RealEstate680

My old friend and seasoned Loan officer, Sam Wright  from Washington Mutual Loan Center informed me about a window of opportunity WA MU’s has for select communities in cities like Concord.

Buyers may be eligible to save up to 1% of the loan amount, that’s $1,000 for each $100,000 they borrow.  This may be used for lowering closing costs or getting a lower rate.  This is only available to primary homeowners that qualify, not investors. 

This is the first time, since the “credit crunch” in Contra Costa County that a bank is stepping up to show the community that they are here to stay.  This offer expires September 30, 2008.  For more information, call Sam Wright at 510-502-0040 or email him at samuel.wright@wamu.net.

 Home owners that live in the North Concord area that want to sell their home may want to take advantage of this offer. 

The new housing bill, scheduled to go into law next week, has a tax credit provision for first time homeowners:

BREAK FOR FIRST-TIME BUYERS If you are buying a home for the first time, and it is your primary residence, you are eligible for a federal tax credit of $7,500 or 10 percent of the purchase price, whichever is smaller. With a tax credit, you subtract the credit amount from the total you would otherwise pay to the Internal Revenue Service. So if you owe $1,500 and you qualify for the credit, you would end up getting a $6,000 refund.

There are two big catches, though. If you earn a modified adjusted gross income of more than $75,000, or $150,000 if you are married and filing your tax return jointly, the credit starts to phase out. For single people, it phases out completely at $95,000 of annual income, while for married people filing jointly, it phases out at $170,000.

But you have to pay back the credit over the next 15 years, in equal amounts each year when you pay your federal taxes. That makes this more like an interest-free loan than a true credit. According to the National Association of Realtors, there were about 2.5 million first-time home buyers in 2007. A large proportion of them would have qualified for this credit, but whether it is enough to push would-be buyers over the edge this year remains to be seen.

The tax credit is retroactive to home purchases on April 9, 2008, and expires on July 1, 2009. If you purchase a home from Jan. 1, 2009 to June 30, 2009, you can claim the tax credit on your 2008 tax return.

New York Times

Bank of America is reporting that quarterly profits did fall, but less than expected.  I guess in Lay-person language that’s a very positive sign.  The 40% drop in earnings show that the bank has stated a loss for the past 12 months.

Bank of America goes on to say the compesating business was  investment banking that showed a $357 million trading profit.  So where’s the credit crisis?  It’s on Main Street, not Wall Street. 

I have to give Bank of America credit for their positive attitude towards the mortgage business.  If my instincts are correct, they will emerge as a Super Player in consumer mortgage banking as well as wholesale business through mortgage brokers, small banks and credit unions.

My good friend, Mark Brunelle; fellow sailer and mortgage guru at Chase Bank has articulated the roll-out of the increase in loan limits.

“The Office of Federal Housing Enterprise Oversight, which regulates Fannie
Mae and Freddie Mac, announced it plans to remove the portfolio growth caps
for both companies on March 1. The shares of both government-sponsored
mortgage giants surged on the announcement, and were recently higher by
about 12% each.
Who cares?
This is significant because the two agencies were operating at over 90% of
their caps. Should they be suddenly open to the market for $417k to $729k
loans, it wouldn’t take much for the caps to be breached, which in turn
could shut off their capacity for new loans. OFHEO’s action isn’t a major
newsmaker but it’s an important link in the chain to some housing relief
from the lending side.

Rules are changing like we’re in a Road Runner Cartoon. “Beep Beep” and
suddenly you’re Wiley Coyote with an anvil on your head. Last month we had
90% CLTV loans with Stated results. Now there are no stated seconds at all.
Next month, there won’t be any 90% seconds. Each company in the industry
has subtle (and not so subtle) revisions, so keeping up is a full time job.
The rate of change will be even heavier when the loan limits do come into
play because the agencies will need to apply risk management to the new
loans.

What’s likely when the increased limits are finally ready for prime time:

Higher rates. This will come in the form of higher fees. It occurred to me
that we might see staggered fees, say around $600-$625k. The end result
might be something like a quarter point higher rate for up $600ish, then
3/8ths higher on the rate for the next tier, to $729,900.

Tighter guidelines: I haven’t seen anything on this, but having stricter
standards to get Stated/Stated findings is likely. These will be part of
the automated underwriting algorithm so you probably won’t see guidelines
but you’ll get the sense that some people who were stated/stated at $417k
might be getting full doc at $650k.  You’ll also see stricter total debt
ratios needed in the automated decisions. Right now, there’s no effective
cap on ratios, the decision is balanced among several other risk factors
with tremendous weight given to credit score and LTV. I wouldn’t't be
surprised if we started seeing a hard ceiling at between 45-48% on debt
ratios.

Lower LTV’s:  There’s no information about this either, but the agencies
are increasingly sensitive to declining market indicators, which currently
limit maximum financing on any given program to 5% lower LTV’s. Right now,
what used to qualify for 5% down needs 10% down if the area is determined
to be declining.  Expect another 5% LTV reduction for the higher limits and
I can’t imagine them doing anything at 100% even in markets that are not
declining.

What’s left? First and foremost is the consistency that comes with a
Fannie/Freddie loan. Plenty of liquidity for the product on the secondary
market. Next will be a better spread between today’s jumbo fixed and these
loans. Even with the ticket price higher than regular conforming, they’ll
still be 3/8ths to 5/8ths less than the current jumbos. Finally, these
loans will be far less susceptible to the “now you have it, now you don’t”
approvals we hear about that make us all work harder and look dumber.

Finally, those ideal, middle class, professional who wants and needs a nice
3 bedroom, 2 bath home in a good neighborhood, will be able to get one with
5-10% down and with a decent rate. They’ll need good credit and verifiable
jobs with good incomes, but the money will be available.”  Mark Brunelle, Chase Mortgage Services

 During the next month or so, lenders will be able to price these new products.  The price of homes in Walnut Creek and surrounding areas are a perfect fit.

As I have said in the past few weeks, this may be the time to list your home.  This may also be time to start the buying process.  If we are not careful, we will be in a market with little inventory.  That’s not a good idea.

Buyers and sellers here’s an incredible real estate window.

Part of the Presidents Stimulus package is raising the mortgage loan limits from $417,000 to $625,000.  This would be a good thing for California real estate as well as other States with the price point that we have too.  Walnut Creek home prices need this increase.  Most of the San Francisco East Bay Area needs this increase.

It makes perfect sense to increase the Conforming loan limits to $625,000 because many home buyers in Contra Costa County have a $417,000 first and a second mortgage for the remainder.  In theory, they already have this debt and we certainly have the income in the Bay Area to service this debt.

 Fanny Mae and Freddie Mac are the quasi-governmental agency that wervicde these loans.  They have proven to be a very responsible resource for homeowners ans well as investors.  Increasing the loan limits in California are an absolute HOME RUN!

Most of you have heard that Bank of American came to the rescue of Countrywide Mortgage. Is is really a mixed bag. The good news is stability. It would be devastating to the market if the largest originator in home loans was to file for protection in a Bankruptcy. it would also create a stronger lack of confidence in all financial markets. Countrywide has alsway been a very well run company, albeit, run by salespeople with need to fund loans on a daily basis.

There is enough blame to go all the way around a couple times between Lenders, Brokers, Homeowners and don’t forget the investors.

Here’s the bad news. This has all the trappings of loosing FREE MARKET. B of A may use this to squuese the mortgage broker out of the business. BofA has already suspended a major part of their own business to licensed mortgage brokers. Now that they own Countrywide, I would suspect they will probably to something very similar with the Countywide offices.

Free markets are one of the foundations of competition in the US. The creed factor is certainly a byproduct of this, but the thought of a hand full of banks controlling the retail mortgage market hs me wondering if fair trade will exist. Only time will tell, but I have my doubts whether in the long run this is good for the consumer.

Greed, how many times have we seen it happen? Brokers and Lenders greed. Homeowners betting that appreciation will exceed their wildest dreams. What’s that phrase? “If it sounds to good to be true’? I spent 15 years in the corporate mortgage business before moving in 2001 to residential real estate in Contra Costa and Solano Counties. I saw good loans being done for people that understood the process and I saw loans created for people that had never seen the cycles of a commodity like real estate. If you’re under 30 years old there’s a very good chance you have never seen anything less that double digit appreciation on the 680 corridor.

We had a hiccough in the San Francisco Bay Area real estate the early 1990’s, but that was nothing compared to the lack of bank liquidity that’s happen in the past few months. So, what does it mean to you, the guy that has a 6% fixed rate mortgage? It will mean we probably won’t have to wait for a table in restaurants like Piatti’s in Danville or Monticatini’s in Walnut Creek. Nordstrom’s won’t be out of size 11 Feragamo shoes. Real estate or mortgage people are spenders. Walnut Creek Mercedes may come off the sticker price. Consumer spending in Contra Costa County will be affected. Lack of liquidity and diminished consumer spending can slow down a local economy. We have enjoyed tremendous growth locally. In the long run, those of us who live on the 680 corridor will be fine. We have good schools. Our businesses are very diverse; finance, real estate, technology, awesome retail and many other sectors. Walnut Creek is headquarters for many international corporations. BART has proven to draw business and homeowners to our Counties. How long will it be this way? I don’t know, but there is no quick fix. “Keep your Powder Dry.”