My New Blog

If you are like many people you are wondering what is going on right now in the residential mortgage world. In the last few days I have watched the reactions to Wall Streets distaste for Alternative Documentation Mortgages. This a result of poor performances on those loans. The rising foreclosure rates across the country have had a direct impact on the correction that is taking place right now on the mortgage industry.

Gone are the days where you could "state" (not verify) your income and buy your investment property with no money down. Gone are the days where you could "cash out" the equity in your home to 100% of the value of the house. These couple of examples are only the tip of the iceberg.

What will happen I project is that many people will return to the way they bought homes in the past. You will have to rely more on FHA, VA, FNMA to get your home loan approved.

What this means for you is it is going to be more important to work with an experienced loan officer who can assure that your loan will get approved, closed, and funded! For example, did you know a homebuyer can have zero credit? I mean zilch credit established! I don't mean only bad credit mind you. Even today and tomorrow that person could buy a home with little to no money down AND get a 30 year fixed rate at about 6.5% (which is currently lower then the Freddie Mac 30 Year Average.

PLEASE, when you are "shopping" for a home loan now and into the future be more concerned about the integrity, credibility, and experience of your loan officer / mortgage banker / mortgage broker then you are about "shopping rate". Afterall, if someone promises you a rate that sounds far fetched and things change before or at closing, don't be surprised when you are feverishly scurrying to the bank to bring more money to the title company or digesting being told that your rate is higher then you were promised and ultimately you are forced to make a higher mortgage payment.

Please call if you are buying a home, thinking of buying a home, refinancing your home because your adjustable rate is going to change and payment is going up. If you need honest advice about mortgage rates, financing and the smart way to get qualified for a home loan and do it right the first time, in the new world of mortgages Please call Ray      303-779-0591

BUSH ADMINISTRATION TO HELP NEARLY ONE-QUARTER OF A MILLION HOMEOWNERS REFINANCE, KEEP THEIR HOMES
FHA to implement new “FHASecure” refinancing product

WASHINGTON - President George W. Bush today announced that HUD's Federal Housing Administration (FHA) will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing.

In addition, FHA will implement risk-based premiums that match the borrower's credit profile with the insurance premium they pay-i.e., riskier borrowers pay more. This common-sense, risk-based pricing structure will begin on January 1, 2008.

"Many hard-working American families who were able to make their mortgage payments under the initial teaser terms of the exotic loan are now struggling to make ends meet because their rates have doubled or tripled," said HUD Secretary Alphonso Jackson. "FHASecure will bring stability to the housing market and give eligible families who were in good financial standing before their loans reset a chance to keep their homes."

The combination of FHASecure and risk-based premium pricing will permit FHA to return to the role it was originally designed to play, bringing stability to the real estate market by helping break today's cycle of foreclosures and price depreciation and creating much needed liquidity in the now-constricted mortgage market.

FHA has recently experienced a substantial increase in the number of conventional borrowers refinancing into FHA products. With FHASecure, it can help even more. The number of these refinancing transactions has tripled since the start of 2006. FHA's transactions are projected to surpass 100,000 loans by the end of the fiscal year. To date, these figures do not include refinances for delinquent borrowers.

The FHASecure initiative will operate under the same safe guidelines as the FHA's existing mortgage insurance program without affecting FHA's financial health. Eligible homeowners will be required to meet strict underwriting guidelines and pay a mortgage insurance premium, which offsets the risk to FHA's insurance fund at no cost to the taxpayer.

The risk-based insurance premium structure will further expand FHA's reach to additional underserved borrowers, particularly minorities and first-time homebuyers who have been disproportionately lured into exotic mortgages, and enhance the FHA's overall risk management. The move to risk-based premiums ensures that FHA remains on solid financial footing as a self-financed agency for the long-term.

FHASecure, like all FHA products, will be underwritten to ensure the borrowers have the ability to repay the loan, will require escrow for taxes and insurance, and will continue to offer unprecedented foreclosure prevention assistance. The FHA has never permitted and will not include pre-payment penalties or teaser rates that are common in exotic mortgages and have caused much of the current market troubles.

To qualify for FHASecure, eligible homeowners must meet the following five criteria:

1. A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
2. Interest rates must have or will reset between June 2005 and December 2009;
3. Three percent cash or equity in the home;
4. A sustained history of employment; and
5. Sufficient income to make the mortgage payment.

"FHASecure is designed for families who are good borrowers but were steered into high-cost loans with teaser rates," said Assistant Secretary for Housing-FHA Commissioner Brian Montgomery. "These homeowners, many of whom are minorities, need a safe, affordable mortgage product that will help build wealth. All FHA borrowers pay mortgage insurance premiums to offset claims to the FHA insurance fund and ultimately prevent risk to the taxpayer."

FHASecure will also bring much-needed liquidity to the mortgage market. FHA anticipates more lenders will offer FHA-insured loans, pool them, and securitize them with the Government National Mortgage Association (Ginnie Mae), which has the full faith and credit of the U.S. government. This guarantee makes Ginnie Mae's mortgage-backed securities the safest on the market and helps to channel greater capital into the housing market, benefiting U.S. homeowners.

Since its inception in 1934, FHA has helped almost 35 million people become homeowners, making it the largest insurer of mortgages in the world. The 109th Congress introduced the Expanding American Homeownership Act in June 2006 which would enable FHA to be a safe option for more underserved low- and moderate-income and minority families so they can achieve the American Dream of homeownership. Today, President Bush also urged Congress to quickly pass the Administration's FHA modernization proposal to help more families in need.

For more information about FHASecure and other FHA products, please call me at 303.779.0591 or email at rwilliams@summit-mortgage.com~ Enjoy your Labor Day weekend!~ Ray

Some more information you can use to learn more about what is going on in the mortgage market today. Of course get in touch with me if you have any questions.

Current State of Mortgage Financing...What's Going On?

Anyone watching or reading the financial news over the last few weeks has seen a lot of angst and consternation over the state of the mortgage industry. In fact, one of the larger lenders in the US, American Home Mortgage, was forced to shut down operations recently. But why? What is happening, what does all this mean to you and most importantly... what should you be doing do right now to make sure you are protected?

Here's the scoop.

Over the past several years, many loans were made to homeowners with somewhat non-traditional or "non-conforming" situations, be it a poor credit history, inability to document income, or any number of factors that do not fit within the traditional "box" for home loans. These loans are often called "Sub-Prime", or "Alt-A", meaning that they were somewhat riskier in nature than A credit, prime, or traditional loans. Another type of "non-conforming" home loan is one where the credit and income might be perfectly fine, but the loan amount is higher than $417K, which is the current maximum loan that can be done using pools of money from mortgage giants Fannie Mae (FNMA) and Freddie Mac (FHLMC). If the loan amount is higher, it can certainly be done - it's called a "jumbo loan" - but the end money comes from private institutions, not from the large government sponsored entities of Fannie and Freddie.

Most non-conforming loan product rates popped significantly higher recently. Here's what happened.

The end investor for Subprime or Alt-A loans will charge a premium for taking on a pool of these loans, because they know that traditionally, they might have a higher rate of default and delinquent payments within that risky pool. But lately, default and foreclosure has been on the rise - partly due to the fact that with credit tightening and a soft real estate market, many troubled homeowners are unable to refinance or sell in order to get out of trouble. So now, these end institutions are demanding a much higher "risk premium" for taking on these pools of loans, as they see the rates of default are climbing higher.

But since these institutions are purchasing these pools of loans sometimes months after the borrower has actually closed at a given rate, this increase to the risk premium means that instead of paying $101K for a $100K loan that will bear interest, they may only be willing to pay $95K for that $100K mortgage to account for the risk. Multiply that times thousands upon thousands of loans...and you have millions upon millions of dollars in loss for the company trying to sell the pool at a much lower price than they were expecting. This is called a "liquidity crisis", and is exactly what happened to American Home Mortgage - there was no mismanagement, but they simply got caught holding too many "hot potato" loans, forced to sell them at massive losses...and eventually they had to make the decision to close the doors and stop the bleeding.

Further, even when a lender is able to take some losses, they may be subject to a "margin call". This means that as their losses and risk premiums increase, the value of their loan portfolio decreases. As the value decreases, the credit lines that are secured by those portfolios begin to issue margin calls as the value of the asset that they are secured on is now diminished. This is exactly like margin calls in the Stock market. If you have a loan against a Stock that is losing value, you will get a "margin call" and need to pay down the loan, as the underlying Stock is losing too much value to be considered adequate collateral any longer. So for the big lenders, as their portfolio is losing value due to increased risk premiums and losses...the margin calls start coming in, and they are required to pay down their balances. In turn, this means that they have less availability to fund their new loans, which then exacerbates the problem.

In response to seeing this situation play out in the demise of American Home Mortgage, lenders of other non-conforming loan products increased their interest rates dramatically almost overnight to be better prepared - and likely over-prepared - for increased risk premiums down the road. Even though loans above $417K are not presently suffering from increased delinquencies like the Subprime and Alt-A loans are, these rates popped higher as well, because they are being purchased by smaller private entities that can't afford to take on any margin of risk.

What happens next? The major damage is probably already done, and the present situation will likely settle out over the coming year. Lenders will stop pulling products off the shelf, and the rates on products that have moved so significantly higher now should trend lower down the road as delinquency rates stabilize.

But here are a few important things YOU should do right now:

ONE: Even if you are not presently in the market for a home loan of any type, make sure that your credit standing is as solid as possible. Many people in the market for a home loan didn't expect they would have a need, and didn't plan in advance to ensure their credit would qualify them for the best possible financing. With no immediate need for a home loan, time is on your side... why don't we take a few minutes together and just make sure you are prepared, should a need arise down the road? Call or email me right away.

TWO: If you are in the market for a home loan, or know someone who is - understand that now is the time to be working with a real qualified professional who can keep you informed of changes in the market and get your loan funded quickly. Now is NOT the time to be playing the risky game of trying to scour the entire nation to find someone who promises to save you a paltry amount on costs, or deliver a rate that seems too good to be true.

Your home and your financing are just too important, and times have changed. I am here to help and advise during these volatile times - and would welcome calls from you, your friends, family, neighbors or coworkers.

~Ray

Do you have questions about your situation or does someone you know have questions? Don't hesitate to call for a honest answer 303.779.0591

"Authorized Users" benefit to be eliminated in credit scoring

For quite some time many people who have needed to boost their credit scores have been added to a family member's credit card account. They would show up on the account as an authorized user. What this would do is "rent" credit. How this was done, was that if you were added as an authorized user you would automatically get "credit" for the other person's history, balance, and limit as if it were your own. Once someone was added as an authorized user it would populate on their credit report with the bureaus and Fair Isaacwould recognize it as an account and scoring would be affected accordingly. Usually this would immediately increase someone's credit score and help them qualify for a home loan, even if their own personal credit didn't satisfy underwriting guidelines for home loans. Many lenders would disregard that authorized user account as an active personal account, but it did help people's credit scores once it was done.

This would help if someone needed to build a credit score to help qualify for a home loan. Fair Isaac wouldn't disseminate between an authorized user account and an account the person was listed as a borrower on.

However, with so much pressure on Fair Isaac to correct the credit scoring model there has been a fix to the "authorized user" benefit. What will happen is the scoring model will look to see who is responsible for the account. If shows as an authorized user, then the person's credit score won't reflect as if they are the borrower signed on the account. The reason for the fix is to make credit scoring more accurate and to reflect the actual accounts one is responsible for.

The reason authorized user accounts aren't factual for scoring is that if you are an authorized user you aren't legally responsible for the financial liability created by that debt. If you were an authorized user on an account a creditor can't come to you for collection of the borrowed monies. That being the case it makes sense that someone who can't be held liable for a credit card, shouldn't benefit from the scoring impact which results by paying that debt back.

If you have authorized user accounts showing on your credit report make sure you also have a couple of your own accounts started before the change takes affect in the next months. Otherwise, you will lose the benefit from the credit score "bump" from the authorized user account and have nothing to fall back on for your own credit score.

If you are thinking of buying soon and are working to make sure your credit and finances are in order beforehand shoot me an email or call 303-779-0591 to discuss what things should be done to be ready.~

Have a great day!

Ray

Hey guys~

So last night my girlfriend and I took a few friends to our favorite new sushi restaurant in Denver. It is a little gem in my neighborhood (D.U.). 

John Holly's Bistro is located at 2422 S Downing St, it is just off the corner of Downing and Wesley past the gas station. When you walk in the door everyone is friendly and the decor is appealing to the contemporary eye. They have cool mosaic tiles and great art too.

The menu is filled with fresh rolls you won't find anywhere else on menu's of Denver's sushi restaurants. Everytime we put a piece of these rolls in our mouths the freshness and quality of the sushi was without a doubt like melting chocolate on a sunny day. The winner of the night hands down was the SoDo roll (a speciality roll). We also had a sampling of their sake menu which was nice.

If you are looking to get out and try something new, and not heavy on the pocketbook head to John Holly's Bistro on Downing!

If you have a recommendation let me know as well!

~Ray

Denver, CO~ Local and national news is filled with stories concerning the mortgage industry and housing market. Colorado home owners are faced with many worries; adjustable rate mortgages, declining home values, foreclosures, being able to qualify for a loan, a seemingly endless list of issues that affect you, your family, and loved ones.

With so much emphasis on the news of frustration , misery and financial loss, little attention is being paid to the truly good solutions that are available.

Whether you are looking to purchase a home, refinance out of an adjustable rate mortgage, reduce the term of your mortgage to pay it off sooner, we have options for you.

Summit Mortgage Corporation is a mortgage banking company that has been helping to provide homeowners and future buyers with quality mortgages that meet their needs. Summit is a  company that strictly adheres to all education and licensing requirements for their loan originators, along with a philosophy to assist each homeowner with mortgage products that work to meet their short and long-term goals.

Do you have questions?

Can I move to a fixed rate mortgage? What kind of mortgage will best suit my needs? How much home can I qualify for? What is this 1% payment rate I hear about? Am I stuck in my adjustable rate mortgage? If I reduce my term from a 30 year fixed mortgage to a 15 year fixed mortgage how much will I actually save? (you will be surprised)Can I do a "streamlined refinance"? What are the benefits of an FHA or VA loan?

The list of questions is endless, and regardless of your questions, you can call and speak to an expert at Summit Mortgage. We understand and offer all of the mortgages that are available to you, not just conventional, Alt-A, or FHA and VA. New programs that are hitting the street for Freddie Mac and Fannie Mae, and special local programs as well.

Don't spend anymore time being concerned and unsure about the mortgage market and you families biggest asset. Call Ray and ask about how your mortgage will affect your future. Ray 303.779.0591

Just like King Kong clutching the top of the Empire State Building…Bankrate, the "800-pound Gorilla" of online home loan rates is falling under fire. The Bankrate website draws millions of visitors, as it promises to give a listing of companies and their rate and cost offerings for mortgage loans, and even passes that information on to most of America's largest newspapers as fact. It proclaims itself to be a tool for the consumer, just delivering information and advice…but as many reputable mortgage lenders have known all along, it turns out that consumers are finding the reality of Bankrate to be a little different.

A lawsuit is in the works against Bankrate, after hundreds of consumers complained about lenders who failed to deliver the rates and terms they promised on the website. In fact, one lender actually told a Bankrate employee that a consumer would need a "direct pipeline to God" in order to qualify for the rates and terms they advertise on the site. Why would a lender post rates and terms they are unwilling or unable to honor? To lure in consumers who truly want to believe that they are getting an interest rate or cost package that is significantly lower than all the competition. And by the time the consumer finds out they are not getting the package they were promised, they likely have wasted enough valuable time that they feel somewhat stuck to use whatever terms the lender hauls out.

Of course there are real reasons that the terms of a loan package can change mid-stream. When working with a reputable lender, it would generally only be caused by a change from what was submitted on the loan application. Some examples of this include a change in credit, income, employment, debts or assets.

So are there any reputable lenders on Bankrate? Yes, of course. And some of those lenders were the ones who prompted the lawsuit in the first place. As they were posting real interest rates and terms they could actually honor, they could see that consumers would instead be contacting the less-reputable lenders who were posting completely unrealistic rate and cost offers. And the consumer might not find out the difference until it was too late. Mortgage lenders get their money from essentially the same places - so anytime there is a very large difference between quotes on identical programs, it pays to ask some questions.

Bottom line - the internet at large can be a great place to gain basic trends and information about a home loan, but the Bankrate lawsuit illustrates the need to work with a Trusted Advisor. A home loan is generally the largest financial transaction of your entire life - working with a real professional who can advise you on correct strategies and programs for your needs is a must. And like your mom or dad always used to say - you get what you pay for, and solid advice from a real professional may cost more than a bargain basement operation.

With specific questions about your home purchase or refinance shoot me an email r_w_mtg@yahoo.com or give me a call 303.779.0591 for honest answers about your real life mortgage needs. ~Ray

Most importantly, remember that the absolute lowest rate and terms on the WRONG financial strategy or loan program for your life will prove to be far more costly than a competitive rate package on the RIGHT strategy, which correctly fits your financial goals and needs.

Please read below to hear what a large bank such as WAMU feels about the reactions on wall street to our current mortgage market. Again, conventional and government mortgages (FHA and VA) are going to potentially quintupial as a result of the drawback we are seeing on the market for mortgages.

Ray~

read as follows~

Folks,

We are in the midst of a mortgage  liquidity crisis. This is for ALL mortgage products, not just subprime or alt-a. We are seeing the credit markets now panic, on all mortgage debt, and loans are not moving through the financial systems of the US or world economy.

To be honest, I think the press has not even caught up with what is really going on as I type this email. Basically the pipelines have been shut off to the entire mortgage industry, and the only loans funding are loans coming from a temporary liquid sources such as a bank balance sheet(like Wamu), or a lender with a credit facility still open, etc.

This form of short term liquidity actually only has very short term life, even for the largest of banks. If Wamu for example has a 300 Billion balance sheet, believe it or not, it has liquidity constraints as well. Funding 40 Billion per month pipeline can add up really fast.

Even worse if you are say a 30 Billion bank-like Indymac or a 50 Billion bank like Countrywide funding 40-50B per month.

So I guess the question on top of everyone's mind is what does this mean to me? This is what I would expect over the next few days, weeks, and possibly months.

Pricing- Pricing will be going up for all loans. This will be an industry issue not a company issue. Some of this pricing may seem amazing as far as how much it might go up. Lenders are not increasing pricing because there costs are going up. Lenders will be purposely raising pricing to slow production down(to keep the tap open).

Credit- Credit will be tightening across the board in the industry. Again credit may be tightened not because of loan performance, but because if lenders have only so much access to funds, they may only want to fund the best quality loans.

Small Lenders- The smaller lenders or non-banks will simply have no funds to fund loans. This could actually create a "run" at the banks for funds.

My suggestion to all is spread the word as fast as possible. If I were a broker, I would be locking and funding any loan I could anywhere I can get it. I think we may witness many lenders (particularly non-bank) lenders actually fail to perform on delivering loan funds.

Make sure your brokers understand this is not Wamu, this is industry issue.

More to follow, but I wanted to keep you all in the loop on current market conditions, and I hope you all will have an understanding of what and why certain events are happening to us, and our industry.

If you have been thinking about refinancing your home or will need to in the next 6 months due to an Adjustable Rate Mortgage give me a call so we can do a no obligation review of your mortgage~ 303.779.0591

Ray

You may have been turned off by government loans before because you were told "Don't get a loan that has mortgage insurance". Well with the changes in congress last November, did you know that mortgage insurance is tax deductible on your primary residence when your MAGI is under $100K? That's right? It makes you wonder if congress knew things were going to change in 2007, dramatically!

The beautiful thing about a government loan is it works for everyone. Great credit, zero credit, credit with problems in the past. First time buyers and people who have bought homes before can all qualify for an FHA loan or a VA loan (if you have veteran eligibility status).

Another great thing is that interest rates for FHA and VA mortgages aren't, I repeat, not driven by your credit score!!!! Right now you can be looking at a 6.5% rate with little to no money down. That is on a 30 year fixed mortgage that has NO pre-payment penalty. That is HUGE considering the FHA only requires 3% down payment. Not to mention FHA allows that the money can be gifted to you from a relative as an example. Currently, you can also receive the money from a grant from a non-profit organization. FHA also allows for what is called a non-occupant co-borrower, meaning a family member can co-sign to help if your debt to income is too high to qualify on your own. You can't get a rate like FHA with less then 5-10% down otherwise.

In regards to getting the FHA and VA approval it is important to know who you are working with. Just because the loan officer says they can do FHA and VA loans you will want to make sure you are working with an experienced FHA or VA originator. Our business is 35% FHA and VA loans and we understand that FHA and VA have philosophies that allow for what are called compensating factors.

For example, you made have had some slow pays on your student loans when you graduated college but have since been paying on time. Although your credit score is going to be affected by these slow pays that have caused your credit score to dip, you can still be eligible for an FHA mortgage, even if the underwriting decision isn't an automatic approval. Additional compensating factors can be time on the job, savings, alternative credit, or even time in the same residence as an example.

You may have great credit and a great job. If you are like many people you either don't have or don't want to put too much money down on a house. FHA and VA are great solutions for this situation as well. You may have the money to put down but would prefer to have it in a higher interest bearing account where you can earn high interest rates.

The main ponit to understand is that lenders are tightening their guidelines and desire to lend money to people on second mortgages is disapating. That will cause more people to have mortgages with mortgage insurance that is either financed (LPMI) or Borrower paid (BPMI). These types of loan come with far higher rates then FHA or VA mortgages by far.

If you are interested in learning more about FHA and VA, or what is going on in the mortgage industry shoot me an email r_w_mtg@yahoo.com. If you need a mortgage please apply online or call Ray 303.779.0591 for a no hassle consultation where you can get honest answers from an experienced and respected professional.

Cheers~

Ray