Spokane Real Estate and Mortgage Info

Spokane has been chosen one of the 100 Best Communities in America for young people, as judged by America’s Promise Alliance.

What an encouraging endorsement of our community!

Unfortunately it’s buried on page B4 of The Spokesman-Review so most people probably missed it. Why is it we give such little attention to really important stories  like this?

I’ll be including this information in all my presentations to out of town buyers.

If you missed the original Spokesman-Review article, it can be accessed by CLICKING HERE.

The story also led me to discover the wonderful organization – America’s Promise Alliance – founded by Colin Powell in partnership with his wife Alma. They are doing great work in support of our children – CLICK HERE to check out their organization.

Following is my comment tonight to the Washington Post in response to their article - Senators Deny Knowing Of Home Loan Favoritism ~

I've been waiting for this story to break and as usual the media misses the important part!

Let's see the reporters ask the real questions - did any of these individuals take a reduced doc loan, and if so, did their loan application reflect their true income?

Were any of these loans (or any others made to the committee members for that matter) reduced document loans like Countrywide's Fast N Easy program. In the industry we referred to these as the "Fast N Sleazy" loans because we all knew of loan officers and their clients that were overstating the income to qualify, even though Countrywide denies this happens. These fraud attracting loan products are now going the way of the dinosaur and I'd love to know if Dodd and Company were party to any of these loans and inflated their income. It wouldn't be hard to find out.

With the sole exception of the acceptance of the 8 unit property in violation of company policy, the rest of the stuff in this article is pretty innocuous.

I've been a mortgage guy for almost 20 years. The rates quoted in the article may or may not be "market rates." The LOWEST 30 year fixed I've ever closed was at about 5%. One could have conceivably gotten into the low 4%'s with paying 3-4 discount points. We also don't know if these loans were Adjustable rate loans which would have carried a lower rate.

As already mentioned in other comments, the "waiving" of points may or may not be a big deal. The amounts listed in the article happen every day. And waiving 1% on a $1,000,0000 loan is certainly no big deal - the loan officer may have still made $5k to $6k even after waiving 1%!

The Lake Spokane Chamber of Commerce has recently updated their web site to include new features like an Event Calendar, online registration for new members, Discussion Forum, and Photo Album.

We are very passionate about our beautiful community.  Many "city" folk in Spokane consider Nine Mile Falls and Suncrest to be "way out there," but we are trully only about 15 to 20 minutes from down town.

Please keep in mind the Chamber's web site was just created and it is definitly a work in progress.  Our first priority was to improve the functionality of the site and I'll be adding the art work and logos soon.

Check it out!

FHA has just published a significant update regarding the use of Nontraditional Credit with FHA loans.  I've summarized what you and your clients need to know.

"Nontraditional Credit" means monthly obligations that a person may pay but that is not normally reported to the credit bureaus.  Examples would be rent, utility payments, auto insurance, cell phone account, etc.  Essentially, a nontraditional credit account would be any monthly obligation being paid to a business.

Borrowers with limited or no traditional credit must have a minimum of 3 alternative trade lines with a 12-month history. One of the 3 must be rent or housing utility payments, i.e., gas, electric, water, cable, land-line phone.

Borrowers with no traditional credit AND no rent or utility accounts will need:

•Two months cash reserves from their own funds (gifts are not allowed to meet this requirement);
•Ratios of 31% (for housing expense to income ratio) and 43% (for total debt to income ratio) cannot be exceeded; and
•No exceptions will be granted.

Additional underwriting criteria for nontraditional credit are as follows:

•No history of delinquency on rent payments;
•No more than 1 x 30 day late payment in the last 12 months on all other alternative trade lines;
•No collection or judgments filed within the last 12 months (excludes medical collections, which are evaluated by the underwriter); and
•All alternative trade lines must have a 12-month history.

For more information on FHA loans just give me a call or shoot me an email

Fannie Mae is releasing an update to their ubiquitous Automated Underwriting System DU.

One of the unlikely benefactors of the guidelines being installed in the approval "engine" are self-employed borrowers.  In the previous versions of the DU software a borrower's self-employed status was considered an additional risk factor.  They have now removed this risk  factor so the type of employment will no longer be considered in approving the loan.

Fannie Mae did not explain why they made this change but the result will be to make it easier for a self-employed borrower to qualify for a home loan after May 31st, 2008.

If you are self-employed and are curious about how to qualify for a home loan, just send an email and I'd be happy to answer any questions.

Make it a great Thursday!!

2008 is going to be a tough year for many homeowners, particularly those in California.  While not declining nearly as much there are also some trouble spots in Idaho (Coeur d'Alene area), and Washington (Seattle and Vancouver areas).  After 20 years of relatively low interest rates and high home appreciation rates the market has reversed itself making it very difficult for you to supplement your income with equity withdrawals from your home.

A lot has been said in the media about how we came to be stuck in this situation or who is to blame for it.  For me this "issue" is much simpler than everything you've heard so far - IF YOU SPEND LESS THAN YOU MAKE AND SAVE THE DIFFERENCE ALL WILL BE GOOD.  And I'm talking about spending less than your earned income - taking equity out of your home to pay for credit cards, cars, vacations, etc. does not count.  Another way to put this is to ask yourself "is my home loan balance less today than it was 5 years ago"?  If you can answer positively then you are on the right track.

Recently I've begun fielding more and more questions about foreclosures, short sales, and bankruptcy from past clients who have no equity left in their home (many are "upside down" - they owe more than the home is worth) and can no longer afford their payments.  There is just not enough space here to adequately address these issues. I will provide some brief notes and will continue to write about these issues in the coming months.

NOTE:  I am not an attorney and the following information is more opinion formed by my experience than actual facts you can rely upon.  If you are considering a foreclosure, short sale, or bankruptcy I urge you to contact an attorney to make sure you understand the process.

Foreclosure - typically a foreclosure starts when you have missed three consecutive mortgage payments on your first OR your second mortgage.  You will know a foreclosure has started because your lender will be calling frequently and you will receive a legal notice that the foreclosure proceedings have begun.  Thousands of dollars of late fees, penalties, and other fees will be added to your loan balance and approximately 90 days after the foreclosure notice the lender will sell your home.  The foreclosure will be reported on your credit report, your score will drop 200-300 points and you will be precluded from obtaining a conventional home mortgage for at least four years.

Short Sale - A short sale occurs when you sell your home for less than you owe and your lender agrees to accept less than the full loan amount.  They may or may not create a note for the difference and expect you to repay the shortage.  This is a "booming" industry right now and there are plenty of really bad individuals offering to "help" you negotiate a short sale with your lender.  If you take this route please make sure you use an experienced Realtor and short sale negotiator!  A short sale is also reported to the credit bureaus but is significantly different than the foreclosure.  A short sale is not a "public record" item like the foreclosure is and will not cost you as many points as the foreclosure would.  Think of it this way - a foreclosure means you blew off the lender and your responsibility to pay them back while a short sale means you did not pay "as agreed" but did make an effort to do so.  You are probably going to have to wait 3-4 years to use conventional financing to purchase a home.

Bankruptcy - This is not real estate debt specific relief but may be utilized that way.  If you lose your home to foreclosure the lender may have the right to file a deficiency judgment against you for the unpaid balance of your home loan.  Some people will file a bankruptcy to avoid paying this deficiency judgment.  A bankruptcy is a public record and will be reported by the bureaus as such.  However, if you get through a bankruptcy while reaffirming your home loan(s) payment(s) then you may be able to obtain conventional financing within two years of the discharge date.

There are many "plans" being touted in the media right now to help struggling homeowners and the situation is changing very rapidly.  What was not possible two months ago (loan modifications) may now be possible.  Lenders are going to great lengths to figure out how to help - not because of political pressure (as our government would have you believe) but out of self-preservation.  Your very first step if you are in trouble is to contact your lender and tell them what's going on.  Your second step is to get professional advice.

If I can elaborate on any of these or other related subjects please send me an email at mmullin@TheLoanConsultant.com or give me a call at 509-252-9151.

Another excuse for another "meltdown"

As I'm sipping my morning cup of coffee and catching up on yesterday's news via my local Spokesman Review I notice we are in the middle of another "meltdown" of one of our national institutions - this time it is the airline industry.

Apparently the airlines have grown cozy with the FAA and decided that they no longer had to follow the rules because their buddies at the FAA would let them slide.  Now that the FAA has decided to hold their feet to the fire the airlines are grounding flights left and right and, of course, blaming "the government" for their problems.

The problem is that according to the FAA the airlines knew exactly what was expected of them and were given 18 months to comply - here's an excerpt of an Associated Press story -

FAA spokeswoman Lynn Tierney said the agency is simply doing its job.

"We are aware and sympathetic ... but the role is clear, it's a regulator's role," Tierney said. "We understand the disruption this causes, but (the airlines) had 18 months to complete the work."

Tierney was referring to the safety order issued on the Boeing Co. MD-80 aircraft that recently have been grounded. The FAA ordered visual inspections of certain wire bundles on those planes after reports of shorted wires, evidence of worn-down power cables, and fuel system reviews conducted by the manufacturer. The order was effective Sept. 5, 2006, and the airlines had 18 months to comply.

So let me get this right - the airlines had ample warning of exactly what was expected of them and now they want to blame the FAA for actually enforcing the rule!

Just like with the "mortgage meltdown," and the "housing meltdown," everyone seems to be quick to blame the regulatory agencies responsible for the industry in question.  The trouble with this is that we (those of us not running these companies) should be able to rely upon these companies being run in an ethical and legal manner even if there were NO regulatory agencies to oversee them.  They are all run by highly paid, highly educated individuals - and many of those individuals are in turn monitored by a board of directors.

With that much brain power involved we shouldn't have to worry about any of these companies behaving contrary to the public good.

After exactly ½ day on Tuesday, interest rates improved after the Fed cut their rates.  It's been all downhill since then and mortgage interest rates for buyers and people refinancing have gone straight up.

How can mortgage rates go up when the Fed lowers their rate?  Well the explanation for that takes more writing than you probably want to read on a blog post.  For a white-paper on the subject send an email to mmullin@theloanconsultant.com and I'd be happy to send you one.

If you are currently in the process of buying a new home in the Spokane area (including Nine Mile Falls, Suncrest, South Hill or Spokane Valley) you may want to float your rate - the damage has already been done this week.

Predicting the movement in mortgage rates is difficult and inexact; however, your loan officer should have an extensive understanding of the underlying economic factors that affect mortgage rates on a daily basis.  Choosing the right time to lock the rate or continue floating could save you thousands of dollars over the life of your loan.

For a look at current mortgage rates for buying or refinancing a home in the Spokane, Washington area go to http://www.theloanconsultant.com/

For next week's market update and lock advisory check back on Monday.