash purchase, and you decide you want to diversify your money in other investments, buy another great-priced home to become a landlord, or simply need the money for personal needs. If you didn’t finance any portion of your home purchase, you can apply for a conventional loan to get your money out. Plus, you can add on the processing costs to your loan (fees, points, and closing costs) which have been reduced since April 1, 2011.

The timing of this new cash-out program is an added bonus. There are reports coming out indicating signs of an economic recovery the second half of 2011. If that holds true, interest rates and home prices will start to go up as well as stocks and other investments. Now is the time for many to leverage their money to realize the best possible gain down the road. And to do that, it takes cash.

As lending brokers, we understand and appreciate the value of “cash is king.” We have a variety of programs and resources to help to you get your hands on it – quickly. The only wait is if you hesitate to pick up the phone.

Want to beat the housing market with low rates?

Are you one trying to beat the housing market with the lowest mortgage rate? In today’s economic climate of ever-changing mortgage rates, picking the optimum time to lock in the best rate is tricky. As a result, many buyers and those who want to refinance remain on the fence afraid to make a move because tomorrow’s rates might be better. In doing this, there’s also the possibility of the alternative – a missed opportunity because rates go up.

In an effort to seize the best rate, borrowers tend apply for a loan when they believe the rate is at its lowest and lock in that rate at the beginning of the process. In too many situations unfortunately, borrowers find that by the time all the loan requirements are met and unforeseen delays stall the closing, their locked rate has expired. They then have to settle for the new, often higher, rates which can be frustrating at its best.

For all the fence sitters out there in pursuit of low interest rates, Delta has a solution. It’s Best Execution. It’s a great solution because it allows you to strategically keep “sitting on the fence” without making a commitment on a rate until the very last minute. It is a bit different from locking in a rate at the time of initiating the loan application in that it combines closing your loan (yes, closing) with the lowest rate at that time.

The reason why Best Execution works is simple. It is a rate that is locked after all loan conditions and appraisal items have been satisfied. With the loan process more stringent these days, this is a real benefit that takes away the worry of trying to beat the rate lock clock. After loan conditions are met, the typical lock time is 12 to 15 days in which your loan must close and no additional information is required. This ensures that you have the most up to date and lowest possible rate at that time.

Additionally, Best Execution affords you the opportunity to buy down your locked rate to reduce it further. The closing costs (points/discounts) would be higher; however, if you plan to hold onto your mortgage for several years to recover the cost difference, the lower rate could be a valuable long-term payoff.

We’re seeing mortgage rates on a downward trend for the summer. In fact, it’s been a really long time since 4.5% for a conventional 30-year loan has been offered. With amazing low rates and the comfort of Best Execution, this is perhaps the worst time to be sitting on a fence.

Want to beat the housing market with the lowest rate? We’ve got the answers.  There are great lending programs to take advantage of. What are you waiting for?

USDA Rural Loan a Best-Kept Secret

This isn’t my first blog about the U.S. Department of Agriculture Single-Family Housing Guaranteed Loan Program that is offered here in Nevada and Placer Counties. Nor is it my first blog about big-name banks withholding information and their limitations when it comes to financing options for those seeking a mortgage or re-financing.  However, the two topics have intersected once again, so I’m compelled to recycle my message regarding the realities and differences between a banker and a broker.

Unlike banks that are limited to their specific funding, I have a variety of loan options to offer my clients, including all the great government programs geared toward affordability. One of the best-kept secrets is the USDA’s program which guarantees loans for single-family homes in designated rural areas. Aimed at low- and moderate-income borrowers with 100% financing, low fixed interest rates and no Mortgage Insurance, it has opened many homebuying opportunities for residents in our community.

Recently during the final process of closing on a USDA loan, my client expressed his good fortune at learning about the program through Delta. It turns out that, simultaneously, a friend and co-worker of his went to a big-name bank for a mortgage, but was never told about the program. He was never advised of how to repair his credit score to get a lower interest rate or how to eliminate Mortgage Insurance.

Furthermore, my client’s friend was required to come up with a 3.5% down payment. Like many buyers, he got locked into the bank’s high-cost, no-way-out loan that only benefits the bank’s already lucrative bottom line. By the time his friend learned of the 100% financing through USDA, he was too far into process and too worried about the fallout to move his mortgage.

We hear of this happening far too often. There are many differences between big banks and brokers worth re-blogging. Bankers are not always trained loan officers. Their responsibilities include opening CDs and checking accounts along with working on car loans and mortgages.

Particularly important to emphasize is that banks are not required to disclose some information to consumers including available local programs or yield-spread premiums (rebates for banks = higher rates for you). As brokers, we are required to disclose absolutely everything to you, which I believe is simply good ethics and business practice.

The USDA rural loan program is just one of the many excellent, federally funded programs being offered these days. Just give us a call. We love talking about best-kept secrets.  We’d also like to hear about your experiences with a big-name bank. Leave us your comment.

Fannie Mae and Freddie Mac’s HARP offers hope

Every day, most of us look to find hope in the recession’s recovery. Home values continue to dwindle along with jobs, while the federal government creates and implements new programs to stabilize the economy and the housing market. For many in fear of losing their home, government programs can offer the hope they need for survival.

The Home Affordable Refinancing Program (HARP) is one. It’s a key part of the Making Home Affordable relief efforts to help distressed homeowners avoid foreclosure.  HARP was introduced over a year ago and was set to expire this June. With the economy still struggling and more homeowners needing to save their home, HARP has been extended for another year, until June 2012.

As a mortgage lender, I think this was a great decision. HARP has a number of advantages, particularly in that it’s a more stable and affordable mortgage, allowing rate and term refinances up to 125% of the current appraised value of the home. The program also allows a current second deed of trust to remain in place with the acceptance of the second deed of trust note holder.

A few of the program’s highlights include:

• Current mortgages have to be owned by Fannie Mae or Freddie Mac.
• There is no minimum credit score required.
• Your lower property value doesn’t hurt you.
• There will be no mortgage insurance (MI) with negative home equity.
• You will probably have lower surcharges. In other words, you won’t be paying high costs for a new loan because of lower credit score or high loan-to-value ratio.
• You can have taken your home off the market one day prior to applying for the loan.

For those who have been unable to obtain traditional refinancing, HARP offers hope, and Delta can help turn your need for affordable homeownership into a beautiful reality. Just give us a call and let’s work together to see if this program works for you.  You can check if your mortgage is held by Fannie Mae or Freddie Mac with these links:

http://www.fanniemae.com/loanlookup/

https://ww3.freddiemac.com/corporate/