Layman’s Information on H.R. 3221- Foreclosure Prevention Act of 2008

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