California VA Loans with Nate Pina

One of the great things about this country is that we do a lot for those who have served us. And in the area of real estate financing, we can do exceptional things.
Understand that the VA (Veterans’ Administration) is, in the mortgage world, like HUD is with FHA financing. They are an insurance company, collecting premiums and using the backing of the Federal government to guarantee the payments to lenders. Because of the government’s guarantee, lenders can stretch traditional guidelines and offer very competitive terms (of course, while adhering to the VA’s guidance).
Some of the more attractive features of a VA loan are:

1. 100% Financing on Home Purchases – Veterans, assuming they are in good standing, can buy a home with no money down. In most cases, the maximum VA loan is $417,000.
2. The Ability to Finance Reasonable Closing Costs – On many VA loans, the closing costs are negotiated into the sales price and the seller pays them. This feature can significantly reduce the cash a veteran needs to buy a home.
3. More Understanding with Regards to Credit Challenges – In an effort to help those who served us, lenders are more liberal towards hiccups in credit.
4. Common-Sense Look at Income – Rather than approve loans strictly by income ratios, VA mortgages incorporate what is called Residual Income. There is a form that actually budgets all expenses (not just housing) to account for family size, heating and electrical usage, and more.
5. Financed Insurance Premium – The VA charges what they call a Funding Fee to set up a fund to reimburse lenders, should a default occur. The Funding Fee varies on loan terms and usage (consult your lender for exact costs), but the good news is that it is typically just added to your loan. Instead of paying thousands of dollars up front, you can pay $10-$50 a month in a higher payment.
6. Refinancing Your VA Loan is Easy – Through the I.R.R.L. (Interest Rate Reduction Loan) Program, getting a better rate (if the market has better rates) does not carry with it all the verifications of income, credit, appraisals, and assets of other loans…and closing costs can be added into the loan! The logic is the VA is already “on the hook” and lowering the payment increases the likelihood of continued payments, so why not be as lenient as possible.

For more detailed answers, contact Nate Pina with Sierra Pacific Mortgage. With three million veterans returning home in the next couple years, the opportunity of VA financing needs to be publicized and understood. Nate Pina is a VA Loan Specialist and can get the job done every time and very quickly. Nate Pina is teamed with Sierra Pacific Mortgage and we are a VA Loan Direct Lender. What this means is we can close VA loans in as little as two weeks and NOBODY can match our LOW, LOW Rates!!!

New Foreclosure wave in Solano County and California!

Nate Pina reported two months ago that foreclosures will significantly increase this summer as a result of The National Mortgage Settlement. This month, both Reuters (Americans brace for next foreclosure wave) and CNNMoney (Flood of foreclosures to hit the housing market) concurred. However, we believe this increase in distressed properties will have a much different impact on the housing market than previous increases for three reasons.

1. Demand Will Absorb Much of the Increase in Supply

The last wave of foreclosures entered the market as both consumer confidence and demand for housing was on the decline. That created an overhang of discounted properties that pushed down the prices on non-distressed homes. This new increase in foreclosures is hitting a different type of real estate market. Consumer confidence is stabilizing and the demand for housing is increasing. The impact on prices will be much less dramatic in most markets than it has been in the past.

2. Many Banks Are Doing Necessary Repairs and Renovations

Historically, the typical foreclosure has sold at a discount of 25-30% compared to non-distressed properties. The banks are finally realizing that they may soon own one or more of homes in any neighborhood. For that reason, we are beginning to see banks do the necessary repairs and renovations in order to garner a price closer to the value of non-distressed properties in the marketplace thereby lessening the impact on the value of surrounding homes.

3. Different Regions Will Bear the Brunt

Originally, many thought that the foreclosure fiasco was confined to the four ‘sand’ sates (CA, AZ, NV and FL). We now realize that cities like Chicago and Atlanta, along with many others, have also faced the burden of falling prices because of an increase in distressed properties.
This next ‘flood of foreclosures’ will have the largest impact in the judicial states that impeded the foreclosure process over the last few years such as New York, New Jersey and Connecticut. California, Nevada and Arizona will be impacted in a much less dramatic way than in the past.

3 Question to ask when Buying a Home!

If you are thinking about purchasing a home right now, you are surely getting a lot of advice. And some of that advice is probably negative. Why buy now with prices still falling? Don’t you realize real estate is no longer a good investment? Don’t you know that people who bought six years ago lost their shirt? We understand the concern your friends and family have. However, let’s look at whether or not now is actually the perfect time to buy a home.
There are three questions you should ask before purchasing in today’s market:

1. What are the experts recommending?

In the last 120 days, many experts have said that buying now makes sense. This list includes: John Talbott, Christopher Thornberg and Warren Buffett.

2. When will I begin to see appreciation if I buy now?

This is a great question. Macro Markets, LLC is a company that studies housing prices. They started their Home Price Expectation Survey in 2010. They ask 100+ housing industry experts to project housing prices through 2016. The most current survey shows that the experts are predicting prices to remain relatively flat in 2012. The experts then project prices to rise reaching a cumulative appreciation of over 10% by 2016.
Purchasing a home today makes great sense from a financial standpoint. Think of the old axiom: you want to buy low and sell high. This decision should not only be a financial one however.
That leads us to our third and final question:

3. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. The Fannie Mae National Housing Survey shows that the four major reasons people buy a home have nothing to do with money:

• A good place to raise children and for them to get a good education
• A place where you and your family feel safe
• More space for you and your family
• Control of the space

What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the reason you decide to purchase or not.

Bottom Line

Don’t allow money to get in the way of you making the right decision for you and your family. In the long run, the finances will work in your favor anyway.

The 6 Dont's After You Apply For a Mortgage with Nate Pina!

I learned a long time ago that “common sense is NOT common practice“. This is especially the case during the emotional time that surrounds buying a home, when people tend to do some non-commonsensical things. Here are a few that I’ve seen over the years that have delayed (and even killed) deals:

1. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Small, explainable deposits are fine, but getting $10,000 from your parents as a gift in cash is not. Discuss the proper way to track your assets with Nate Pina.
2. Don’t make any large purchases like a new car or a bunch of new furniture. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher ratios…higher ratios make for riskier loans…and sometimes qualified borrowers are no longer qualifying.
3. Don’t co-sign other loans for anyone. When you co-sign, you are obligated. With that obligation comes higher ratios, as well. Even if you swear you won’t be making the payments, the lender will be counting the payment against you.
4. Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is a consistency of accounts. Frankly, before you even transfer money between accounts, talk to Nate Pina.
5. Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car, when you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
6. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more approvable. Wrong. A major component of your score is your length and depth credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score.

The best advice is to fully disclose and discuss your plans with Nate Pina before you do anything financial in nature. Any blip in income, assets, or credit should be reviewed and executed in a way to keep your application in the most positive light.

Rents and Prices Increasing

We report on Fannie Mae’s Quarterly National Housing Survey every ninety days. Fannie Mae also does a monthly survey covering different aspects of the housing market.
Here are some record numbers we found interesting in Fannie Mae’s March report (emphasis added).

• Thirty-three percent of respondents expect home prices to increase over the next 12 months, the highest level over the past 12 months.
• The percentage of respondents who say it is a good time to buy rose to 73 percent, the highest level in over a year.
• Forty-eight percent of respondents think that home rental prices will go up, the highest number recorded to date.
• On average, respondents expect home rental prices to increase by 4.1 percent over the next 12 months, the highest number recorded to date.

Doug Duncan, chief economist of Fannie Mae, capped the report off by stating:

“Conditions are coming together to encourage people to want to buy homes. Americans’ rental price expectations for the next year continue to rise, reaching their record high level for our survey this month. With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that homeownership is a more compelling housing choice.”

Why Buy a Home in Solano County?

The 4 C's of Mortgage Underwriting

With Spring upon us, and new buyers out looking for houses, I thought today might be a good time to review the basics of what lenders look for as they decide to approve (or deny) mortgage applications. For at least 25 years, I have heard them called “The 4 C’s of Underwriting”- Capacity, Credit, Cash, and Collateral.  Guidelines and risk tolerances change, but the core criteria do not.

CAPACITY

CAPACITY is the analysis of comparing a borrower’s income to their proposed debt. It considers the borrower’s ability to repay the mortgage. Lenders look at two calculations (we call ratios). The first is your Housing Ratio. It simply is the percentage of your proposed total mortgage payment (principal & interest, real estate taxes, homeowner’s insurance and, if applicable, flood insurance and mortgage insurance – like PMI or the FHA MIP) divided by your monthly, pre-tax income. A solid Housing Ratio (often called the front end ratio) would be 28% or less; although, at times loans are approved at a significantly higher number. That’s because your front end ratio is looked at in conjunction with your back end ratio.
The back end ratio (referred to as your Debt Ratio) starts with that mortgage payment calculation from the Housing Ratio and adds to it your recurring debts that would show up on your credit report (auto loans, student loans, minimum credit card payments, etc.) without taking into consideration some other debts (phone bills, utility bills, cable TV). A good back ratio would be 40% or less. However, loans sometimes are granted with higher debt ratios. Understand that every application is different. Income can be impacted by overtime, night differential, bonuses, job history, unreimbursed expenses, commission, as well as other factors. Similarly, how your debts are considered can vary. Consult an experienced loan officer to determine how the underwriter will calculate your numbers.

CREDIT

CREDIT is the statistical prediction of a borrower’s future payment likelihood. By reviewing the past factors (payment history, total debt compared to total available debt, the types of monies: revolving credit vs. installment debt outstanding) a credit score is assigned each borrower which reflects the anticipated repayment. The higher your score, the lower the risk to the lender which usually results in better loan terms for the borrower. Your loan officer will look to run your credit early on to see what challenges may (or may not) present themselves.

CASH

CASH is a review of your asset picture after you close. There are really two components – cash in the deal and cash in reserves. Simply put, the bigger your down payment (the more of your own money at risk) the stronger the loan application. At the same time, the more money you have in reserve after closing the less likely you are to default. Two borrowers with the same profile as far as income ratios and credit scores have different risk levels if one has $50,000 in the bank after closing and the other has $50. There is logic here. The source of your assets will be examined. Is it savings? Was it a gift? Was it a one-time settlement/lottery victory/bonus? Discuss how much money you have and its origins with your loan officer.

COLLATERAL

COLLATERAL refers to the appraisal of your home. It considers many factors – sales of comparable homes, location of the home, size of the home, condition of the home, cost to rebuild the home, and even rental income options. Understand the lender does not want to foreclose (they aren’t in the real estate business), but they do need to have something to secure the loan against, in case of default. In today’s market, appraisers tend to be conservative in their evaluations. Appraisals are really the only one of the 4 C’s that can’t be determined ahead of time in most cases.
Now, each of the 4 C’s are important, but it’s really the combination of them that is key. Strong income ratios and a large down payment with strong reserves can offset some credit issues. Similarly, long and strong credit histories help higher ratios….and good credit and income can overcome lesser down payments. Talk openly and freely with your loan officer. They are on your side, advocating for you and looking to structure your file as favorably as possible.

Short Sale Stats

Rental Rates on the Rise

Because of the challenges in the current economy, many families have either decided to rent or been forced to rent. How has this impacted rental options and the cost of the available options?
Housing Wire recently quoted Paul Dales, senior economist with Capital Economics:

“As a consequence of Americans being less willing and less able to buy a home, the number of households in rented accommodation is set to rise by at least 850,000 a year over the next few years.”

The price of anything is determined by supply and demand. As demand increases, the price of an item will increase unless there is an equal increase in supply. The article mentioned above said:

“Dales said in his research that rental vacancy rates will fall again in the future, pushing prices up. The median rent is already up to $712 per month—well above the average monthly mortgage cost of $647, Dales reported.
He estimates vacancies in the home-rental market will push average rental rates up as much as 5% by early 2013.”

How many markets will be impacted? A new rent index offered by Zillow:

“…showed year-over-year gains for 69.2 percent of metropolitan areas covered.”

Bottom Line

Rents are increasing and will continue to do so for the foreseeable future. In many parts of the country, buying a home might make more sense as you can lock in your housing expense for the next thirty years.

Cost vs Price - Solano County Mortgages Cost Less

Buying a Home? The COST Is More Important Than the PRICE Posted: 19 Mar 2012 04:00 AM PDT We have often advised buyers to look at the COST of purchasing a house more than the PRICE of the home. Obviously, price is part of the cost equation. The other piece, assuming you are not an all cash buyer, is the mortgage rate. The mortgage rate to finance a purchase can have a dramatic impact on the overall cost. Recently, there are more people talking about the possibility that mortgage rates could begin to increase. HSH.com studies trends in mortgage rates. They explain: “A better economic climate almost always brings higher rates, and a lessening of the troubles in Europe from massive central bank assistance adds to the movement of money from safe havens to more risky assets, driving rates upward.” Dan Green of The Daily Market Reports recently stated: “The Fed sees growth coming faster than originally expected. There’s suddenly less chance that the Federal Reserve will intervene to help keep mortgage rates low. Absent Fed intervention, mortgage rates are apt to rise and Wall Street is now betting that the Fed has bowed out. With no stimulus, mortgage rates rise.” Lawrence Yun, chief economist for the National Assoc of Realtors, recently wrote: “Mortgage rates will be starting to rise. From the 3.9 to 4.0 percent average rate in the past five months on a 30-year fixed mortgage, the new rates will soon be in the range of 4.3 to 4.6 percent.” Yun explains his logic here. We do not attempt to predict future interest rates. We leave that up to the experts in the field. However, we want our readers to understand the potential impact on the cost of purchasing a home if they do rise. Here is a simple table that shows, even if the PRICE of a home softens, the COST of a home could increase. Bottom Line Many purchasers think they should wait until they are sure that prices have hit bottom. Deciding whether or not to wait should be determined by where the COST of a home is headed.

March Madness - Real Estate Mortgages

It’s the time of year when the so-called experts tell you how to fill out your brackets for college basketball. The frenzy has been coined March Madness. Well, in the mortgage industry, we are seeing a frenzy of headlines, offers of so-called expert advice, and an unusually high level of buzz around real estate and mortgages. Here are some of the things I keep hearing…

• “The bank bailout settlement is going to allow all the shadow inventory to come to market at lower prices, which is going to drive home prices even lower.” Likely true. How much and how fast prices fall will be determined by the speed at which lenders proceed with the foreclosures.
• “The bank bailout settlement means people will get large principal reductions in their loans, if they are underwater.” Some will, most won’t. In its settlement, Bank of America will exclude loans owned by FannieMae/FreddieMac. This agreement will probably be mirrored by others, and therefore, won’t help a good portion of the population.
• “The government has finally helped the homeowner who is underwater yet still maintained a good payment history.” Semi-true. If you have an FHA loan closed prior to June 2009, you are able to do a streamline IF rates make sense in June (too soon to tell). If you closed after June 2009, no such luck. On the conventional front, HARP 2.0 may offer some help to those who have had their loan held by FannieMae/FreddieMac as long as there was no private mortgage insurance. Not exactly all inclusive – but applaudable.
• “You need to put 20% down to get a mortgage these days.” I hear this crazy notion from people far too often. Besides the FHA insuring loans with as little as 3.5% down (on loans up to $729,250 in high cost areas), people often forget that veterans can still finance 100% of the purchase price, and that Private Mortgage Insurance Companies are still insuring loans with 5-10% down.
• “Costs associated with loans are going up.” Most definitely. The hike in the guarantee fees has already caused a 3/8 – 1/2 increase in conventional loans and will raise FHA loans by 10 basis points in April. The FHA is also changing its premium structure to increase the cost of the mortgage—regardless of where rates themselves are headed.
• “Rates will stay low through 2014.” While every indication from Ben Bernacke & friends is consistent in their rhetoric that rates will stay low, we have already seen some significant swings in rates based on market conditions (unemployment numbers, problems in Greece, and so on). Rates will likely stay low, but getting the best rate will still require staying on top of everything.

Amongst the whirlwind of sound bites and headlines, there is some good news about real estate and mortgages. Never as rosy as it may sound, there is relief and opportunity for many  if you can sort through the hyperbole and consult with a true professional to make sure you have all the facts.

Time to Refinance? I think so!

There have been a few developing (and some already existing) programs that are worth mentioning, as the newspaper headlines applaud the opportunity. With interest rates remaining at near historic lows for quite some time, many people have been unable to take advantage of these rates because of problems in securing a high enough appraised value.
To that end, here are a few thoughts to consider:

New FHA Streamline Announcement

HUD announced that they will be rolling back the insurance premiums on this program for loans closed prior to June 2009. The Upfront Premium (the one that is added into the loan amount) will be .01% and the annual premium (the one that is paid in the monthly payment) will be slashed to .55%. These cuts could reduce borrowers’ expenses drastically. This program can be done where the lender pays the closing costs – without an appraisal, income verification, or even a credit check. Most lenders will look for a good mortgage payment history.

The VA IRRL – (Interest Rate Reduction Loan)

For people with existing VA mortgages, this program allows reasonable closing costs to be added into the loan. There is no new appraisal required, nor is there an income calculation. Basically, as long as the veteran is getting a payment at least $50 lower, it is good to go. In some cases, veterans may choose to reduce the term of their loan (instead of a monthly savings). This can be done with some documents delivered to the lender.

HARP 2

This is a program for loans currently owned by Fannie Mae and Freddie Mac wherein the house is underwater. Under this program, lenders may be able to reduce your interest rate despite your loan-to-value. Each mortgage investor is developing their own underwriting and risk criteria, but the good news is that people with good payment histories can take advantage of the great rates – even though their home has declined in value.
I gave you a very general overview of some loan products here today. There are many considerations (ex. closing costs and time you intend to stay in the home) and qualification items that will pertain to your individual circumstance. My intent was to heighten awareness and get you to reach out to Nate Pina at Sierra Pacific Mortgage in Vacaville, California and see if there is an opportunity for you.

Buying Costs Going Up! Get into Contract Before April.

In a move to increase their financial standing (and to get the FHA back into required capital requirements), on Monday, HUD announced their anticipated increases in the premiums they charge borrowers. Simply stated, the cost of borrowing is going up.
FHA loans, by design, are more liberal in their underwriting guidelines than most conventional loan products (in terms of credit, income ratios, required investment from the borrower, and maximum loan amount). HUD is not a lender. Rather, it is a federally-insured insurance company. They insure lenders against default on loans underwritten in compliance with their published guidelines. It is because of this insurance that lenders approve and close loans with more liberal guidelines.
As an insurance company, HUD charges two types of premiums on the FHA mortgages:

• The UFMIP (Up Front Mortgage Insurance Premium) will be raised effective April 1, 2012 from its current 1% to 1.75%. One advantage to the UFMIP is the fact that it is typically built into the loan amount and does not require additional cash outlay at closing. However, the increase in loan amount does impact monthly payment and cash flow.
• The MMIP (Monthly Mortgage Insurance Premium) will be raised 10 basis points on April 1, 2012 to cover the requirements of the payroll tax extension approved last year. This is a direct increase of 10 basis points in the borrower’s mortgage payment, and has the effect of a 10 basis point increase in interest rates. As a kicker, loans over $625,000 will be bumped 35 basis points from today’s levels effective June 1, 2012. This bump is substantial, as you can see in the chart below.

For a larger version, click on the image.

On a loan amount of $300,000, we are seeing an increased payment of $36.41, which doesn’t sound too bad. However, we know that home buyers buy homes comparing what their monthly payment will be after they close. This hike in payment is equivalent to borrowing an additional $7000. Starting next month, it’s as if the home became $7000 more expensive. What is the result? Buyers are going to have to pay more OR they’re going to have to offer less to the seller (to maintain the same mortgage payment they were comfortable with today). A $7000 lower offer is like another 2.5% decline of home prices. Not good for anyone.
Advice:
Sellers, price correctly and get into contract in March.
Buyers, today is the cheapest mortgage you are likely to see in your lifetime (all things considered)! Get off the fence and buy NOW!

______________

P.S. – Rumors are strong that FHA is looking to reduce the allowable sellers’ concession from 6% to 3% in April as well. This move will have a huge impact on how much cash will be needed to buy (especially in places like NY with the NYS Mortgage Tax).  Hurry—get in the game!

Demand For Home Purchase Loans Spikes

Mortgage applications declined 0.3% from a week earlier for the seven-day period ending Feb. 24, the Mortgage Bankers Association said.
The results were adjusted to account for the Presidents Day Holiday.
The decline in the MBA's market composite index shows mortgage applications down overall with refinancing activity falling 2.2% for the survey period.
During the same week, the seasonally adjusted purchase index grew 8.2%.
Still, activity overall slowed as the refinance share of mortgage activity fell to 77.9% from 80.1% the previous week.
"Mortgage rates remained near survey lows last week, but refinance volume fell slightly," said Michael Fratantoni, vice president of research and economics at the Mortgage Bankers Association. "According to survey participants, more than 20 percent of refinance applications were for HARP loans. The HARP share of total refinance applications has increased over the past month. Purchase application volume increased over the week, but remains within the narrow and anemic range of activity we have seen since the expiration of the homebuyer tax credit in May 2010."
The average interest rate for a 30-year FRM with a conforming loan balance of $417,500 or less declined from 4.09% to 4.07%. In addition, the average contract interest rate for the 30-year, FRM with a jumbo loan balance increased from 4.32% to 4.34%.
The 30-year, FRM backed by the FHA fell from 3.87% to 3.86%........

How the Government Paid for the Payroll Tax Cut

Before the end of the year, Congress and the President agreed to extend the payroll tax cut. In that bill, there were two items of interest for those involved in real estate.

1.) The hike in the Guarantee Fees charged by the GSEs Fannie Mae and Freddie Mac.
The 10 basis point increase in the fees has translated to a .375% to .5% increase in mortgage rates for conventional loans. Many customers who started their loans a couple of months ago are being “surprised” with higher than expected rates. Heck, everything you read in the papers says rates are at historic lows and will likely stay there through 2014. Many consumers feel as if their lender is being unscrupulous. However, your lender has fallen victim to the increase in Guarantee Fees and how the secondary market is passing on the cost. What looks like possible lender greed is just a passing on of the increased expense imposed by the government. Sadly, the increased revenue isn’t even being used to help aid an ailing Fannie Mae or Freddie Mac. It is being turned over to the US Treasury to cover the temporary extension of the payroll tax cut.

2.) Permission for HUD to increase the insurance premiums they charge on FHA loans.
If you remember, HUD charges two insurance premiums – a monthly one and an up-front one that is usually added into the loan. Most recently, they reduced the up-front mortgage insurance premium (UFMIP) and dramatically raised the monthly fee (MMIP). It is widely anticipated that, maybe as soon as April, we will see a hike in the UFMIP with no adjustment to the MMIP. While this will help shore up the reserves in the insurance fund, it will simultaneously make buying a home more expensive. No one knows the effective date or amount of the increase. Buyers should look to buy before the increase in fees.
We always hear how our government officials tuck away things in their bills. In this case, while the headlines during the holidays praised Washington for preserving the payroll tax cut, they may have hurt us more in the long run.

Who Are you Working With?

I have long been a proponent of referrals when choosing whom to do business with. But even with a referral, you owe it to yourself to do some homework. In terms of a mortgage, you have always had the Better Business Bureau and local regulators (like state banking departments) that you could contact. Over the past few years, the internet search engines have become popular ways of finding information beyond a company’s or a loan officer’s website.  Two other places I strongly recommend you visit online (one for the company and one for loan officers) are:

1.) https://entp.hud.gov/sfnw/public

This is the website for HUD’s Neighborhood Watch. Neighborhood Watch is where HUD publishes a lender’s loan performance on FHA loans and how it compares to the national and local averages.
A compare ratio of 100% means “average” performance. Numbers greater than 100% are below average. And a ratio under 100% is above average. Understand that the Neighborhood Watch numbers measure the quality performance of FHA loans only. Further, be aware that HUD recently stated that lenders with compare ratios over 200% were subject to suspension from being able to participate in the FHA Program, and lenders between 150-199% were going to be scrutinized very closely and subject to audit. Be wary of “riskier” lenders.
When you go to the website, click on the “Early Warnings” tab and either research an individual lender or look for a list of lenders in an area, and then just follow the instructions. Remember, many lenders nationally have similar names, so make sure you have the right lender.

2.)  www.nmlsconsumeraccess.org

Here you can search for loan officer and company licensing status. Recognize that loan officers are individually licensed now. Those who have taken the required courses, passed the required tests and been approved by their respective state licensing authority have all that information verified on this website, along with their employment history. Loan officers who work for federally chartered institutions (like banks) have not yet been required to take the classes and pass exams and are listed on the site with their license number and their employment history.
Make sure you are dealing with a loan officer who is licensed! Ask questions if they have a lot of job changes.
There has been a cleansing in the mortgage industry over the past few years, but there are always a few bad apples in any large group. These websites may help you identify mistakes you can avoid when choosing whom you do business with.

As always, check out www.MyLenderNate.com and call me if you need assistance with your mortgage.

National Mortgage Settlement: Why is Inventory down? Where is it headed?

Last week, the Federal government and 49 state governments (Oklahoma being the exception) agreed to a $25 billion settlement regarding robo-signing and the challenges it created in the foreclosure process. We want to give a synopsis of the settlement and some perspective on what effect it will have on the housing market in 2012.

The Basics

The $25 billion in funds will be dispersed as follows:
$17 Billion National Commitment to Foreclosure Relief Efforts
The servicers collectively agree to commit a minimum of $17 billion directly to borrowers through foreclosure relief effort options, including principal reduction for qualifying borrowers, short sales, anti-blight measures, and enhanced homeowner transition programs.
$3 Billion National Commitment to Underwater Mortgage Refinancing Program
The servicers collectively agree to commit $3 billion to refinance “underwater” homes (when a homeowner owes more on a mortgage than a home’s current market value). To qualify, borrowers must be current on their mortgage payments on a mortgage owned by one of the five banks.
$5 Billion Payment to States and Federal Government
The servicers’ $4.25 billion payment to the states includes $1.5 billion for payments to borrowers who lost their home to foreclosure by one of the five servicers…$750 million of the state-federal payment will go to the federal government to resolve federal claims.
For further details on the settlement you can go to the official website.

Will the Settlement Have a Major Impact on a Housing Recovery?

Probably not. Though it is a step in the right direction, it may be too little too late. Here are some opinions on the settlement:
IHS Global Insights

 “Like many previous plans to stem foreclosures, this agreement will help at the edges. The problem is too big for it to have a large impact, however…This agreement will help the housing market move ahead in 2012 in a small way. But it is hardly a game changer.”

HSH.com

“While there is no doubt some benefit to formalizing and organizing the process of foreclosure and better monitoring of the process, the fact is that the settlement changes little.”

Capital Economics

 “While it is good that the settlement has been finalized and will offer principal reductions and refinancing schemes to borrowers, the bigger picture is that the settlement is not large enough to dramatically alter the outlook for the housing market or the wider economy.”

What about Foreclosures Moving Forward?

The settlement did bring clarity to one major issue – foreclosures. Banks have been holding off the foreclosure process on millions of homes over the last 18 months as they waited for the particulars of the settlement. They now know how they can move forward without penalty. The result will be an increase in foreclosures coming to the housing market.
Housing Wire

“It will speed up processing, and perhaps mean that foreclosures that have been waiting around since robo-signing came to light in 2010 will now gain legitimacy.”

Calculated Risk

“It does appear the number of completed foreclosures will increase following this settlement – especially in some judicial states with large backlogs – so there will probably be more REOs (lender Real Estate Owned) for sale.”

Bloomberg News

“The $25 billion settlement with banks over foreclosure abuses may result in a wave of home seizures…Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year over allegations of faulty and fraudulent paperwork used to repossess homes. With yesterday’s agreement, banks are likely to resume property seizures.”

Wells Fargo

“Mark Vitner, a senior economist at Wells Fargo Securities, said the settlement helps the housing market in the long run because it allows banks to proceed with millions of foreclosures that have been stalled. Many lenders have refrained from foreclosing on homes as they awaited the settlement.”

Where are Rents Headed?

People are delaying the decision to buy a home because they are not sure where prices are headed. If they buy and prices continue to soften, they feel that they will not have purchased at the optimal moment. They reason that, if they sit and wait, they can’t be hurt. This thinking assumes that a non-decision comes without consequence.
The normal retort to this thinking by people bullish on real estate is that prices may soon turn to the positive or that interest rates will start heading upward. Buy now before the cost of buying increases! Today, we want to look at this from a different angle. We want to alert our readers that their housing expense is about to increase if they continue to rent.
Currently, in Solano County and most of California, buying is less expensive than renting. Plus, purchasers can lock in their housing expense for the next thirty years by buying now. They will get a sensational price and a record low interest rate. What will happen if they continue to rent?

The Alternative to Buying

If a family continues to rent, they are looking at a housing expense which will rise with the market. Rental costs increase by 3% a year historically. But today’s rental market favors the landlord to a greater degree. Below is a graph of how rental prices have increased recently and where they are projected to go over the next few years based on a report from Marcus & Millichap.

 

Bottom Line

Hoping to save by delaying the purchase of a home may result in higher housing costs while you’re waiting, thus achieving the exact opposite result. Feel free to give Nate Pina a Call or Email and he can write you up a rent vs. buy scenario for your proposed mortgage vs your current rent payments.

Does your Lender have what it takes? Nate Pina does!

For the longest time, I have listened to other loan officers talk about why people should do business with them; and 95% of the time their presentations boil down to three things – price, product, and service. On the pricing front, they talk about low interest rates and/or closing costs; on the product side, they position themselves as experts in a particular loan program (like a 203K or reverse mortgage); and on the
service side, they discuss turnaround
time or how available they are.
Let me just say that, in today’s marketplace, virtually every lender (and therefore, every loan officer) has very similar pricing, pretty much all the same products, and service is difficult to prove until you give them a loan to work on. My point being is that the changing lending landscape (tougher underwriting guidelines, loan officer licensing, stricter appraisals, and such) has eliminated virtually 70% of loan officers in America. The remaining people have been vetted and represent a very high quality group of professionals. (Not that there aren’t always a few bad apples, but there truly are very few.)
So, when borrowers shop for loans on the old “price/product/service model”, how does a consumer differentiate between loan officers?

• Ask for referrals – If you have a friend, co-worker, or family member who had a good lending experience, ask who they used. Talk to people who deal with multiple lenders (real estate agents, attorneys, accountants, etc.) and leverage their comparative experience into making good choices. Loan officers who earn referrals typically go beyond price/product/service.
• Seek out a mortgage adviser – Even today, with limited loan programs, there are many factors to consider when choosing the right mortgage. Your future income, the length of time you expect to be in the home, and your risk tolerance should be discussed before ruling out adjustable rate mortgages, for example.
• Look for transparency – Demand a lender who freely and competently discusses rates and likely rate movements. Don’t buy into the idea that rates are conjured up in a mysterious way. Rates are derived by activities in the bond market and your loan officer should be able to explain, in layman’s terms, the factors that affect rates and upcoming events and economic reports, as well as, the most likely impact they will have.
• Accessibility of information – Are you looking for printed materials and/or videos to guide you through the process? How about online workshops or home buying seminars?
• Seek out a resource – You may need other professionals when buying a home (from insurance people, to home improvement people, to legal help). A good loan officer has a network of high quality referral partners to help you. 

As your Lender, I have solidified my expertise in Pricing, Products and Service. I however will go much farther for you as your Mortgage Lender. I study on a daily basis the fixed income, real estate and equity markets. I can tell you where mortgage rates are and where they are going and why. I have a vast network of professionals who are the very best at what they do. Whether you need a Realtor, Insurance Agent, a handyman or a specific Contractor that excels in his or her trade, I have spent the past 7 years in Vacaville and Solano County building the very best team of professionals that are here to serve your needs and will do so within your time frames and budget. My goal is to not only provide you with the very best loan, rate and "red carpet service", but to also provide you with knowledge, and a team of professionals that has your back for years to come.

If you go to www.mylendernate.com you can read testimonies that demonstrate that Nate Pina is the very best choice in Solano County for your mortgage lending needs!

Real Estate Wealth

Several real estate economists have shown that the average homeowner accumulates more overall wealth than the average renter.[i]  However, it is not clear how this is done.  Is it that owned property usually appreciates at such a rate that, after considering leverage, returns to ownership are extraordinarily high?  Said another way, might homeowners accumulate more overall wealth because ownership is a great levered equity creator through property appreciation?  Or, is it that owners acquire greater wealth, on average, because they are systematically paying down a mortgage thereby creating equity thanks to loan amortization?  In other words, paying off property creates wealth.
In ongoing research being conducted by Beracha and Johnson,[ii] these and other questions concerning home ownership and the accumulation of wealth are being investigated.  In earlier research, Beracha and Johnson show that renting is the superior investment strategy; however, in this earlier strict horse race between buying and renting, a very bold assumption is made.  Specifically, it is assumed that any rent savings (from lower rent versus mortgage payments) are reinvested without fail. Thereby, after balancing all of the costs and benefits from ownership and comparing them to renters’ portfolios from reinvesting rent savings, renting wins.
The question, however, very quickly becomes that, in a setting where Americans generally save less than 5% of their disposable income, is this assumption realistic and how might the removal of this reinvestment decision alter the outcome of the horse race between buy and renting?  As part of their current research, this question is directly addressed.  In particular, Beracha and Johnson find that after allowing renters to spend any rent savings on consumption (beer, cookies, healthcare, education, etc.), ownership leads to greater wealth accumulation, on average.  The graph below highlights this finding.

The graph looks at the ratio of renters’ portfolio values to owners’ proceeds from sale for the entire U.S. between 1978 and 2010 both with strict reinvestment of rent savings and without reinvestment of rent savings.[iii]  Clearly, numbers greater than 1 indicate that renting leads to greater wealth accumulations, while numbers less than 1 indicate that home ownership creates greater wealth, on average.
When renters are forced to reinvest (top line in the graph), the results confirm the earlier findings of Beracha and Johnson (2012).  That is, in a strict horse race between buying and renting, renting wins in the vast majority of cases.  However, when renters are allowed to spend rent savings on consumption (i.e. economically act like the typical American consumer), home ownership wins in virtually all instances.  Notice that in the bottom line of the graph (no reinvestment), the renters’ portfolio values divided by owners’ sale proceeds is great than 1 for only four of the 32 years of the study.  Thus, when renters are allowed to spend rent savings, home ownership is the clear winner in the wealth accumulation horse race.
Finally, in the same current research, Beracha and Johnson find that allowing for property appreciation rates to increase as much as 20% over their actual historic values results in virtually no change in the outcomes concerning wealth accumulation.  That is, property appreciation contributes only marginally to wealth accumulation

Implications

Without proof many have speculated about this outcome for years.  However, there is now actual quantifiable evidence that home ownership is not the great levered equity creator that it has so often been touted to be.  Instead, it appears that home ownership creates extra wealth mainly through its ability to force owners to save rather than through property appreciation.  Thus, home ownership appears to be a self-imposed savings, which through time leads to greater wealth accumulation as compared to comparable renters.  In short, buying a home makes Americans save.
Who says that Americans are horrible savers?  Apparently, we are not.  We have simply been saving through our homes rather than putting our savings in the bank.

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Endnotes

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[i] Home ownership is the most viable path to wealth creation for the majority of Americans.  See Engelhardt (1994), Haurin, Hendershott and Wachter (1996), and Rohe, Van Zandt and McCarhty (2002), among others.

[ii] Eli Beracha and Ken H. Johnson, 2012, Beer and Cookies Impact on Homeowners’ Wealth Accumulation, ongoing research.
[iii] The research assumes 8-year holding periods.  When the holding period is allowed to vary between four and twelve years, the results change only marginally.  Thus, holding period has very little to do with the results.

Assumable Loans

One of the rarely touted advantages of people taking FHA mortgages today is the fact that they are assumable. What that means is, when the FHA home-buyer of today is looking to sell his home, a qualified purchaser can “take over” their loan.
Most people believe that interest rates will return to a “normal” range (between 6.5% and 7%) in a couple of years. When you assume a mortgage, the terms remain the same. This means that a buyer five years from now can enjoy a 4 – 4.5% mortgage by assumption rather than the 6.5% – 7% mortgage they would get without it. Since most people buy homes based on how the monthly payment fits into their personal monthly budget, this is extremely impactful.
As an example, a $300,000 loan at 4% today carries with it a $1,432.25 principal and interest payment on a 30 year fixed mortgage. If offered for sale in five years, the purchaser could assume the $271,858.56 balance with the same $1,432.25 payment and remaining term of 25 years. The total payments over the 25 years would be $429,675.
Compare that to a new $272,000 loan at 6.5% for 25 years, which would carry a monthly payment of $1,836.56 (over $400 more a month than the assumption and more than $120,000 more over the 25 year term).
At 6.5% for 25 years, to wind up with the same payment as the assumed mortgage, our borrowers would only be getting $212,000…$60,000 LESS!

The point here is that, when rates go up, homes with assumable mortgages will have more value and will sell at higher prices because they are more affordable. As an additional bonus, the closing costs on assumable mortgages are significantly less (especially here in New York where NYS Mortgage Tax is such a large component of closing costs).
The borrowers must be credit-worthy of course (have good credit, qualifying income, and necessary assets to close), but they would have to be credit-worthy to get a new mortgage too!
Besides the multiple other reasons to obtain an FHA mortgage (low down payment requirements, extended income ratios, lower credit scores, and easier sourcing of funds), there is another perk. In the future, there is a good chance that you may be able to sell your home for more money because of the FHA loan’s assumability.

Negative Equity By State

InfoGraphic

Nate Pina and SPM Mortgage Have your Mortgage Needs Covered!

It’s the time of year that we look ahead and attempt to give our best guesses about the market, the industry, and the effects they may have. So, here are my thoughts about the mortgage world:

Interest Rates Should Be Stable

With a faltering economy nationally and worldwide, including pessimistic estimates for employment, there is little chance that the Fed will risk increasing rates which would jeopardize any recovery. Couple that with a Presidential Election in November and conventional wisdom says we’ll see rates hovering in the same neighborhood for most of 2012.

Mortgage Costs Will Increase - NOW THIS IS INTERESTING

Quietly tucked away in those bills passed in Congress to extend the payroll tax cuts before the holidays was an increase of 10 basis points in the guarantee fees on loans sold to Fannie Mae and Freddie Mac. That will translate into .10% higher interest rates (which would be $4000 extra on a $200,000 loan over 30 years). Interestingly enough, the additional revenue is not going to Fannie or Freddie to help with defaulted loans, but rather going to the US Treasury to make up for the payroll tax cut….go figure.

The Mortgage Interest Deduction Will Be Challenged

Look for people of a certain income level to lose their write off as a measure to increase revenue. Taking away from the wealthy as a way to raise governmental revenue is politically strategic. It is unlikely everyone will lose the deduction (political suicide), but that top 1%…watch out.

Loan Products Will Expand

Common sense lending will start creeping back. Large down payments will liberalize credit and income standards. This will likely begin with local banks who are comfortable with appraised values. I’m not calling for a return to the madness, but some loans that are low risk are not being done today. Anticipate some lenders expanding their guidelines.
Don’t be shocked by a lowering of FHA loan limits and/or an increase in the FHA Up Front Mortgage Insurance Premium either. Overall, mortgages should give people more reasons to buy homes in 2012 as the economic recovery is strongly tied to housing. Given that most people vote their own personal economy rather than policy beliefs, I expect support by those who are looking to be re-elected.

Real Estate: Today's Golden Opportunity!

Real Estate: Today’s Golden Opportunity comparing the current housing market to the market for gold about a decade ago. Some commented on the fact that you can’t compare gold to real estate as an investment as gold is a very liquid asset and it would take more time and effort to sell a house. We were not trying to make the case for real estate vs. gold as an investment in our blog. We were just showing that all investments go through cycles and that the best time to buy any investment may be when everyone is saying not to.
However, since the subject of comparing real estate to other investments has come up, let’s take a closer look. There are two major advantages to investing in a home of your own rather than another option:

You Can’t Live in Your IRA

When you buy your own home you are not taking available dollars away from another investment. You are replacing one housing expense (rent) which has no potential for a return on investment with another (mortgage payment) that does give you an opportunity for a return. We realize that there has been research showing that over the last 30 years renting has been less expensive than owning. That research also says that if you invested the entire difference between the rent payment and mortgage payment you may have done better financially.  There are two challenges with this conclusion:

1. Today, in the vast majority of the country, renting is actually more expensive than owning a home.
2. History has proven that tenants DO NOT invest the difference in their rent and mortgage payments.

Today, study after study shows that owning a home is no more expensive than renting a home. However, even if this wasn’t the case, history shows that owning a home creates greater wealth.
Paying a mortgage creates what financial experts call ‘forced savings’. The Joint Center for Housing Studies at Harvard University released a study earlier this year titled America’s Rental Housing: Meeting Challenges, Building on Opportunities. In the study, they actually quantified the difference in family wealth between renters and homeowners:

“[R]enters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”

There Are Tremendous Tax Advantages to Investing in a Home

There is no doubt that selling an investment such as gold is easier than selling your home. However, this liquidity comes at a price. The price is called capital gains. That is the tax you pay on any financial gain you receive from the investment. This tax doesn’t apply the same way when you sell your primary residence:
Theresa Palagonia, a CPA and the Accounting Manager for the firm G.S. Garritano & Associates, was good enough to explain the Home Sale Exclusion Rules:

“You may qualify to exclude from your income all or part of any gain from the sale of your main home. 
Maximum Exclusion
You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true:

• You meet the ownership test.
• You meet the use test.
• During the 2 year period ending on the date of the sale, you did not exclude gain from the sale of another home.

If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions listed above.
You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements. (Special rules apply for joint returns.)
Ownership and Use Tests
During the 5 year period ending on the date of the sale, you must have:

• Owned the home for at least 2 years, and
• Lived in the home as your main home for at least 2 years

Certain exceptions exist in which you may qualify for the exclusion without satisfying the tests listed.”

Bottom Line

Every investment has pros and cons. That is why there is such an assortment of great opportunities. Real Estate has been, is and always will be one of those opportunities.

Solano County Real Estate Trends

Predicting trends during the most volatile housing market in American real estate history is no easy task. We strongly believe these are the five real estate items we should keep an eye on in 2012:

1. Buyers Will Return

In 2011, a lack of consumer confidence in the overall economy dramatically impacted the housing market. Buyers were afraid to make a purchasing decision on any big ticket item. By the end of 2011, consumer confidence began to return and sales increased. Economic conditions will continue to improve throughout 2012 and consumer sentiment will solidify. Once that happens, home buyers will realize that now is the time to buy.

2. Foreclosures Will Increase

The ‘shadow inventory’ of foreclosures which has been growing since the robo-signing challenges of late 2010 will finally be introduced to the market. Distressed properties sell at discounted prices. They will impact the housing values of the non-distressed homes in the area.

3. Prices Will Soften

As more and more foreclosures come to market, there will be greater downward pressure on the values of houses in the region. Foreclosures impact values of non-distressed properties in two ways:

• They will eat up some of the buyer demand in the market.
• They will impact the appraisal on ALL transactions in the area.

An increase in foreclosures will have a negative impact on values. This will cause more homes to be underwater.

4. Short Sales Will Increase

As mentioned above, we strongly believe that home prices will soften through at least the first half of 2012. Falling prices will force more homeowners into a position of negative equity. Negative equity is one of the triggers that cause people to strategically default on their mortgage obligations. If this happens, there could be an increase in the number of foreclosures. However, we predict that banks will take preventative measures which will help many of these homes avoid foreclosure by easing the requirements in the short sale process for both homeowners and real estate professionals.

5. Great Agents Will Be VERY Successful

Real Estate professionals who have invested the money, time and energy to truly understand what is happening and why it is happening will separate themselves from their competition and do very well this year.
Those who take that next step of learning how to simply and effectively communicate the market to their clients will be seen as industry leaders. These experts will dominate their markets.