Mortgage News by Lee Maynard

One has only to read a newspaper or watch the evening news these days to see that the mortgage industry is in a world of dissaray.  Over the next few posts I will attempt to make some sense of the headlines and keep you informed as to how your finances may be affected.

100% Financing

For years 100% financing of real property was virtually unheard of.  Recently though, we have seen several products created that cater specifically to the zero down crowd.  Lender competition and "irrational exuberance" (thank you Mr. Greenspan for your creative language skills) led the drive to finance more and more properties for more and more people regardless of their qualifications. 

As competition grew between lenders the underwriting guidelines dropped and approvals rose at an incredible rate. This spiral put lenders completely at risk if the borrower defaulted but the strong housing market presumably gave  safe haven to the investors should anything negative happen to the borrower.

Guess what?  Those risky investments came back to bite the investors in the arse!  Their dreams of an ever appreciating real estate market have been shattered along with their bottom lines as more and more of these loans move toward foreclosure.

Result: 100% financing is on its way out.  Buyers will have to pony up a down payment in the very near future as lenders pull back and lick their wounds.  Currently Fannie Mae and Freddie Mac still have 100% offerings but the underwriting guidelines have tightened to the point where those that truly need this type of product won't qualify.

How does this affect you?  If you have built a great deal of equity in your current home you will be able to access the required down payment needed when it is time to buy your new home.  Life goes on as before.  But...

If you are a first time home buyer... there will still be products out there to assist you but they will require a great deal more in the credit and asset department to obtain.  From this point on all free lunches are hereby cancelled!  A clean credit rating and work history are now required for home ownership.

This market correction is actually a positive step toward a safer and more stable pool of money from which to support the mortgage industry.  The more conservative lenders with strong portfolios will survive and those that jumped on the crazy express will fall with the speed of a dot com investor in the late nineties.  Hopefully this market cleansing will correct our current position and the supply of funds available for home purchasers will remain affordable and available for years to come.

More on the mortgage industry in another post.

That's the truth as I see it.  August 13, 2007

Lee Maynard

Make millions in today's foreclosure market!  Loans are defaulting and banks are selling homes for pennies on the dollar... or so the pitch goes on the late night "get rich quick" station.

I wager that there will be someone making money hand over fist as a result of the current rise in foreclosures but it won't be those buying the latest greatest foreclosure madness program from their favorite loud mouthed huckster.  It will be the huckster carting off millions and laughing all the way to the bank!

Historically speaking we've all been told that banks are in the banking business and have no desire to be in real estate.  As a person who has seen countless offers rejected by bank's REO (real estate owned) departments I can tell you that this simply isn't true.

Banks know the value of real property.  They pay an awful lot of people to get the most from their investment and protect them from loss.  Foreclosed properties generally sell at or near their current market value making the entire process of purchasing a foreclosed property an ordeal envisioned only by the likes of Rube Goldberg!

How can I take advantage of the opportunities available in this distressed market without working through the bank's REO department?  Funny you should ask.  For $199.95 I will send you a tape that will unlock the secrets of the pros... just kidding!!

Here's how.  There are more than 20,000 homes listed for sale in the Orlando market.  Some have been listed for nearly a year  This is where knowledge and research come into play. 

As you shop for a home you will need to have your Realtor provide you with a list of homes that have been on the market for 6 months or more in an area that you find attractive.  Take the list and decide for yourself what a fair price would be for each property.  Follow that list of homes for a period of time and see how the prices match up to your expectations.  If one sells look it up in public records.  How much did it sell for?  If a seller decides to drop the price then compare that to your list.  Eventually you will figure out what the market is commanding for the properties you've selected and perhaps you will find that one property with a seller desperate enough to match your price.

There's no insider's foreclosure list!  No magic formula!  Just good old fashioned research with emotions kept in check.  That's how you find that little gem of a home at your price.  It's a buyer's market out there!

But...

Don't forget to consult with your lender before hand.  You don't want to discover any surprises when it's time to purchase that home you've worked so hard to find!

Lee