Mister VA's Mortgage News

Don't Be A Frog Boiled Slowly

There is a story about a frog put in a pan of water at room temperature.  Being a cold-bloooded creature, the frog will stay in the pan as the water is heated.  By the time the water is too hot for the frog, it is too late for him to jump out.  His temperature was raised slowly and he did not notice the danger.  If the frog is dropped in a pan of hot water, he is shocked by the temperature change and will jump out.

That story can apply to homeowners who gradually find their finances are beyond their control.  If the problem is ignored, it becomes too great for very many options to be available.  This can happen to veterans with VA loans, too, of course.  But the Department of Veterans Affairs has thrown you a lifeline.  They have helped over 74,000 veterans who have had problems paying their mortgage.  If you find yourself in that position--don't wait. Don't be the slowly boiled frog.  Make a call.  It could save your home.

Finally, It Happened!

I have had a couple of rounds of golf with combination scores [2 9 hole rounds combined] that have been under 100.  But I never have had an 18 hole round under 100.  Until today.  I went with a friend of mine this morning and it was still in the 40s.  Gray.  Windy.  And the first hole was challenging.  I hope to get 6 or under on the par 4 390 yarder.  It is a new green that is hard as a rock and faster than a slide after 50 kids have gone down with wax paper.  I scored an 8.

But, even though I did not think specifically about the book "Extraordinary Golf", it must have sunk in.  The next hole is a long par 3 and I putted from shy of the green and missed a birdie by 3 inches.  I made par and my friend bogied.  We joked about playing that hole 16 more times so we could get really good scores.  Then 3 tap ins for bogey, followed by a par, another tap in for bogey, another par and another tap in for bogey and I finished the front 9 with a 45--my best nine holes ever.  This may not seem impressive to anyone else, but to me this was a milestone.  I had been under 50 3 times in a row on the front nine, which is uncharted territory.

The back 9 started out with a short putt for bogey and then a tough hole followed by another bogey & par.  The next two holes were not great, but still no snowmen since the opener of the round.  Hole 16 is up a steep hill and can be a very tough hole, but I sank a long par putt, my fifth par on the day.  I had a rough time on the par 3 hole 17.  I managed a double on the last hole and when I added things up, I had a 53 on the back, which was good enough for a 98 and worthy of celebration.  It is probably the last round of the season thereand it was a good way to finish.

What's On YOUR Bucket List?

 We've all had hopes and dreams ever since we were kids.  Things we have always wanted to do and things we realize we may never do.  I have seen some dreams of my folks occur and others that will remain dreams.  One of my favorite movies of all time is "It's a Mad, Mad, Mad, Mad World".  In the opening scene there is a guy passing cars recklessly on a winding mountain road.  He loses control and crashes.  People rush to his aid, but he knows it is too late.  He tells them all about a sum of money and some clues as to where it can be found.  He then literally 'kicks the bucket'.  He would not fulfill that particular dream.

In business and in our personal lives, we have realized some goals and dreams, fallen short on others and know that some will never be fulfilled. On a personal level, here are some of the dreams I have fulfilled.  I ran for political office.  I saw several games at Olympic Stadium in the final year of the Montreal Expos near the end of the season.  I went to Vancouver with my wife for a week.  I drove to see my birthplace.  I shared a lot of growing up events with my kids so that they could experience some of the things I did.  I saw the Rocky Mountains. 

I would someday like to go to England and see a Premier League game.  I would like to get a hole in one.  I would like to see an NFL game in Buffalo.  I would like to call a varsity basketball game on the floor where I learned to play.  I would like to go to Arizona.

In business, I have opened up a branch mortgage office.  I have attained the Certified Mortgage Professional designation in both Vermont & New Hampshire [the first and only one to do so, at this point].  I have gone to a New England Mortgage Bankers Convention.  I have been top producer for my company in Reverse Mortgages.

I have a number of goals yet to attain.  I am keeping those to myself for now.  But what about YOU?  What's on YOUR bucket list?

 

One Last Chance

You never know when you will have another chance to do something.  So, today, after taking some things to my daughter, who lives near my old hometown of St Albans, Vermont, I decided to have a rematch with the Champlain Country Club.  Those who have followed the blog know that I am a new golfer in my 4th season.  The only time I set foot on the golf course growing up was in the role of caddy for one of my good friends, the late Terry Baker.  The course was only 9 holes in those days.  I do not remember much about it other than he let me take a tee shot on one of the holes.  It was lousy.

Last year, on a hot summer afternoon, I golfed there for the first time.  Not knowing the course, even from my caddying some 35 years earlier, I failed miserably.  I did not want that to be my only memory of the course.  My handicap [other than not being a very good golfer] is around a 32.  I had hoped to get under 30 this season, but that will have to wait.  One of the things I have learned is to not try to make up for a bad tee shot.  And today, that strategy paid off.

I have a favorite club.  It is my 8-iron.  I use it when I am feeling frustrated or about to go into a tailspin.  I can count on a good shot even if it only goes 125 yards or so.  But it is better than trying to overcompensate and making an even poorer 2nd shot.  A bad hole to me is a snowman or higher on the scorecard.  And today, I only had one hole like that. [I chose not to use my 8-iron & paid for it]   I did not lose a ball.  I lost 6 or 7 the first time I played there.  I played the front & back with equal scores and had the best away round I have ever played.  The leaves were past peak foliage, but the weather was great, and I enjoyed the round immensely.  Made bettter by taking that one last chance.

"I Got Rid of a Ton of Stuff"

That is an expression that we hear quite often.  I have used it myself.  Only this time it is true.  In fact, my wife & I got rid of 1.59 tons if you want to be precise.  And that is only what went into the dumpster.  The yard sale held a few weeks ago saw us saying good-bye to many other household items in our effort to simplify our lives.  Some things ended up going to our kids for them to decide on years from now.  And other things we decided were important enough to keep.  Even furniture that was in great condition was not spared.

Among the stuff that is gone are magazines I had so proudly acquired over the years but rarely, if ever, referred to as they sat neatly in a row on my desk at work.  If you do not use an item and it is not really worth much to anyone else, then why hold onto it.  I am trying to simplify things at work as well.  If I do not need it.  If I do not consult it.  If it takes up space.  It is now on its way out the door.

I am amazed when I look at my office which I opened in May of 2001.  I had a folding chair, a card table, an old phone and a fax machine.  The two room office looked so barren.  Oh for those days to return!  WIth 4 desks, a table, a dozen filing cabinets, etc., space is at a premium.  You might wonder what that has to do with mortgage officers.  Just think of the product line available now and the product line available in 2006.  That should send you on your way to simplification.  In fact, the sister phrase to "I got rid of a ton of stuff" is probably "I am just getting back to basics."

Interest Rate Volatility Is No Joy Ride

Watching the roller coaster ride of mortgage rates these past two weeks has been a stomach turner for sure.  For those of use who have been in the mortgage business for any length of time, we really have not seen the volatility head in both directions within short periods of time.  We did see periods of rapid decline in 1992 and into the fall of 1993.  We also saw rapid increases in rates from the fall of 1993 until early 1995.  Those cycles have been repeated several times since then.

 

Immediately after the Fannie Mae/Freddie Mac consolidation by the Federal Government, we saw rates plummet to levels not seen since January. Then, since the 8^th of October, we have seen rapid increases and severe increases in rates.  As I write this on the 15^th of October, the difference on a zero point 30 year fixed rate FHA loan is 1.5% higher on the rate than it was less than 10 days ago.  Conventional rates have seen similar increases, but are not as severe due to the number of rate options that are available.

 

The ‘Murphy’s Law’ syndrome sometimes will kick in here as well.  As soon as you lock your rate, you may see a decrease which you cannot obtain.  But, if you do not lock in your rate, you will see an increase and will wish you had locked your rate.  Hopefully, the recent rise in rates will not continue its trend of the past few days.

 

The Federal Reserve has talked of lowering its rate once again.  Please recall my earlier discussions on this subject. This will NOT result in lower mortgage rates.  The opposite may well occur.  The appetite for Mortgage Backed Securities [MBS] is not very strong right now.  In fact, it is not too far different from feeding a trout one of your best worms and expecting him to bite at the next cast.  MBS activity drives mortgage rates.  The more interest in buying, the higher the price.  The higher the price, the lower the yield.  The lower the yield, the lower the corresponding mortgage rate.  And as a Loan Officer, I am on the very same page as the borrower.  I like the rates to be lower than they are.

 

If you have an application pending but not locked, this kind of activity can be gut wrenching.  Especially, if things are going the wrong way and your rate is floating.  Just be ready for a drop and do not be greedy.  I have spoken to many folks over the years who have wanted the rate to go just a little bit lower or just wanted one more day to think about it.  If the rate today will work for you, then you should take it and lock it in.  But always remember, keeping track of the rates is your responsibility.  Most loan officers try to be pro-active in that area.  Rates usually are available late morning each day.  If you are floating, make sure that you make the call to find out about rates. 

So, Is There STILL FHA Money Being Loaned Out?

With all of the headlines about government bailouts, bank takeovers, stock market declines, etc ad nauseum, this seems to be a question on the minds of consumers. Everywhere I go, I am asked by people in my community about the availability of mortgage money. Most are readers of my column in the local paper, but all have a slight distrust for the media and the validity of the information being provided to them on the evening news. In the light of all of this, those questions are good ones to ask. And since FHA loans make up a large percentage of the mortgage business, at least in my corner of the world, I will focus on that program in this column.

FHA is not the old Farmers Home Administration. It is run under the auspices of HUD, not USDA. It has been around since the 1930s and it was the first program that offered lenders protection in the form of mortgage insurance when a smaller down payment than the normal 20% was being made by the homebuyer. FHA has lender guidelines that are published and there are Direct Endorsement [DE] underwriters who are given authority to approve the loans as opposed to sending files directly to HUD for approval. Here is where the differences lie. HUD may have guidelines, but lenders may have more restrictive self-imposed guidelines by their own choice. Some of the guidelines that relate to credit score, property type and alternate credit are being focused upon by lenders today.

HUD does not have FICO credit score requirements, for example. But lenders may decide to impose them. And many have decided that only automated approvals will allow them to move forward with a loan application if the credit score is below a certain threshold. FHA [Federal Housing Administration] does allow for manufactured housing, too. There are certain requirements for manufacture dates and foundation specifications. Those loans tend to be grouped together for sale on the secondary market and may be priced differently. At present, the secondary market does not seem to have much of an appetite for loans secured by manufactured housing. And, consequently, a number of lenders are not presently offering the product.

Related to the FICO scores are the absence of scores and borrowers who use alternate credit references such as utility bills, rent, documented savings histories, etc., to compensate for the lack of traditional credit. Some of these homebuyers are very good credit risks and have demonstrated responsibility without the use of traditional credit. This is an area that some lenders are not willing to take a risk on at the moment.

But, the good news is that FHA loans ARE being done. Loans ARE being funded. And even if down payment requirements are increasing slightly, the low rate of mortgage insurance makes FHA one of the best programs available. It is not a subprime program. And it is not only for people who have had credit issues. There are no income restrictions, either. If you are shopping for a home, you should consider the FHA program. You can contact HUD for a list of approved lenders or you can ask your trusted real estate professional about the program. If you are working with a knowledgeable agent, he or she will not only know about the FHA program, but which loan officers are proficient in FHA lending. And that is a very important piece of knowledge to have in these times of uncertainty.

New England Mortgage Bankers Conference

A couple of weeks have gone by since this conference in Rhode Island.  I would like to say that the dust has settled, but it hasn't.  I have live all but my first 17 months in New England--most of it in Vermont, but 6 years in Maine.  Until 2 years ago, the time I spent in Rhode Island was a 4 hour sales meeting in a hotel in Cranston when I worked for National City Mortgage.  In 2006, I attended the NEMBC in Providence and this year, it moved back to Newport.  A lot has changed in the two years, most notably the size of the exhibition hall and the number of attendees.  About 1/3 attended this year and there were no Jack Davises giving seminars and no subprime lender booths.

The big message was licensing of mortgage originators.  All 6 states had banking officials there to discuss the changes.  These changes are good as long as all mortgage officers are licensed including those working for banks.  Many LOs move from broker to mortgage banker to banker and consumers need to know that the playing field is level.  They need to know that the loan officer has the tools and the training no matter where they obtain their mortgage loan.

The mood was more upbeat than I thought it might be.  The 2007 conference featured a job fair.  Still there was the bailout in the background and the election that was discussed.  Of course, Congress has more of a say than a President does when it comes to legislation.  So, it is important to choose wisely next month in congressional elections.  Probably more important than in the presidential race.  What will happen at the 2009 convention?  Will it be smaller still?  I suspect not.  I think it will have more educational opportunities for LOs to receive Continuing Ed credits.  And the product mix may be a bit broader than it is today.  Not like 2006, but certainly a more optomistic mix of offerings than now.

Reciprocate. It Always Pays.

As a board member of the Newport Country Club, one of the projects I have been working on this year is a reciprocal agreement with area country clubs.  It is an ongoing task and although 5 agreements were secured early in the season, we continue to seek out others.  About 2 weeks ago, I was headed back from southern NH when I stopped at the Bethlehem Country Club.  The manager was very enthusiastic about the idea.  And on Wednesday, 16 folks from Bethlehem golfed a round at Newport CC.  This is an idea that has taken on a life of its own. 

But, it is something that translates into our business very easily.  What we are giving to members of our club and to members of other clubs is something of value.  Something that can be used.  And something that will be shared with others.  It is something that the other clubs can sell as a benefit to belonging.  And that is how it is for us.  If we refer folks to other lenders who have a product we do not have, it is very likely that those folks will do the same when we have something that they cannot offer.  If we know of someone thinking of selling or buying real estate or see a For Sale By Owner sign, we can pass along a referral to a Realtor.  It is giving something of value to them and it is appreciated.  It can set us apart from those who are always and only thinking of themselves.

Think about how you feel when someone gives you something.  What do you think about the giver?  What will you say about the giver? Now translate those feelings and reverse the roles.  I am not saying that the reason to give is that you will receive.  I am saying that because you give, you will receive.  Reciprocate.  It always pays.

How Are Veterans Affected by Recent Events?

With all of the doom and gloom on the evening news, one would think that there is no more mortgage money available.  And, though it is true that many programs have disappeared and there are fewer 100% financing options available, the Veterans Administration loan program is still intact.  What has happened with VA loans is the tightening of credit standards by many lenders has meant that a greater emphasis is being placed on credit scores and what is known as ‘reserves’.

Reserves are funds available that do not need to be spent at closing by the borrower.  Typically, if a veteran has closing costs and pre-paid expenses paid by the seller, no money is required other than fuel re-imbursements.  However, if credit scores are below 620, a loan approval may not be granted if there are not two months’ reserves equaling two monthly mortgage payments including taxes and insurance.  Sometimes, if the veteran is not stretched to the max in qualifying ratios, the reserves might not be needed.  If your total payment will be $1000, then you should have $2000 in the bank.

One of the best things veterans can do is to get pre-approved before house shopping.  If there are credit issues, they can be addressed and taken care of ahead of time.  If money needs to be saved, a plan can be put together to accomplish that goal.  A good rule of thumb is this:  Add your rent plus savings per month and that should be what you should look at for housing expense on a mortgage.  Utilities are also something you should factor in. If you are not paying them separately from your rent, then you may want to scale down your housing payment goals.

The good news is that VA loans are still available.  And it is an excellent program to use in your home purchase.  Call or email me with any questions you may have.