FHA Increases Buyer's Costs!

In FHA's infinite wisdom, their commissioner David Stevens announced he was implementing changes that will "save buyers money", while raising additional, critical funds necessary to keep FHA afloat. Does something smell funny to you? If you think something smells fishy, you're not alone. Mr. Stevens says he's going to raise MORE money by reducing YOUR BUYER'S COSTS! You're right - He's only telling HALF the story. (sounds like more of a politician, than a commissioner!)

Let's get to the bottom of it.  Congress HAS ALREADY PASSED legislation that will allow Mr. Stevens to increase FHA's infamous mortgage insurance to raise more capital.  He has announced, that EFFECTIVE SEPTEMBER 7th, the following changes will occur: FHA's Up Front Mortgage Insurance Premium (currently 2.25% of the loan amount) will DECREASE to 1.00%. Hooray...Our buyers are saving money!  OK, now the rest of the story.  The monthly Mortgage Insurance rate (currently .55%) will increase to between .85% - .90%. What is the net affect?  See the chart below

As you can see, looking at a $200,000 loan at 5.00% interest rate, after September 7th, the loan amount actually decreases to $202,000, from $204,500, however, when you add in the new Monthly Mortgage Insurance, the payment jumps from $1,190 to $1,234.  This, effectively increses the buyer's interest rate .33%.

An even scarier proposition is that Congress gave Mr. Stevens the authority to increase the monthly Mortgage Insurance Premium to 1.55%.  Illustrated in the chart, you'll see at that rate, a buyer's monthly payment would jump again another $109 or $153 per month more than the current MI rate!  Keep in mind, this change begins with FHA Case Numbers issued after September 7th.  If you have buyers sitting on the fence and can't decide on a home NOW is the time to pull the trigger before their payment jumps up! 

Stay tuned for more information!

Posted via email from AZ FatCats

FHA Increases Buyer Costs!

In FHA's infinite wisdom, their commissioner David Stevens announced he was implementing changes that will "save buyers money", while raising additional, critical funds necessary to keep FHA afloat. Does something smell funny to you?

If you think something smells fishy, you're not alone. Mr. Stevens says he's going to raise MORE money by reducing YOUR BUYER'S COSTS! You're right - He's only telling HALF the story. (sounds like more of a politician, than a commissioner!)

Let's get to the bottom of it. Congress HAS ALREADY PASSED legislation that will allow Mr. Stevens to increase FHA's infamous mortgage insurance to raise more capital. He has announced, that EFFECTIVE SEPTEMBER 7th, the following changes will occur:

FHA's Up Front Mortgage Insurance Premium (currently 2.25% of the loan amount) will DECREASE to 1.00%. Hooray...Our buyers are saving money! OK, now the rest of the story. The monthly Mortgage Insurance rate (currently .55%) will increase to between .85% - .90%. What is the net affect? See the chart below

As you can see, looking at a $200,000 loan at 5.00% interest rate, after September 7th, the loan amount actually decreases to $202,000, from $204,500, however, when you add in the new Monthly Mortgage Insurance, the payment jumps from $1,190 to $1,234. This, effectively increses the buyer's interest rate .33%.

An even scarier proposition is that Congress gave Mr. Stevens the authority to increase the monthly Mortgage Insurance Premium to 1.55%. Illustrated in the chart, you'll see at that rate, a buyer's monthly payment would jump again another $109 or $153 per month more than the current MI rate!

Keep in mind, this change begins with FHA Case Numbers issues after September 7th. If you have buyers sitting on the fence and can't decide on a home NOW is the time to pull the trigger before their payment jumps up!

Stay tuned for more information!

Loan Originator Licensing... a Good Thing?

Boy has THIS legislation ever been overdue! Yes, loan originators' licensing is upon us and the playing field has certainly changed! Just a few years ago, it seemed that EVERYONE was in the mortgage business. Just ask your lawn guy or pool cleaner. They too were probably part-time loan officers! Heck, even your Realtor was getting in on the action. However, with the advent of Financial Reform, as of July 1, 2010, only LICENSED MORTGAGE ORIGINATORS are allowed to discuss, negotiate and quote terms for your next home purchase or refinance. A short time ago, there were an estimated 11,000 mortgage loan officers operating both full-time and part-time in Arizona. Many were already in the business operating in a legitimate, career-oriented manner. Others were individuals that only knew of someone looking to buy or refinance a property and wanted "in on the action" to earn a commission. Since the new financial reform laws have passed, only licensed originators are allowed to receive compensation for loan origination services rendered. What does it take to become licensed? Applicants must take and pay for 20 hours of financial classes, pass both the State of Arizona and National loan originators exams, clear the extensive background checks, including fingerprinting and credit review can qualify. What has this done to the pool of originators? Exactly, what it was intended to do. Part-time loan officers have raced back to their steady jobs and only the serious, career oriented producers have remained. What was once a field of 11,000+ in the business has dropped to below 2,000! It is estimated that by the time the State's Department of Financial Instituations catches up on applications, there will be a pool of about 2,600 licensed loan originators. Congratulations to our legislators for getting this one right! By the way, I, Jon A. Achilles am a licensed Mortgage Loan Originator!

Posted via email from AZ FatCats

Loan Officer Licensing... a Good Thing?

Boy has THIS legislation ever been overdue! Yes, loan originators' licensing is upon us and the playing field has certainly changed! Just a few years ago, it seemed that EVERYONE was in the mortgage business. Just ask your lawn guy or pool cleaner. They too were probably part-time loan officers! Heck, even your Realtor was getting in on the action. However, with the advent of Financial Reform, as of July 1, 2010, only LICENSED MORTGAGE ORIGINATORS are allowed to discuss, negotiate and quote terms for your next home purchase or refinance.

A short time ago, there were an estimated 11,000 mortgage loan officers operating both full-time and part-time in Arizona. Many were already in the business operating in a legitimate, career-oriented manner. Others were individuals that only knew of someone looking to buy or refinance a property and wanted "in on the action" to earn a commission.

Since the new financial reform laws have passed, only licensed originators are allowed to receive compensation for loan origination services rendered. What does it take to become licensed? Applicants must take and pay for 20 hours of financial classes, pass both the State of Arizona and National loan originators exams, clear the extensive background checks, including fingerprinting and credit review can qualify.

What has this done to the pool of originators? Exactly, what it was intended to do. Part-time loan officers have raced back to their steady jobs and only the serious, career oriented producers have remained. What was once a field of 11,000+ in the business has dropped to below 2,000! It is estimated that by the time the State's Department of Financial Instituations catches up on applications, there will be a pool of about 2,600 licensed loan originators.

Congratulations to our legislators for getting this one right!

By the way, I, Jon A. Achilles am a licensed Mortgage Loan Originator!

Why are Interest Rates STILL Low?

I've been preaching to the masses that interest rates will be rising soon, only to see them recently drop even lower. While I'm sounding like the proverbial used car salesman, it hasn't been without good reason. Let me explain.

Our government has artificially propped up the mortgage market and kept interest rates low by purchasing $1.25 trillion in mortgage backed securities. What does that mean? It means when mortgages are signed and agreements are made with banks, those banks 'pool' those mortgages and sell them as 'mortgage backed securities' on Wall Street. Since the 'mortgage meltdown', nobody would touch those with a ten foot pole, so our government stepped in and agreed to purchase them.

If the government didn't buy these, banks would have to entice investors to purchase them by increasing their return. Investors would demand a higher return for what they perceive as risky investments which, in turn would drive mortgage rates much higher, much faster. Since the Fed's stepped in, the free market system hasn't been put to the test for over a year.

Now that the Fed's buying spree has ended, all signs pointed to rising mortgage interest rates, with economic pressures and unemployment numbers not improving. All signs point to higher rates until WHAM.... Greece's economy starts to tank and the threat of France following in their footsteps hits the airwaves.

What does this have to do with US mortgage interest rates? Well, the world has become a much smaller place and, as they say, "we're all in this together". Investors spread their portfolio worldwide. When funds invested in Europe, specifically Greece and France begin to sour, they look for stronger places to put their money. The US bond market still seems to be a safe haven, although yields are low. Therefore, just as we are expecting mortgage rates to rise, we get a sudden influx of interest into our bond system that strengthens the market, keeping rates in check.

So, the instability of the European Union has helped to keep US mortgage interest rates in check. How long will this last? Who knows? One thing is for sure... if there's one thing we can always count on, it's change!

What a WILD RIDE!

Wow, did you see that crazy stock market this week? Within a matter of hours, the Dow Jones Industrial Average plummeted almost 1000 points, only to see it come back and recover 650 points back. Oh my! Though it's still not clear as to what exactly sent the sellers into a flurry, the overall volatility of the market reared its ugly head.

Where does that leave mortgage interest rates? Fortunately, in our current state, investors are moving funds back and forth between stocks and bonds. Bonds are what mortgage banks are watching, since they have the most affect on rates. Since loads of money left risky stocks and sought refuge in safer bonds, the prices of bonds rose. That's GOOD NEWS for mortgage rates, but as we said, the prices came right back down.

Overall, mortgage interest rates are hanging on at very low levels, still offering terrific deals for investors and new buyers alike. There's still time to take advantage of these rates, so if you know of buyers sitting on the fence, now might be a great time to jump in the game before we see inflation rear its ugly head.

April 30th is Soon Arriving... Now What?

April 30, 2010 marks the end of an era. No, this may not be anything life changing, but in the real estate world we live in today, it is significant. April 30th is the last day a real estate purchase contract can be written so that the purchaser of that home can qualify for an $8,000 or $6,500 Federal income tax credit, but that's not all. This is HUGE! Here's why:

When we all witnessed the mortgage meltdown, the real estate industry was turned upside down. Agents and lenders alike saw their business fly out of site as quickly as a mobile home in an Oklahoma tornado! The following year and a half, we watched as the Federal government put together incentives to help support the industry. One by one, those incentives have dissipated until April 30th - the last one goes away.

NOW WHAT? You're not the only one asking this question. Investors on Wall Street are watching closely to see just how stable the market will be once the supports of the government are finally pulled away. At the end of March, the government ceased buying mortgage backed securities, which artificially kept mortgage interest rates at their lowest levels ever. Come April 30th, the Federal government will no longer pay a person to buy a home. Is this good for the market and for our economy? Only time will tell.

Since rates have begun to climb and the purchase incentives begin to fade, it will surely be interesting to see the market's reaction. In my opinion, we will continue to see interest slowly rise. Also, as the market stabilizes, it's only a matter of time that we see housing prices climb. After all, Arizona is STILL a very attractive place to live. Our market will begin to steadily grow, at the rate it SHOULD, not at artificially inflated rates we've seen in the past.

Bottom line: There is no better time than now to get your production in gear! March was better than April, but April, surely will be better than May, June or July! Time is flying by... "There's no better time than the present!"