Mortgage News

St. Louis Mortgage News – Goodbye Tiny Dancer

Goodbye Countrywide and Goodbye to their step brother Indy Mac by Chris Scheer, Cornerstone Mortgage, O’Fallon, MO

The Federal Reserve stepped in and took over Indy Mac bank on Friday.

This comes as no shock to members of the mortgage industry as recently Indy Mac announced it was ceasing its retail mortgage operations.

So why do I call Indy Mac Countrywide’s step brother?

For years Indy Mac mirrored all the lending programs that Countrywide created, almost to the point where unless you looked at the login page when you were visiting their site, you could not tell the 2 companies apart. There were times when Countrywide would announce a change in a program or guideline and within hours the same change would be announced at Indy Mac. From an originators standpoint, it was comical how the two companies mirrored each other.

When Countrywide was hammered last year and the Fed stepped in to rescue them Indy Mac started to take on a life of their own. They for the first time were the first of the two companies to change programs and products reducing their exposure and tightening their lending practices. It was because of these efforts that they managed to last as long as they did. If it were not for comments made by Senator Schumer they may have managed to right their ship and avoid the Fed taking them over.

So why does the Fed rescue one company and take over another? Stock penetration and price. If Indy Mac would have had the numbers of shareholders that Countrywide had world wide or even Bear Stearns, they would have been rescued as opposed to taken over.

For Questions or comments, please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St.+Louis+Mortgage+News, Indy+Mac, Countrywide

Posted by Doug Aegerter | Read More | Your Comments Are Welcome! | 07.14.2008

St. Louis Mortgage News – Optimisim

Filed under: Mortgage News

Looks OK to me!

We are on the Cusp! by Chris Scheer, Cornerstone Mortgage, O’Fallon MO

Undeniably the stock market has become a Bear market. That means that the Dow industrial average is down more than 20%. Sooner or later, those investors are going to start to move to safer investments. What are safer investments you ask? Well I am going to suggest that Mortgage Backed Securities are safer investments. For the last 12 months, this investment has been out of favor with everyone from institutional investors to foreign investors. As housing prices have fallen drastically on both coasts the middle of the country has done a good job of holding value. The Countrywide Mortgage debacle has turned a corner and is now Bank of America’s problem. The Fed has not had to rescue any more mortgage companies for the last 30 days. Second quarter earnings are being reported this week and by now all the major companies have figured out that they cannot hide the losses from the mortgage mess, so those will be dealt with in these reports.

That leaves us with mortgage backed securities in position to be an attractive investment again; especially the Ginnie Mae government loans. With over 70% of all loan applications that I am taking right now being for FHA or VA loans, I am confident that most other successful originators are doing the same. This will create a huge supply for these investments and the hawkers of these securities will have the product to sell and most of these properties will not be those that are going into foreclosure but being bought out of foreclosure by people who have the means and desire to make their mortgage payments. Sooner or later, Wall Street is going to start moving these securities and then the laws of economics will take over. As demand goes up so does price. On a bond, for those of you that don’t remember, when the price goes up the yield (see interest rate) goes down. Thus, even though there is discussion of the Fed raising short term interest rates, what they really are hoping for is that the lowering of short term rates that they did months ago will finally take hold on the long rates and we will see the 30 year fixed rate get below 6% again.

Now I realize that this is optimistic thinking on my part, but if you listen to the doom and gloom prognosticators out there saying that the economy and the stock market are still in for tougher times, someone has to be willing to bet on the bond market. Today I am that person!!!

For questions or comments on this please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St.+Louis+Mortgage+News, Bear+Market

Posted by Doug Aegerter | Read More | Your Comments Are Welcome! | 07.09.2008

St. Louis Real Estate – Mortgage News – Foreclosure

Filed under: First Time Home Buyer, For Buyers, Mortgage News

Summertime Summer is almost here! by Chris Scheer, Cornerstone Mortgage, O’Fallon, MO

After spending 5 of the last 7 days on the golf course, I realized (not for the first time) that my future is not in professional golf. Thus I am resigned to continuing to help people achieve the American Dream of home ownership. So what is going on in the real estate world you ask?

Well we finally have the long awaited change in FHA mortgage insurance premiums coming into play. Therefore after July 14, 2008 it will be more expensive for borrowers with less than stellar credit to purchase a home. The effect in most cases will be less than $20 per month, but when you are living paycheck to paycheck, $20 a month can be a lot of money!

Foreclosures continue to rise! That is to be expected, but what it has done is that over the past 10 years an appraiser could ignore a comparable sale if it was a foreclosure. Now with the amount of foreclosures, they have to be treated as part of the marketplace. Thus property values are declining in areas of numerous foreclosures. The positive aspect of this is that those property owners who have been complaining about their rising real estate taxes will see a freeze on the rise and in some cases may see there property taxes come down in 2009!

For questions or comments on this post, please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, Mortgage+News, First+Time+Home+Buyers, Home+Buyers, FHA, mortgage+insurance+premiums

Posted by Doug Aegerter | Read More | Your Comments Are Welcome! | 06.16.2008

St. Louis Real Estate – Mortgage News – Live Talk

Filed under: For Buyers, For Sellers, Mortgage News

Someone Finally Heard the Message! by Chris Scheer, Branch Manager, Cornerstone Mortgage, O’Fallon, MO

Stop the presses! After attempting to brand myself as “Your Residential Lending Expert” for over the past 2 years, one of my past clients has finally heard the message. Dave Simons who hosts the “Dollars and Sense” money show on KMOX 1120 AM radio has asked me to join him on Wednesday, May 21, 2008 to discuss what is going on in the mortgage industry. At this time I am scheduled to go on air at approximately 10:10 a.m. The length of the visit should be around 10 minutes.

You can tune in or check out their live stream at www.kmox.com.

For questions or comments, please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, Mortgage+News, Home+Buyers, Home+Sellers, KMOX+1120, Dave+Simons

Posted by Doug Aegerter | Read More | Your Comments Are Welcome! | 05.19.2008

St. Louis Real Estate – Mortgage News – Declining Market 2

Filed under: Appraisal News, For Buyers, Mortgage News

Declining Markets Part 2 by Chris Scheer, Branch Manager, Cornerstone Mortgage, O’Fallon, MO

So what defines a “Declining Market?” Some investors have taken their large paintbrush out and if an area; county, city or zip code has seen their average sales price drop in the last quarter; they are calling it a “Declining Market.” Others have chosen a smaller brush and have stretched the time out by reviewing the last six months. Then the rest of the investors have left the defining to the appraisers, which is whose shoulders it should fall on. They are the ones whose job is to provide support that the investor is making the right decision to purchase a loan on a certain piece of property.

So when I checked with a few appraisers to learn their definition of “Declining Market” I was not surprised to find that each appraiser had their own Declining2 definition of “Declining Market.” The thing to remember about appraisers is that what they do is not a science; it is more of an art. So again we use the paintbrush analogy and there are some appraisers that are running scared and using their large paintbrush and putting the term “Declining Market” in all of their appraisals. Others are taking the time to do a statistical review of the cost of the homes in the various areas and are applying the term when there is a continued decrease of value that exceeds 5% over three six month periods and then there are others who are only applying the term if the valuations have changed by greater than 10%.

In addition, most investors are only concerned with reducing the loan to value on Conventional loans. On FHA and VA loans, the appraiser has factored the market into the value and it does not have an impact on the amount the borrower can borrow.

For questions or comments on this, please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, Mortgage+News, Appraisal, Home+Buyers, Declining+Market

Posted by Doug Aegerter | Read More | 4 Comments » | 05.13.2008

St. Louis Real Estate – Mortgage News – Going Down

Filed under: For Buyers, Mortgage News

Lock and Load! by Chris Scheer, Branch Manager, Cornerstone Mortgage, O’Fallon MO

Well the Federal Reserve has lowered short term interest rates once again and if you believe the written statement coming out of the meeting, they are finished lowering interest rates. The “inflation” boogeyman is haunting them as well it should be. Mortgage rates have not gone as low as they should have, for a majority of reasons:

1. RISING OIL PRICES
2. Falling value of the dollar.
3. Mortgage Backed securities are not an attractive investment.

Rising oil prices are the single biggest concern with our economy. This nation is so dependent upon oil that most everything that we do involves some use of oil or oil byproducts. Why the U.S.’ Oil Dependence is Bad for the U.S. Economy. Prices for all consumer goods are being affected by the rising price of oil, making it less likely that the consumer will have extra money to spend on non essential items.

The falling value of the dollar does have a positive; it makes it more attractive to foreign nations to purchase American goods. Unfortunately, we have become less of a manufacturing nation than we were 40 years ago. The Dollar’s Decline and Its Implications.
Along with purchasing goods, we may see foreign investment in US Real Estate since we also have declining value in real estate.

The Sub-Prime Mortgage Crisis has put a stain on all mortgage backed securities. Most investors have been trying to rid themselves of mortgage backed securities. Even though short term rates have fallen, interest rates on mortgages have not followed. This trend is brought about by the simple law of supply and demand. As the demand for mortgage backed securities has lessened, their price has gone down. When the price on a bond goes down, the yield (interest rate) goes up. Until we see demand for the mortgage backed securities increase, which would drive the yield down, we will continue to have interest rates well above where they should be.

So why do I say lock and load? The Federal Reserve is almost out of bullets to stimulate the economy. Some are predicting that the economy will soon recover. Once the Fed sees signs of a recovering economy, they are going to want to start raising rates to slow the economy. And even more importantly, reload their own gun. We have now seen the Fed lower short term rates from 5% to 2%. They would like to have some room to work again with interest rates. If they need to get some room to work, raising rates is the easiest thing for them to do. For buyers looking to purchase a home or owners wanting to refinance, it means that rates are no longer going down and now will only go up. So find your house, lock your rate and start saving your pennies. We are going to be fighting inflation for a few years! Chris Scheer can be contacted at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, Mortgage+News, Buyers, Federal+Reserve, inflation

Posted by Doug Aegerter | Read More | 1 Comment » | 05.05.2008

St. Louis Real Estate – Mortgage News – The NEW King

Filed under: First Time Home Buyer, For Buyers, Mortgage News

Crown FHA is the King! The top Dog!

The new economic stimulus package has allowed HUD to raise its maximum loan amounts for FHA loans depending upon the county of the property. For those in the St. Louis, Missouri area, that means we now can do an FHA loan for up to $281,250. The previous amount was $213,750, so that is a huge jump, almost a 33% increase.

So who can take advantage of this? You could spend days Googling FHA loans to get all kinds of information about the FHA insured loan so I won’t waste you time covering everything. What I will do now is touch on the opportunities that I think will make the most amount of practical use for the clients that I see on a daily basis.

1) First time homebuyers: With the end of the conventional 100% financing (see previous post) now more than ever this will be the product of choice for first time homebuyers who have little or no money down. FHA requires a 3% down payment; however those funds can be gifted to the borrower from a relative. The gift does not have to come all from the same relative either. You can get part from one parent, part from another parent or their siblings such as an aunt or uncle and then you can get more from another relative. Thus on the $289,950 purchase price that the borrower needs $8,750 for a down payment, they can get that from various relatives or at least the part that they have not saved up on their own. They can also borrow the money for a down payment, as long as the loan is secured and has a repayment period of at least 5 years. That payment counts against their debt to income ratio, but makes borrowing against a car, a boat, a certificate of deposit or a 401K an option for coming up with all or some of the down payment.

2) Refinance to get out of an 80/20 loan. The second mortgages on these loans were priced higher than the rate on the first. Many people regretted getting them, but because of the change in Conventional guidelines, they were not able to refinance the loans since they owed over 95% of the appraised value. On an FHA loan, we can refinance them at 97% loan to value if we are paying off liens on the property. A great way to get those people out of 2 mortgage payments and into one at a FIXED rate.

3) Refinance for cash out. Both Fannie and Freddie have made it darn near impossible to get approved for conventional cash out loan over 80% loan to value. First your FICO score has to be over 720 and then good luck getting mortgage insurance on the loan. With FHA we can go to 95% loan to value and thus help get people out of the credit card debt or other challenges that are overwhelming them. It will also allow people to borrow money to improve their property, which in the near future will be a key to helping people hold their property values.
Cscheer
These are just a few of the ways the FHA loan can be used.

For comments or questions, please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St.+Louis+Mortgage+News, FHA, HUD, Home+Buyers

Posted by Doug Aegerter | Read More | Your Comments Are Welcome! | 03.19.2008

St. Louis Real Estate – Mortgage News – 100%

Filed under: First Time Home Buyer, For Buyers, Mortgage News

The End of 100%!

In the ever changing landscape of lending, we had the latest and most significant change take place this past Monday. All of the Private Mortgage Insurance Companies announced that they would no longer issue mortgage insurance on any loan with a loan to value greater than 97%. On a side note I can remember when we could only do a 97% loan and then just one of the mortgage insurance companies said they would insure up to 100% and it was months before the others joined in when the LTV was going up, but now that the maximum LTV is going down, they are all are the same page and quick to make the move.

Kind of like rats jumping off a sinking ship!

But I digress! Now there are few instances that one of the companies will honor the 100% commitment but it is in such a limited scope that you have a better chance of winning tonight’s Powerball drawing than getting a 100% loan.

So why are they doing this?

First of all they are all taking a bath financially in mortgage insurance claims on loans that are in default and foreclosure due to the current mortgage crisis. Some would argue that they have been making money hand over fist for years as their losses have been limited as the housing prices grew and mortgage rates were declining or low, but keep in mind that during that time that they had to fight to keep market share and revenues as the banks created the second mortgages that would go to 100% and in the industry it was common practice to do a first mortgage for 80% and the second for the remaining amount to avoid mortgage insurance. So let’s not rush to judgment on the profits of the mortgage insurance companies over the last 7 years.

Secondly and more importantly, we are seeing house values in some areas decline. So if they did insure a loan that was a 100% loan in one of those areas and the house price has declined, they are now insuring for over 100% of the value of the house. How smart is that?
Where does this leave us? Thanks to the stimulus package that was passed we now have higher FHA loan limits and in most cases the cost of the monthly mortgage insurance will be less on an FHA loan.

Also, in the old days, before 100% financing, we did most loans using gifts, tax returns, SAVINGS, as a way to come up with the initial 3% for a down payment. Imagine that, you have to save some money to buy a house?

I will write more on the increase in the FHA loan limits and the opportunities that are presented by this later this week.

Cscheer For questions or comments on this please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com