A Sense of Whimsy

There was a time, in the 1920’s and 30’s, here in the valley, that the land was filled with artists. They had more than an understanding of beauty; they had a sense of whimsy. They had come here to make films, silent ones, which were pure visual art. They were actors, directors, producers – story tellers.

The invention of talkies and the innovation of animation only fueled their imaginations.

There are still a few homes left from that period. They dot the entire eastern side of the valley. They are living testimony to that sense of whimsy. A unique form of architecture, which took the boring standards of the time and exaggerated them into the stuff of dreams, like something right out of the movies.

This home is one of them. A three bedroom, 1 bathroom darling built in 1930. Most agents would refer to the style as Tutor, but I call the style Whimsy. There is a touch of magic to this home, which looks like it belongs in the movie Snow White, not on Lima St in Burbank. Who knows, the animators that created Snow White lived in this part of the valley. I cannot say what inspired them. I just know that when I look around I see a lot of homes that look as though they belong more in a fantasy than down my own street.

AFTER THE HOUSING BUBBLE: TOLL BROS. CEO IS OPTIMISTIC ABOUT HOME PRICES

How?s this for divergent thinking? Granted, home builders are looking past the housing bubble as they try to anticipate future demand and position themselves in growth markets. But, if Toll is right, those who buy now will be richly rewarded.

Daily Real Estate News / April 25, 2007

Toll Bros. CEO Expects Housing Shortage

Robert Toll, CEO of luxury home builder Toll Bros., predicts that U.S. home prices will climb so high in the next five years that housing will represent 45 percent to 50 percent of household income, up from 21 percent in 2006. Why? Toll says restrictive zoning is reducing the number of new houses in the pipeline, making it likely that there will be a shortage in a few years.

Meanwhile, the business of building and selling new high-end homes isn’t easy. Commenting on the health of various markets, here’s what Toll told 3,000 executives attending the Michael Milken Global Conference in Beverly Hills:

“Boston is still in the pits and Connecticut looks better, although I don’t understand why this is the case. They’re just a few miles apart. New York’s exurbs are doing exceptionally well. We’re building in Fishkill and Peekskill ? places I’d never thought I’d be in a million years. In North Jersey, things stink. Pennsylvania is OK. Florida is terrible ? death takes a holiday. Texas is good; but in Phoenix, Indiana Jones did go off the cliff ?? his fingers did not hold. California was a comeback briefly but recently it has dipped. Chicago ? not really. Minneapolis/St. Paul is not so good. Michigan might be a situation that never comes back.”

No sugar coating here. I love the candor!

“California was a comeback briefly but recently it has dipped”

So what about Sacramento? November and December brought activity and hope, but today the market is slow, buyers are scarce, and offers are low even when properties are well priced. Chris DeMattei of Keller Williams says that ?relative price??being priced below your neighbors?is important, but only if the home is affordable to begin with. Brian Gardner of Metro Appraisals sees 10% price declines in certain parts of Sacramento over the past 90 days.

Where are we headed? What are ?affordable? prices? I think the magic number is around 2003 price levels. At last November?s 2006 Sacramento Region Housing Forecast, Greg Paquin of the Gregory Group charted the divergence of median incomes and median homes prices that began in 1998 and subsequently picked up speed. You can see where prices became unaffordable. According to Gardner, we are already at 2004 levels. DeMattei believes that 2003 prices represent the place where mortgage payments and rents meet. I agree. The good news is that we are getting close.

Smart buyers should be buying or getting ready to buy now. If you find the perfect home, buy it. You might save a few bucks if you wait, but rising rates could offset the lower price. \

And, worst of all, someone else might end up living your dream.

Leave a comment; I know you have something to say!

Got a question? Email me.

ANOTHER LENDER PULLS BACK ON THE REINS

Just another in a daily stream of email notices from lenders tightening their guidelines. Take care with your approvals and recheck constantly. The loan you had approved may no longer exist.

Indymac Bank announces immediate changes to their 80/20 program, to take effect Tuesday, 3/20/07 (note today?s date).

All 80/20’s in their pipeline need to be locked no later than today for Indymac Bank to honor this product. This includes all subprime, Alt A, and prime loans that don?t fall within the guidelines below.

These loans have to be locked through the Emits system not the Quick Pricer. Here is a highlight of the changes:

The No Ratio 80/20 will be gone
Full doc will now require a min, credit score of 680 and 3 mos. PITI reserves
Stated will now require a min. score of 700 and 4 mos. of reserves
Maximum loan amount for a 1st mortgage will be $417,000
200% Payment shock requirement will be eliminated
2/6 Libor program will be eliminated
Alternative sources of credit will no longer be acceptable
Got questions or concerns? Send me an email.


« Qualifying For a Home Loan: 6 Reasons to Consider FHA
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This entry was posted on Monday, March 19th, 2007 at 11:43 am     and is filed under Mortgage Programs, Qualifying, Subprime Meltdown. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “Another Lender Pulls Back on the Reins”

Jim Perry Says:
March 20th, 2007 at 9:48 am
And if you do lock today, expect pricing to be OUTRAGEOUS!.

I had a borrower pre-qualified at 7.125% on a 5/1 ARM I/O and 12.375 on a 30/15.

When I tried to lock yesterday, pricing came in at 9.125 discount points to get 8.125% on the first and a 16% second.

FHA ACCESS–A SAFE WAY TO 103% FINANCING

A couple of weeks ago I wrote an article called Qualifying For a Home Loan: 6 Reasons to Consider FHA.  Not all lenders have been around long enough to remember FHA loans.  Those who have remember the extra requirements that made FHA loans unpopular with sellers.  But it’s a buyer’s market today, and all that has changed.

Last week I originated my first FHA Access loan in 7 years, and I was reminded what a great program it is.  FHA Access is a 2nd loan that pairs with a traditional FHA 1st and covers the 3% down payment and all of the buyer’s closing costs.  The Access loan is an 8%, 20–year fixed rate mortgage for up to 6% of the purchase price.

While FHA loans have no income limits, Access does.  The borrower’s income may not exceed 120% of the median income for the area. For most of the Sacramento region, the limit is $78,480.  That’s pretty generous and shouldn’t be a problem for most people.  FHA loans are no longer subject to strict debt to income ratios—instead we submit them through automated underwriting—Access debt to income ratios cannot exceed 43%.

With all the exploding 100% loans out there, FHA Access offers a path to sustainable home ownership without a big down payment.

Got a comment?  Please leave it below.

Got a question about FHA Access?  Send me an email.


« Sacramento Mortgage Rate Update
SouthStar Funding Implodes, Leaves Borrowers Stranded »
This entry was posted on Saturday, March 31st, 2007 at 9:01 am     and is filed under 100% Financing, 1st X Buyer, Affordable Payments, FHA/VA, Mortgage Programs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

3 Responses to “FHA Access–A Safe Way to 103% Financing”

LendingClarity.com » Blog Archive » Safe 100% Financing with “My Community” Says:
April 14th, 2007 at 11:06 am
[…] FHA Access–A Safe Way to 103% Financing […]

Nicole Says:
May 14th, 2007 at 2:57 pm
Isn’t the income limit 140% for CA?

Marc Brinitzer Says:
May 14th, 2007 at 4:30 pm
Hey Nicole,

The income limit is 140% of median (by county) for Conventional Access loans. Most lenders don’t even offer these since the up-front MIP is 1.5%. For FHA Access, the income limit is still 120%. But those limits were just raised. In Sacramento, that 120% of median is $80,640.

You can see all the counties here:
http://www.nhfloan.org/pub/access/ACCESSIncomeLimitsCA.pdf

APPRAISERS PRESSURED TO FALSIFY FINDINGS

It?s an ugly fact of life in a declining real estate market. Real estate appraisers are under pressure from all sides. Here?s a recent article I saved.

Daily Real Estate News | February 2, 2007

Appraisers Get Pressured to Falsify Findings

The pressure is on property appraisers to come up with the right number, say 90 percent of appraisers surveyed by October Research Corp., which publishes Valuation Review, an industry newsletter.

That percentage is much higher than it was in 2003, the last time the survey was conducted, when only 55 percent of appraisers reported attempts by others to influence their findings.

The current survey found that 68 percent of appraisers lost the client when they?


refused to fudge the numbers and 45 percent reported not being paid.

Seventy-one percent of appraisers blamed mortgage brokers for the pressure, while 56 percent said real estate practitioners pressured them.

Source: Washington Post Writers Group, Kenneth Harney (02/02/07)

It?s not that this doesn?t happen even in a normal market, but today?s tumbling values can send more otherwise good loan files to the shredder bin. In Sacramento, many sellers have given up hope of selling their home for a decent price until the market recovers. Instead, many decide to refinance. If they can?t sell, the logic seems to go, they decide to stay and fix the things that they had postponed fixing. The problem is, the same value issues that have made a sale difficult will likely prevent a refinance.

It is very common these days to hear clients or agents say, my appraiser can get what ever value we need to make this work. First of all, that?s short-sighted and stupid. Second, it probably won?t work. Increasingly, lenders utilize Automated Valuation Methods (AVMs) to check values and make the sure the appraiser didn?t ignore the sale next door for a higher priced one further away.

Recently, I had a self-employed client who got into a business pickle and put her house on the market, though she didn?t really want to sell. We spent quite a bit of time analyzing how to restructure her debt in order to keep the home. She loved my ideas but turned her nose up at the rate. Instead, she shopped until she found a lender and an appraiser who would deliver a value $125k over the price at which the home was listed for sale. For a few basis points in rate, she was willing to compromise her ethics. How they sneaked that past the lender I?ll never know. But that loop hole is closing.

To the FBI, falsifying appraised values constitutes fraud. Increasingly appraisers and lenders are fighting back with legislation and fraud detection programs that will eliminate this abuse. Ultimately, there will less opportunity to commit this type of fraud and more opportunity to experience the consequences and penalties for committing it.

Got an opinion or thought on this topic? Leave a comment below.

Got a question or need help with a loan? Shoot me an email.

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« The 5-year, Fixed-Payment, Option ARM–The Devil at the Crossroads
States Weigh Mortgage Loan Suitability Standards »
This entry was posted on Wednesday, February 14th, 2007 at 11:35 am     and is filed under Appraisals, Sac Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

3 Responses to “Appraisers Pressured to Falsify Findings”

LendingClarity.com » Blog Archive » 6 Reasons Your Next Loan May Take Longer Than It Should Says:
February 21st, 2007 at 1:17 am
[…] Appraisers Pressured to Falsify Findings […]

Molly Stuart Says:
August 10th, 2007 at 12:44 pm
I’ve seen this, every appraisal coming in within $1000 of the offer price. I wish, as a buyer looking for a deal, that appraisers would consider a realistic low ball for negotiating purposes instead of matching ever offer. Not that I want a fraud, just that the paper inflation/loan qualification urge wasn’t so great.

Marc Brinitzer Says:
August 10th, 2007 at 9:23 pm
Hey Molly,
I’m afraid that the appraiser low balling the value would be just as bad as inflating it.

The appraiser’s objective is to determine “market value”, defined something like this: what a willing buyer and a willing seller will agree upon in an arm’s length transaction with all the relevant market information at their disposal.

So, it’s not coincidence that the value usually comes in close to the price. Unless there is funny business between the principals, the buyer and seller have determined market value by their actions.

STATES WEIGH MORTGAGE LOAN SUITABILITY STANDARDS

What’s next for the mortgage lending industry, beset by deepening accusations of predatory lending and mortgage fraud?

Well, several states are considering the creation of suitability standards, similar to what stock brokers and investment advisors live with in the securities industry. If this movement takes shape, mortgage lenders might be required to furnish evidence that the loan program recommended was suitable for the client’s needs, level of understanding, and sophistication.

However, Kurt Ptotenhaur, senior vice president of the government affairs for the Mortgage Bankers Association (MBA) argues that ?Making the lender responsible for determining which loan is suitable for a borrower will limit consumer choice and could deepen the slowdown in the housing market,” and may result in discrimination at worst and subjected decisions made by the lender about who should have access to certain loan programs. See the MBA?s Policy Paper for more.


On the flip side, Rep. Barney Frank believes that ?you shouldn’t lend (homebuyers or refinances) more than they can afford to pay back, and you don’t lend them more than their house is worth.? Frank chairs the House Financial Services Committee that makes bank and mortgage laws. He made it clear that a top priority will be enacting national lending standards to protect consumers. Read the National Consumer Law Center?s rebuttal to the MBA?s Policy Paper for more.

Daily Real Estate News February 13, 2007
Politicians Weigh Laws to Protect Borrowers

Congress and several states are contemplating laws that would require mortgage brokers and lenders to make sure that a loan is ?suitable? for a borrower ? just as stockbrokers must make sure an investment is suitable for a client.

Tennessee has already passed a law that prevents lenders from refinancing a mortgage that?s less than 30 months old unless the refinancing ?provides a reasonable benefit? to the borrower.

A new Ohio law imposes a ?duty of fair dealing? on non-bank mortgage lenders and requires mortgage brokers to secure loans with ?advantageous? terms for the borrower.

Laws like these require loan officers to ask potential borrowers a series of detailed questions about things like their financial goals and their tax status. And if the loan they make turns out to be ?inappropriate,? or ?not advantageous? ? definitions will have to be decided by the court ? the lender could be open to a lawsuit, or even a prison term, says Kurt Pfotenhauer, chief lobbyist for the Mortgage Bankers Association. La Jolla corporate housing is always my first choice.

If Congress passes its proposed law, ?it would dramatically change business models, just because of the litigation risk,” Pfotenhauer predicts.

Source: Forbes Inc., Matthew Swibel (02/26/07)



For an unusually insightful discussion of this issue, read Wright Andrews’s article Is Suitability Suitable for Mortgage Lending. Mr. Andrews is a Washington lobbyist and Executive Director for the Coalition for Fair and Affordable Lending.

At the heart of the issue lies a) the question of whether the lender has a fiduciary duty to the client, and b) the debate over whether loan originators should be held accountable when loans go bad. Predatory lenders practice business in a way that begs for more consumer protection.

On the other hand, career-oriented mortgage advisors are all about suitability for their clients. And layering on more laws can have unintended consequences. Will suitability standards protect consumers or bar the doors to home ownership?

Leave a comment below and let me know what you think.

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« Appraisers Pressured to Falsify Findings
Sacramento Mortgage Rate Update »
This entry was posted on Thursday, February 15th, 2007 at 5:21 pm     and is filed under Qualifying, Subprime Meltdown. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

4 Responses to “States Weigh Mortgage Loan Suitability Standards”

Wright Andrews Says:
February 16th, 2007 at 7:33 am
My thoughts on suitability are contained in the following article:

http://www.nationalmortgagenews.com/plus/?show=plus186.htm

Chris DeMattei Says:
February 16th, 2007 at 2:43 pm
The entire mortgage industry brought this on itself. If they would police themselves and not offer home owners and buyers loans they cannot afford, like Option ARMs and 125% financing to any person that can breath, then the the government and consumer groups would not have any reason to step in.

Marc Says:
February 16th, 2007 at 8:21 pm
Wright, thanks for weighing in. Your article is insightful and eloquent, and I’ve placed a reference and link within my post.

Chris, thanks for the comment. I would agree that the mortgage industry created the hand basket in which we are all going to hell. But let’s not forget that the borrowers jumped in like lemmings with a lot of encouragement from Realtors and real estate “investors” peddling their books, CD’s and seminars about how to get rich speculating on real estate.

My point is simply that everybody shares responsibility for what is happening now.

Brian Brady Says:
March 14th, 2007 at 11:53 pm
Marc:

Lenders do not have a fiduciary responsibility to the customer; that can be established if the customer signs an exclusive brokerage agreement.

It is good business practice for an originator to adopt that approach but until we eliminate a borrower’s ability to “double app” a loan, we will never be true fiduciaries.

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