Mortgage News by Lee Maynard

FACE IT! Home prices have skyrocketed in the past few years. For those of us lucky enough to have owned property during this time we have bankrolled a ton of equity. Good for us!!

But… What about the people that are currently looking to purchase their first home? With prices this high, how can they possibly afford to step into the home buying arena?

Here’s how… The mortgage industry is constantly working to make buying your first home more affordable. It all started many years ago with the development of FHA, Fannie Mae and Freddie Mac. Although technically not competitors, they do compete for market share. This competition keeps pricing low and moves these entities to develop products that encourage and assist people in purchasing there first home.

New programs have been developed that allow 100% financing along with large seller contribution amounts and reduced mortgage insurance. You get all of this and a 40 year term. Stick around long enough and they may even throw in a set of Ginsu knives!

Seriously though, the industry recognizes that first time home buyers need creative products if they are going to enter the market and they are developing new ideas and products daily.

Lending is a quirky business. I like to use the term “selling money” to illustrate the loan transaction. As long as there is money to sell, the industry will find a way to sell it. Whether it be interest only loans, Zero down payment products or 40 and 50 year terms the mortgage industry will always try to make home buying more affordable.

Until next week,

Lee Maynard

Please join me in celebrating the arrival of Larry Joseph Andre IV! Larry was born to our administrative assistant Leslie and her husband Larry Joseph Andre III on Saturday September 1, 2006.

In an article dated May 29, 2007 the Orlando Sentinel examined the "No Fee" mortgage advertised by Bank of America.  The purpose of the article was to determine whether "No Fee" really meant no fee.

The answer, surprisingly enough, was No.  The "No Fee" mortgage was another reincarnation of the old marketing concept designed around prices that are artificially high but discounted in such a way that the consumer feels that they are getting a good deal.  In the business this is called perceived value with an emphasis on perceived.

Let's take a look at an example.  I'll use a loan amount of $250,000.00 and closing costs of $5,000.00. 

Lender A will have you pay the closing costs and allow them to be rolled into the loan amount therefore your loan amount increases to $255,000.00

Lender B of A will pay the closing costs for you and your loan amount will remain at $250,000.00

Lender A will charge a 6.30% rate for their fixed rate thirty year loan (according to the article).

Lender B of A will charge you a 6.80% rate for the same thirty year fixed rate loan (also according to the article).

Let's compare monthly payments of Principal and Interest on each loan:

          Lender A                                      Lender B of A

    $1,586.21 / month                            $1,669.51 / month

That equates to a difference of $83.30 per month or $29,988.00 over a thirty year period.  Ouch!!!

The article closes with a very important point.  Do the research, crunch the numbers.  Not all is as it seems in the mortgage industry.  By educating yourself and becoming a more informed consumer you can avoid being trapped in what looked like a good idea at the time.

These articles are my way of assisting you to make the right decisions when it comes time to purchase or refinance your home.  As always I will continue to tell you the truth as I see it. 

By the way, if you would still like one of these "No Fee" mortgages call me, I could use the extra money!

Lee

Here is a link to the article.

The answer is... CRIAP.

The question is:

    A. What is found in the bottom of a bird cage?

    B.  What was the first word out of your mouth when you noticed that you locked your keys in the car?

    C.  What is a mortgage acronym?

If you picked C you are correct!   Boring but correct!

CRIAP stands for the four most important factors an underwriter considers when approving a mortgaged Real Estate loan.

CRedit: Your credit report and score are indicative of your attitude and responsibilities toward taking on new debt.  The credit report is a reflection on how you have managed your debt over a period of time and can be very useful in determining how you will manage any new indebtedness.

Income: Your income is documented so that your ability to take on and support additional debt can be assessed.

Assets: Savings, Retirement and Stock portfolios are examples of your ability to save money.  If you're saving then obviously you are not spending more than you take in.  Assets are required when you must provide a down payment and cover all or some of the loans closing costs.  They can also be used as an excellent source of reserves if you run into future financial difficulty.

Property:  This is the actual home that you will be providing as security for the mortgage loan.  The property must be in good livable condition with noe deferred maintenance.  A current market value will be established to provide the underwriter with the security that if all else fails the property can be sold and the loan paid off with the proceeds.

I like to think of CRIAP as sort of a table.  Four legs provide a stable platform but you can also get by with only three.  Just like a table, when one leg is taken away the others must be strong enough to support the load.

Credit problems can be overcome by excessive strength in Income, Assets and Property.

Income problems can be overcome by excessive strength in Credit, Assets and Property.

You get the idea. 

So the next time you find yourself preparing for a new home purchase ask yourself...  Do I have my CRIAP together?

Take Care,

Lee

Great Loans Mortgage Funding Inc.

TO BUY OR NOT TO BUY…. That is the question I am asked over and over lately.

Everyone, by now, has heard that we have entered a buyers market. What does that mean and how does that affect me?

Simply put a buyer’s market is a market in which the buyer has more control over the transaction than the seller.

For the past few years we have experienced a strong seller’s market. Buyers were pitted against each other in a bidding war for any property that came on the market. Typical market time was counted in days rather than months and properties sold for more than their asking prices in many cases. Think of being the seller with thousands of buyers trying to outwit, outlast and outbid their competition. You get the point.

Now comes what the media and industry analysts are calling a buyer’s market. Currently in the Orlando area there are over 19,000 homes for sale. Compare this with just 4,500 this time last year and you can see that the sellers are getting a bit nervous. The once almighty seller has been forced to bow down to the buyers that, only a year ago, were catering to their every whim. Radio ads from builders claiming price reductions and large allowances for closing costs are currently the norm. Condominium developers are flat shaking in their boots! Sellers are finally coming down off their high horses and working with the buyer to arrive at a fair market price.

Interest rates are currently low (30 year fixed rate notes go for about 6.375%). The Fed has temporarily halted rate increases and is expected to hold steady in the short term. As inflation fears grow this may not be the case in the long term. I wish I could more clearly read my crystal ball but the indications are that rates will continue to rise.

The market for home buyers is better than we have seen it in the past few years. Prices have stabilized and interest rates are still historically low. I can’t say in every case whether to buy now or wait on a price decrease that may never come but I can say that in my years as a mortgage professional (those of you who know me know how funny that sounds) that the most important factor in the home buying equation is the monthly payment. With interest rates currently in the low sixes and new mortgage products that allow for larger seller contributions and 40 year terms the time may just be right for that next move!

Until next week!

Lee

“Bou 149” in flight

Those of you who know me are at least somewhat aware of my love for aviation. This passion has recently taken me in a direction previously unknown. I, along with others, have taken on the challenge of maintaining and flying a Vietnam era aircraft that my father flew into harms way right around the time I was born. The Army Aviation Heritage Foundation owns this aircraft and relies on volunteers to keep it flying.

Sounds like a good time right?

Well, after countless hours of work and a bit of “large aircraft” flight training I was selected to fly as copilot on Caribou N4149HF or “Bou 149”. This accomplishment should have been the crowning event of my aviation experience to date short of being accepted as pilot in command.

I was wrong…

My interactions with the gentlemen who served on these aircraft and the history lessons learned from them have turned out to be the real treasure.

I recently spent a weekend with these men at a reunion of old Army pilots. Stories were told, friends were remembered, lives were relived and B.S. flowed like a river. I was, at many times, aware that the service these gentlemen gave to their country and the life changing events that followed may all be forgotten when the last two members of this organization sit down to toast their fallen brothers with a bottle of Cognac already selected for the occasion.

Stories about acts of bravery as well as acts of stupidity went hand in hand. Lessons of history were there to be learned and the wisdom of having “been there done that” was ripe for the picking. I learned a lot that weekend and realized that the legacy of these men flies with me and old Bou 149. That, my friends, tends to put a lot of things in perspective.

We can all learn from those who have gone before us. I was lucky to have found this group of men. We encounter these people every day without knowing. Take the time to listen and get to know those around you. You never know what you’ll find.

Until next week!

Lee

If you are reading this email then chances are you were one of my clients over the past few years and chances are also good that none of you are currently in a loan that started at a low, low 1.25% interest rate.

How can this be you ask? The reason is simple. I have only written two of these notes over the years and through a good bit of education managed to steer most of you away from this potential lending nightmare.

In CNN’s mortgage section on CNNMoney.com I found this headline:

Tick. Tick. Beware the mortgage time-bomb

That ridiculously low-rate ARM seemed like such a good idea at the time. But now, payments will be coming due in a big, big way.

The article goes into great detail regarding the concept of variable interest rates, negative amortization and recast payments but the bottom line is this…

You did not get stuck with a loan whose payment and payoff are about to adjust upward by a huge amount.

Thanks for listening at the time and please remember me when your friends start complaining about having to refinance because they can no longer afford the payments on the loan the “other guy” gave them.

I appreciate all referrals and will continue to give my clients the truth as I see it.

Until next week!

Lee

Here’s a link to the article:

http://money.cnn.com/2006/10/09/real_estate/arms_nightmare/index.htm?postversion=2006100911cnn=yes

It’s been a busy month but my long awaited email ramblings are finally here!

Enough small talk let’s take a look at the market:

There are more houses on the market than ever.

New home builders will do almost anything to sell their current inventory

Mortgage rates are still low (low to mid 6’s on a 30 year fixed)

Current home values are expected to slip slightly

So… what have I been doing lately? I have been working with people settling in for the long haul. They are renovating their homes, adding on pools, consolidating debt and waiting for the next market turn. They want to be ready when it comes time to sell and move or simply relax and enjoy their newly remodeled current home.

Second mortgages are becoming more popular than ever. Most everyone has a phenomenal rate on their first mortgage (if not call me!) and the thought of refinancing it makes my skin crawl. Second mortgages, as opposed to lines of credit, are fixed rate products which take the volatility out of the mix. These notes are currently available on a 30 year term at rates as low as 7.65%. This is well below the current prime rate of 8.25%!

If you are looking to tap into the equity of your current home please consider these fixed rate notes. They offer the same no closing cost option as the lines of credit but without the excitement factor inherent in a variable rate.

Until next week,

Lee

1/12th of 2007 has come and gone!

Its February folks so it’s time to do a little mortgage management.

Now that everyone has received their W-2’s (they were supposed to be in your hands by January 31) it’s time to start assembling your tax return documentation. All of you homeowners should have received a Statement of Mortgage Interest and Annual Taxes outlining the amount of interest and taxes paid out in 2006. This document should be submitted to your tax preparer along with all of your income and expense documentation. If you have not received one please contact your mortgage servicer directly.

Homestead. The deadline for filing is March 1, 2007. Do not miss it! In addition to saving approximately $500.00 per year in taxes the homestead exemption will also trigger the Save our Homes initiative which keeps your property taxes from rising more than 3.4% per year. This can be huge savings over a period of time and can not be done retroactively.

PMI. You may have heard that mortgage insurance will be deductible in 2007. It is but only on new loans originated in 2007. Check with your accountant for more details. Remember, I am only the messenger!

Real Estate Taxes. Check the online records search for each county to verify your 2007 tax rate. Chances are your property has been re assessed and your property tax bill may have increased. With taxes being paid in arrears you may have a shortage in your escrow account. It’s best to be prepared!

I am available if you have any questions on the items covered in this article or any other mortgage / real estate questions you may have. Please keep me in mind when you are thinking about purchasing or refinancing.

Until next time,

Lee Maynard

Links for Homestead Exemption Information:

Seminole County: http://www.scpafl.org/scpaweb05/index.jsp

Orange County: http://www.ocpafl.org/docs/hxbro.html

Lake County http://www.lcpafl.org/homestead_exemption_qualify.asp

 The mortgage world has embraced this pipe dream for years but without much progress.

Until Now!

We have finally been able to create a system that allows you to apply for a loan, sign all of the required disclosures, upload your income and asset documentation to your loan file as well as access all of these documents on line.

No more dead trees in our office!

This means that the entire loan process with the exception of closing can be done in your pajamas (or what ever your personal choice of sleep ware may be) in the comfort of your own home at the hour of your choosing.

This is a major breakthrough for an industry that still relies on the “Stone Tablet and Chisel” method of loan processing!

If you or any of your friends are considering a purchase or refinance in the near future please contact me. You’ll find it to be the quickest, easiest mortgage solution in town.

Thanks for reading!!!!

Lee

Customer Service

I recently read a news article regarding service (or the lack thereof) in the retail marketplace. It claimed that the level of service in the U.S. has dropped markedly over the years and that we as consumers have begun to expect less and tolerate more.

I agree in part to their findings but, as in everything, there is always an outstanding example of the way that things should be to inspire us to work a bit harder and set loftier goals.

I recently had such an experience. This is my story…

Over the past few years I have slowly been working on my wife’s old Mustang converting it from a nice little grocery getter to an all out road warrior. She enjoys participating in my little hobby and occasionally points to the engine which, for the better part of a year, I have poured money, blood and testosterone into, and says… “That’s cute!!! What is it?”. Arrgh!!!!

Back to the story,

I ordered a set of headers from Kooks Custom headers in New York which are designed to fit my particular application. Some of you are reading this and wondering “what the heck are headers?” To that I reply…

Take out all references to “headers” in this email and substitute “Widgets”, “Igloos” or “Prada Purses” whichever you’re more comfortable with.

It doesn’t matter what the product is as long as you can follow along.

The headers were sent to me in a timely manner but they just would not fit. I spoke with customer service about the problems and we agreed that I would send them back and they would correct the problem.

This was done but when I received them the second time they were still not quite right. After several phone conversations we determined that the headers were bent correctly but still did not fit the car. My concerns were moved up to the General Manager where I thought everything would be taken care of. I once again shipped the headers back to New York and once again they massaged them and sent them back to me. No Joy! They still would not fit.

So…

I called the General Manager who was completely perplexed by this time and told him of my current troubles. He told me he would be back to me within the hour. I waited… After about thirty minutes my phone rang. It wasn’t the general manager as expected. The gentlemen on the other end of the phone introduced himself as Mr. Kook. No first name just Mr. Kook (evidently that’s what everyone knows him as… perhaps his parents were a bit formal when issuing first names).

Anyway, Mr. Kook asked several questions about my needs and ran some scenarios by me. He suggested that I send the headers back to him one last time. He would personally oversee the process and make sure that I received exactly what I wanted. Now, this is a very large operation. They must produce thousands of headers every week and here is the head honcho taking time out to personally assist a customer. I was impressed but still a bit wary. I shipped the headers out once again.

The day they arrived Mr. Kook (still no first name) called me to once again go over exactly what I wanted. He told me that he was walking them back to the shop right then and that they would be corrected and sent out the next day.

Before shipping them he called me once again just to make sure that what they did was what I expected. The headers arrived and fit perfectly. A good experience overall considering the complexity of what we were trying to achieve over the phone and via email but here’s the kicker…

I asked Mr. Kook why he took the time to assist me out of the thousands that come through their doors everyday and he said…

“ Lee, it’s my name on the side of this building and it’s my name on the side of those headers. If things aren’t right I’m going to make them right”

Enough said. Personal ownership of a problem, responsibility and accountability for the actions of yourself and those that work under you are the things that are missing in today’s so called service mentality. It could not have been said any better than those words uttered by Mr. Kook. It’s so simple!!!

I value that encounter and try to pass it on at every opportunity. It’s an old school way of thinking but I believe it is one that made this country great and I intend to envelope it into our way of doing business.

After all, our motto is… “Service Oriented, Technology driven!!!”

Thanks Mr. Kook!!!

Lee                     

I ran across the following article, written by Lew Sichelman, that truly describes the current mortgage lending situation from a borrower’s perspective. It’s a bit of a read but the information is sound and timely. You may even be able to use this as a talking point at your next cocktail party!

Lew Sichelman | United Feature Syndicate

WASHINGTON -- The time to find more favorable financing is running out rapidly for the millions of homeowners with adjustable-rate mortgages that are going reset this year or next.

The clock is ticking fastest for those credit-challenged borrowers who have been unable to improve their credit standings.

And the timekeeper isn't the lending community, at least not this time. Rather, it's lawmakers, regulators and consumer advocates who, in trying to protect future borrowers from the more dangerous variety of ARMs, are slamming the door on those who already have them.

Millions of these unconventional loans, often called "exotic," or sometimes even "toxic," mortgages, have been made during the past few years in the name of affordability. In many cases, financially savvy borrowers use them to conserve cash or keep their money working in other investments.

But in some instances, these loan products -- pay-option ARMs, interest-only loans and shorter-term adjustables that have fixed rates for two or three years and then switch to rates that reset to the market rate once a year thereafter -- have been put into the hands of the wrong borrowers.

These include cash-starved people who couldn't afford to buy a house without a loan at the lowest possible starting rate and/or minimal monthly payments; folks who were depending on ever-rising home prices to bail them out when the time came for their loans to adjust; and risky "subprime" buyers who had big-time credit issues and shouldn't have been given any kind of mortgage at any rate, let alone one that put them in harm's way a year or two down the road.

In many cases, greedy mortgage brokers and loan officers who cared more about lining their own pockets than the welfare of the borrowers they serve originated hazardous loans. And the loans were gobbled up without question by funding lenders to keep their volumes up, and sold on through the fee-hungry secondary market to Wall Street investors who had no idea how the loans would perform.

Now the verdict is in, and the situation isn't pretty. Early payment defaults are rising, and the foreclosure rate is on the upswing. As a result, investors are demanding that lenders repurchase their faulty loans, forcing those thinly capitalized firms without much money in the bank to close their doors.

Lenders also are taking steps to protect themselves by revamping and tightening their underwriting guidelines to make sure that, in the future, only creditworthy borrowers can qualify for the exotic types of adjustable loans.

So, too, are the conduits that keep mortgage money flowing by purchasing loans from primary lenders and packaging them into securities for sale to investors throughout the world.

For example, secondary-market institution Freddie Mac recently announced it would purchase only 2/28 and 3/27 ARMs -- those with fixed rates for the first 24 or 36 months and then switch to one-year adjustables for the remainder of the term -- at their fully indexed rate. The change will serve to protect -- or cut off, depending on your point of view -- borrowers who can qualify only at the low, introductory starting rate.

Regulators and legislators who oversee the lending process also have moved to protect borrowers -- belatedly, according to some critics. And of course, all this has lenders griping about tightening the noose too much.

Lenders argue that the situation isn't nearly as bad as some pundits make it out to be and that they have made the necessary adjustments to keep the situation in check. They also say the new rules, which are intended to protect future borrowers, will only make the situation worse for borrowers who already are swimming in the deep end of the loan pool.

"What about the millions of homeowners who already have these products and need to refinance?" asks John Robbins, chairman of the Mortgage Bankers Association. "We cannot simply abandon these borrowers, lest they get trapped in these loans."

Robbins, a 30-year mortgage veteran from San Diego, Calif., says that "loans were made that shouldn't have been made," and he says no one can condone profit as justification for making a bad loan.

But he maintains the mortgage business is taking care of the problem on its own. "We know that loans being made today are significantly more conservative and represent the best loans made in a decade," he says. "The market is working. It has, and always will, move at lightning speed compared to regulators or legislators."

At the same time, he worries that, if the noose is tightened too much, it will exacerbate the foreclosure problem, especially among credit-impaired borrowers who have yet to right themselves and will have trouble qualifying for a new subprime loan a second time. And others have the same concern.

"Tighter restrictions will leave a tremendous number of borrowers holding the bag," says Jeffrey Taylor, managing director of Digital Risk, an Orlando risk-mitigation firm. "They may not be in trouble yet, but they will be because they won't be able to meet the new guidelines. They'll be stuck in something they can no longer afford."

Subprime specialists say the same thing. "How are we going to take care of all our current customers" if they can no longer qualify for a new loan, wonders subprime specialist Michael McQuiggan, CEO of Lenders Direct, which was forced to close its doors to originating brokers because it had to buy back too many underperforming loans.

"If we don't address this issue now, [the foreclosure rate is] going to snowball," the Orange County, Calif., lender warns. "We have to solve what's coming toward us. Millions of loans are about to reset."

There is talk on Capitol Hill about granting relief for subprime borrowers who can't qualify for new financing and are facing foreclosure.

One contingency is some kind of forbearance requirement. Another possibility is a moratorium on future interest-rate adjustments so borrowers would have additional time to clean up their finances. Or perhaps someone will come up with a "rescue" loan to bail out troubled borrowers.

But borrowers shouldn't wait for lawmakers or regulators to act. Even if it will be months before your interest rate resets, you should start looking now for alternative financing. Even if you are a Class A borrower who will have no trouble qualifying for another loan, begin the refinance process now, before a rate adjustment is near.

And whether you are a subprime borrower or a prime one, don't make the same mistake twice. Unless you know exactly what you are doing, stay away from unconventional financing. If you don't, you might not get another chance at the brass ring.

"People better wake up," warns risk specialist Taylor. "If you get it wrong a second time, there won't be a third time."

Good Advice!

Lee

Property Tax Reform… What Gives????

The Florida legislature, after convening early to specifically address property tax reform has finally come to a decision. They decided, in their infinite wisdom, to put off the real work until they reconvene in late June leaving the state’s property owners at a loss.

There have been many proposals from both sides of the aisle as well as input from a specially designated committee that was relieved of its duties by the governor in order to speed up the reform process. Some of the more interesting proposals have been:

Repealing the Save Our Homes Initiative in favor of a higher homeowner’s exemption based on a sliding scale according to home value (50% exemption on the first $400,000, 70% on the value between $500,000 and $600,000 and so on).

Save Our Homes Portability (allows those with the SOH tax break to transfer it to their new home)

Eliminating property tax altogether in favor of a higher sales tax.

Whatever the plan may eventually become is anyone’s guess but one thing’s for sure… we’re not going to see anything until our legislators get back to work!

Links:

What is the Save Our Homes Amendment?

Florida Property Appraisers Websites

Lee