housing

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?

housing

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

housing

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.

housing

Price Reduction? Maybe…

This blog is brought to you in part by:  www.AZRealtorAdvantage.com

This particular blog post is directed at real estate agents but I’m sure that anyone, including sellers, can see the logic!  And…I think we can all agree that 90% of marketing a piece of real estate in today’s housing market is coming on the market with a good, competitive price.  Therefore is it crucial for real estate agents to have a plan, up front, for making price reductions with their sellers.

With that in mind…

Have a “pricing reduction” system in place and explain it to your sellers up front.  Many sellers want to “test” the market and not start out so low with their home’s price and that’s fine but most likely that is not the price that will get the home sold.  So have a system in place.  IE: If you have 10-15 showings in a 3 month period and no offers, it’s probably over-priced.  Figure out your own system and implement it with your clients.  Be sure to even bring your listing modification form with you on your first appointment letting the seller know, up front, that you expect that there will be a price reduction in this housing market.

Set up clients with  an email search of their neighborhood.  Knowledge is power.  Agents, keep your sellers educated with detailed information from their neighborhood or subdivision.  Sellers will typically be able to understand the realities of their own market.  It’s easy!  Just use MLS!

Show them Internet traffic! If you are not posting your listings online with at least 3 or more real estate search engines like Trulia, Zillow, or Realtor.com then you are missing a large audience of technically savvy buyers.  90 percent of all home searches now begin online.  Provide clients with weekly reports to let them know that their home is being “seen” even when they’re not being seen.  In addition to using property search engines, use social networking sites to your advantage!  Post your listing to Craigslist, Facebook, Twitter, etc.

Keep your sellers motivated by keeping them on the buy side.  Sellers are going to be buyers, most likely, and a smart agent will already have set up an email drip of MLS listings that match the sellers buying criteria for their next home.  When sellers find something they like they can become much more motivated to sell their own home sooner.

Give ‘em what they want! Most clients truly appreciate open houses, they really do.  They will know that you’re working for them that day.  Sellers will be much more willing to adjust their prices when they know you are working hard for them.

Once you had made sure that you are the local real estate expert for the neighborhoods you market in, let the seller ask for the price reduction. Use a “passive aggressive” approach to sales.  Agents, you want your clients asking you to reduce the price.  Act as an adviser.  Provide them the raw data like the MLS neighborhood/subdivision information, the online traffic is good but the showings are low, feedback from those who have seen the home (feedback forms).  Most sellers will see the writing on the wall and realize that a price reduction might be the key to receiving an offer!

One of the best ways to incorporate online marketing into your overall marketing strategy is have a single property website.  Since 90% of new buyers are looking online, they want to see LOTS of information and pictures before stepping foot into a hot car to drive out and see a home.  A smart single property website can automatically feed property info to the major search engines, provide for unlimited media options like being able to show hundreds of pictures, virtual tour, a actual walk through video tour of the home, a panoramic tour and show city demographics & local schools as well as aerial views of the neighborhood.  Buyers want to know these things.  Pictures are worth thousands of words.  Make it easy for potential buyers to have the information all in one place!  This is the kind of stuff that might make price less of a driving factor for buyers.

Drive traffic to your single property website using print ads with the URL and text code or hanging a sign rider with that same info.  Include that URL info in your blogs and on your websites.  When anyone sees a new product on the market (or in this case a home’s website address or URL) they want to learn more about it before they invest any time to go and see it in person.  Give them that information through a dedicated website that only features one property.  Load the website up with as many pictures, videos and documents (positive inspection reports, completed appraisal supporting the homes listing price, etc) and when prospective buyers land on your listing’s website and sees ALL of that info, they are much more likely to find a picture, document or statistic about the home that makes them want to come out and see it.  We live in a Google age.  You can either embrace that and be successful or wither away…trust me on this.  Then you should post the property’s website URL into your Facebook, Twitter, MySpace, any social networking site and get some real traffic into the home!  If you still aren’t seeing offers after doing this much work marketing, then a price reduction is probably in order.

Post your own thoughts about pricing on your own blog or website and share that info.  Sellers will read it and they could easily turn into your clients!

I hope some of these tips work for you as well as they have worked for countless agents I work with that seem to get fantastic results from implementing these concepts.

Want more information about single property websites at no charge?

Check out www.AZRealtorAdvantage.com and watch the video.

Regards,

Spencer Anglin