The first of a series of expected mortgagee letters from FHA on their implementation of the new Housing Law came out this afternoon.

FHA has announced the new upfront and monthly mortgage insurance premiums that will replace the existing premiums that were tiered based on credit risk.

The new premiums are the same for all credit levels, but they are higher than the premiums used to be before the tiered MI pricing went into effect on July 14.

Confusing isn't it.

The new upfront mortgage insurance premium is 1.75% for purchase money and all full credit qualifying loans.

For streamline refinance loans (FHA refinance of an FHA loan) the new upfront mortgage insurance premium will be 1.5%.

For FHA Secure the new upfront mortgage insurance premium will be 3%.

Monthly mortgage insurance premiums for 30 year loans will be based on .5% annually for loan to values equal to or under 95% and .55% annually for loan to values over 95%.

These premiums are actually lower than I had feared, so they seem like good news to me.

Here is the announcement for the new premiums.

The determining date for which mortgage insurance premiums are in effect is the case number order date. The new premiums will be used for case numbers ordered on or after October 1, 2008.

This is the first FHA announcement that I have seen. More are expected soon to address implementation guidelines for the other significant changes brought about in the housing law that was signed July 30.

Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

The FDIC has just today finally updated its regulatory watch list, increasing the number of problem banks from 90 to 117. We have been looking for this revision to guage how the industry is moving. The news report I read indicates that the banks added to the list are larger players.

While the number of banks increased from 90 to 117, the combined assets increased brom $26 billion to $78 billion. Additionally, banks have had to set aside more that 4 times the loss provisions than were required in the 2nd quarter last year.

The impacted banks increased the number of troubled banks by 30%. The assets held by the troubled banks more than doubled.

This will impact liquidity for all types of lending.

This annoucement comes with a couple new reports that home prices have fallen by a record amount this quarter, as compared to a year ago.

These reports follow immediately upon the announcement yesterday that home sales have increased.

There were even headlines that the Housing Crisis Over? July Sales Spike. A closer read of the actual article by Alan Zibel shows that much of the increased sales was bargain priced foreclosures, and that actual housing inventory has increased to record levels.

Combining this with the loss of programs, and the imminent ban on seller funded down payment with FHA loans, and prices must drop. There are just not enough buyers.

I hope that those in charge are paying attention and can put these numbers together.

Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

The Southern Belle is Chattanooga's feature river boat. It has 3 decks, dining, dancing, and wonderful views. You can be down at river level or high on the open upper deck. Day trips and night trips offer different perspectives of the Tennessee River, each beautiful.

This afternoon my wife and I joined a group of Riverbend Festival volunteers for a luncheon cruise. One of the many benefits of volunteering to help with the Riverbend Festival.

We traveled up and down the river, with views of Coolidge Park, the Hunter Museum, and the Tennessee Aquarium. The weather was cloudy but pleasant. The food was good. The entertainment - prizes ( we did not win anything), a DJ and dancing, the Tennessee River, and my wife - was excellent.

 
Captain Ron Robertson of the Southern Belle

 
21st Century WaterPark from the Southern Belle

Tennessee Aquarium seen from the Southern Belle.

Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

Another bank failure was reported today. Again the FDIC was prepared with a buyer and acted swiftly to be ready to reopen on Monday.

The bank that failed this time is Columbian Bank and Trust Company out of Topeka, Kansas. The failed bank's assets will be taken over by Citizens Bank and Trust . This is the 9th bank to fail this year, and the 2nd bank to fail in Kansas.

Losses in residential real estate lending were cited as the cause for the bank's failure to maintain adequate capital reserves.

This new bank failure takes place as the Federal Reserve is holding its annual economist meeting in Jackson Hole, WY.

Inflation, the mortgage markets, Fannie Mae and Freddie Mac troubles are all being discussed. In July inflation figures reached 5.6%, the highest in 17 years. Because of this, the decisions to lower the federal funds rates to 2.0% are being questioned.

One bit of good news is the recent decline in oil prices, but the bad news here is that the price still remains high.

NPR interviewed New York University economist Nouriel Roubini, who was one of the economists who, a couple years ago, warned of the likelihood of a coming mortgage crisis. He asserted that the US economy is in a recession and he pointed to the strong potential for it to extend to an global recession. He puts the blame square on the lack of regulation that allowed overly risky mortgages to be made.

These issues bring a picture of a tough market ahead, one that will be even tougher than it is at present.

High inventory.
Tightening credit standards.
Loss of high loan to value loan programs.
Growing foreclosures.
Upward pressures on interest rates from inflation.
Losses at FNMA and FreddieMac causing increased adversed market charges to closed loans, effective Nov 2008.
Decrease in numbers of qualified buyers, from loss of programs and economic problems.

These, and more issues including increased federal regulation, will make the restoration of stability in the housing market difficult.

All these issues combine with the facts of the recent purchase boom brought about by the dramatic increase in the numbers of home buyers who became newly qualified to purchase. They were newly qualified because of loan programs with less stringent credit and income standards, low downpayment requirements, and various low payment options. These programs are no longer available, and these formerly qualified home buyers can no longer purchase.

The recent boom years impact in at least two ways. First, recent home purchasers are not normally ready to purchase so soon. Second, the boom was fueled by an increase in qualified buyers who in many cases are no longer qualified.

We have probably returned to the 1990's levels of eligible home owners. The pending loss of seller funded down payment assistance will be the final impacting change. And I think the impact of its loss will be significant.

As an industry we need to focus on getting more people qualified to purchase at these higher credit standards. For the self employed, make sure your accountant understands the credit impact of all those deductions, legitimate though they may be. Those tax savings may keep you from purchasing a home.

My message to those who want to purchase a home: Take the steps to become qualified - credit and savings.

We can then hope that the Federal Reserve can keep enough liquidity in the system to lend even to qualified buyers.

Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

Signal Mountain Market Data

Real estate market information about Signal Mountain, TN plus a local feature - Nolan Elementary School. It helps to understand the trends about homes for sale in the local market.

Signal Mountain is located in Hamilton County on Walden's Ridge.  Its population is approximately 7,500. It received its town charter in 1919.

Signal Mountain is supported by Thrasher Elementary and Nolan Elementary schools and now by a newly built combined middle and high school. The new school opened this fall with over 800 student enrolled.

The Mountain Arts Community Center provides education in the arts as well as facilities for community gatherings.

The community website provides excellent information about events, opportunities, the town council, and organizations.

Here are some local information and pictures about Signal Mountain.

The information in the below 5 charts indicates the local residential market trends over the last 12 months.

Chart 1 Average Selling Price and Average Listing Price
The trend of the average sales price and compared with the average listed price of those sold homes. This can give some insight as to how the market is supporting the asking price for listed homes.

Chart 2 Number of new listings and number of sold homes
The trend of number of homes listed and sold. This gives some indication of the balance between selling and buying in the local market.

Chart 3 Number of listings active on the market and average days on the market
The average day that properties have been on the market as well as the total number of properties listed for sale on the date this report was posted. 

Chart 4 Average Price of New Listings
The trend of average price for newly listed properties. It gives an indication of the trending in the average price for the local market.

Chart 5 Median List Price to Median Sold Price
The trend of listing and selling prices. It indicates whether a market has declining or increasing values. The median price is the price at which half the homes sell for more and half the homes sell for less.

Would you like to know what payment you qualify for? or How much home you can afford?

Call me at 423-280-0345 or email me . Visit my website for information about purchasing your new home.

We offer excellent first time home buyer financing, as well as FHA, VA, and Rural Development loans. Visit my website to learn about our different home financing programs.

We specialize in new construction financing.

We have numerous lenders that offer a variety of programs that meet the financing needs of higher priced (jumbo loan) homes.

Your home financing goals can be fulfilled at American Acceptance Mortgage.

Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

The Chattanooga Community Kitchen will soon kick off its main annual fund raiser, Fast Day. The premise is that donors are to skip a meal and to donate the cost of that meal to the Community Kitchen. Fast Day used to be help around Thanksgiving Day celebrations, but now it is not limited to a single event.

Organizations are free to hold their Fast Day at any time, and in any way that best suits their purposes.

The Community Kitchen began in 1982 as a joint mission of seven downtown churches: Christ Episcopal, First Baptist, First Centenary United Methodist, First Christian, St Paul Episcopal, St Peter and Paul Catholic, and Second Presbyterian.

The mission was to provide a free meal program to help the homeless population which was and is still a growing concern locally.

The Kitchen has now grown into a full service agency with dozens of church and other faith congregations, businesses, foundations, private citizens, and community organizations providing volunteers and financial support.

Its services have been expanded from the "soup kitchen" days, although providing meals remains central to its mission. The Kitchen has become a model for non profits nationwide.

Chattanooga Community Kitchen now serves 3 meals each day, every day, plus a snack.

Healthcare for the homeless is one of the Kitchen's most important services.

The Family Housing & Learning Center provided 10 transitional housing units. It has been opened since 1999.

 The Chattanooga Community Kitchen is a highly respected non profit organization. It is very well thought of by all in the Chattanooga area.

In addition to the above services the Kitchen has a day care center, a thrift shop, job skills and life skills training, and a clothing program. It has a Recycle Works program that helps provide employment for the homeless as well as strengthen our environment.

The Community Kitchen has been under the able administration of Charlie Hughes, the Executive Director, for the last 8 years.

For information about the Community Kitchen or Fast Day, you may email them at cckpr@chattanooga.net. Feel free also to contact me at at my email below.

Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

The 10 year old access to seller funded down payment assistance for FHA home purchases will end on October 1. This ban was part of the massive and hastily enacted Housing and Recovery Act of 2008. The bill was touted as foreclosure relief and market stabilization in the form of support for the struggling Fannie Mae and FreddieMac. The bill included so much more and the ban on DPA was part of the extras. 

A new bill to reinstate down payment assistance, as well as tiered FHA mortgage insurance premiums which were also stopped in the foreclosure relief bill, was introduced soon after the Housing act was signed into law. This new bill has not progressed as quickly as I would have hoped.

Michael Schulz, a field representative for US Senator Lamar Alexander, gave a group of industry professionals over an hour of his time to listen to concerns about this issue.

Topics that were discussed were the impact of down payment assistance on home sales, home values, FHA delinquency, appraisal inflation, community tax revenue.

Improvements in underwriting FHA loans that use down payment assistance were also discussed.

Michael Schulz asked insightful questions about the impact of the loss of down payment assistance and about the new bill to reinstate it. He even indicated a desire for a follow up meeting.

The meeting was encouraging to me. It was far better than the response I received from emails sent to Congressman Zach Wamp's office and to some others. Those replies seemed to be stock response emails. Nothing in them even indicated that my initial message was at all read. This seems to be a common type of response from our elected representatives.

But Senator Lamar Alexander's representative, Michael Schulz, gave us an hour. At the meeting, one of those who attended mentioned that Senator Bob Corker has previously given an hour himself to hear a group of people concerned about this issue.

At issue is ensuring the pool of qualified buyers is not dwindled further. One of the statistics mentioned was that 80% of Americans do not have funds for a down payment. I am not sure of the source of that statistic, but if true, and it sounds close, then our housing market recovery will rest on the remaining 20%.

How about that for an good illustration of the old 80/20 rule.

The group who met with Senator Alexander's representative were Chuck Hammett, National Account Manager for Ameridream, Trey Lewis, broker for Ole South Realty, affiliate of Ole South Properties a large developer in central Tennessee, Chris Meagher, VP of Ole South Financial, the mortgage company with Ole South Properties, and me, representing the Tennessee Association of Mortgage Brokers. I was asked to attend on behalf of Tina Christein, President of TNAMB, who could not go on Thursday.

Trey Lewis mentioned to me that he has an upcoming interview on HGTV about the new housing laws. We need to be sure to look for that airing.

Richard Smith

Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

New legislation is coming through the House Financial Services Committee as additional response to the housing crisis and to the increase in foreclosures. The bill targets mortgage brokers and yield spread premiums.

The Mortgage Reform and Anti-Predatory Lending Act of 2007, HR3915, attempts to put into law prohibitions against doing a loan that is not in the borrower's best interest, requirements for minimum loan repayments, restrictions on refinancing that require a tangible net benefit.

It also establishes a distinction between mortgage brokers and depository institutions. Additional licensing requirements are put forward for mortgage brokers and broker compensation from lenders (yield spread premiums) are banned.

This ban on yield spread premiums does not restrict the equivalent investor payment to depository originations which is called service release or gain on sale.

North Carolina has just passed the first state ban on yield spread premiums. I do not have any details on the YSP ban or the other two mortgage related bills signed yesterday in North Carolina. The impact on mortgage lending in that state will be watched.

I remember some years ago when Georgia passed a predatory lending law that almost stopped all mortgage lending in the state, and required emergency corrective legislation. 

This new legistation enjoys momentum from the Housing Rescue and Foreclosure Prevention Act and from the general mortgage market problems. Industry professional and consumer groups need to review and consider the provisions to make sure that this bill accomplishes it intentions without bringing on unintended negative results of reduced competition, limited consumer choice, and increased consumer cost.  

There is still a lot going on in the regulatory and legislative realms, not the least of which is HUD's insistence on proceeding with loan disclosures that are confusing to consumers. Industry professionals and consumers need to be aware as possible, because these decisions will impact mortgage lending in the future.

Richard Smith

Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

AOL and the Travel Industry Association have listed two of Chattanooga's natural attractions in their Top 24 in America. Ruby Falls, with its beautiful underground waterfall, is listed as number 3. Rock City Gardens with its equally impressive rock formations and famous view of 7 states came in at number 5.

Both of these attractions were listed in my post of the Top 5 Things for Chattanooga.

The Scenic City is receiving recognition for its outdoor life, for its growth as a retirement location, for its commitment to technology, for its culture and opportunities. Along with these and other recognitions we also can take pride in our beautiful natural setting.

Ruby Falls and Rock City may be the most recognized of our beautiful natural wonders. They are not the only wonders that Chattanooga enjoys.

Richard Smith

Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

There have been several posts and articles about troubled banks and federal regulators increasing staff to manange upcoming failures. The last three banks to be closed were smaller banks that had evidently suffered liquidity problems from commercial real estate. Jim Crawford, of Atlanta, wrote about the most recent bank to fail.

Some high profile economists are now indicating that there will be one or two large banks to fail. These banks have already moved in some way to reduce their mortgage lending operations.

Former IMF chief economist Kenneth Rogoff is quoted as looking for a major failure to take place in the next few months. Various other economists seem to agree, with Lehman Brothers, Wachovia and Merrill Lynch among the names mentioned.

At the same time, with last week's Consumer Price Index numbers indicating higher than expected inflation, there is pressure to increase interest rates. This was compounded by reports yesterday that the Producer Price Index making a larger than expected increase. The good news on the inflation front is lowering oil prices.

All of this is compounded by the well publicized losses that Fannie Mae and Freddie Mac are suffering. This weekend the Federal Reserve will hold the annual conference of ecomonists.

There are many matters of interest to be discussed.

How to recapitalize Fannie Mae and Freddie Mac?

How will stock holders be treated in any restructuring of the GSE's?

How to respond to increased numbers of struggling banks, many of them large banks?

How to contain inflation and hold off recessionary pressures?

How to manage the world wide financial crisis that seems to be developing?

How to turn the housing market around in an environment with tightening credit standards?

How to restore bank solvency and liquidity, and how to determine which banks to allow to fail?

Mark Organek, a real estate agent in Arizona, asked how long would it take to recover if we were at bottom. Have we reached the bottom? Liquidity remains an issue. Reduced numbers of qualified home buyers remains an issue. The loss of mortgage programs remains an issue.

And just this morning, Goldman Sachs lowered earnings