Merry Christmas From The Huntington Beach Mortgage Oracle

]]> http://hbmortgageoracle.wordpress.com/2011/12/25/3582/feed/ 0 D Fragoso clip_image001 http://hbmortgageoracle.wordpress.com/2011/11/23/happy-thanksgiving/ http://hbmortgageoracle.wordpress.com/2011/11/23/happy-thanksgiving/#comments Wed, 23 Nov 2011 19:05:57 +0000 D Fragoso http://hbmortgageoracle.wordpress.com/?p=3576 ]]>

HVCC – the “Home Value Code of Conduct” is a huge change to the process of a residential appraisal.  The idea is principle is a good idea but the method at with the HVCC process has been implemented allows for no accountability for appraisers.  For example I personally had to charge a borrower additional fees for lock extensions because the appraiser went on personal leave and we had to wait for the appraiser to return so get a simple correction done which was the appraiser mistake to begin with.  How can this be since we now have to use a middle man or HVCC management company?  Well it be!  Best of all this management company has to be paid for their services to which on average has raised the cost on an appraisal $150.  Isn’t that great?  And it was all done to benefit the consumer or at least the Fed’s would like you to think so. 

Mortgage rates will soon rise to near double digits most likely by the end of year.  QE2 is set to expire in June which in some ways is a good thing as it will stabilize gasoline prices.  Yes gas prices at the pump for the consumer or you and I.  Putting people on a wild goose chase to find out why gas prices are so high is unbelievable.  High school economics showed us how devaluing the dollar will cause the cost of all imported products to go up.  Anyone that has been to Mexico knows that the Dollar has great buying power when compared to the Pesos.  Well that buying power has been diminished a bit over the past few years and continues to be reduced.  So how can this be?  Well simple so I will break this down for my good friend Vic.  “World Market Prices” are what we are dealing with so let’s think past your locate favorite store. 

International Trade is far past my friend Vic’s understanding I am sure so let’s break it down.   For example Oil – the cost of Oil has remained fairly stable over the past few years from the “International Trade Prices.”  What has changed is the value of the dollar.  So it takes more Dollars to buy the same Oil.  The more money that the Fed’s print, create or however the Fed’s chose to create additional money hurts us all.  Soon there will be huge inflation bank on it!  The question is when will it come.  Currently the devaluing of the Dollar is hurting everything from Gas Prices to Home Values, imagine that!   

You have all heard me refer to Vic and I use his comments from time to time to point out the misinformed opinions that some people seem to share.   Vic’s latest comment is on Oil Companies recent profits.   OK let’s break this down, all long term profitable companies have a solid business plan and for the most part it works well.  All businesses have highs and lows when they are connected to variable multipliers such as the Stock Market, a local professional team getting to the playoffs or even tourism.  If any of these multipliers are up then their businesses will enjoy additional profits.  So why is this?  It is because they have a fixed profit margin.  So your business bulk buys its raw materials and then sells them to their clients at fair market price.  The fair market price is just that “what the market will bear.”  Just like we all shop at Costco, Wal-Mart or wherever these stores have shown huge growth due to fixed margins and strong sells.  This is good business. 

In the case of the Oil Companies the speculators pushed up the cost of oil a few years ago and that caused a huge run up at the pump.  Many of these speculators lost huge amounts of money when the prices came down.  Today is much different as the cost of oil remains steady yet our dollar continues to lose its international value.  Many American have fought hard to make the Dollar strong but yet is continues to lose value.  We can all continue to say it is not my fault and blame others but the Dollar is America’s money.  It does not see color, race, religion or sex.  It only knows that when it is not used correctly it loses value.  There are those that want to blame Bush for everything and yes he deserves his share of blame.  With that said the situation is much worse today than when Bush left so who has to wear the blame today?  Just like the quarterback of a team Obama is our President like it or not it is Obama’s to wear and so what?  It is time to move on. 

Soon we will begin to hear how Firemen, Policemen and Teachers will have to take pay cuts and they will be on strike.  Protesting is fine but when we are all having to tighten up is it fair to the rest of us?  We have to seriously look at pension funds as they are not possible to fund in the current structure.  Yes people worked thinking they would get their pension funds I get it.  It is time to get serious and understand that even pension funds have to be given a break as those who draw from them today draw far more out than they put in and simple math tells us that does not work.  Even Vic should agree with that.  Today we spend more money on Teacher Pension Funds than we do on students.  Are we serious about education?  It just seems like we are focused on a birth certificate issue and missing the big picture.  You decide.

• Tax transcript: If the IRS is on furlough, we will not be able to obtain tax transcripts. If you have a registered/locked loan with us and have not already delivered it to the branch, please upload your completed and signed 4506T into eMagic TRIO now. Even though the TRIO folder will not contain a complete file, please upload your registration or lock confirmation and select “deliver to Underwriting.” You will need to check the audit trail in TRIO to confirm receipt by SunTrust Mortgage. We will order the transcripts prior to the shutdown to minimize a potential delay when you deliver your loan file.
• Flood insurance: Borrowers may have difficulty obtaining flood insurance through FEMA during this period.
• FHA: We understand that HUD may not support FHA Connection during their hiatus, and therefore we will not be able to order case numbers or perform other functions in FHA Connection while they are on furlough.
• Rural Housing: We are not sure of the impact to GUS since that system was created since the last shutdown in 1995. However, we should anticipate the system will not be available. In addition we will not be able to get conditional commitments during the shutdown.
• VA: We should anticipate that the system by which VA appraisals are ordered will not be available.

SunTrust Mortgage, Inc. is working to minimize the impact of this potential shutdown and its effects on your business. We will keep you informed as more information becomes available. Please contact your account executive should you have any questions.

Pros

•  As of the new Fed action a Lender is supposed to send you information on all of their loan placement options and show the actual fees associated with a particular loan placement option. 
  • Brokers have loan placement options as they work with multiple banks on many levels.  Banks only offer their program so they only have a single product to some degree. 

Cons  

• As of the new Fed action it is no longer possible for a Loan Officer to cover any last minute miscellaneous fees at time of closing. 
  • Real Estate transactions are fluid in nature and therefore impossible to calculate the exact total fees.  Anyone that has every purchased a home has been what is called an “Escrow Pad.”  These funds are used to cover additional last minute fees or cost and the balance left is refunded back to the consumer at closing.  

• If you any reason your loan does not close on time a Loan Officer in the past has been able to pay for what is called a rate lock extension. 
  • Well now that option is now gone.  The new Fed action does not allow for this cost to be paid for by the Loan Officer so that means the consumer will get this cost added to their closing cost.

• The new Fed action no longer makes it possible for the Lender to pay some of the consumer’s fees.  The Fed action requires the loan Officer to structure the loan so all fees are covered or no fees are covered. 
  • So what this means is you will get two rate options which will break down something like this;
  • A fair rate with the consumer paying all of the loan fees or a no fee loan with a much higher rate.  The higher rate will allow the Lender to sell the loan on the secondary market which will allow them to recover their cost of paying the consumers fees.    

• The new Fed action will push out many low level Mortgage Brokers and lead to high loan cost over all due to lack of competition. 
  • We are a fee market society and the cost of a loan is dictated by the market.  The new Fed action says that the average person does not understand the loan process and with that I have to agree.  But the bottom line is what the consumer is paying and they understand that.  Would you go to AMPM and buy a 32 ounce drink for $2.50 when you can go to 7/11 and get a big gulp for $1.50?  The point here is you should have the choice. 

  So I am sure my reader Vic should even get this but if not then a Vic type consumer will never get it.  Mortgage Brokers keep the loan cost down much as Costco keeps grocery store prices down and so on.  It is our system and for the most part is work pretty good.  If you disagree then maybe you should look at it this way.  There are those of us that we work harder than the next person to obtain more stuff whatever that stuff is.  There are also people that say they are not married to their work and refuse to work as hard as others.  So shouldn’t the person that works harder and longer be rewarded? 

   Let’s look at this another way in the beginning of the meltdown the Media had multiple stories stating that Brokers are bad.  As people looked into this that proofed to be untrue and the focus was shifted to the “Wall Street Fat Cats.”  Well yes they play a role just as the Fed Commission that was asleep at the wheel.  So bring thing current to today and who is the biggest problem now.  Many people are making business decision short sales or just letting their homes go because they do not want the home today because of its value.  Isn’t this the same greed?  It is money and not wanting to pay for an investment that went bad of an individual with complete disregard for how it impacts anyone else.  Please Vic or anyone else explain how this type of greed is any different than the Fat Cats. 

   Putting the Fed in control of mortgage fees is a huge mistake as clearly the law makes do not understand how a Loan Officer gets pad either.  Look if gas is $3.00 and one station and $4.00 at another which station are you going to go to?

 Below is a copy of an internal press release that is currently being circulated to Union Teacher Members.  Today with so many people hurting due to the current economic situation it is unbelievable that this group is pulling at our emotions and shafting us at the same time.  If this is what Teachers have become today then clearly we need to break up the school districts and bring in private schools.  I myself would have my own kids in private school is it was affordable as they would receive a real education.  The below internal memo sickens me as our children are being used as a tool against us for more money for Teachers.  Unbelievable!!! 

  This memo was sent to me by a teacher that does not support the Union’s scare tactic.  Teachers it is time for you to stand up and police your own!  Media where are you?  Is there any journalistic integrity left?     

— Memo —

 1. “Like” CTA on Facebook. They will give you updates on what is going on in CA education. (If you don’t have face book, go to www.cta.org often.)

3. Walk the precinct (check with your local teacher’s association)

4. Go to a rally. Take your kids (if you have any) and turn it into a family event. These take less than a few hours and don’t happen frequently.

5. Contact your representatives (state and national) either via phone or e-mail.

6. Sign up for NEA (www.nea.org) and become an “E-Activist.”

7. When you talk to people about supporting educational issues, always frame the argument that you ARE A TEACHER and are not arguing about pay cuts or a rise in co-pays. You will turn them “off.” Rather, say, “As a teacher, they cut my after school chess club for “at risk kids” and it just broke my heart.” You will win the hearts and mind of—the voter that will end up voting on education issues.

8. Pick your fights. It’s absolutely a waste of time and energy to try to convince a pro-voucher, anti-union, rabid tea-partier to support your cause. Spend your energy on the voter that is on “the fence.”

9. Talk to other teachers on your campus and get them on board. (It’s just your career right!)

10. Famous quote: “We should be taught not to wait for inspiration to start a thing. Action always generates inspiration. Inspiration seldom generates action.”

***Extra credit: sign up for Moveon.org and stay informed about current issues (including education).

3. More cuts to education funding 9. More furlough days

4. Bigger classroom sizes 10. Cutting of electives and sports programs

5. Elimination of seniority 11. Higher health care costs

6. Continued teacher layoffs

To contact Mr. Shimogawa email: savecaliforniaschools@yahoo.com.

Pros

  When a Mello Roos bond is issued the funds raised are to pay for infrastructure items such as – Storm Drains, Street Lighting, Sidewalks, Parks and Schools to service a specific community.  When these costs are paid for through means of a Mello Roos bond there is a direct impact to the sale price of a property within the footprint of a specific community.  So the cost of the infrastructure items is covered by the fund raised when the bonds are sold. 

Cons

  Bonds are another way to finance a desired project much like a traditional loan in terms of it must be repaid.  So who repays the Mello Roos bond?  The answer is simple; it is every property owner within the footprint of the issued bond.  This is where most people get lost.  If you purchase a property with Mello Roos then you are purchasing a property with a silent second note that needs to be repaid. 

  In the example that I used it was for a Corona CA property that did not have Mello Roos.  The home is still for sale as I understand it and you can see it online at   http://budurl.com/FeaturedProperty.  This property does not have Mello Roos and that was the point of discussion in the original posting.  So what does this mean to a buyer?  If you run the figures in reverse using a rate of 4.5%, 30 Yr term and a Mello Roos payment of $150 monthly the total value difference is $29,604.17.  This difference is the difference in buying power which is the silent second that is hiding behind the Mello Roos bond. 

  Zillow is a peaty neat online system that is used by many people to get a quick value of a residential property.  This is an automated system and does not factor in Mello Roos and this is why a value is applied and there is also a range given as it is possible to address even detail of every property at this time.

  Many people do not realize that these Bonds have many provisions built into them which allow for increases the monthly payment to cover increased cost.  Please stay with me on this as it is important.  Agents know about Condo HOA’s and how they can request a special tax assessment to be applied to all of the home owner’s to cover back unpaid dues which most likely are no fault of your own.  Think about all of the homes that are in foreclosure and most likely these homes are not receiving their monthly payments which means the Bond payments are not being paid.  Keep in mind that Mello Roos hides behind a tax assessment already.  Just like in a HOA scenario an increased Mello Roos assessment can be applied to you the home owner.           

  Many people think that their Mello Roos will end at some point in the future.  Well I would not bank on it.  I have not seen a bond structure yet that does not have a “maintenance provision” within it.  So what does this mean, simple put then infrastructure must be maintained so that tax rate will most likely never change.  Have you ever seen your property HOA or special tax assessment go down? 

  We have all been very complacent when it comes to Real Estate.  We seem to ignore the risk associated with real estate in terms of investment.  We have all received the wake up call and our eyes should be open know, even Vic should agree with that.  My point is to look at everything so you are not surprised later.  If you have a Mello Roos tax associated with your property then please do look up your bonds structure.  This is all public record stuff that you should be able to find with a little leg work. 

Stay Tuned…

  First of all if you are paying $100 per month in Mello Roos tax that is the same as roughly $16,000 in buying power.  The Mello Roos tax is still counted against you in terms of loan qualifying as you have to pay the tax every month with your monthly payment.  So what has happened is the buyer might feel good about buying a home for $20,000 less than a near by home that does not have Mello Roos but that is not really the case as you are still paying the loan payment for the higher priced home. 

  Most of these bonds are being repaid at a 6.5% interest rate so ask yourself what is your rate and then you will know if you are really getting a good deal.  Most people fixate on the actual sales price and not the per month cost.  What would you rather buy a home for $400,000 with a $150 Mello Roos tax and a rate of 4.75% and an actual monthly payment of $2,236.59?  Or a home with a sales price of 425,000 with the same payment?  So ask yourself which is the better deal?  The point here is this, do not get lost in the sales price as the monthly payment is the true cost you will feel.

  The fist place to look, and I think we all can agree, is at the banks.  The problem here is we only look at the outside and not what is happening inside.  Today we are experiencing the worst economic down turn in history, in my opinion.  Yes greater then the depression in terms of dollars.  Our Government has imposed such heavy regulations on the banks that they can only lend to the best borrowers.  People forget that a bank earns most of its income from doing loans.  So tell yourself “if Bank’s do not lend money then they do not make money.”  So the imposed regulations are hurting the banks just like everyone else.  So the Bank’s begin to charge us in other areas such as a monthly bank account fee, higher credit card fees, and etc. much like raising taxes on the citizens of a tax or a country to cover short falls.

  The average person is the voice of any community and this voice is not being heard clearly.  I have been reviewing residential loan applications for sometime now and I am very surprised to see how much money Teachers, Firemen & Policemen make when compared to the average person.  I am not even going to speak about their benefits.  We the people elect individuals to represent us when the deals are made with the Teachers, Firemen & Policemen Unions.  The problem here is the candidates we elect all take money from the unions to get elected.  So ask yourself, who is really representing us “the employer” at the negotiating table?  It is no wonder how something like the Bell CA rip-off can happen.  The people in Wisconsin are being a greedy as the so called Wall Street Fat Cats and this is why.  My own income has been hurt dramatically much like the average person’s income.  Why is it these people do not feel that they should not tighten their belts like the rest of us?  This is not a Union issue but rather we all share in giving some back.

  As for the three most emotional Unions the Teachers, Firemen & Policemen Unions pull at us emotionally the most which should make you very upset.  Whenever they need more money then we see commercials with huge class rooms, homes burning and thieves robbing us.  We do not like this but it is a sales job much like a used car salesman might try to pull.  Policemen take the biggest risk as they do it everyday.  Firemen take risk only when they go to a serious call and when compared to their overall work history this ratio is much lower than a Policemen.  Teachers are a tuff group to understand and yes it is a difficult job.  Bring back the real discipline and much of this nonsense will stop.  Yes teachers, I agree that parents do not parent today and as a result kids to not respect Teachers.  However, your income is very good when you consider that you only work ¾ of a year.  You get all of the perks plus teacher days with no students, are you kidding me?  It is a tuff job and if you do not like it do something else.  We all have the same ladder to clime.   

  I am sure you have all heard of the noodle guy.  Just a quick recap, this guy believes that he does not need to follow the owner’s business protocol and wants to do what he wants to do at work and share in the profits.  Well he has that opportunity to do everything that he wants in our country if he wants to.  All he has to do is open his own business and he can do whatever he wants to do.  You see, the problem here is he needs to risk his own money to do it and he most likely does not have any money or the know how to pull off such an endeavor.  This feeling of entitlement must stop in order to move forward.  In other words “you do not get something for nothing.”

  We are at the final steps to begin the economic recovery but we have to do it as a group.  No one person is any better than the next as everyone Union or non Union must pull his or her own weight.  Our Teachers, Firemen, Policemen and Political figures should know better and not striking or walking out in our country’s time of need.  You all work for the public and if we have to endure it, then so should you.  

  I recently spoke to a borrower that had a loan locked, but due to many reasons outside of the lenders control the borrower exhausted the lock and extension periods.  So this means that the borrower’s rate is now subject to current market conditions.  The borrower does not understand why he can no longer get the lower rate and is unwilling to listen.  I tried to show him the recent history of the bond market and explain it to him.  This borrower’s unwillingness to educate himself has cost him the loan.  The borrower wanted to wait for a lower rate and the market went back up and now he does not qualify due to back end income ratios. 

  My point in all of this is we all need to take a few minutes and truly understand what it is we are talking about in terms of obtaining a home loan and the details of buying a home.  It is so much easier to cry foul and point the finger at someone else than to take the time to understand what it is we are doing.  The Wall Street Fat Cat’s could not exist if our own greed did not allow for the Fat Cat’s to exist.