Mister VA's Mortgage News

What Do You Have in Common?

It is amazing sometimes what you can find in common with someone if you ask and listen.  Today was my 'road day'.  And I head to Hardee County in central Florida to meet new people, say hello to folks I have met there recently and to build a referral network a little bit at a time.  Referral sources are not always Realtors if you are a mortgage officer.  Sometimes they can be loan officers whose product mix is different from yours.  And ignoring this group can be something I prefer that my competitors will keep doing.

One product that is not offered by everyone is the Reverse Mortgage.  VA loans & FHA loans are other loan types that may surprise you as being absent from some lenders' offerings.  But, like anything else, you have to build relationships.  In my case, I am not going to be some schmoe who stops in with business cards and asks for referrals.  I want to get to know the other loan officers and I want them to get to know me.  Think about referring friends for a moment.  Would you send them to a mechanic you found in the yellow pages but had never used?  Why should you expect anything different from your referral partners?

In this case, I found out that the loan officer had lived in Bangor, Maine, about 10 miles from where I went to college and Houlton, Maine, where I bought my first car.  She had also lived in a small town not too far from Plattsburgh, NY, where I worked for several years and knew of the 'singing bridge' in Chateauguay, NY, that spanned a high gorge.  I did mention that I did reverse mortgages as well as VA & FHA loans, which she could not do.  And I found out something about her on a personal level which means more than "Here's my card--call me".  I hope to meet some other bankers over there on my net trip.  But, before I go, I will ask this new contact who I should speak to at these banks.  Because knowing this loan officer will be one thing we will have in common.

Reverse Mortgages: A Shift in Products

There have been a number of changes in recent months with Reverse Mortgages.  Most notably in the product mix.  As a senior, you want to be aware of how these changes could affect you.  The mortgage insurance, which is through FHA, is a two way insurance that protects both you [in case of lender failure] and the lender [in case of negative equity].  That amount is based on the appraised value and is at 2% of that amount.   The origination fee, though, is ow capped at $6,000, which tops out at the $400,000 appraisal amount.  The loan limit was raised to a ceiling of $625,000 for appraised value.   Be advised that this limit is temprory through 2009 and it may be reduced if not extended by HUD. The nationwide limit was capped at $417,000 elsewhere.  And it could revert back to that level.  And the counseling is generally $125 and often is paid out of loan closing proceeds at time of disbursement.

But, with limited buyers of the loans, and Fannie Mae is the major player here, there are some risk averse decisions being made that affect pricing.  And that means that you must make some decisions if you are considering such a transaction.  Since the advent of the fixed rate HECM [HUD's FHA reverse mortgage], it has provided the least amount of cash to seniors and had to be taken in a single advance.  The more popular monthly adjustable rate HECMs had lines of credit available that featured a growing equity provision [the part that Fannie Mae was averse to] and interest only accrued on the used portion.  A greater sum of equity was available with the adjustable rate product until recently.

Now the margins for adjustable rate HECMs are higher [many at 3% above US Treasury indices rather than 1-1-75%] and the amount available is LESS than for the fixed rate products.  So many opt for receiving more money.  And that leaves seniors open to investment schemes that could tie up their funds.  And that defeats the purpose of a reverse mortgage.  It does not mean that the fixed rate product is bad, it just means you have to be sure you can access your funds without penalty if they are invested.  As a loan officer, I do not recommend using your funds for investment purposes.  You are not prohibited from doing so, of course, but you should be resistent to sales pitches that sound too good to be true.

Eventually, the pendulum will shift back toward the line of credit products.  But until that time comes, make sure that your loan officer is someone you can trust. And someone who is looking out for YOUR best interests.

Using your VA Benefit

 

With mortgage rates at or near 40 year lows and with housing prices available that haven’t been seen for a number of years, it makes sense to look toward your hard-earned VA benefit to purchase a home. Knowing where to begin is the first step. And that first step is to obtain your Certificate of Eligibility by sending in a copy of your proof of service [usually the DD214] and the application. Or you may be able to obtain it online at

www.va.gov

. Do not be alarmed by the $36,000 figure you see--it does not mean you can only look at homes at that amount or less--it is a guaranty amount and no matter what your rank, that is what will be on the certificate.

Your next step is to get pre-qualified for an amount you can afford. It is important to only do what is comfortable for you. If the amount is less than what you qualify for, then go with the comfortable number. Having credit examined is part of the process. If there are issues to be worked through, a qualified Loan Officer can help guide you. Financial resources are also analyzed, but with VA, no down payment is required and the seller can pay closing costs. Using a Loan Officer that is familiar with the VA Home Mortgage is of prime importance.

Once pre-qualification has occurred, then you are ready to look for a home. Just as important as a knowledgeable Loan Officer can help you with the financing, a VA savvy Realtor® can help you with finding the right property. There are a lot of old myths associated with the program, so don’t use an agent who still believes them. Negotiating a sales contract is serious business and you don’t want there to be rookie mistakes. Or false assumptions made by the seller or Realtor® .

And last of all, have fun. Buying a home is an exciting thing to do. Enjoy your search. And thank you for your service.

Networking. Networking. Networking.

Thursday I am attending [or will have attended by the time this posts] a new networking group's inaugural meeting.  It is a Senior Roundtable group.  And since I do Reverse Mortgages, I can fit right into this group in that category.  How did I find out about it?  Believe it or not, it was at the pool where I now live.  My wife and I had struck up a conversation with a fellow resident who indicated that she published senior directories with large print.  I told her I did reverse mortgage loans and she was not only looking for a reverse mortgage advertiser, but she mentioned the start-up of this networking group.  Which is a lesson to always be networking.  This simple conversation could lead to a steady stream of business.

Sometimes, it is easy to forget about the many ways there are to network.  And it is not necessarily a conscious decision that sets off a signal in your head "I will now network".  It is an everyday thing.  It is an all the time thing.  It is simply meeting people and letting them know what you do, AFTER you find out what THEY do.  And it doesn't stop at simply meeting people, anyone can say "Have a nice day."  It is getting to KNOW people.  At a large gathering you may meet many people.  But it s good practice to get to KNOW a couple of people which may involve asking questions about family, interests, etc.  Which gives you a jumping off point for the next conversation you have with them.

That is my goal tomorrow.  To meet several people and to get to know a couple of people that I can follow up with later.  If it is left until another monthly meeting date, it will mean starting over.  Just having moved to the area, it is not easy to meet a lot of new people at once.  So, I am getting to meet a few people and get to know who they are.  I found out one Realtor was originally from Berlin NH.  I used to do business there and was familiar with the area.  So, that is a common thread I can use to build upon.  And, hopefully, it will mean the ability to refer people to her and vice versa.

HVCC: Consumers About to Pay More for Less

Remember Eliot Spitzer? He was the former NY Attorney General who went on the warpath against many corporations, became governor of NY, and then became disgraced and left office.  His hard handed tactics left many in his wake and the destruction in many cases was not well-founded.  Enter his protege, NY Attorney General Andrew Cuomo.  Mr. Cuomo decided that he knew a lot more about mortgages and appraisals than anyone else.  He then pressured the implementation of the Housing Valuation Code of Conduct or HVCC by both Fannie Mae and Freddie Mac.  By extension, lenders who sell loans to either entity will be adopting this code in the next few days.  And it SOUNDS good.  On the surface.  Unfortunately, there were already codes of conduct in place in the appraisal industry as well as in the lending industry and enforcement of those codes of conduct certainly would have gone a long ways toward cleaning out problem lenders, underwriters, appraisers, real estate agents and mortgage brokers.  A simple evaluation of foreclosure rates and common threads in files of defaulted loans would have turned up many of the problem personnel.

Let's take a look at some of the possiblities that could occur under HVCC.  I am being kind in the usage of the word 'could' here.  Lenders will now assume the role of ordering appraisals, even if they have no contact with the consumer directly.  The largest lenders will dictate the terms as to who is on their approved lists and what those fees will be.  It is very likely that the use of a 'review' of all appraisals will be a part of the cost to the consumer and that the appraisers may not even receive their full fee as part of that cost to the consumer will be allocated to the 'review' of the appraisal provided. 

In simple terms, a consumer may pay $350, for example, for an appraisal, and the appraiser, who is doing a lot more work than in the past, may receive only $250 for their services.  Since the appraisal is only a part of the approval process, and the lender assumes the duties of when to order the appraisal, it is entirely possible than a loan application could be denied for a reason OTHER than the appraisal and yet the consumer is forced to ante up for the cost!  Most loan officers and brokers will try to be sure that an application would be approved subject to an appraisal as a part of their dedication to good customer service.  An appraisal would likely not be ordered if a loan would be declined for other reasons.

Let's assume that the borrower wants to go to another lender...especially if the appraisal was not the reason for the denial.  Guess what? That appraisal is not portable, so another appraisal fee would be due.  The possibility exists that the same appraiser would be selected by the new lender and a reduction in the fee could be done, but nobody will be guaranteed that that will happen.  Meanwhile, many appraisers who are very good at what they do may see their workload increase and their compensation decrease.  It does not take a genius to figure out that many of the top quality appraisers will decide to leave the business.  Which means the consumer will pay for an inferior product that still may be torn to shreds by an underwriter during the loan application process.

And here is another surprise in store for the consumer.  The broker may not even know anything about the appraisal issues that could come up because lenders refuse to provide a copy of that appraisal to the broker.  Right now, the appraisals are done in the broker's name which means any number of lenders can receive it as part of an application package.  So, the loan officer you have worked with very closely throughout the process, is no longer to offer any advice or suggestions to you.  And that goes for any of the Realtors involved in the transaction, too.  It means fewer choices for the consumer and we all know about supply and demand and what that does to prices.

DPA Programs: The Great Unknown

When FHA wrote off the Down Payment Assistance Programs [DPA], many thought they had taken an arrow through the heart.  Especially those who adminstered those programs.  The FHA program does allow for them.  But the sources are now much more limited in scope.  The key for homebuyers is to find out about the ones that remain.  And the same holds true for Mortgage Officers and Realtors, too.  FHA only has a 3.5% down payment requirement.  But even that is beyond the reach of some.  The "Mom & Dad" gift program has never gone away.  For a sale price of $150,000, the down payment is $5250.  Not a huge sum, but sometimes it is more than what can be saved.  And with housing prices down, the waiting game could be costly.

Some municipalities and counties have grant programs to help first time homebuyers.  Some strings are attached.  The house must be a primary residence and any change of use other than the sale of same while being a primary residence will result in a payback requirement.  The City of Tampa has such a program, for example. Homebuyer Education might be a pre-requisite as well.   These were often overlooked sources by many during the DPA frenzy that ended with the passage of the Housing Bill last fall.  But, they should not be overlooked now.  And it would be a good start in the homebuying process to find out about the availability of these programs near you.

Home Affordable Refinance Program

Do you wonder who owns your conventional mortgage loan?  Do you wonder if it is Fannie Mae, Freddie Mac, or neither?  With new refinance programs coming out to assist homeowners, knowing which is which could end up saving you time and money as you look at options, even if you think you are upside down.  Some circumstances will warrant only a Property Inspection Waiver rather than a new appraisal.  And knowing who owns the loan can help shorten the process.  Fannie Mae loans can go anywhere as long as it is another Fannie Mae loan.  Freddie Mac loans must stay with the same servicer.

The tool for Fannie Mae can be followed by clicking on the hyperlink provided here. For Freddie Mac use the same procedure.  The programs are somewhat different, but both can save you a lot of money and folks who have timely payment histories are not ineligible as with other programs.  You should check with your local mortgage broker or loan officer to see if you might be eligible.  The programs might not be around forever and today's low rates will not be around forever, either.            

Buying Your First Home

While many are afraid to take that step of buying their first home, you could be in a position to take advantage of the market.  With lower sale prices AND lower interest rates, you could win twice.  And here is a common misconception, you do not have to be buying your first home EVER to be considered a first time homebuyer [FTHB].  A FTHB is defined as someone who has not owned a primary residence in the past 3 years.  An exception is someone who was displaced.  And a new tax credit could be helpful to you with closing costs and down payment now or as a welcome benefit when you file your 2009 tax return.  But you must buy by December 2009 to qualify.

The FHA program with its 3.5% down payment is one option available with credit scores as low as 620.  In some areas, the Rural Development Guaranty program is an option.  There is no down payment or monthly mortgage insurance with that one.  And veterans can use the VA Home Mortgage Program without a down payment.  Conventional programs can be used as well.

In some areas, an appraisal may be the issue.  If there have not been enough recent sales to support your contract price, there may need to be some adjustments in the contract or loan terms or both.  You should not assume the worst, of course, but you should be prepared.  And you should not be pressured into doing something that is not right for you.  In the meantime, why not contact a mortgage professional to get pre-qualified before you buy.  In the St Petersburg area, I hope that would be me, but there are many qualified professionals who can give you good, sound advice.   And that is most important when buying your first home.