My New Blog

Not a day goes by that I don't hear someone in a panic over the credit crunch. The TV, radio and newspapers have us all scared we won't be able to get mortgage money or buy a car or that our credit cards will self destruct any minute now.

If that's so, why is my mailbox full of credit card solicitations and offers to refi my home?

As a mortgage lender, let me assure you that mortgage money is available. What has disappeared is the Sub-Prime, No Money Down, Stated Income type of loan. These are the loans in default - what the industry calls Non-Performing Loans.

As a matter of fact, this may be a window of opportunity for first-time homebuyers. Some experts are calling this a Perfect Storm. How can this be? Let me explain - write or call for details. Ask for the Perfect Storm report.

Hal

Young Chuck in Montana bought a horse from a farmer for $100. The farmer agreed to deliver the horse the next day. The next day he drove up and said, 'Sorry son, but I have some bad news, the horse died.'

Chuck replied, 'Well, then just give me my money back.'

The farmer said, 'can’t do that. I went and spent it already.'

Chuck said, 'Ok, then, just bring me the dead horse.'

The farmer asked, 'what ya gonna do with him?

Chuck said, 'I'm going to raffle him off.'

The farmer said, 'You can't raffle off a dead horse!'

Chuck said, 'Sure I can, Watch me. I just won't tell any body he's dead.'

A month later, the farmer met up with Chuck and asked, 'What
happened with that dead horse?'

Chuck said, 'I raffled him off. I sold 500 tickets at two dollars a piece and made a profit of $998.'

The farmer said, 'Didn't anyone complain?'

Chuck said, 'Just the guy who won. So I gave him his two dollars back.'

Chuck grew up and now works for the government. He was the one who figured out how to "bail” us out

Hal Tennant

Aren't you glad? No more campaign ads; no more watching cable news all evening long. So what does that mean for rates?

Today's rates are significantly lower as the money sitting on the sidelines flows into the bond market. It's too soon to tell if this is a trend. If you are a student of how the economy effects rates - or maybe you have a closing coming up, log on to my Daily Rate Lock Advisory for the latest.

Hal Tennant

5.5 FHA Myths

Myth 1 - FHA has a list of "allowable closing costs" that limit the fees charged to the buyer; therefore the seller ends up paying for a lot of the borrower's costs.

Myth 2 - It's Harder to qualify FHA.

Myth 3 - FHA is only for low income or first time homebuyers.

Myth 4 - Because of the FHA MIP, the overall rate for FHA is higher than conventional loans.

Myth 5 - FHA is ONLY for high LTV loans.

Myth 5.5 - Many homes don't qualify FHA and/or they need repairs and inspections.

4.5 Quick FHA Secrets - Did You Know?

(1) - When using a non-occupying co-borrower, such as parents, the occupant borrower is not required to have any assets or income of his/her own.

(2) - 2 - 4 unit owner-occupied properties are eligible for 97% financing at the same interest rate as 1-unit homes.

(3) - Mom and Dad can lend, not gift, some or all of the money for closing, and put a second lien against the home that exceeds 100%LTV.

(4) - 15 year loans at 90% LTV have -0- monthly mortgage insurance.

(4.5) - FHA has NO declining market policy reductions in LTV. (Loans over $417,000 in declining markets use the lesser of two appraisals to determine value.

Want More Details?

I have a two page report I'll mail to you. Just call or email with your address.

Hal Tennant  MMC Mortgage  615.895.4265

That is what the government threw at the mortgage situation a week ago, when they took control of Fannie Mae and Freddie Mac. This is a big, big deal and needs to work, because there aren't a lot more things they can do that will have such an impact.

Let me take a few seconds to explore some of the impact of this takeover.

First of all, interest rates have dropped and should stay low, whatever that means. My take on that is, they should hover around mid 5's on a 30 year fixed. This should be for an extended period of time. However, rates never move in straight lines up and down, so expect some volatility.

Initially, the rate drop is mostly attributable to the government backing of the mortgage bonds. Now, mortgage bonds look like treasury bonds in investors eyes. And mortgage bonds have higher yields. So money moved from Treasury Bonds into mortgage bonds, driving interest rates down.

What leads to the feeling rates will stay down is the continued support of the US Government for one, plus the sense that foreign investors will come back into the US bond market strongly. In addition, large domestic investors are now in a buy mode for mortgage bonds (PIMCO). Plus, inflation may be showing signs of slowing, given current economic conditions and the price of oil dropping.

Overall, plenty of indicators of a favorable rate environment. It may be a good time to refi or purchase. Contact me to discuss.

Some things this bailout will not do is change the underwriting environment. It will continue to be very tight on qualifying standards. Jumbo rates and qualifying will stay elevated, for the most part. These loans are not purchased by Fannie and Freddie, so private sources need to fund them, and they are still suffering from low capitalization.

Some good news, though, for jumbo borrowers. (Jumbo is a loan above $417,000). The lending industry is realizing there is a very good block of business for some of the jumbo borrowers. Really good rates are being offered, but the lending criteria is VERY tight. You'll need help wading through these products, so call me on this, if you have a loan or combination of loans, that

exceeds $417,000. As a little teaser, a 5/1 ARM could be had on a purchase loan of $417,000+ for a rate in the low 5's.

The bad news? Well, there is the continued stringent underwriting criteria. Don't expect that to go away. Also, we have probably had the largest escalation of government size in any one day in history. That just makes me queasy. I always want to duck when the government says, "We're here to help!" We'll have to wait and see how much more bailout is required and how long this lasts.

Hopefully, the initial cost to the tax payer is mitigated by returns on the assets now in the hands of the government. I heard some numbers regarding the S&L bailout a couple decades ago. The initial cost was placed at $300 billion and by the time the government had closed the RTC, the government had captured about $225 billion in asset sales and the like through the life of the RTC. We should hope for results in this neighborhood.

Finally, all things considered, this had to happen. Things were looking pretty grim unless this action was taken by the government. Let's all hope we can work through this quickly and decisively and get back to a rational approach to housing and home mortgage financing.

Do you have any questions about your current situation?

Call me at 615-895-4265

Hal

Is it better to file for bankruptcy or to be foreclosed?

What is a short sale and how can it affect my credit?

What about a Deed in Lieu of Foreclosure?

What should I do?

Every day these questions are asked of me by my clients who are quickly trying to respond to the financial chaos that continues to emerge from the mortgage crisis that has taken the country by storm.

Many individuals know, with certainty, they will have to leave their homes. The biggest question now is how to most effectively do so without devastating their credit scores so they will someday be able to buy a home again.

I have a six page report that explains exactly what you should do. To receive your free copy, email me at hal1127@bellsouth.net with your name and address and I will mail you a copy.

Hal Tennant,  MMC Mortgage

New legislation passed a few days ago regarding FHA loans appears to eliminate DPA after October 1, 2008. The bill is over 600 pages so it bears some closer scrutiny - it is unclear regarding whether or not Tribal Nations will be exempt.

There is good news! First Time Homebuyers who buy starting this year will receive a $7500 tax credit. This may offset the loss of DPA.

FHA continues to be one the best remaining loan programs available for buyers with a low down payment or less than perfect credit.

What's going to happen to the Mortgage Industry? With Fannie and Freddie in the news daily, many are concerned about how it might affect them.

It appears that the Fed will not let either GSE fail, however there will be stricter guidelines regarding what loans are acceptable. Since last year, both agencies have eliminated 100% (zero down) loans. The remaining products are more difficult to qualify for, have higher interest rates and higher Private Mortgage Insurance rates. PMI insures the lender against default

Help! The sky is falling! Not really since another Federal Agency has stepped in to take up the slack. FHA is back, stronger than ever. I don't have space here, but call or email me and I'll share the advantages to you, the borrower, of FHA loans. 

Our government is working hard to protect us from ourselves. The National Association of Realtors (NAR) has released a report suggesting that loan disclosure changes proposed by the Department of Housing and Urban Development (HUD) would add more than $400 to the average cost of obtaining a loan, more than double the estimate made by the housing agency.

Howard Ruff used to say that whenever the government tries to solve a problem it creates two more. I don’t think adding $400 to the cost of obtaining a mortgage is such a good idea. I’m sure HUD thinks it will come out of the mortgage company’s pocket.

What can a lender do when his expenses increase?

1. Not do the loan.
2. Pass the increased cost of business on to the consumer.

Which one of the two choices above is in the consumer’s best interest?

Congress sees one of its own become a mortgage “victim”. Rep. Laura Richardson (D-CA) spent her money on financing her campaign instead of making her mortgage payments. She borrowed $177,500 against equity in her Long Beach home, then purchased another home in Sacramento for $535,500 with a no money down subprime loan.

The Long Beach property went into default March 28 but she was able to arrange a loan modification. She wasn’t so lucky with the Sacramento property. It sold at a foreclosure auction May 7 for $388,000 and the lender took a loss of nearly $200,000.

Who gets the black eye here? Will it be the “evil” mortgage company or the irresponsible borrower?