Richard's Real Estate Thoughts

I saw this sign at a local restaurant in downtown Chattanooga. If anyone knows which restaurant, please post in comments. You will win!

I'm not sure exactly what point to make from the sign, and would love to hear comments about how you take it.

The restaurant is a gourmet hamburger place - very good hamburgers by the way.

But it is not fast. Hence the sign. One of the other signs was NFF - not fast food.

Of course the other signs in the picture point to the quality of the food, and actually the service is very good too.

• Is it picture perfect?
• Would you come back for what you are about to serve?

I really like the last question.

Would I come back to me, or refer someone to me, for what I am serving?

Does your loan officer serve what you expect? that would justify using them again?

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

www.RichardSmithHomeLoans.com

The Get Motivated Seminar has announced it will be in Chattanooga on July 20, 2010. The speaker list is impressive, and I am excited to attend.

It happens all in one day - 8 AM to 5 PM - at the Chattanooga Convention Center Halls A-D.

Speakers for the Chattanooga "Get Motivated" Seminar

Knoxville will have the same seminar on July 21.

More information on the Chattanooga seminar here.

UPDATE on speakers and additional seating prices.

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

www.RichardSmithHomeLoans.com

Udate 6/24/10 - It does not look good for passage of the tax credit as Republicans and Democrats fight over the bigger cost items in the Tax Extender Bill - vote expected today or Friday. Senator Reid indicates that the 60 votes required to call for the vote are notpresent. 

Update 6/23/10 - the House passed the flood insurance extension. Small miracle. It still must pass the Senate. They finally considered the flood extension separate from the Tax Extenders bill. Maybe they will do the same for unemployment and for the home buyer tax credit.

Here is a very good summary of the status of the proposed changes to the now famous Tax Extenders Bill - pulled from the Senate Finance Committee website. This summary lists the changes and the costs.

The most significant change is with the carried interest provision.

"Investment fund managers from paying taxes entirely at capital gains rates on investment management services income received as carried interest in an investment fund."

The Democrats' position was to retain this tax benefit. The change on the table would partially close the loophole and reduce the overall cost of the total bill by $13 billion.

A similar amount is saved with changes to the Medicare payments to doctors.

The Homebuyer Tax Credit extension is one of the listed provisions - back on page 3. At issue is how to pay for the entire package - estimated cost $140 billion, now with the reductions listed in the linked summary, reduced to $120 billion.

A reduction of $20 billion. Is this enough improvement to pass the bill? (Which then would return to the House for a reconciliation vote.)

Of that, the Homebuyer Tax Credit Extension is ....... $140 million.

The summary is tedious reading. And it is annoying to think that these arguments are holding up consideration of extending flood insurance, extending unemployment insurance, and extending the homebuyer tax credit.

The end result of these ongoing negotiations?

It is possible that a new vote will take place tomorrow.

UPDATE 6/17 - Senate vote today on HR4213 - Cloture not passed. Thune Amendment to waive budgetary discipline not passed. It looks unlikely that this bill in its present form will not go through. Maybe some of the pressing issues can be split off and passed separately - unemployment, flood, and home buyer tax credit extension come to my mind.

And the world waits expectantly.

Will these changes be enough to end the filibuster?

See my previous post  here.

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

www.RichardSmithHomeLoans.com

Well at least rates should stay low, with the results of two impacting and telling economic reports.

Yesterday builder confidence and home starts were lower than expectations and lower than forecasts.

Today's unemployment figures - new claims and existing claims - were higher than expectations and than forecasts.

The increase in unemployment figures breaks a 3 week trend of drops in new claims. The significance of these numbers of course can be determined only by any new trend over the next few weeks.

For today though mortgage rates should improve based on concerns about hiring prospects.

Congress does not appear to be interested in extending unemployment benefits.

Congress does not appear to be interested the housing market - tax credit extension not passed, funding for Rural Development not passed, FHA Reform allowing increased consumer costs for mortgage insurance, flood insurance not extended. 

Congress is acting in ways that suggest they either do not undestand the housing market, don't care, or actually want to slow its recovery down.

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

www.RichardSmithHomeLoans.com

The news from last night is that the home buyer tax credit amendment was passed by the Senate. Great news for everyone. And prominently announced by Senator Reid on his website.

This would extend the deadline for closing from the current deadline of June 30. The bill needs to pass the House, and likely must be passed before the June deadline.

The problem with the news is that its significance may be misleading. As best I could find out last night, only the Tax Credit amendment to the Tax Extenders Bill was passed.

The actual bill has not passed.

The Tax Credit amendment has not been voted on as a separate bill, I do not think. I will follow this closely today, and try to post updates.

This extension is estimated to cost $140 million, and to help 180,000 buyers who would otherwise miss out on the tax credit

More information on the tax credit and the full bill can be found here.

 6/17 UPDATE POSTED HERE.

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

www.RichardSmithHomeLoans.com

How about this - The FHFA has ordered Fannie and Freddie off the New York Stock Exchange.

Not that such action should be a surprise. It is just the fact that it has happened.

Here is the press release from FHFA.

I wonder if this has any significance with respect to the proposed changes that are being considered to reorganize the GSE's?

"FHFA's determination to direct each company to delist does not constitute any reflection on either Enterprise's current performance or future direction, nor does delisting imply any other findings or determination on the part of FHFA as regulator or conservator," said FHFA Acting Director Edward J. DeMarco.

Fannie and Freddie - the mortgage giants - now, or soon to be, OTC stocks.

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

www.RichardSmithHomeLoans.com

The housing starts for May came in a good bit lower that expectated. And a good bit lower than the previous month.

Yesterday the NAHB (National Association of Home Builders) announced that builder confidence had dropped.

Today we see the reason. From the May Residential Construction report

"Privately-owned housing starts in May were at a seasonally adjusted annual rate of 593,000. This is 10.0 percent (±10.3%)* below the revised April estimate of 659,000, but is 7.8 percent (±9.7%)* above the May 2009 rate of 550,000."

Expectations were 655k and the forecast called for 680k. Big difference.

The drop in housing starts from the previous month and from market expectations will probably help mortgage rates for today, but it is not good news for our economy in general.

Now we have talk of a double dip in the housing recession. And it may indicate that the tax credit did not kick start the housing market enough to overcome the surplus supply of homes and the shortage of qualified home buyers. 

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

www.RichardSmithHomeLoans.com

Alison Krauss and Union Station headlined the second night at Riverbend. You love Alison Krauss' music and voice, but if you have not seen her live - then you have missed out.

She is a joy on stage, fun, funny, and oh so sweet.

One man in the audience shouted - "I LOVE YOU ALISON!" And while it surprised me that that approach did not work for him, he spoke for us all.

What a great performance she gave. I did not record any video because it was requested that no video be taken.

Here are some pictures from the show, and I posted a play list with some of her 26 Grammy awards. 

Riverbend Festival is always about the music, but there are so many other happenings going on.

Again this year, we can enjoy watching the sand sculpture on Riverbend Beach. This time some of the great landmarks are on display. The sculpture is by Team Sandtastic. I will post updates as the sculpture progresses.

And the Boy Scouts have a very popular venue this year. I did not try the climbing. (Did not want to show anyone up - least of all me.)

 Nashville Flood Victims

The Riverbend Festival this year is collecting donations for the Nashville flood victims. You can donate here.

More information on performances at www.RiverbendFestival.com.

My post for Riverbend Day 1 with Sheryl Crow.

FHA Reform-Strengthening Risk Management through Responsible FHA-Approved Lenders

FHA has issued its new mortgagee letter announcing its implementation of the Final Rule for lender net worth requirements. It should not have much immediate impact on consumers, but it is significant nonetheless.

Perhaps more impact to consumers - FHA will no longer approve loan correspondents - mortgage brokers. This responsibility will shift entirely to HUD approved lenders.

Until December 31, 2010, correspondents that already have FHA approval can continue to originate through the rest of the year. After that, HUD approved lenders will have full responsibility for compliance and performance of sponsored correspondents/brokers.

This new lender/sponsored correspondent broker relationship will change the broker industry. My thoughts are that it will limit consumer choice. I expect that brokers will be less able to select lenders for their niche strengths - such as pricing, property, credit standards.

Lenders will likely have volume standards to justify maintaining the sponsorship. Brokers who send a particular lender the occasional loan because of a special niche may no longer have that luxury. Already some lenders are hiring third party management companies to handle their correspondent sponsorships.

This seemed to me to be a bad idea when it was in the comment period. It still seems like a bad idea to me now. I do not see how it will be more efficient for each lender to duplicate the oversight of sponsored correspondents. But that is just me. Maybe it will enable more brokers to originate FHA loans, brokers who were not previously able to do so.

I would love to read comments from others about how they expect this to impact lenders, brokers, and consumers.

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

www.RichardSmithHomeLoans.com

A recent question from my Ask an Expert link requested clarification about home loan funding fees. Again, a very good question for home buyers.

Funding fees are used primarily with government loans - FHA, VA, and Rural Development. Technically only VA and Rural Development have funding fees. FHA also has an upfront fee, but that fee is called Upfront Mortgage Insurance Premium. For practical purposes, no difference except that FHA also has an annual MI premium that is paid in monthly installments with the regular mortgage payments.

Each of these fees or premiums are used to fund the specific government program and enable the respective targeted home buyers to obtain high loan to value home financing.

FHA Upfront Mortgage Insurance Premium

FHA insures lenders for 100% of the mortgage balance in the event of borrower default. The insurance premiums - upfront and annual - fund the reserve accounts that are used for this 100% lender guarantee. With the recent mortgage problems HUD's reserve accounts fell below Congressionally mandated levels. Recent and pending changes to the FHA mortgage insurance premiums are designed to restore appropriate levels to these reserve accounts.

Currently the FHA Upfront Mortgage Insurance Premium is 2.25% of the base loan amount for purchases and for refinances. This fee is typically financed with the loan, but it can be paid with borrower or seller funds. The premium must either be paid in full by the seller or buyer or financed with the loan. No partial payments are allowed.

With FHA upfront mortgage insurance, borrowers can be entitled to prorated refunds if the loan is paid early. With the current refund schedule the loan must be paid within three years in order for any portion of the upfront premium to be refunded.

VA Funding Fee

VA has a funding fee that is also typically financed with the loan. This fee is used to defray the costs of the VA Home Loan program. It is not specifically tied to default losses. Periodically, Congress can review the program costs and determine whether a change in the funding fee is necessary.

The fee percentage is determined by

1. the veteran's type of qualifying service - regular or reserve
2. if the VA loan is a first time or second use of the VA home loan guaranty
3. if the veteran is paying a down payment.

For a regular military service, first time use, no down payment purchase the funding fee is 2.15%. Again this fee is typically added to the loan amount.

The VA funding fee may be waived for disabled veterans.

The VA home loan guaranty is not specifically tied to the VA Funding Fee.  The amount of the loan that VA guarantees to the lender is based on the veteran's eligibility and the loan amount, but generally the guaranty is between 40% and 25% of the loan amount.

Rural Development Funding Fee

The Rural Development Home Loan Guarantee program is designed to encourage single family housing in rural areas

It is a no down payment program for qualified buyers. The funding fee for Rural Development is also generally added to the base loan amount.

As with VA mortgages, the Rural Development funding fee is used to defray costs of the guaranteed housing program, and is not directly tied to mortgage defaults.

The Rural Development fee is currently 2%.

Rural Development guarantees lenders, in the event of borrower default, full reimbursement for the first $35,000 of loss. Any additional amount of loss is reimbursed to 85% of the loss amount.

FHA, VA, Rural Development Effectively Target Respective Audiences

With VA and Rural Development home loans there is no monthly mortgage insurance, only the initial funding fee. For many that makes these two programs more attractive, but in truth each of the three programs - FHA, VA, and Rural Development - target different home buyers and have developed very effective programs for each of their targeted buyers.

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

www.RichardSmithHomeLoans.com