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Ethics In the Mortgage Industry

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Recently in an open discussion a mortgage broker I know  FreEthical Mortgage Brokerd Glick said, “I just had a wholesale mortgage lender call and tell me proudly that his company approves FHA loans a credit score as low as a 545.”

“I explained to him that when people with such low credit ratings get these loans and default, the government will have to raise my taxes to pay for any losses over and above what is in the MIP fund. I will not sign up to sell such loans because of how irresponsible it is on so many levels to the tax payers who are responsible with their money.”

These are the type of mortgage brokers that have ethics and should be praised in choosing their ethics over making a quick dollar. We should not blame this type of broker for the housing crisis and current foreclosure problem.

Moreover, these are the mortgage brokers we should trust when seeking a loan because they are doing their job properly and as a result, looking out for and protecting everyone: our collective assets, collective futures.

Watching and analyzing the housing industry for years, I have learned to tell the snake oil housing professionals from the ethical, morally responsible ones.

My advise is just look for the blunt speaker who doesn’t always tell you what you want to hear. Brokers like these will tell you the truth about the affordability of the home you want to purchase and they will not let you sign for a loan if you don’t truly understand the terms.

They can also rub people the wrong way because they tell people what they might not want to hear while speaking the truth without sugarcoating reality or leading you to believe you can purchase something that will only put you in a bad spot in the future.

Keep up the good work!
Mortgage brokers that refuse to sell loans that they know will get the economy and individuals in trouble are housing ethical gods. And yes, they did exist in pre-crisis. Housing professionals like these will bring back the housing market.

A Group Effort
Is all the responsibility to keep the housing industry strong on the mortgage brokers shoulders? Not at all. It is a group effort.

This was just one example of one link in a chain of people who picked ethics over greed. All of us need to play a part in improving housing market situation. Potential home buyers must not have bigger eyes than their wallets when looking to purchase a home.

Real estate agents must not let prospective buyers purchase a bigger house than they can afford, mortgage brokers must not sell loans that will have a high rate of defaulting, mortgage wholesalers must not push loans that people can easily default on.

Banks and government must work together to promote programs and strategies that encourage healthy and responsible spending.

What are your thoughts? Please comment below.

State of the SF Bay Area Real Estate Market and Loans – January 2012

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Due largely to the lagging economy and the Euro crisis, Mortgage Rates remain at record lows to begin the year with the Avg 30-Yr fixed mortgage being at 4.18%, a # that is right between the low of 4.13% we saw at the beginning of October and the 4.23% Avg we saw throughout most of November and December. The Fed says it will keep the key federal funds rate near zero until mid-2013 and continues to reinvest in long-term securities to help keep rates low. However, a recent move by Congress will surprise some borrowers with higher mortgage fees in the coming weeks. On April 1st, the guarantee fee on loans that can be sold to Fannie Mae and Freddie Mac is set to increase by a minimum of 10 basis points and lenders have already started to pass that extra cost on to borrowers. Some lenders have plans to increase the price of their loans anywhere from 20 to 80 basis point, which translates to .125% – .25% in interest.

The Avg 30-Yr Fixed Conforming loan with 0 Pts is currently at 3.75% and the Avg 30-Yr fixed High Balance Conforming loan with 0 Pts is at 4.125%

Turning to the latest Real Estate trends, we finished up 2011 with another month of sales outpacing listings and inventory going down (for the 7th straight month) throughout most of the SF Bay Area. Overall, there was a net drop of ~40% of residential property inventory year-over-year from Dec 2010 to Dec 2011. Despite the trending of inventory reduction, SF Bay Area property values were flat through 2011 and we haven’t seen any appreciable gains in value since we hit the bottom of our current real estate cycle in the Winter of 2009.

The median price paid for all new and resale houses and condos sold in the SF Bay Area in November was $363,500. That was up 3.9% from $350,000 in October, but down 4.3% from $380,000 in November 2010. The median has declined on a year-over-year basis for the last 14 months. The low point of the current real estate cycle was $290,000 in March 2009. The peak was $665,000 in June/July 2007.

The median price of a SF Bay Area Single Family home was down 8.5% from Nov 2010 to Nov 2011 (from $511,140 to $467,680). San Mateo & Napa were the only SF Bay Area counties with a year-over-year “gain” for November (5.6% gain for San Mateo, 1.4% for Napa).

Just as in 2011, many will be trying to figure out where housing is headed for 2012.

While the housing market didn’t worsen in 2011, it didn’t stabilize either. This year, the story will be about local markets. While many housing markets rose and fell together, they’re recovering at difference paces. The key factors to effect the pace of recovery will be Confidence and Jobs, the Rental market, Mortgage Credit and Rates, and Foreclosures.

Housing is more affordable than it has been in decades and most SF Bay Area residents believe that this is a good time to buy, but some would-be buyers are worried about the short term direction of home values, some are worried about their job stability, and still others can’t qualify for a mortgage because of damaged credit and/or today’s tighter mortgage standards. However, if low mortgage rates aren’t enough to give urgency to would-be buyers, recent rent hikes could accelerate buyers’ decisions to take the plunge.

I believe the greatest degree of home value recovery will come out of significant reductions in distress sales. SF Bay Area foreclosure reslaes peaked at 52% in Feb 2009. In recent months, foreclosure resales have been accounting for ~25% of resales. However, short sales are as popular as ever, still accounting for ~21% of all resales, up from ~16% 2 years ago. Also, banks and other mortgage investors own around 440,000 foreclosed properties nationwide, but there’s another estimated 3.4 million loans in foreclosure or serious delinquency.

In the mean time, we enter 2012 on a positive note for the SF Bay Area housing market with low mortgage interest rates, a high level of housing affordability, and inventory trending down. February is typically the start of the biggest selling season here & we will know by April whether there are enough buyers lined up to keep pace with the many homes coming on the market in the new year.

To speak directly with George Sudol about SF Bay Area Real Estate Market please visit www.ba-realtyservices.com

Mortgage Scams How to Spot and Avoid Home Loan Fraud

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It might not always be easy to spot mortgage scams. However, it can help to know some of the warning signs to look out for. Below are six red flags that might indicate you could be dealing with home loan fraud or mortgage scam:

  • A company tries to pressure you to sign over the deed to your home or sign any paperwork that you haven’t had a chance to read, and/or that you don’t fully understand. Never sign any documents without reading them first. Many homeowners think that they are signing documents for a loan modification or for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership of their home to someone who is now trying to evict them. A legitimate housing counselor would never pressure you to sign a document before you had a chance to read and/or understand it.
  • A company/person you don’t know asks you to release personal financial information online or over the phone. You should only give this type of information to companies that you know and trust, like your mortgage lender or an approved HUD counseling agency.
  • A company/person asks for a fee in advance to work with your lender to modify, refinance or reinstate your mortgage. This fee might be called a processing fee or an administrative fee. However, once you pay the fee, you probably will never hear from this person or company again. When you try calling them, you will never get in contact with them and you certainly will not get your phone calls returned. They may pocket your money, keeping the money for themselves, and do little or nothing to help you save your home from foreclosure.
  • A company/person guarantees they can stop a foreclosure or get your loan modified. Nobody can make this guarantee to stop foreclosure or modify your loan. Legitimate, trustworthy HUD-approved counseling agencies will only promise they will try their very best to help you.
  • A company/person advises you to stop paying your mortgage company and pay them instead. Despite what a defrauder will tell you, you should never send a mortgage payment to anyone other than your mortgage lender. The minute you have trouble making your monthly payment, it is in your best interest to contact your mortgage lender.
  • A company claims to offer “government-approved” or “official government” loan modifications. They may be mortgage scam artists posing as legitimate organizations approved by, or affiliated with, the government. The scammer’s company name and website may sound like a real government agency, but the website may end with .com or .net instead of .gov. You may also see terms like “federal,” “HAMP,” “MHA,” “HARP” or other words related to official U.S. government programs. Contact your mortgage lender first. Your lender can tell you whether you qualify for any government programs to prevent foreclosure or modify your current loan. And, remember, you do not have to pay any organization or company to benefit from government backed loan modification programs.

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