Admin

Builders Fight for Value Recognition for Energy-Efficient Homes

Last week, HUD Secretary Shaun Donovan and U.S. Department of Energy Secretary Steven Chu met at an energy auditing company on Long Island to announce the launch of the FHA’s new PowerSaver pilot program.

Working with 18 lenders across the country, the program will allow homeowners to borrow up to $25,000 to finance energy improvements in an existing home, including improvements to insulation, duct sealing, replacement doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems. Terms can go up to 20 years, and rates will be lower than standard. The FHA will guarantee up to 90% of the loan.

The idea is to generate interest in the private sector, which Donovan is hoping will get on board by providing these types of loans more readily.

Fannie Mae recently came out with a similar offering, a new Energy Improvement feature for mortgage loans. Fannie had already stopped offering its Energy Efficient Mortgage feature, which could have been used to finance the purchase of a new energy-efficient home. The replacement program can only be used to make energy improvements to an existing home.

The financing will cover energy improvements deemed cost-effective by a RESNET home energy rating, and amounts can go up to 10% of the post-improvement appraisal.

Unlike Fannie, the FHA still has a program for buyers of energy-efficient new homes intact. Its Energy Efficient Mortgage program can be used to help home buyers finance energy-efficient features in a new home as part of an FHA insured mortgage.

However, the increasing shift in emphasis toward improving the energy efficiency of existing homes rather than new homes is symptomatic of the disconnect between what government entities see as the market reality and what builders are seeing in the field.

According to a Fannie Mae spokesperson, the company feels that private lenders are meeting the needs of buyers of energy-efficient homes, suggesting that lenders will value energy-efficient features appropriately.

Shaun Donovan agrees. When Builder questioned Donovan after the PowerSaver announcement about why the government seemed to be moving its focus to existing homes, Donovan emphasized that the benefits of energy-efficient building are being recognized by private sector lenders and appraisers.

“We’ve seen greater progress in the new-home market through local building codes,” Donovan told Builder. “What we’ve seen more and more are appraisers and Realtors who see the value in [energy-efficient construction], and lenders are recognizing that.”

But that’s not what builders are saying.

About two years ago, Meritage Homes decided to go all-in with energy efficiency. “We took the approach that we were going to start over and change the way we build,” C.R. Herro, vice president of environmental affairs at Meritage, told Builder. “We frame different. We build different. We use different appliances and features.”

As a result, Herro reports that Meritage can build a home that uses half the energy and half the water of a traditional home with only a 10% increase in the cost of construction. The energy-saving upgrades Meritage includes can save the homeowner between $1,200 and $3,600 a year in utility bills, depending on the home (some of Meritage’s homes achieve net-zero energy efficiency).  

But when asked if appraisers and banks recognize the value of the energy-efficiency benefits Meritage includes, Herro replied emphatically, “Absolutely not! We’re building a lot of significant improvements into our homes. We’re doing net zero. We’re doing solar. And we’re struggling to get a penny out of it.”

“Conventional construction is leaky,” Herro said. “A traditional home will have to recondition all of the air in the entire house 70 times a day. When you rebuild [to high energy-efficiency standards], you can cut that down to five.” According to Herro, such a reduction would cut heating and air-conditioning costs down by 60%.

The trouble, Herro said, is that the people consumers look to when trying to gauge the value of a home—appraisers and lenders—are failing to recognize the value in the energy-efficiency upgrades the homes include, and as a result, the builder is forced to absorb that additional cost.

Despite these challenges, Meritage has been able to make energy-efficient building work as a business model, largely because of customer awareness that sees the value in it. Also, as one of the largest builders in the country, Meritage is able to achieve economies of scale by building all of its homes to energy-efficient standards. “But the average builder is incentivized to build a less energy-efficient home,” Herro said. “It’s ridiculous that you can build to [a high] level of efficiency, but it has a negative effect on your income statement.”

In an effort to remedy the problem, Herro is promoting the Sensible Accounting to Value Energy (SAVE) Act, a proposal supported by Sen. Michael Bennet (D-Colo.) that would require federal loan agencies to take into account the expected energy costs of a home when assessing a mortgage loan application.

“Homeowners who spend less on energy will have more money to make mortgage payments and to maintain and repair their homes,” SAVE Act press materials say. “A person will be less likely to have to choose between paying the utility company or his or her lender.”

The materials also point out that the average U.S. household will spend more than $2,300 in energy costs over the course of a year, “more than the average cost of property taxes or homeowners insurance, two expenses that are routinely underwritten in a mortgage loan. Energy costs are not accounted for in this process.”

“If you take all the things out of a home that waste resources and money, that innovation costs a little bit more,” Herro said. “The problem is that building better, until the average consumer recognizes the benefits, is disincentivized by the establishment.”

This article was written by Claire  Easley

To visit the full article, click on the link: http://www.ecohomemagazine.com/news/2011/04-april/builders-fight-for-value-recognition-for-energy-efficient-homes.aspx

CFL Bulbs, Why and How to Recycle

In my profession, one of the most common questions that I get is do CFL bulbs really make that much of a difference and why should I switch? This can be looked at in many different ways but here are some points that I feel are key.

• Saves 40.00 in electricity costs over its lifetime
• Uses 75% less energy than incandescent bulbs and lasts ten times longer
• Produces 75% less heat

The important thing is to recognize where to install them to get these benefits. It’s recommended to install them in heavy traffic areas such as the kitchen, living room and recreational rooms. Also, to make them the most effective they should be left on for a minimum of 10 minutes as frequent turning off and on will shorten their life span. Typically a CFL bulb costs 5.00 and lasts 10,000 hours whereas, the cost of a regular incandescent bulb is in the area of 0.75 and lasts 1,000 hours. Over time, you will save some money on buying the bulbs but also the energy savings as well. If you aren’t convinced yet, then maybe our friends at Energy Star can help because this is staggering, “If every American home replaced just one light with a light that’s earned the ENERGY STAR, we would save enough energy to light 3 million homes for a year, save about $600 million in annual energy costs, and prevent 9 billion pounds of greenhouse gas emissions per year, equivalent to those from about 800,000 cars.”

Finally, one of the most important things to remember is how to recycle them because they do contain a little bit of mercury. First and foremost, don’t put them in your regular trash can instead take them to Home Depot of you can use this friendly website to locate a place near you. www.earth911.org  Another fantastic site that can help with safe containers for recycling in the home, office or commercial sites is personal friends of mine at www.buschsystems.com

Appraiser Independence?

Federal Reserve Proposal Comment regarding Docket No. R-1394 and RIN No. AD-7100-56:

Post your own comments to the Fed:  http://bit.ly/fJ3lkW

Just because someone has an appraiser’s license does not mean they are knowledgeable, ethical or moral nor good at what they do.  Therefore, the “judgments” of these people are not infallible and Appraisal Management Companies (AMC) seem to just be another revenue stream for the Big Banks and provide no benefit to the consumer whatsoever.

Since the implementation of the Home Valuation Code of Conduct (HVCC) and the “forced” use of AMCs, I have seen more errors in appraisal reports than ever before.

Some examples include:  Omitting an entire bedroom (making a 3 bedroom SFR into a 2 bedroom) from the report and their sketches even though county records and the home itself clearly showed 3 bedrooms.  On several occasions I have seen appraisers using comparable home sales from bisecting neighborhoods that should not be used to determine a home’s value, in most cases, deflating the subject home’s value AND consequently deflating that property’s adjacent home values for all of its neighbors.

I have seen AMCs send an appraiser who lives in Sedona, AZ to do an appraisal in Mesa, AZ (about 150 miles apart).  They might as well have sent him from another state like Oklahoma to Arizona; it would provide the same poor results.  And in about 80% of all reports that I have seen there are poor comps in the report, incomplete reporting and even multiple spelling errors that forces underwriters to condition for clarification or additional comments on their loan approvals which have led to unnecessary increases in closing times, lost revenue and increased stress for the consumer.

But even in those examples listed above, appraisers still got paid for their shoddy work which in some cases derailed the hard work that was provided in good faith by the real estate agent and the loan originator.  All this does is ultimately hurt the consumer with artificially lower home values (in many cases), increased stress and anxiety, in addition to forcing the consumer to pay (30% more than in 2009) for poor service.  (Appraisals went immediately from $350 to $450, $650 with a rent schedule, in 2009 when HVCC was implemented.)  The appraiser MUST be held accountable to the consumer who is paying for the report!

Local business people and residents know who the good businesses and bad businesses are in their local area and that includes appraisers.  The Federal Reserve, Fannie & Freddie, Big Banks located thousands of miles away have no realistic expectation as to what is a good or a bad appraisal or who is giving good or poor service.  It is those people on the ground (real estate agents, loan originators and local, reputable appraisers) and in the field who know what the expectations should be and it has always been that way.

Homeowners must be allowed to say, “I do not want that person to appraise my home.”  You must see the unfairness of forcing a homeowner to pay a vendor that they have had problems with in the past.  HVCC gives appraisers too much power once an appraisal has been assigned to them and with no accountability.  They are paid regardless of the accuracy or competency of the report and that is just wrong.

The only people who truly know that the appraisals might be flawed (the mortgage originator who interviewed the homeowner, the real estate agents and the homeowners themselves) are the very people who are prohibited from talking to the appraiser.  Does that make any sense?

You must understand that for low to moderate income homeowners, an appraisal fee of $450-750 (the standard fee range since HVCC was adopted) can easily represent 25 percent or more of their monthly income.  That is a lot of money to spend on a gamble with no accountability.

Prior to HVCC, my conversations with appraisers about value prior to completion of the report were not intended to coerce a higher than fair value but they were to determine if we should proceed from the standpoint of consumer protection.

For example, let’s say I have a consumer with low to moderate income (that’s 90% of my book of business) wanted to refinance their primary residence.  If they owe $100k, in order to successfully refinance, they would need an appraisal that shows that they have a certain amount of equity right?  Prior to HVCC, if my appraiser advised me that the homes in that consumer’s neighborhood were selling in the $90k range, then I could advise my client not to waste their $450 on an appraisal.

Ethical appraisers and originators liked this because ethical appraisers and originators don’t want to see a consumer pay for a product that does not benefit them.  Now, HVCC forces the consumer to lose $450 to find out that they cannot refinance.

The large majorities of mortgage brokers doing business in their communities have been and still are ethical, honest and upfront people.  Like any business, if consumers receive poor or unethical service, word gets out and that business eventually goes away.  It’s called a “free market”.  It has worked great for centuries…

“Concentrated power is not rendered harmless by the good intentions of those who create it.” - Milton Friedman

A free enterprise system is the fastest way to put a bad company out of business, NOT government interaction.  All that government interaction has done is made things worse for the consumer.  It has not protected them and has directly increased costs in the form of over-priced appraisals, extended closing times with daily late fees and lock extension fees in some cases.  HVCC was unnecessary for those of us who never used our positions to coerce, bribe or threaten an appraiser.  More importantly, those actions are illegal and immoral already and were committed by a very small number of originators and we didn’t need HVCC to tell us that.  As a matter of fact, if the current laws that we had on the books prior to 2005 were simply enforced, then there would not be this need for legislators to create more new and complicated legislation that ultimately hurts those people they intend to protect!

“One of the great mistakes is to judge [government] policies and programs by their intentions rather than their results.” – Milton Friedman

But what HVCC has done is severely increased costs to the consumer (the average increase is about 30%) while simultaneously very much lowered the bar for appraisal reporting.  How is this benefiting the consumer? I have no idea.  Mostly, it seems to be benefiting the bottom lines of those investors (many of them Big Banks) who now wholly or partially own the AMCs that are supposed to be helping the consumer but instead continue to hurt the consumer at every turn.

With the recent discussions about eliminating the mortgage interest tax deduction and compile that with declining home values, in part due to shoddy appraisals derived from the inception of HVCC, our government is taking away the last two financial incentives to own a home in this country, appreciation and tax deduction.

This then begs the question, “Is it truly the government and the Federal Reserve’s intention to really protect the consumer?”

Here are some points for the Federal Reserve to consider before ruling:

Ø  Reasonable and customary fees should be based on appraisal fees PRIOR to the implementation of HVCC.  AMCs add about $175-200 per file leaving the appraiser a reduced income.  If the appraiser should normally get $350 per appraisal then the AMC adds a markup it should increase the burden to the consumer and NOT reduce the appraiser’s income.  This is how competition is reduced to just the appraisers willing to work for less but not give a better report.

Ø  Total fee for the appraisal report should be separated on the final HUD-1 as a fee paid to the appraiser and a separate fee paid to the AMC.  Since the AMC did not create the appraisal report, they should not be listed on the HUD as “appraisal fee”.  It should be clear to the consumer that the AMC fee is a pure markup fee.

Ø  AMCs should not be allowed to “review” an appraisal unless that “reviewer” is a certified licensed appraiser with a minimum of 2 years experience.

Ø  AMCs MUST be whole and separate entities.  The AMC should not be allowed to be owned wholly, partially or in any manner (subsidiary, affiliated business partner, etc) by any financial institution, bank, credit union, etc.

Ø  Appraisers need a contact and a secure site for reporting violations of appraisal independence against AMCs, banks, mortgage bankers, mortgage brokers, credit unions, real estate agents, lawyers, etc.

Ø  Appraisal reports ordered in compliance with Uniform Standards of Professional Appraisal Practice (USPAP) guidelines should be portable and accepted by ALL lenders, banks and secondary markets including Freddie and Fannie.  If the USPAP guidelines are followed and a second lending institution requests another appraisal report, the cost of that appraisal should be at that lender’s expense.  That expense should NOT be taken from the loan originator’s income NOR charged to the consumer.

Ø  Appraisers are currently not “graded” or “tracked” by revision requests from an AMC.  Most revision requests should be tracked and graded to those appraisers that seem to be providing inferior reports.  This “grading” system needs to be publically accessible by the consumer and vendors alike.  Typical revision requests have been for using poor comps from bisecting neighborhoods that are not representative of the subject property’s value, misspelled words, fields with more than 50 characters (if more than 50 then the rest is cut off from the report), UW requesting clarification or comment, no aerial photos of the property or a change in contract price after the report has been completed.

Ø  There is absolutely NO NEED for a geographical market area for each AMC.  Fair competition is always better for the consumer.

Ø  Stop blaming the Mortgage Broker for the financial meltdown. We did not create the risky loans you keep pinning on us.

Ø  Why is the Mortgage Broker the only industry that has to disclose our income?  Banks, mortgage bankers and credit unions should have to disclose their Service Release Premium and their total income as well.  Why the double standard?  All that does is provide less transparency which is always bad for the consumer.

Ø  ALL Mortgage Loan Originators MUST undergo the same testing and compliance measures as loan originators that work for Mortgage Brokers.  Each individual loan originator at a mortgage broker’s office has to pass a state and national licensing test, complete an FBI background check, national fingerprint recording, 24 hours of pre-licensing education and 8 hours of continuing education annually.  Not to mention all of the new fees and classes to pay for (I spent over $1400 this year to get my license).  If I have to do it, why shouldn’t bank and credit union employees who originate mortgages have to do it?  Isn’t that what’s best for the consumer?

Please feel free to contact me directly for conversation regarding these issues.

Post your own comments to the Fed:  http://bit.ly/fJ3lkW

Spencer Anglin – Licensed Mortgage Loan Originator
Velocity Financial, LLC | NMLS# 226533
O: 480.287.5719 | C: 602.705.6293 | F: 1.866.589.5742

A Look At Keynesian Economics

For those of you not familiar with Keynesian economics or what a licensed mortgage loan originator does with their “free time”, then this is for you.  In short, licensed mortgage professionals find ourselves studying economic news and essentially becoming economists in order to try and determine the best time to lock a loan.  As a result, some of us will develop a professional political-economic opinion based on the historical data.  By the way, it is Keynesian economics has been the driving force behind of all of these government bailouts and takeovers of private sector markets.

Many of you may have heard the term “Keynesian economics” in the past but it is now a phrase that is synonymous with the economic policies of the past 20 months.  Look at the way things are right now in our economy and this is what you get when you try to impose that kind of economic policy in a very global market.   In case you have no idea what I’m talking about, this information is somewhat accurate:  Wikipedia: Keynesian Economics

“One of the great mistakes is to judge [government] policies and programs by their intentions rather than their results.” – Milton Friedman

Keynesian policies failed during the Great Depression, and they are failing today, only to a much larger degree.  This economic catastrophe has been caused by very loose monetary policies, crushing levels of debt, and appalling lending practices.  It simply cannot be solved by looser monetary policies, issuance of twice as much debt, and government commanding banks (or, in the case of Fannie and Freddie, “commandeering”) to make more bad loans.

For those who don’t remember, The Great Depression was caused by Federal Reserve expansion of the money supply in the 1920s that led to an unsustainable credit-driven boom.  When the Federal Reserve belatedly tightened in 1928, it was too late to avoid financial collapse.  According to Murray Rothbard, in his book America’s Great Depression, the artificial interference in the economy was a disaster prior to the depression, and government efforts to prop up the economy after the crash of 1929 only made things worse. Government intervention delayed the market’s adjustment and made the road to complete recovery much more difficult.  Have our elected officials simply ignored history?

The parallels with today are uncanny.  Alan Greenspan expanded the money supply after the dot-com bust, dropped interest rates to 1%, encouraged a credit-driven boom, and created a gigantic housing bubble.  By the time the Fed realized they had created a bubble, it was too late.  The government response to the 2008 financial collapse has been to expand the money supply, reduce interest rates to 0%, borrow and spend $850 billion on useless and supposedly “shovel-ready” pork projects, encourage spending by consumers on cars and appliances, and artificially prop up housing through tax credits and anti-foreclosure programs.  The National Debt has been driven higher by $2.7 trillion in the last 18 months because of these actions.

The government has sustained insolvent Wall Street banks with $700 billion of taxpayer funds and continues to waste taxpayer money on dreadfully run companies like Fannie Mae, Freddie Mac, General Motors, and Chrysler.  The government is prolonging the agony by not allowing the real economy to bottom and begin a sound recovery based on savings, investment, and sustainable fiscal policies. President Obama continues to scorn business by creating more burdensome health care, financial, and energy regulations.  Andrew Cuomo did his part by creating HVCC in an effort to save some of his friends in the name of “protecting the consumer”.  That little piece of legislation has cost consumers several millions of dollars in increased appraisal costs and maybe even into the billions when you look at reduced values because of the shoddy appraisals HVCC has helped to produce, but I digress.

I think the message here is there is that the government cannot “create or save jobs” or “lower unemployment” and the government cannot “fix” our housing problem or the economy no matter what John Maynard Keynes and his followers believe.  The proof is in the pudding, so to speak.  In fact, the more that the government interferes with the free market, the worse off we’re all are going to be as evidenced by the events of the past 90 years.  In this excerpt, Niall Ferguson talks about the direct effect of existing failed Keynesian policies in a globalized world:

Globalization has not broken down. In fact the US economy is more open than it has ever been. That means that stimulus; both monetary and fiscal is very prone to what is called leakage. We’ve had an enormous [amount] of stimulus in the US, it’s the biggest fiscal stimulus in the world, and huge unprecedented monetary stimulus. What’s been stimulated? Not jobs in Michigan. What’s been stimulated has been commodity markets and emerging markets because the liquidity just leaks out.  And that’s why another round of stimulus would not stimulate in the promised way. It would stimulate the wrong things. And those things, commodity markets and emerging markets, are already over-stimulated to the point of being nearly bubbles.

VIDEO:  Niall Ferguson on the Pitfalls of Keynesian Economics

VIDEO:  Friedrich Hayek on John Keynes

VIDEO:  Hayek on Keynes (1977)

VIDEO:  Milton Friedman Remembers Hayek

So simple, yet so incomprehensible by the cadre of false Keynesian prophets (most of the Democratic liberal base including President Obama) who will never admit to this most elegant of realizations. It also means that America can expect more such farces as double stimulus road signs, and oil back at $140 a barrel (or much higher) before even another job is created out of all the excess money sloshing around.  Remember when gas was almost $5.00 a gallon for no good reason at all?

“So that the record of history is absolutely crystal clear.  That there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.” – Milton Friedman

So when you head to the polls this November 2nd, please try to look for those politicians that believe in the free market and vote for them.  Moreover, look at those candidates that actually have private sector experience at “running” things…like a business.  History will show that those candidates tend to make much better macroeconomic public policy decisions.

VIDEO:  Milton Friedman on Liberty and Equality

VIDEO: Milton Friedman on Capitalism and Greed

To truly learn more about Capitalism and the free markets, be sure to read Milton Friedman’s book, “Free to Choose” or watch the DVD series of the same name.

Both can be purchased here:   www.FreeToChoose.com

Just for agents:  www.AZRealtorAdvantage.com

A cute little reminder of why consumers should work with licensed mortgage professionals:   Bank Loan Officer vs. Mortgage Professional

Follow me on:  Facebook – Twitter – LinkedIn

Spencer Anglin.com | NMLS# 226533
Velocity Financial, LLC | Office Map | Phoenix Homeowner’s PIT Stop Blog
O: 480.287.5719 | C: 602.705.6293 | F: 1.866.589.5742
Click here for the HUD Cost Settlement Booklet

Restore Housing Petition – Please Sign

Very Important Update Regarding FHA Financing

Here is the latest information on FHA Mortgage Insurance increases:

FHA publishes MIP changes ( http://bit.ly/acon4I )

Main points:

• • Effective for case numbers assigned on or after October 4^th, the new MIP structure will be implemented.
  • Upfront premium will be 1% for all forward mortgages (purchases and refinances including streamlines)
  • Annual premium
    • Over 15 year terms
      • 90 bps for LTVs over 95%
      • 85 bps for LTVs of 95% or less
    • 15 year term or less
      • 25 bps for above 90% LTV
      • No annual premium for 90% LTV or less

So what does this mean for you and your clients?

On a $200k loan amount at today’s annual FHA MI rate is $91.67 per month in mortgage insurance (MI).

On a $200k loan amount at the new annual rate is $150.00 per month, an increase of $58.33 per month.

On the surface, a reduction in the upfront MI sounds like a nice trade off for the increased annual mortgage insurance right?  Well…let’s take a look at that.  On a $200k loan amount that reduces the upfront MI by $2,000 that was rolled into the loan so it reduces the P&I payment by about $6.00 per month.  Sounds good so far right?

But with the increased annual MI the overall PITI payment goes up by more than $52.00 per month.  Over the next 10 years, before that MI drops off on it’s own, the buyer will pay over $6,000 in additional annual mortgage insurance premiums.

Since mortgage insurance is a pure finance charge that directly increases the APR, it essentially and very directly increases the cost of financing to your buyers.  Not to mention the increase in the debt to income ratio which could have some clients looking for a less expensive house or simply not qualifying to buy.

This basically makes the cost of FHA financing for the buyer more than $4,000 higher in the first ten years.  And if that isn’t a new tax, I don’t know what is.

This change is set to take place for FHA case numbers assigned on or after October 4th, 2010.  October 4th is a Monday.  Make sure your case number is assigned by Friday October 1st, 2010 to avoid the increase.

Please feel free to call me with any questions.  If you find this information to be a great reason to contact your database, I always appreciate your referrals.

Spencer Anglin.com | NMLS# 226533
Velocity Financial, LLC | Office Map | Phoenix Homeowner’s PIT Stop Blog
O: 480.287.5719 | C: 602.705.6293 | F: 1.866.589.5742
Click here for the HUD Cost Settlement Booklet

Watch The Video – Milton Friedman:  Liberty and Equality?

Wouldn’t you do your taxes with a CPA if it was the same price as Turbo Tax?

Is YOUR loan originator licensed?  Find out here:
NMLS License LookupI am sure you have heard about this by now, but if you have not let me share again.

Effective July 1, 2010 all Mortgage Bankers and Mortgage Brokers in the State of Arizona were required to have their loan originators licensed.

Now based on an exemption in the laws the big Interstate Chartered Banks do not require their loan originator working for a big bank such as Chase, Wells Fargo and Bank of America to be licensed.

This is because, compared to the mortgage brokers, the chartered banks have lots more money to spend on lobbyists that get Congress to write laws in their favor.  This has happened for decades.  Banks do not like mortgage brokers because mortgage brokers give consumers more choices and creates more competition.  Which we all know is much, much better for the consumer.

Now I am not trying to make this into a David versus Goliath story, but I am trying to emphasize the huge differences and implications this change will have on the consumer.

Here is a chart to show the differences:

SAFE ACT AZ LO’s Chartered Bank LO’s Licensed Yes No FBI Background Yes No Fingerprinted Yes No Assurity Bonded Yes No 20 hours upfront education Yes No 8 hours continuing education Yes No Credit checked Yes No Fed and state testing Yes No Complaint mechanism w/ DFI Yes No Licensing  fees and renewals Yes No

So I think the choice is clear.  The funny part is the cost for the service based on rates and fees are about the same.  The best analogy I can use is having a choice of working with a CPA vs. Turbo Tax but paying the same price.

Spencer Anglin.com | NMLS# 226533
Velocity Financial, LLC | Office Map | “Whatever it takes…and then some.”
O: 480.287.5719 | C: 602.705.6293 | F: 1.866.589.5742

HUD Comment Period: “Required Use” Affiliated Business Arrangements

<<< Call To Action >>>

Please take some time to comment to HUD during the comment period on “Required Use”.  I would also recommend reading this extremely informative blog from Bob Willett of Sacramento, CA: http://sacrelender.com/?cat=41

From National Association of Independent Housing Professionals (NAIHP):

Affiliated Business Arrangements:

“As many of you know, RESPA Reform originally contained a provision prohibiting the “required use” of specific settlement service providers, where discounts and/or incentives were offered. HUD was forced to withdraw that provision last year, after the National Association of Home Builders filed suit in objection.

HUD is again exploring language to clarify “required use” and is asking for your comments.

To be perfectly clear, NAIHP is NOT opposed to Affiliated Business Arrangements. Our concerns pertain to consumers forced to use certain settlement service providers, as a condition of receiving discounts and/or incentives. Research has shown these discounts and incentives are frequently made up elsewhere in the transaction, often by higher interest rates and closing costs.

Please click on the link below and give HUD your comments. If you have personally witnessed harm to consumers, please give them this information. You can upload supporting document attachments.

We support consumer incentives and discounts, PROVIDED consumers are NOT required to use specific mortgage companies, title companies, or any other settlement service providers to obtain them. One stop shops often eliminate competition and provide no benefit to consumers.”

You can comment by clicking here to comment:  CLICK HERE

Here is what I wrote to HUD if you are looking for talking points:

“Required Use” Clarification –

My concerns pertain to consumers forced to use certain settlement service providers, as a condition of receiving discounts and/or incentives. Research has shown these discounts and incentives are frequently made up elsewhere in the transaction, often by higher interest rates and closing costs.  Furthermore, this hinders competition which, in turn, leads to a reduction in consumer choice which ultimately leads to increased costs for the consumer.  One only needs to see the increased costs of appraisals due to the implementation of the Home Valuation Code of Conduct (HVCC) to see how lack of consumer choice increases costs and provides no benefit to the consumer.

In addition, if a home builder has “required use” for a lender that is a bank (IE: Wells Fargo, BofA, etc) then they are under even less scrutiny to provide transparency because the lending institution is not required to disclose the service release premium (SRP) to the consumer.  SRP is exactly the same thing as yield spread premium (YSP) which is credited to the consumer on broker transactions.  This is even more detrimental in providing accurate information and choices to the consumer.

Basically, if “Joe Schmo” seller trying to sell his home in the resale market cannot do it, why should a builder, bank (REO homes) or any other seller be allowed to dictate through “required use” incentives where any buyer receives their services?

This leveling of the playing field needs to happen on the services and lending side in order for consumers to get a truly fair deal from lenders and other service providers.  Providing consumer choice is the only way to truly protect the consumer.

Mortgage Industry Update: Rates, News & More

***Weekly Mortgage & Business Update June 4, 2010***

How I see it $: Since so much of what happens in the U.S. is influenced by the rest of the world I thought I’d provide a few headlines from the week. The French Budget Minister said last weekend that maintaining France’s AAA rating is a “tough objective”. Monday the ECB said the potential loan losses for its banks could be as much as $240 billion in the next 18 months. Tuesday the Chinese Central bank said its housing problems are more severe than the U.S. faced before the financial crisis because the housing bubble is combined with “social discontent”. Thursday Hungary warned that its deficit could be higher than the 3.8% of GDP target set by the EU. The government blamed “fiscal skeletons” left by the previous Socialist administration. The deficit could go as high as 7.5%. Today the U.S. jobs report drove markets lower as market volatility continues to worry investors.

In the U.S. the state of New York continues to struggle with its budget as it delayed paying $2.5 billion in bills as a short term way to stay solvent but the state’s budget director warned it could get worse in August and September if things don’t change. If you have any comments or thoughts please e-mail me at burt@gosfm.com.

Interest Rates

Retail rates remained below 5% for yet another week and it does not look like we will see upward movement any time soon. The bad news is that applications to purchase homes are down sharply even with great rates and beaten down home prices. Makes one wonder what it is going to take to get buyers back in the market.

When	Rate
This Week	4.78%
Month Ago	5.00%
Year Ago	5.29%
2 Years ago	6.09%

Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm

Mortgage Industry

· Bank of America announced its “Principal Reduction Enhancement” program this week. The plan is an earned principal forgiveness loan for borrowers who are at least 20% underwater. The bank said its plan will be a first step toward reaching the federal loan modification target of housing expense being no more than 31% of income. The stated reason for the program is to combat strategic defaults. A bank executive said “There is a huge incentive for customers to walk away”. Ya think!

· The Federal Home Loan Board (FHLB) of San Francisco may have losses on its $20 billion MBS portfolio of nearly $5 billion which would wipe out its $1.5 billion in equity. The FHLB system has 12 institutions across the country and if the San Francisco banks equity is wiped out it would only be the second time in the 77 year history of the system that a bank “failed” (Pluris Valuation Advisors/American Banker).

Good News

· Pending home sales increased 6% in April the third consecutive monthly increase (NAR).

· Construction spending increased by 2.2% in April from March. This was biggest monthly increase since August 2008 (Commerce Department).

· U.S. service sector index of 55.4 in May indicated expansion for the fifth consecutive month (ISM).

Statistics of Interest/Concern

· U.S. manufacturing index slipped to 59.7 in May from 60.4 in April (ISM).

· Non-farm productivity rose at 2.8% for first quarter 2010 down from the previously announced 3.6% (Labor Department).

· The U.S. budget deficit for FY 2010 will be 10.6% of our economy the largest since 1945 (White House).

Foreclosure Headlines

· Fannie Mae delinquency of 90 days or more declined to 5.47% in March from 5.59& in February the first decline since early 2006 (Financial News Network).

· The average borrower in foreclosure has been delinquent 438 days before eviction is final this is up from 251 days in January 2008 (LPS Applied Analytics).

Jobs Update

· The May jobs report showed an increase of 431,000 jobs but only 20,000 were in the private sector with most of the jobs created by adding census employees. The jobless rate declined to 9.7% and the under employed rate also declined to 16.6% from 17.1% in April (Labor Department).

· Initial weekly jobless claims declined by 10,000 to 453,000 (Labor Department).

· Continuing jobless claims rose 31,000 to 4.67 million (Labor Department).

· Four week moving average for jobless claims increased slightly to 459,000 (Labor Department).

· The pace of job losses edged slightly higher in May as employers announced plans to cut 38,810 jobs just slightly higher than April (Challenger, Christmas & Gray).

Key Indicators

Indicator	5/28/10	6/4/10	Change
Dow	10,137	9,931	-206
10 year yield	3.30%	3.20%	-.10%
Crude oil	74.09	71.16	-2.93
Dollar (vs Euro)	1.2268	1.1971	-.02970
Gold	1213.7	1221.5	+7.8

Source: www.cnbc.com/markets/commodities

Mortgage Industry Update: Rates, News & More

***Weekly Mortgage & Business Update May 28, 2010***

                                                                                          

 

 

How I see it $:  The crisis in Europe continues over fears that one or more Euro-zone countries could have to restructure its debt or even default. One country in the spotlight this week is Spain and especially the stability of its banking industry. On Friday Spain’s credit rating was downgraded from AAA to AA+ by Fitch Ratings Service. Meanwhile Italy announced $30 Billion in budget cuts to show investors that Euro nations can trim budget deficits. The reductions included a three year wage freeze for civil servants and a crackdown on tax evasion.

Another related issue is the increasing LIBOR rate. This is the rate that European banks charge each other to borrow money on a short term basis. While the rate itself is very low it has increased for eleven straight days (as of Monday). Given all of the borrowing going on in the Euro Zone if as rates move higher the cost of repayment increases which among other things could cause banks there to tighten lending.

Finally, in honor of all of those who have given so much for our freedom please take a moment to remember them this weekend. Happy Memorial Day!

If you have any comments or thoughts please e-mail me at burt@gosfm.com.  Finally, if you would like to view any of the articles I have written click on the link http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.

 

Interest Rates

Retail mortgage rates remained near the mid 4% range for the week and the average rate for a 30 year fixed rate mortgage of 4.78% (see chart below) approached the record of 4.71% set in early December 2009. In its annual report the Federal Reserve said it will not sell its MBS or mortgage financed agency debt until “the economy is clearly in a substantial recovery”. Some observers had suggested the Fed might start selling these assets sooner but apparently they will wait. What this means is that the concerns back in March that mortgage rates would increase are on the back burner for now.

 

When	Rate
This Week	4.78%
Month Ago	5.06%
Year Ago	4.91%
2 Years ago	6.08%

 Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm

 

Mortgage Industry

·         In the first quarter of 2010 FHA insured $52.5 Billion in loans compared to the total loans by Fannie Mae and Freddie Mac of $46.5 Billion. When asked about the huge increase in FHA market share the head of the FHA said “This is a market purely on life support, sustained by the government”. FHA market share is typically 4% and before the current crisis had never been above 14%. According to the Mortgage Banker Association 12% of all FHA loans are at least one month behind on their payment (CNBC).

·         FHA loan modification update: FHA did 171 loan mods in April which includes trial and permanent/fully approved modifications. There are about 6 million FHA borrowers and one million of them are delinquent (HUD Neighborhood Watch).

·         A possible partial solution to Fannie Mae and Freddie Mac could be the covered bond. This is a debt security that is backed by the cash flow of a loan such as a mortgage. The loan is covered (secured) by a pool of assets that investors can claim rights to if the issuer (or originator like a bank) becomes insolvent. While not common in this country they are very common in Europe. For example, Bank of America and Chase have issues them and companies like Blackrock and Pimco have invested in them. Currently the Covered Bond Act is being discussed in Congress and may become part of the financial reform package soon to be passed into law (CNBC).

·         In 2009 Arizona Mortgage Fraud Index (MFI) was 158 placing it fourth in the country for mortgage fraud with Florida number one at 292. Nationwide the MFI increased by 7% in 2009 from 2008 (Mortgage Asset Research Institute).

Good News

·         Existing home sales increased 7.6% in April and the median home price increased 4% to 173,100 (NAR).

·         New home sales increased 14.8% in April to the highest level since May 2008 (Commerce Department).

·         Consumer confidence increased to 63.3 in May from 57.7 in April the April number was the highest since March 2008 (Conference Board).

·         U.S. consumer spending was flat in April but for the first quarter 2010 was up 3.5% twice fourth quarter 2009 number. Consumer spending is about two thirds of GDP (Commerce Department).

·         A key index of current business conditions in New York for May was 89.9 up from 62.2 in April. This was the fifth highest number since the index was created in 1993 (ISM).

Statistics of Interest/Concern

·         First quarter GDP was 3.0% compared to the 3.2% initial reading reported last month. State and local governments reduced spending at the steepest rate since 1981 (Commerce Department).

·         The U.S. economy is forecast to grow at 3.2% this year and next (NABE).

·         Home prices fell in March by .5% from February but have increased 3% since April 2009. In the first quarter 2010 prices declined by 3.2% compared to fourth quarter 2009 but are up 2% year over year (S&P Case-Shiller).

·         Durable goods orders decreased by 1% in April after increasing 4.8% in March (Commerce Department).

Foreclosure Headlines

·         Bank of America has implemented a new automated system for handling short sale applications which has reduced the average number of days to approve a short sale from 90 to 50. The bank approved 18,000 short sale applications in April but received more than 50,000 (AZ Central).

·         Lenders nationwide have repossessed 350,376 homes thru April 30, 2010 (RealtyTrac).

Jobs Update

·         Initial weekly initial jobless claims declined 14,000 to 455,000 (Labor Department).

·         Four week moving average for weekly jobless claims was up slightly to 465,500 (Labor Department).

·         Continuing jobless claims were down 49,000 to 4.61 million (Labor Department).

 

 

Key Indicators

 

Indicator	5/21/10	5/28/10	Change
Dow	10,193	10,137	-56
10 year yield	3.23%	3.30%	-.07%
Crude oil	70.24	74.09	+3.85
Dollar (vs Euro)	1.2579	1.2268	-.0101
Gold	1176.9	1213.7	+36.8

 

Source: www.cnbc.com/markets/commodities

 

 

 

 

 

 

 

 

 

 

 

 

Next Page »