Mike Smalley (407) 644-0870

Mike Smalley's Mortgage and Real Estate Trends

2 Pieces of Major FHA news:

 

FHA announces major changes January 20, 2010 

 

This morning FHA will announce a series of changes designed to protect the federal agency that has emerged as the cornerstone of the mortgage market as the housing sector wobbles toward recovery.  Lenders will find these new rules painful but necessary.  With FHA hovering around 40% of new loan originations, even small changes have a major impact on the housing market.

 

Here are some of the changes:

-minimum down payment increased to 10% for borrowers with FICO scores below 580 (in reality, this is minor, as few lenders will lend to a borrower with a sub 580 FICO anyway)

-raise the upfront mortgage insurance premium to 2.25% (from 1.75%)

-allow legislative changes to monthly mortgage insurance premium (currently.55% of the loan amount on an annual basis)

-decrease seller concessions from 6% to 3% of the sales price

-grade lenders on loan portfolio performance

 

What did not change is the required minimum down payment, which currently stands at 3.5%.

 

Here are a few articles from this morning:

New York Times - http://www.nytimes.com/2010/01/20/business/20home.html?scp=2&sq=fha&st=cse

 

Wall Street Journal - http://online.wsj.com/article/SB10001424052748703837004575013690004466692.html

 

FHA Eases Flipping Rules

 

It appears that starting February 1^st, 2010, HUD / FHA is going to loosen their guidelines pertaining to property flips. THIS IS HUGE!!! According to HUD's Shaun Donovan, some of the restrictions will be temporarily lifted beginning February 1st to further promote home sales. Here are some basic guidelines I have been able to research:

   - The transaction must be "Arms Length".

   - The seller MUST hold title to the property at the time of the sale.

   - There shall be no pattern or previous property flipping in the past 12 months.

   - The property must be marketed openly and freely (i.e. MLS).

   - If the home being "flipped" has a new sales price that is 20% + greater than the   previous purchase price, then the seller must document any repairs / rehabilitation performed on the home and/or a 2nd appraisal will be needed and requested. In these cases it should be expected that a home inspection will be required as well. ***Currently, FHA does not require home inspections OR termite / WDO inspections unless the contract calls for them. FHA only recommends the buyer order these services.***

 

REAL ESTATE NEWS - Sellers Lowering Their Prices Less:

 

With home prices beginning to flatten in many areas around the country, home sellers are slowly gaining ground in their quest to hold on to their asking price. A new report from Trulia.com finds that of all homes on the market today, 21 percent have seen at least one price reduction. That's the second straight month that percentage has declined.

 

JANUARY REAL ESTATE SEMINAR - IT IS THIS THURSDAY - 01/21/2010

 

On Thursday, January 21^st, 2010, we are paying for the President of Waterstone Mortgage, Eric Egenhoefer, to fly in town to present a legislative and economic forecast pertaining to the Mortgage and Real Estate Industry. The event will be held at the Winter Park Civic Center from 9am to 11am. This is a “Must Attend” as the changes that have taken place on January 1st and the ones we anticipate happening over the next twelve months will impact your buyers and sellers and quite possibly how you operate your Real Estate business.

 

MORTGAGE RATES:

 

Currently, mortgage backed securities (mortgage bonds) are "Channel Surfing". This means that Mortgage Backed Securities are bouncing off of levels of support and levels of resistance that are close in proximity to one another. This is why we are seeing small movements in mortgage rate pricing day in and day out. Currently 30 year fixed rates are bouncing between 5% and 5.25% with 15 year fix rates are in the 4.625% to 4.875% range. These rates are quite a ways off of the lows we saw in November. Most "experts" are calling for November of 2009 as being the "bottom" for mortgage rates. The long term outlook is for rates to rise throughout the year with the average 30 year fixed rate for 2010 being 5.625% to 5.75%, possibly touching a high point in the 6.25% range.

 

Weekly Market Update - US Senate to vote TODAY on extension of First Time Buyer Tax Credit

Weekly Market Update from Waterstone Mortgage

 US Senate to Vote today on extension of First Time Buyer Tax Credit

According to Senator Bill Nelson (D-FL), the US Senate is poised to vote today on an extension of the first time buyer tax credit.  There are 2 proposals being looked at, one from Senator Harry Reid (D-NV) and one from Senator Johnny Isakson (R-GA).  The Reid proposal phases out the credit, dropping it to $6,000 in April, $4,000 in July, and $2,000 in October, with it expiring at the end of December 2010.  Meanwhile, the Isakson plan will keep the credit at $8,000 and extend it to all buyers of primary residences, with it expiring at the end of June.  You can read more here - http://www.reuters.com/article/GCA-Housing/idUSTRE59P3VO20091026.

 

Pyramid of the Complete Realtor Presentation

I have been asked to give my presentation, The Pyramid of the Complete Realtor®, at ORRA for the ABC’s of Real Estate next month.  The presentation will be Wednesday November 4^th from 2:00 – 3:30.  I hope to see you there.

 

Underwriting

Our current underwriting turn time for Conventional, FHA, and VA loans is 2 days!  That’s right, two days after sending a file to underwriting, I have an approval.  If you are having issues closing on time call me.

 

Market Update

Interest rates have ticked up slightly this week.  Conventional rates are in the 5.25% range while FHA is around 5.00%.  5/1 ARM rates have dropped considerably in recent weeks, into the upper 3’s, and can be a good alternative for someone looking to own a home for 4-6 years.

 

2010 Realtor® Success Summit

Two weeks ago we sent out the first invitations for the 2010 Realtor Success Summit, to be held December 1^st from 9:00 – 1:00 at the Winter Park Civic Center.  So far we have received 69 RSVP’s, and we only have room for 150.  We will have multiple speakers, topics, expert panels, and FREE FOOD!  Reserve your seat today for what will be a great educational and motivational experience.

To RSVP, e-mail mpischke@waterstonemortgage.com

Have a great week!

Weekly Market Update - Rates are going up and 2010 Realtor Success Summit

Weekly Market Update from Waterstone Mortgage

There are only 41 days (unless it’s extended) until the first time buyer tax credit expires on November 30^th so get those buyers off the fence. 

 

ACT NOW, MORTGAGE RATES ARE GOING UP

The last 12 months have seen the lowest interest rates over an extended period in history.  Mortgage rates have been as low as 4.625% and as high as 5.625%, with an average around 5.125% for the last year.  Multiple factors led to this, almost a perfect storm of economic factors and government intervention.

-the Federal Reserve program to purchase 1.25 trillion dollars worth of Mortgage Backed Securities between January 1, 2009 and March 31, 2010

-the stock market decline immediately following the financial market meltdown in late 200

-unemployment nearing 10%

-very low inflation

-the worst economic recession since the Great Depression

Low inflation, a poorly performing stock market, and competition to purchase Mortgage Bonds are all factors that individually will cause lower mortgage rates, and when all 3 are combined you will see what we have seen for the last year.  Unfortunately, the party is coming to a close.  The same factors that caused mortgage rates to fall to record lows are about to turn them in the other direction:

-the stock market has crossed the 10,000 mark and most of the Fortune 500 companies have beat earnings expectations for the 3^rd Quarter

-the Federal Reserve is pulling back its Mortgage Backed Security purchase program, buying ½ as many bonds in a given week as it had earlier this year, with the program set to run its course at the end of March 2010

-continued govt. spending will weaken the US dollar, and cause inflation to rise; in the last week the govt. announced a budget deficit of 1.4 trillion dollars for the just completed fiscal year, which blew away the previous record; continued deficits mean more govt. spending (=borrowing) and will continue to weaken the dollar and cause inflation to rise

The bottom line is, mortgage rates are going up, so don’t wait to purchase or refinance as doing so might mean the difference between 5.00% and 6.00% on your next mortgage.

 

Pyramid of the Complete Realtor Presentation

I have been asked to give my presentation, The Pyramid of the Complete Realtor®, at ORRA for the ABC’s of Real Estate next month.  The presentation will be Wednesday November 4^th from 2:00 – 3:30.  I hope to see you there.

 

Underwriting

Our current underwriting turn time for Conventional, FHA, and VA loans is 2 days!  That’s right, two days after sending a file to underwriting, I have an approval.  If you are having issues closing on time call me.

 

Market Update

Interest rates have ticked up slightly this week.  Conventional rates are in the 5.25% range while FHA is around 5.00%.  5/1 ARM rates have dropped considerably in recent weeks, into the upper 3’s, and can be a good alternative for someone looking to own a home for 4-6 years.

 

2010 Realtor® Success Summit

Last week we sent out the first invitations for the 2010 Realtor Success Summit, to be held December 1^st from 9:00 – 1:00 at the Winter Park Civic Center.  In the first week we received 38 RSVP’s, and we only have room for 150.  We will have multiple speakers, topics, expert panels, and FREE FOOD!  Reserve your seat today for what will be a great educational and motivational experience.

To RSVP, e-mail mpischke@waterstonemortgage.com

Have a great week!

Weekly Market Update - FHA Loan Limits and 2010 Realtor Success Summit

Weekly Market Update from Waterstone Mortgage

There are only 48 days (unless it’s extended) until the first time buyer tax credit expires on November 30^th so get those buyers off the fence.   

How long does it take to close?

Many lenders are advising 45 day contracts, especially for FHA loans.  If you are running into delayed closings please call me.  As a direct lender who underwrites in house, we can easily close in 30 days, even on FHA loans.  If you have buyers looking to close before 11/30 and another lender can’t get it done in time, I can help, so call me. 

Tax Credit Extension

Congress just passed a 6 month extension of the first time buyer tax credit for members of the military who have recently completed 90 days of active duty service.

There is nothing new on the overall extension of the credit.  I expect an announcement in early November, so one way or another, we should know in 3-4 weeks if it will be extended for all first time buyers. 

Higher FHA loan limits becoming permanent

In January the increase of the FHA loan limit is set to expire.  Remember that the previous limit was $271,000 before it was increased to the current limit of $353,000 in most of Central Florida.  If the limit was to return to previous levels, or even lower based upon a much lower median sales price for the area, it would have a very negative impact on the local Real Estate Market.

Congress is currently considering HR 2483, a proposal to make the increased loan limits permanent.  Call your representatives to support this bill today!

 Underwriting

Our current underwriting turn time for Conventional, FHA, and VA loans is 2 days!  That’s right, two days after sending a file to underwriting, I have an approval.  If you are having issues closing on time call me.

 Market Update

Interest rates have ticked up slightly this week.  Conventional and FHA rates are in the 5.125% range.  5/1 ARM rates have dropped considerably in recent weeks, into the upper 3’s, and can be a good alternative for someone looking to own a home for 4-6 years.

 ORRA Seminar on Business Planning

I will be giving a presentation at the ORRA ABC’s of Real Estate on November 4^th from 1:00 – 3:00.  You can RSVP through ORRA directly.  I will be teaching Realtors how to write their business plan for 2010.

 2010 Realtor® Success Summit

In the coming days you will be receiving information on our end of year seminar.  Block off December 1^st from 9:00 – 1:00 for an event you don’t want to miss.  We will have multiple speakers, topics, expert panels, and FREE FOOD!

To RSVP, e-mail mpischke@waterstonemortgage.com

Have a great week!

Weekly Market Update - $8,000 tax credit extension, FHA changes, and where are interest rates headed

Weekly Market Update from Waterstone Mortgage 

Where are interest rates headed?

2009 will go down as the year of the lowest average 30 year fixed rate mortgage in history.  So will 2010 be more of the same?  The answer is it depends.

Interest rates have remained low because the Federal Reserve has allocated 1.25 trillion dollars to purchase Mortgage Backed Securities (MBS), in an effort to drive down interest rates and stimulate the housing market.  To date the Fed has spent $870 billion, or about 70% of the allocated amount.  By purchasing MBS, the Fed is causing MBS prices to rise, and MBS yields (see Interest Rates) to fall.

So what will happen if the Fed stops buying MBS on December 31^st as planned?  Rates will rise, and they will rise quickly.  Absent the Fed buying MBS, the impact of record government spending and deficits will lead to rapidly rising inflation and interest rates.  It is not unrealistic to think rates could reach 7% in 2010.  This week alone the government is auctioning $112 billion in US Treasury debt to pay for budget deficits and spending programs.  That’s right, the government is borrowing $112 billion dollars this week…..talk about fiscal responsibility!

The good news is the Fed has mentioned the possibility of extending the MBS purchase program into 2010.  If this happens, and I put the likelihood at greater than 50%, rates should remain low.

Tune to CNBC tomorrow at 2:15 to hear the Federal Reserve’s policy announcement live.

First Time Buyer Tax Credit Being Extended?  Expanded?

There is a lot of buzz about the $8,000 tax credit being extended, and possibly expanded.  I’ve seen proposals to extend it another 6 months, 12 months, and one proposal to let it expire in November and renew it from March – December 2010.  Of all the proposals, I think the likelihood is that it will be extended 6 months, and any future extensions after that will depend upon economic factors at that time.  Look for the tax credit to be extended just before the November 30^th expiration, causing some panic, then relief when it does get extended.

As for talk of expanding the credit to $15,000 and even opening it up to all home buyers, I do not expect that to pass.  The extra money is not necessary and not fiscally intelligent.  I will also be very surprised if it is expanded beyond just first time buyers.

Here is a great article to summarize what is being discussed - http://www.usnews.com/money/blogs/the-home-front/2009/09/18/will-the-8000-first-time-home-buyer-tax-credit-be-extended.html

FHA Lending Facing a Major Overhaul in 2010

This week HUD announced major overhauls to the FHA mortgage program.  Among them are changes in the appraisal ordering process and in what lenders are able to be FHA approved.

The most damaging change is the requirement that all FHA approved lenders must have a net worth of $1,000,000.  This will effectively eliminate the FHA approvals of almost all mortgage brokers and small correspondent lenders.  Mortgage brokers will be forced to be sponsored by a lender in order to do FHA loans.  While more mortgage brokers will have access to FHA, many lenders will not take on the new risk associated with sponsoring the mortgage broker.  The end result might be a much more difficult market for brokers trying to do FHA loans.

Small correspondents will have an even larger adjustment.  Many of them have been underwriting and approving FHA loans for years, but without the net worth requirement, they will be forced back into the broker world.

This is another reason being owned by a bank gives Waterstone strength as a company and significant competitive advantages. 

Underwriting

Our underwriting turn times are 2-3 days for purchases, refinances, condos, FHA, VA, and Jumbos.  We can easily close within 30 days, so don’t let anyone tell you closing an FHA loan takes 45 days….it doesn’t.

We will also be approved to underwrite USDA loans in house with 60 days.

Interest Rate Update

Interest rates have remained flat this week.  Conventional and FHA rates are in the 5.125% range.  5/1 ARM rates have dropped considerably in recent weeks, into the low 4’s, and can be a good alternative for someone looking to own a home for 4-6 years. 

September’s Seminar

Topic: Polybutylene Plumbing and Chinese Drywall

Speakers: Brad Clark of Florida Insurance Specialists and Jim Murphy of HomePro Inspections

Date: Thursday, September 24^th

Time: 9:00 Registration, 9:30 – 10:30 speaker

Location: Winter Park Civic Center

To RSVP, e-mail mpischke@waterstonemortgage.com

2010 Business Plan Seminar

Mark your calendar for Tuesday, December 1^st!  We will be hosting our very popular Business Plan seminar, and this year we have an incredible lineup of speakers and topics ready to help you write a business plan to make 2010 your best year ever in Real Estate.  In the two years since I created this seminar, the reviews have been fantastic.  It has been so popular that I have been invited to present it to Realtors in Boise, Idaho and Milwaukee, Wisconsin later this year.  I also have been invited so speak in front of 1,500 fellow mortgage professionals as one of the keynote speakers at the Mortgage Revolution Conference in Atlanta in January.

Have a great week!

Weekly Market Update: Jumbo's and ARM's Make a Comeback

Weekly Market Update from Waterstone Mortgage

 

I hope you had a successful August and have a pipeline full of first time buyers ready to take advantage before the $8,000 tax credit expires.  We are just 76 days away from the expiration of the tax credit.  While there is talk of extending the credit, and possibly increasing it and expanding it to cover all buyers, we can’t rely on Congress keep us busy.  Keep pounding the pavement for first time buyers, they are out there.  Post about the tax credit on Facebook, Twitter, your blog, and your website; get the news out and in front of as many people as possible.

 

Jumbo Loans Are Coming Back Strong

 

One of the hardest hit areas during the mortgage meltdown was the Jumbo mortgage market.  Over the last few months, interest rates on Jumbo’s have come down considerably.  While Jumbo fixed rates are still a little higher than they should be, Jumbo 5/1 and 7/1 ARM’s are as cheap as ever.  Today you can get a Jumbo 5/1 ARM in the range of 4.25%.  Get the word out as high end properties are selling at incredible premiums and financing is available.

 

Having Trouble Getting Financing For Condos?

 

Condo financing is another area that has been hit hard by the mortgage meltdown.  High HOA delinquency rates are making it very difficult to get financing in these projects.  If more than 15% of the unit owners are past due on their HOA dues, it is almost impossible to get a mortgage in the project. 

We just created a portfolio bank product to handle these types of loans and have closed two in the last two weeks.  Call me if you need help and have been turned down by other sources, we have a solution for your buyers.

 

FHA Short Sales

 

We have heard a few agents talk about an issue with getting seller paid closing costs for short sales where the existing mortgage on the property is an FHA mortgage.  While FHA loans were less than 5% of the market until 2008, and FHA short sales are not very common, it is important to know that the cap on seller concessions for FHA short sales is 1% of the sales price.

 

Credit Scores

 

Credit scores are the #1 factor in getting a loan approved and securing a low interest rate.  Here is a great article about the credit scoring model to pass along to your clients.

 

http://online.wsj.com/article/SB10001424052970204348804574400700026852702.html

 

Market Update

 

Interest rates have improved some over last week.  Conventional and FHA rates are in the 5.125% range.  5/1 ARM rates have dropped considerably in recent weeks, into the low 4’s, and can be a good alternative for someone looking to own a home for 4-6 years.

 

September’s Seminar

 

Topic: Polybutylene Plumbing and Chinese Drywall

Speakers: Brad Clark of Florida Insurance Specialists and Jim Murphy of HomePro Inspections

Date: Thursday, September 24^th

Time: 9:00 Registration, 9:30 – 10:30 speaker

Location: Winter Park Civic Center

To RSVP, e-mail mpischke@waterstonemortgage.com  

2010 Business Plan Seminar

 

Mark your calendar for Tuesday, December 1^st!  We will be hosting our very popular Business Plan seminar, and this year we have an incredible lineup of speakers and topics ready to help you write a business plan to make 2010 your best year ever in Real Estate.  In the two years since I created this seminar, the reviews have been fantastic.  It has been so popular that I have been invited to present it to Realtors in Boise, Idaho and Milwaukee, Wisconsin later this year.  I also have been invited so speak in front of 1,500 fellow mortgage professionals as one of the keynote speakers at the Mortgage Revolution Conference in Atlanta in January.

Have a great week!

Weekly Market Update: Colonial Bank, Taylor Bean & Whitaker, and HVCC Seminar

Weekly Market Update from Waterstone Mortgage

 Colonial Bank and Taylor Bean & Whitaker

This week brings news of FBI raids on Colonial Bank’s downtown Orlando office and Taylor Bean’s corporate headquarters in Ocala.  Colonial Bank is the #1 source of warehouse credit lines for mortgage companies like TB&W, and TB&W was the #3 FHA lender in the country.  Yesterday, TB&W announced they are shutting their doors and going out of business.  Colonial Bank could follow within 45 days if they do not raise significant amounts of cash, something they are unlikely to do.  If Colonial Bank fails and they are not able to provide credit to mortgage companies, you can expect many more mortgage companies to fail because they will lack the funding to continue operations.  Most mortgage companies borrow money from banks like Colonial in order to have the cash available to fund loans.  Without access to this cash, they have no money to lend. 

Here are some links to read more about these stories:

Trouble for Colonial Bank

http://www.al.com/news/press-register/metro.ssf?/base/news/1249118134298290.xml&coll=3

FBI Raids Taylor Bean

http://www.ocala.com/article/20090803/NEWS/908039996/1402/NEWS?Title=FBI-raids-local-business

HUD Suspends Taylor Bean from FHA lending

http://www.hud.gov/news/release.cfm?content=pr09-145.cfm&CFID=15134924&CFTOKEN=80545676

Taylor Bean Closes

http://www.ocala.com/article/20090805/ARTICLES/908059981/1402/NEWS?Title=Taylor-Bean-Whitaker-closes

These two major news stories are exactly why I partnered with Waterstone in April 2008.  Mortgage brokers are being run out of business because of competitive disadvantages and legislation.  Imagine if your client’s loan was with a broker who was brokering the loan to Taylor Bean.  When Taylor Bean went under your client’s loan did too.  I have heard of one mortgage brokerage that had 17 loans with Taylor Bean when they closed their doors yesterday.  If Taylor Bean can fail, many others can too, so anywhere a broker is sending their loans could close with no advance notice. 

Small correspondent lenders are in a very unstable position too, because they depend on credit lines from banks like Colonial to fund their loans.  If their bank credit line goes away, their ability to fund loans goes away.

Waterstone is in a unique position of having a bank as a parent company (Waterstone Bank, SSB - NASDAQ:WSBF), so funding loans is not dependent on borrowing money from someone else, and underwriting is done in house so we are not relying on an outside bank that can close their doors with no advance warning.  Stability is critical in these uncertain times and I have found that at Waterstone.

Market Update

Waterstone Mortgage is now an FHA Full Eagle lender, which allows us to underwrite FHA loans in house.  No more waiting weeks for a loan approval.  In fact, we closed a client last Friday, 7 business days after taking his application!

HVCC

We are hearing many complaints from Realtors about the Home Value Code of Conduct.  This terrible regulation is making it very difficult to obtain accurate appraisals for conventional loans.  While this regulation does not impact FHA financing, some banks are choosing to use 3^rd party appraisal management companies for FHA appraisals.  This Monday, Waterstone implemented our internal appraisal management system.  While we still cannot choose a specific appraiser, nor can we communicate with them directly, we were given the ability to choose which appraisers are on our approved list.  We chose the five best appraisers we know and our conventional appraisals will rotate amongst them.  This month we have two of our appraisers speaking at our seminar to answer your appraisal and HVCC questions.  Knowing our appraisals are being done by competent appraisers is a significant boost to our team.  See below for more information regarding the upcoming seminar.

Interest Rates

Mortgage bonds continue to trade up and down, rates are within a range of 5.125% - 5.625% depending upon the day.  Keep an eye on the stock market, if the Dow and S&P 500 continue on their current hot streak, it will cause an increase in mortgage rates.  Also, continued goernment spending has the potential to create significant inflation, which will lead mortgage rates higher.

Our next seminar

As mentioned above, our next seminar on August 20^th will feature a lot of great information about the HVCC.  We have invited Tim Burns of Burns Appraisal, Inc. and Billy Neal of Market Value Appraisals, Inc. to be our guest speakers to answer your questions.  We will also be discussing the new mortgage compliance guidelines that are effective August 1^st.  These have the potential to delay many of your closings so make sure you are up to speed on the changes.  To RSVP, e-mail Melanie Pischke at mpischke@waterstonemortgage.com

Have a great week!