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March 2008
Index of all
past
Affiliate Corner columns
Challenges and opportunities ahead in the 2008 market
By Jim Parker
The Loan Arrangers
The kaleidoscope of changes in the mortgage business leaves one breathless. We must check daily to determine program availability, what price adjustments are required, and if the lender is still in business!
It is a trying time for all of us – REALTORS®, appraisers, and lenders alike.
The fallout from multi-billion dollar losses has forced many national lenders out of the mortgage business. Access to lenders for third-party originators is drying up, as are lines of credit necessary to fund loans for even the most credible mortgage bankers.
We hope the roller coaster ride stops soon, and stable markets return.
How to “stop the drop” in real estate values/prices is a primary concern. While the Aurora/Denver SMSA has been defined as a declining market, many areas are still seeing price increases which must be proven by appraisers.
In declining markets, the maximum loan-to-value ratios must be reduced by five percent on most FNMA/FreddieMac loans which, in my opinion, aggravates the situation and drops in value become a
self-fulfilling prophesy.
The silver lining is that as home prices fall, homeownership becomes possible for many of those who were priced out of the market just one year ago.
The Economic Stimulus Bill was signed by the President in mid February; the bill will implement changes in FHA loan programs through Dec. 31, 2008. The base loan amount will rise to $271,050, and loan limits will increase to $328,125 in Metro Denver, to $439,300 in Boulder, etc. Temporary new limits are due by
March 14, 2008.
FHA may become the savior with borrower investment reduced to 1.5 percent. There may be some trade-offs such as “risk-based” pricing, but overall things look positive.
One program currently available, but little used, is the 203-K rehab program. Your buyers can secure funds to put that trashed foreclosure in mint condition, allowing them to benefit from the huge profit potential now enjoyed by investors. Let’s take back our neighborhoods by putting in owner occupants. They will be your “clients for life.”
If you have past clients who had 80-20 loans or adverse ARMS, or who faced short sales, remind them to check the FHA Secure Loan Program if they would like to keep their house. If they got behind after a payment increase, they may still be able to get a “Secure” loan.
Things to expect:
Risk-based pricing will cause the rate and price to be different on every loan.
If “premium pricing” is eliminated, the additional fees for delivery of FNMA/FHLMC loans, which range from 0.25 percent to 2.00 percent, will need to be paid by someone.
Pay close attention to what your loan officer says, and make sure he or she knows the score.
Have a source for FHA loans. They were only three to four percent of the 2007 market, but are expected to be 30 to 40 percent in 2008.
Don’t just delete e-mails from lenders. Your livelihood depends on what you know!
Get a full pre-approval on every client and lock in the loan as soon as possible.
The rollercoaster ride may continue for a while, but it could well be an exciting and profitable time for you.
Stay tuned. |
