Other articles on Lending:  Understanding the GFE Statement

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Author – Ted Mackel Simi Valley Real Estate Agent – Keller Williams Realty

Ted Mackel is a top producer at Keller Williams Realty Simi Valley, specializing in Simi Valley Real Estate

(805) 432-7705

This clever Youtube video explains how the unemployment rate really does not address the real number. We are in interesting times.

The unemployment figures the news reports form the government do not include:

• Those not in the Labor Market
• Those marginally in the Labor Market
• Those how work Part Time just bring in some money while looking for full time replacement.

Thanks for reading Simi Valley’s Premiere Real Estate Blog!

Author – Ted Mackel Simi Valley Real Estate Agent – Keller Williams Realty

Ted Mackel is a top producer at Keller Williams Realty Simi Valley,

specializing in Simi Valley Real Estate

(805) 432-7705

The government is doing everything it can to keep stability in the housing markets.  75 million was set aside to try and help 3-4 million homeowners with Fannie Mae and Freddie Mac backed loans get help with refinancing.  This assistance was designed to help those who are paying their mortgage on time with lower interest rate refinancing.  A website was set up so home owners can see if they qualify.  See http://makinghomeaffordable.gov/

To check your Simi Valley address against the Fannie Mae and Freddie Mac databases  See:

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

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

Important Notes for 105% Refis:

Please call me if you have questions on the 105% refis right now.  They will be available to everyone with a conforming loan very soon and are designed to lower your monthly expenses so that you can keep your home(s) without a lot of hassle.  In many ways our government got this right except for the potential issues noted above.

On to loan modifications (AKA “Loan Mods”).  These are really designed for “preventable foreclosures” and I have already had seemingly qualified people declined for these loan mods so be careful how you approach this.  You have to demonstrate things have changed since you got your loan and you have to show financial hardship.  If you aren’t having financial trouble (which is a good thing) then you are probably not a good candidate for a loan mod.  In addition, these loan mods only last for 5 years in most cases so if your plan is longer term it’s best to consider a refi if you can get one.  Be aware that you may have to prove everything you say on these loan mods in writing according to the guidelines so make sure you keep excellent notes on your conversations with the lender(s).  I recommend you make a call log for every call, every person you talk to and make sure get their call center location in case you need to track them down again.

• The borrower must have had a change in circumstances that causes financial hardship, or is facing a recent or imminent increase in the payment that is likely to create a financial hardship (this means anyone with an ARM that will adjust is eligible).  The lender must ask about current income and assets and current expenses as well as the specific circumstances relating to the claimed financial hardship. Each of these elements shall be verified through documentation.
• The home must be an owner occupied.
• The home must be a primary residence (verified with tax return, credit report, and other documentation such as a utility bill).
• Borrowers in bankruptcy are not automatically eliminated from consideration for a modification.
• First lien loans must have an unpaid principal balance (prior to capitalization of arrearages) equal to or less than $729,750.
• Loans can only be modified under the ”Home Affordable Modification” program once.
• Subordinate liens are not included in the Front-End DTI calculation, but they are included in the Back-End DTI calculation (see below).
• Servicers are required to”escrow” for modified borrowers’ real estate taxes and mortgage-related insurance payments immediately.  This means every modified loan will have “impounds” and you will have to pay your taxes & insurance monthly moving forward.
• Redefaulting Loans will be terminated from the program, and no further payments of any kind will be made to the lender/investor, servicer, or borrower. Redefaulting Loans should be considered for other loss mitigation programs prior to being referred to foreclosure.
• The investor may not require the borrower to contributeany cash to close the loan mod.
• Unpaid late fees will be waived for the borrower. These include late fees prior to the start of the Trial Period and accrued during the period.
• The borrower’s income will be verified by requiring a signed Form 4506-T (Request for Transcript of Tax Return) and obtaining the most recent tax return on file for each borrower on the note. For wage earners, the two most recent pay stubs for each wage earner on the note will also be required. For self-employed borrowers or for non-wage income, the borrower’s income will be verified by obtaining other third party documents that provide reasonably reliable evidence of income. Borrowers must also represent and warrant that they do not have sufficient liquid assets to make their monthly mortgage payments. Better hide those millions!
• You do not have to trash your credit to be eligible, if you meet the hardship requirements you can still keep up your credit.
• There are no modification fees or charges borne by the borrower.

Front-End Debt-To-Income (DTI) Target:

These loan modifications are designed to get your payment to 38% of your gross income. Here is the easy way to figure that out: Take your current gross income and divide by 12 then multiply that number by .38.  That is your new target payment including your principal, interest, taxes, insurance and HOA fees (PITIA).  For example: You make $60K per year which is $5000/mo x .38 = $1900/mo target payment.

• Mortgage insurance premiums are excluded from the PITIA calculation.
• The Front-End DTI Target is 31%.  The government and your lender will contribute additional monies after you make your first 3 payments on time to get your payment to 31% DTI (In our example new payment reduced to $1550 if you make your first 3 payments on time).
• The minimum interest rate “floor” on these loan mods is 2% with no exceptions, your rate might be higher but not any lower.  This means that if our payment of $1900 requires a 1% interest rate instead of 2% or more then you will not get the loan modification unless they forgive you enough principal to qualify or if the lender defers a portion of your principal.  This might add another layer of complicating factors but at the end of the day, if you are successful with this you will be very happy.
• Some borrowers will be required to work with a HUD approved counselor if their other debts are too high and the loan modification will not take effect until they provide a signed statement indicating that they will obtain counseling.
• In many cases you will get $1000 each year for the next 3 years if you remain current on your loan mod.

Interest Rate Cap:

• The modified interest rate must remain in place for five years, after which time the interest rate will be gradually increased 1% per year or such lesser amount as may be needed until it reaches the Interest Rate Cap.
• The Interest Rate Cap for the modified loan is the lesser of ( A ) the fully indexed and fully amortizing original contractual rate or ( B ) the Freddie Mac Primary Mortgage Market Survey rate for 30-year fixed rate conforming mortgage loans, rounded to the nearest 0.125%, as of the date that the modification document is prepared.

To Wrap This Up:

I know there is a lot to digest here, please feel free to email me or call me with any questions. We, here at Sherwood, want to help you as much as possible but we don’t do these loan mods for any sort of fee, we actually help you for free.  People ask me why I don’t charge for any of this and I respond that we do a ton of things for our clients for free and helping them is one of those things.  I spend at least 20% of my time doing free things for people and that is not about to change.

We will certainly help you through the loan mod process but we absolutely can’t do it for you nor do we believe you should pay someone to do thisfor you, you are more than capable!  Many of these so called loan mod companies are just fee generating machines that do very little for their clients and keep most of their “money back guarantee” money (read the fine print).  If you do find you need professional help I have a local law firm I can refer you to that I trust. Otherwise, this whole thing is much cheaper and safer to do on your own.  I have heard stories of these things only taking a few hours in many cases.  I think we all have a few hours to improve the course of our lives in these uncertain financial times.

I will be in touch soon with more news on the 105% refis as well as a few stories to share on loan mods. Until then, please feel free to contact me with anything I might do for you, your friends, your family and your co-workers.  Rates are still phenomenal and you can always count on us to give you the right advice.

Talk to you soon!

Michael Chabot
Mortgage Professional
100 E. Thousand Oaks Blvd., Suite 210
Thousand Oaks, CA 91360
(805) 496-5415 ext. 19
www.sherwoodmtg.com

See Related Stories from Michael Chabot:  A Fist Full of Dollars – Part I Foreclosure Pevention Act 2008

Here is a nice video short form CBS News on how some investors are out looking for ways to capitalize on the folly created by our government and banking system.

Watch CBS Videos Online

This is a very funny youtube Video on the Bailout money.  Sit back and enjoy!

The Good, the Bad and the Ugly: Part II

It has been a few months since my first installment of this “series” and it’s time for some very important updates on the current state of the mortgage market. This information will affect you in the future so please take a few minutes out of your day to read this email in its entirety. This information literally could change your future or the future of those you care about.

The Good:

Congress has finally passed a housing overhaul bill and the President signed it into law for October 1st of this year. Here are some of the provisions that will help the real estate market and homeowners tremendously:

• Millions of homeowners that are upside down on their mortgages will be eligible for an FHA program that will essentially forgive any current mortgage debt until the homeowner is back to a 90% “Loan to Value” (LTV)! This alone will turn around the real estate market as it takes people who were likely to walk away from their homes at some point into folks who still have equity and ownership in their home. This is an amazing opportunity for many homeowners and while there are some strings attached, this is a lifeline for many local homeowners who are under water.
• Another provision allows for a tax credit of up to $7500 for first time homebuyers. This should help to generate a lot more first time homebuyers who are the driving force of real estate markets around the country including our own.
• States will receive billions of dollars to buy and fix up foreclosed homes to avert further neighborhood blight that foreclosures sometimes bring.
• Fannie Mae and Freddie Mac are getting an overhaul and so is the FHA. One of the things going away is the ability for homebuyers to 100% finance their homes through the FHA.  This program will be gone for good in about 2 months and down payment requirements are actually going up for the FHA.

The local housing market is already starting to show signs of life and we are actually seeing multiple offers and bidding wars at the lower end of the market! Condos are still having their challenges but “starter” houses are now well priced and the competition is getting fierce. We expect that trend to continue until the rest of the market follows suit.

It is my sincere belief that starting in 2009 will see the beginning of the turn around in housing here in Southern California. Get in while it’s still a “buyer’s market” and you still hold the cards. Soon, with the tax incentives and the wider availability of mortgage financing it is going to heat up and you will pay more and lose the ability to negotiate from a position of power.

The Bad:

Mortgage rates are steadily rising and we expect that trend to continue. Fixed rates are now in the low to mid 6’s and we may see 7% before the end of the year if the economy improves. Historically, rates are still excellent but not enough people are taking advantage of the temporary loan limits. These limits are going away December 31, 2008 and it is time to act! If you or anyone you know has a loan amount under $729,750 and they are in any sort of ARM we should talk ASAP. The new housing bill is going to limit the conforming loans to $625,500 which will leave some homeowners out in the cold. PLEASE DO NOT WAIT if you have a loan that you will need to refi in the next few years. The fact is that equity is still declining and loans are harder to get. Fortunately, we have relationships with all the lenders who still want to do mortgage loans and we make it happen. We firmly believe that if we can’t get it done, no one can.

The Ugly:

Banks are failing and it looks like there are more to come before this mess sorts itself out. This uncertainty is very unsettling to the mortgage market and has made my industry even more challenging in recent months. Loans are much more difficult to originate than they have ever been in my career and the simple fact is that the “Age of the Mortgage Broker” is here…

The Feds essentially left mortgage brokers alone in this all of this recent legislation: why? Because they know that without brokers many folks are simply not going to get a loan. A good broker is worth their weight in gold (which in my case is a lot of money!) because we have dozens of relationships with banks around the country that you simply could not make on your own. I can shop 60 banks for you on any given day. In addition, I know who has the best rates, who has an appetite for your sort of loan and how to get you into a position to be the most successful.

I have had an influx of loans from banks and other brokers recently where the loan officer couldn’t get it done because:

A) They couldn’t keep up with guideline changes and they got burned

B) They didn’t have the programs

C) They don’t have the resources

D) They don’t want to work as hard as necessary to get it done

Please let me know if you or anyone you know has any questions about mortgage financing. As always, you will get an honest answer with your best interests in mind. We have the best rates and programs – GUARANTEED!

Other Extremely Important Info:

- Lenders are starting to implement a rule where if you have more than 3 financed properties they will not do your loan for any of your properties! This means the loans you have are the loans you have, period. This is very important and will affect investors very soon. If you know anyone who has 4 or more financed properties we need to talk ASAP or they will be stuck in their loans with no ability to refi.

- The “Buy and Bail” rule is being implemented at many of our lenders and this will definitely affect your ability to buy a new house while keeping your existing home as a rental. In this market it makes sense to keep your existing home and rent it out because of the market and because rents are strong. Soon, unless you can prove at least 30% equity in your current residence (through an appraisal) you will not be able to qualify for a new home unless you can absorb both payments. If you plan to upgrade and keep your current residence we need to talk right away because we can still get it done, for now.

- We have a product that is absolutely unbeatable: a 5 year fixed interest only with loans up to $5 million with rates in the 5’s! This kind of rate doesn’t exist on super jumbo money like that in the open market but we have access to it thanks to our relationships.

I want you to know that you still have a friend in the mortgage business and we will be here next week, next month and next year. While others are dropping away we are still looking out for you and we still care. Please call me. 

Have a great day and please share this with anyone you think might benefit. Best regards,

Michael Chabot
Mortgage Professional
100 E. Thousand Oaks Blvd., Suite 210
Thousand Oaks, CA 91360
(805) 496-5415 ext. 19
www.sherwoodmtg.com

Lots of interesting things happened last week including the failure of Indymac and the troubles at Fannie Mae and Freddy Mac.  While this all might seem scary for the moment, this will definitely provide some opportunity to the savvy.  We are seeing some of the smaller condos in Simi Valley reach lows that could provide as much as a 10% return for an investment rental property.

I stumbled over this great website to help stay informed on the happenings in the Banking industry I wanted to share this link

Bank IMPLODE-O-Meter

I have a series of blogs I have been working on and will get them up soon.  Here are a few of the posts I am working on now:

• Installing a whole house fan
• Marketing your home to today’s Buyers
• Simi Valley Stonegate Villas – Battle Royale HOA vs Homeowners

Stay tuned and use the RSS feature to get the feeds to my blog as they happen.  Have a great day!

Hi Ted, Just thought I’d share with you a money-saving tip that I started doing a little while ago that you may want to share with your website “people”. To save gas, time, sales taxes (usually), and get it at a discount to boot!

I save up a list of items I will need in the next few weeks or so. Then I search the online Pharmacy stores that offer free shipping on minimum orders (i.e., drugstore.com or walmart.com). I search their sites for the best prices on the items I need (which are usually less than local stores), select the items that qualify for free shipping, and then place my order. If they don’t offer free shipping on minimum orders, I don’t buy from them. Your order is delivered to your door in about 5 to 7 days. You don’t waste your time or gas driving around town looking for the best prices, which, in most instances, you’ll save sales taxes as well. With gas prices rising, the economy slowing, and anyone working on a limited budget, this works great.

P.S. I also use this method for stocking up on my pets’ food and supplies.

Have a nice week!
Lynda