HOA Delinquency

Buyer Beware! If the condominium project where you are looking to purchase has an HOA delinquency of greater than 15%, then you will have a difficult time obtaining financing from most if not all lenders. BEFORE you go into escrow, make sure you check the HOA delinquency rate of the condominium project you are making an offer into. You do not want to start the process, get your hopes up, only to find that you that you can't get funding.

Couple of work arounds:

1) Pay the HOA deliquencies to get them current. Anyone can pay these. Depending on how expensive it is, could be worth it.

2) Have HOA recheck condo cert and make sure HOA delinquency figure is accurate. We had an HOA manager counting late HOA payments as delinquent even though there was a 15 day grace period.

Best advice: due your due diligence upfront before making an offer on a condo project

LO's: Is this going to be you?

How bout this finding by the Morgage Bankers Association to help you feel, well, less than jolly. 50 percent of consumers surveyed after 180 days of their loan transaction didn't remember the names of their loan originators, and 68 percent end up doing their next loan with someone else. That's crazy! 70% of your clients will do a loan with someone else. That means one of two things: either we need to do a better job of staying in front of our borrowers or else realize its a lost cause and court the 70% of new deals we will get each year from other LO's.

Shadow Inventory

What in the world is shadow inventory and why is it important? Well we've heard a lot about shadow inventory these days and today CoreLogic put out some sobering numbers in regards to that inventory. Shadow inventory is simply those homes that have not yet been listed on the market via the listing services like MLS. However, these are not your ordinary properties. They are homes that are already in foreclosure, REO status, or whose owners are already 90 days past due. Here's the sobering part -  for every 2 homes listed on the market there is 1 home waiting in shadow inventory. There is currently a 5 month supply of shadow inventory, which is actually down from the 7 month supply found in July of 2010. That's the silver lining. The reality is that in a healthy market there should be less than 1 month supply of shadow inventory according to CoreLogic. Bottom line is that we still have a ways to go till normalcy in the housing market.

Here's the report: www.corelogic.com/about-us/news/corelogic-reports-shadow-inventory-as-of-october-2011-still-at-january-2009-levels.aspx

Paying Points

Because of the business I'm in, I always get asked about paying points. Personally, I'm not a fan unless you are going to be hanging out in your property for more than 5-10 years generally speaking. And yet, I just came across a study which shows that over half of all homebuyers on the West Coast, where I live, stay in their homes for at least 13 years (more like 22 years on the East Coast). This study supports the decision for at least half of the homeowners paying points to get the lower rate. The question is which half will you be? Check out the study at nahb.org/generic.aspx

Keep in mind that with paying points, you are also paying full closing costs. Most refinancing closing costs run anyhwere from $3000-$4000. So on a $300k refi, you are paying 3k for the point and another 3k for the costs. That's a chunk of change to roll into a loan or pay out of pocket. You need to factor in the payment savings between paying points and not paying points.

What do I mean? Let's say you are doing a refinance on a 300k loan. You can take a 4.25 rate at no points or a 3.875% rate with 1 point. The difference in payment between those 2 rates is $54 bucks a month. If you divide 54 into the 3k you paid for the point, it will take you 55 months to break even. You also need to run a long term Total Interest Paid analysis for each scenario too.

Depending on the size of your loan, how far along you are in the payment cycle, and how much your monthly savings will be, paying points may make sense for your situation.

Supply and Demand Lowers Rates

In lieu of the Europe crises, we have all heard the flight to safety argument as the reason for low mortgage rates, but there is another simple reason too - supply and demand. You see, Mortgage Backed Securities (MBS) are in high demand these days for two reasons. One, investors are scrambling for yield in this non-yield producing environment. Would your rather buy a 30 treasury bond at 2.85% or a MBS security yielding 4.5% to 5%? In addition, the FED is also buying MBS bonds to keep interest rates low. So you have lots of demand for these bonds and a limited supply at the moment due to a still anemic purchase environment and a refinance market that has dwindled significantly. However, I expect a new wave of refinances to come through in the near term as those borrowers in the low 5's and high 4's refinance down into the low 4's and high 3's. This should help with supply.

Europe Woes=Mortgage Lows

Thought mortgage rates couldn't go any lower, neither did we. You can thank Europe for the lastest spate of low mortgage rates. Europe's problems are now 2 years old and have in effect contributed to this historic low interest rate environment we've been in for the past 24 months. At issue of course is that most if not all of Europes's various nations have borrowed too much money. Sound familar?

Now the market/creditors realize this conundrum and are charging those nations higher interest rates which is exacerbating the problem. Consequently,  these countries are having issues meeting their short term obligations - no bueno. Also at issue is the fact that Germany for instance doesn't want to bail out Greece, etc. In other words, why should the fiscal responsible bail out the fiscal irresponsible?

Well, the reason is that they all share the same currency and therein lies the dilemma. Could you imagine if Texas had to bail out California? Ha...Texas would never do it. And Germany doesn't want to either. So the financial system has been freaked out and "safe" money has been moving into US Treasuries and Mortgage Backed Securities (MBS) -  which determine our interest rates. Bottom line...take advantage of the uncertainty and lower your rate and payment.

Tax Returns

Tax Returns -  the mother's milk of income documentation. Seems's simple enough really. Hand in the returns you filed for the past 2 years and be done with it, right? Not. What if you own your own business? Well then it gets even more complicated because you will be asked to provide multiple sets of returns. 1 set for your individual returns, called 1040's, and the other set for your corporation or partnership, called 1120's.

And don't forget - all lenders require signed returns, even though all of us e-file our returns. I've seen more files delayed because the LO forgot to ask the borrower to sign the returns. If you can, help out your loan officer and provide signed tax returns.