Let's hope the bankruptcy provision in H.R. 1106, The Helping Families Save Homes Act, does not pass as presented. If so, the credit tightening the mortgage industry has experienced over the past year would worsen, making home ownership more difficult.
While the bill may have good intentions ( because we all know a politician would never present something to only make himself look good) there are too many problems with this bill. Obviously, the intent is to help struggling homeowners stay afloat, and to keep our sagging economy and housing industry from taking more of a hit, but this bill would actually hurt potential home buyers.
The primary concern is the provision allowing judicial modifications to be made by the bankruptcy judge, allowing the judge to arbitrarily make changes to the original terms of the mortgage: i.e., lower the remaining balance, lower the interest rate. While your first reaction may be, "Great", let me point out the downside.
If you have applied for a mortgage in the past 6-8 months, you have noticed the increased documentation requirements, higher credit score requirements, and lower loan-t0-value availability. Guess what? If H.R. 1106 were to pass as submitted, it would get worse. The capitol markets, which provide funding for mortgage loans, would become so restrictive, it would not surprise me for minimum down payment requirements to be 20% or more and minimum credit scores to be 700 or higher.
Doesn't sound so great, does it? Think of it this way, would you want to lend your money if someone could come in and modify the terms? See why even a large down payment still may not help? If a judge could come in a lower the balance, the once "large down payment" would disappear.
The mortgage bankers association is working hard to help legislators understand the negative impact this bill could have. In fact, earlier this week, The House pulled the bill, sending it back for revisions.
Let's hope cooler heads prevail and this bill does not pass as presented.
Click here to read more about the bill.
Saturday, February 28, 2009
Wednesday, February 25, 2009
Ch-ch-ch Changes
Oh how the times have changed.
A year ago, a high credit score would get you pretty much any loan program, regardless of your down payment, and very likely without private mortgage insurance. Documentation was very simple for the customer, and for the mortgage company processing the loan.
The pendulum has now swung the other way, to the extreme. There have been so many loan defaults, institutional failures, and fraudulent activities that the mortgage process has become a "guilty until you prove your innocence" process.
We are now required to do numerous fraud prevention checks in addition to the normal processing we perform on a file. In addition, every detail of the transition is being scrutinized to the point it may seem like overkill. I want you to understand why this is taking place. Trust me, we do not like it, and it is extremely time consuming on our part. Fannie Mae, Freddie Mac, and investors who purchase loans in the secondary market, have been forced to tighten their guidelines to create a marketable security in secondary market. Let's face it, the beating mortgage back securities have taken in the market, would you invest YOUR money in anything to do with real estate as collateral?
Funds are plentiful if you are looking to buy a home, but "Borrower Beware", the process may seem like a visit to your doctor for the dreaded annual exam, including a DNA and blood sample until you prove who you say you are. (yes, this is tongue-in-cheek)
Grin and bear it for a while, understanding your loan officer is NOT picking on you, and certainly not making up the rules as we go.
A year ago, a high credit score would get you pretty much any loan program, regardless of your down payment, and very likely without private mortgage insurance. Documentation was very simple for the customer, and for the mortgage company processing the loan.
The pendulum has now swung the other way, to the extreme. There have been so many loan defaults, institutional failures, and fraudulent activities that the mortgage process has become a "guilty until you prove your innocence" process.
We are now required to do numerous fraud prevention checks in addition to the normal processing we perform on a file. In addition, every detail of the transition is being scrutinized to the point it may seem like overkill. I want you to understand why this is taking place. Trust me, we do not like it, and it is extremely time consuming on our part. Fannie Mae, Freddie Mac, and investors who purchase loans in the secondary market, have been forced to tighten their guidelines to create a marketable security in secondary market. Let's face it, the beating mortgage back securities have taken in the market, would you invest YOUR money in anything to do with real estate as collateral?
Funds are plentiful if you are looking to buy a home, but "Borrower Beware", the process may seem like a visit to your doctor for the dreaded annual exam, including a DNA and blood sample until you prove who you say you are. (yes, this is tongue-in-cheek)
Grin and bear it for a while, understanding your loan officer is NOT picking on you, and certainly not making up the rules as we go.
The HPI Cometh
The Office of Federal Housing Enterprise Oversight (OFHEO) is out with the latest edition of its Housing Price Index (HPI). For those of us in the Augusta area, there's good news and there's not-so-good news. (For those of you who aren't mortgage/real estate geeks like me, the HPI is a quarterly measurement of average home prices for more than 280 metro areas across the U.S.)
The not-so-good news is that after ranking #2 in the country for 1-year home price appreciation in the 3rd-quarter HPI numbers, we've slipped to 97th for 4Q 2008. Our year-over-year home price appreciation was -0.14% from 2007-2008. In other words, essentially flat.
The good news is that:
1) We still rank in the top one-third of OFHEO's list of metro areas
2) Area home prices held steady during the worst quarter of home price declines in the HPI's 18-year history.
3) On average, Augusta-area homes are worth almost exactly what they were worth a year ago.
That last point should be of particular comfort to anyone who can't stop hearing about how home prices nationally are dropping like an untethered stone. I've said it before and I'll say it again: When you hear about the "average price of an American home" in the media, the key word is "average." Of the 25 markets with the worst home price declines in the country over the past year, 24 are in either California or Florida (Las Vegas is the other). That's bad for folks living in those places, but it doesn't directly affect us in Augusta.
The bottom line is that during the worst period for home prices in decades, the Augusta market stayed steady. Mortgage rates are low. Prices are reasonable. It's still a great time to buy a home here...
The not-so-good news is that after ranking #2 in the country for 1-year home price appreciation in the 3rd-quarter HPI numbers, we've slipped to 97th for 4Q 2008. Our year-over-year home price appreciation was -0.14% from 2007-2008. In other words, essentially flat.
The good news is that:
1) We still rank in the top one-third of OFHEO's list of metro areas
2) Area home prices held steady during the worst quarter of home price declines in the HPI's 18-year history.
3) On average, Augusta-area homes are worth almost exactly what they were worth a year ago.
That last point should be of particular comfort to anyone who can't stop hearing about how home prices nationally are dropping like an untethered stone. I've said it before and I'll say it again: When you hear about the "average price of an American home" in the media, the key word is "average." Of the 25 markets with the worst home price declines in the country over the past year, 24 are in either California or Florida (Las Vegas is the other). That's bad for folks living in those places, but it doesn't directly affect us in Augusta.
The bottom line is that during the worst period for home prices in decades, the Augusta market stayed steady. Mortgage rates are low. Prices are reasonable. It's still a great time to buy a home here...
Subscribe to:
Posts (Atom)
