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Friday, January 28, 2011 Mortgage Rates on the Rise The Wall Street Journal is reporting today that mortgage rates rose in the latest week, leaving the average rate on 30-year fixed-rate mortgages closer to 5%, according to a weekly survey by Freddie Mac. "Mortgage rates followed bond yields a little higher this week amid positive data reports from the Conference Board that suggest the economy is strengthening," said Freddie Chief Economist Frank Nothaft. Rates had slumped for months, setting repeated all-time lows in the process, as yields on Treasurys slid amid economic uncertainty. But those yields have risen recently, pulling rates higher. Mortgage rates generally track the yields, which move inversely to Treasury prices. The 30-year fixed-rate mortgage averaged 4.8% for the week ended Thursday, up slightly from the prior week's 4.74% average but down from 4.98% a year ago. Rates on 15-year fixed-rate mortgages were 4.09%, up from 4.05% in the previous week but down from 4.39% a year earlier. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.70%, up from the prior week's 3.69% but down from 4.25% a year earlier. One-year Treasury-indexed ARMs were 3.26%, up from 3.25% in the prior week but down from 4.29% a year earlier. To obtain the rates, borrowers had to pay an average of 0.6 point on the one-year adjustable-rate mortgages; the others required an average 0.7 point. A point is 1% of the mortgage amount, charged as prepaid interest.   1:25 pm cst  Wednesday, January 26, 2011 Mortgage Fees on the Rise - Again Chicago Marketwatch is reporting another rise in mortgage fees - even for those with good credit scores. In industry-speak, the fees are called “loan-level price adjustments” and new ones will go into effect April 1. The fees for conforming mortgages have been adjusted various times during the housing crisis, but this latest revision is an example of how even years into the housing downturn underwriting continues to tighten. “It’s not so much that this is really tightening significantly, it’s that it’s getting tighter. It’s not getting easier,” said Cameron Findlay, chief economist for LendingTree, an online marketplace that connects consumers to lenders. “Consumers are looking for some relief, and what they’re getting is the opposite at this point. They’re getting ‘Sorry, there’s less that we can do for you than even a year ago.’” Already, some lenders are incorporating the higher fees and passing them on to their customers. The April effective date is for when loans are delivered to Fannie Mae /quotes/comstock/11k!fnma (FNMA 0.46, -0.17, -26.62%) , but over the next couple of months, lenders will be originating loans that will be sold to Fannie in April. Most of the time, borrowers can pay the extra costs up front at origination or roll the cost into the interest rate. “The majority price it into the rate,” said Rhonda Porter, a loan officer with Mortgage Master Service Corporation in Kent, Wash. But the fees are anything but one-size-fits all: Fannie Mae releases a grid to lenders to explain the fees that individual loans are subject to for loans, based on a borrower’s credit score and loan-to-value. n this latest iteration, a borrower wouldn’t be affected by a loan-level price adjustment if he or she had a FICO score above 740 and a loan-to-value of 75% or less, Findlay said. But a buyer with a standard 20% down payment (or 80% loan to value) and a 740 credit score could now face additional fees. “It certainly says that even with a great credit score, they still see some risk in you,” he said. An example of how the change could affect borrowers, in dollars: Before the new adjustment, someone with a 700 FICO score and a $160,000 mortgage to purchase a $200,000 home (80% loan-to-value), might have paid an additional $800 in these fees. Now, that cost would be doubled, meaning the loan’s risk-based pricing would equal $1,600, Findlay said. Just a note: The fees don’t have an effect on loans insured by the Federal Housing Administration, which appeal to borrowers who need a low down payment loan, said Greg McBride, senior financial analyst for Bankrate.com. Also, not all lenders sell all mortgages to the secondary market, so not all loans are subjected to the fees — underscoring just how important it is to shop around and compare rates, he said. Risk management Why are the fees rising? Broadly, it’s because government-sponsored enterprises Fannie Mae and Freddie Mac /quotes/comstock/11k!fmcc (FMCC 0.56, -0.11, -15.98%)   are doing what they feel is necessary to manage risk at a time in which they still remain in government conservatorship. That means, ultimately, taxpayers assume the risk for these mortgages, McBride said. “There’s an initiative for Fannie Mae and Freddie Mac to make sure that they’re buying quality paper,” he said. But McBride cautions people from getting too worked up about fee increases: “If you are a consumer and you’re trying to gauge which way mortgage rates are going to go, the big drivers are still macro events such as economic news, the outlook for inflation, or any nervousness in the financial markets,” he said. “Those are the real drivers of mortgage rates day-to-day, week-to-week and month-to-month.” Mortgage rates rose at the end of 2010, as the economy showed signs of improvement and the markets feared an increase in inflation. The conforming 30-year fixed-rate mortgage averaged 4.74% for the week ending Jan. 20, according to Freddie Mac’s weekly survey. For comparison, the rate averaged 4.23% for the month of October. And if the economy stays on track toward recovery, rates could be higher than 5.5% for the second half of the year, McBride said. Need to know Still, consumers should be aware of these fee increases and take them as a reminder of how important it is to have the best credit score possible when shopping for a mortgage. And for some, it might make sense to postpone obtaining a mortgage until they’ve improved their credit. “What could happen is that the people who are, let’s say, at a 675 score might end up waiting a couple of months because the difference between a 675 and 680 is big,” said Les Berman, a senior mortgage advisor with First Cal, a lender based in Petaluma, Calif. To improve your credit, pay your bills on time, and clear up any mistakes on your credit reports, he said. Also, aim to keep credit card balances low. Taking time to improve your score could help you lock in a less expensive mortgage and be well worth the effort in the long run. And you have time: Home prices aren’t going to race up any time soon, McBride said. “So as a borrower, if you feel you need to take a little more time to increase your savings, pay down your debt and improve your credit score, you can feel safe in doing so,” he said. “Even if we see a slight increase in mortgage rates, that could be offset if you put yourself in a higher credit score band in the interim.”   3:57 pm cst  Thursday, January 20, 2011 Real Estate Agents: Beware of Foreign Buyer Scams! These scams have been around quite a while but I recently received an e-mail from a scammer whose name appears all over the internet as a commonly used name for scams. This link to Trulia tells a very interesting story. Click here. I also found this article online with help from another attorney friend of mine which tells a similar story. It is from Homestead Title, LLC's website blog: I am Dr. William Grey, M.D. and internist in Titchfield Engalnd. I am relocating my family to Madison, Wisconsin and I am interested in retention of you services to buy a house. Please send me information about homes that costing $400,000 to $600,000. Sounds too good to be true? In most cases it is too good to be true – it is a complex scam. Falling for the Scam But, the scammers are sophisticated and even the suspicious, cautious REALTOR or attorney can get sucked into the scam. A wealthy, out of town buyer relocating to your area is every REALTOR’s dream. When you look up the foreign doctor’s name, you will find his information checks out. And, upon further emails, he will be very specific about his needs and wishes. He will tell you about his wife and children, his need to for 3 or more bedrooms, his desire to be near a school and he may even tell you the neighborhood he likes best. Then, after sending 5 or 6 listings, the good Doctor will tell you he is ready to buy MLS Listing 0654321, the beautiful colonial on the west side. “Please make a full price offer, unless you think, in your judgment, that a different amount would be appropriate.” The Doctor will also provide you with the name of his financial advisor in New York and ask you for a referral to a local attorney. At this point, the deal still seems suspicious, too good to be true, and likely to be a scam. But how can it be? He’s using a local attorney. He has a financial advisor at Global Financial, Inc. in Manhattan. And, his emails are so specific. How The Scam Likely Works The Doctor signs an offer to purchase remotely from England (or Canada or China) and then sends in the earnest money to either the REALTOR or the attorney. The earnest money check will not be for the customary amount, but instead for the entire purchase price. Oops. And in fact, the Doctor will also send another check for a hundred thousand dollars or more. OOPS! Then, after the checks have been deposited, the Doctor will request that the excess funds be returned via wire or western union. Even if the funds appear to have cleared or been credited to the REALTOR or Attorney account, the check will bounce. It was a fake. The wire goes to a foreign bank and is gone forever. Avoiding the Scam If a transaction appears too good to be true, it likely is. Some red flags and similarities include: A foreign buyer sends you large amounts of funds by accident A buyer asks you to deposit funds that come in by check and, shortly thereafter, return them via wire or Western Union (Western Union is a major red flag!) A buyer offers to pay full price for a house, sight unseen. The Financial adviser either is named Karen James or Paul Jackson and may work at Global Financial, Inc. (While it is possible these are real names and individuals, scammers are using these names) The Buyer is from China, Japan, England, or Canada (really any foreign country where the buyer is suddenly relocating and buying sight-unseen) The initial emails contain typos or poor grammar The Buyer moves incredibly fast, making a decision in hours or even minutes rather than days or weeks. The Buyer’s name is Otake Iwao The email address comes from @asia.com or some other generic email . If you suspect a scam, ask lots of questions and have verbal, phone conversations at a minimum. Don’t send any private information, bank account numbers or anything else that you would not want a scam artist to have. Alert your Broker or legal counsel whenever a foreign individual is sending funds, even if the funds originate within the U.S.  — this alone is cause for caution.  Do not send out wired funds if the incoming funds were not wired. And do not send back large amounts until your bank can confirm with 100% certainty that the incoming funds were legitimate and fully cleared. Having access to the funds does not mean they cleared. Work with your bank to provide solid assurances that the funds are real and cleared whenever you suspect fraud.   1:26 pm cst  Monday, January 17, 2011 Can't Refinance? You're Not Alone! This taken from Yahoo! Personal Finance post: While mortgage interest rates are at their lowest levels in decades, millions of mortgages that carry interest rates of 6% to 9% or even higher are not being refinanced. The reasons for this involve Fannie Mae and Freddie Mac, the two secondary market giants now in government conservatorships. The problem is perhaps best seen through the eyes of borrowers who are unable to refinance. Each unsuccessful borrower cited below is representative of a sizeable group of such borrowers. Adam was turned down for a refinance because he did not meet the new tougher underwriting and pricing requirements set by the agencies in their standard programs. His credit score, which was acceptable when he got his loan before the crisis, is not high enough to meet the new requirements. Excessive Restrictions It clearly was appropriate for the agencies to correct the excessively liberal rules that had prevailed during the go-go years, which contributed to the financial crisis. However, they have reacted to their excessive liberality before the crisis by becoming excessively restrictive in the aftermath. Their underwriting and pricing structures are designed to maximize their net earnings, as if they were still private firms. Fannie and Freddie are now part of the government and should set their underwriting rules and pricing adjustments not to maximize net revenue but to break even over a long time horizon. Barbara is one of many homeowners who bought during the go-go years and who now owes more than what their houses are worth -- she is "underwater". She applied for a loan under the Home Affordable Refinance Program (HARP), which was designed to make refinancing possible for underwater borrowers who are current on their payments and whose loans are owned by Fannie or Freddie. Barbara is ineligible, however, because she is too far underwater. Her loan-to-value (LTV) ratio is 130%, and the agencies have set a 125% maximum. A maximum LTV in the HARP programs cuts out a sizeable segment of the potential market, for no good reason. The agencies are already on the hook for any losses on high LTV loans, and a rate reduction can only reduce the probability that a default will occur that would trigger the loss. Indeed, the reduction in expected loss from a rate-reducing refinance is larger on a 150% LTV than on a 125% LTV. The default rate has to fall only half as much on a 150% loan as on a 125% loan to generate the same reduction in expected loss. Fannie and Freddie should scrap the LTV maximum in the HARP program, for which there is no rational reason, thereby also eliminating the need for appraisals on HARP loans. Giving Up the Search Charley was turned down for a refinance under the HARP program, although his LTV was only 120%, which made him eligible under agency rules. Nonetheless, the lenders Charley approached would not make the loan. They told him their maximum LTV was 105%, and some said that it was 95%. Charley could have refinanced if he knew where to go, but he didn't and he gave up the search. I did a quick and dirty survey and found that HARP loans above 105% are not available from brokers or from smaller lenders who sell to wholesalers who in turn sell to the agencies. HARP loans exceeding 105% are only available from some of the lenders who sell directly to the agencies. Freddie Mac has a list of HARP lenders here, but it is extremely difficult to find. If Fannie has one, I could not find it. The Freddie list has 27 lenders, 14 of which do 125% loans, of which only four have a wide multi-state presence: Aimloan.com, SunTrust Mortgage, Quicken Loans, and RBC Bank. Fannie and Freddie ought to do a better job of informing potential borrowers how to find a lender who will make 125% HARP loans, and they should review their policies that have discouraged broader lender participation. Out-of-Luck Borrowers Doris's situation was the same as Charley's, including an LTV of 120% -- with one difference. Doris's existing loan carries mortgage insurance (MI). The lenders who turned her down told her that the mortgage insurer had to agree to shift the MI policy to the new loan, but would not do so in her case. Under HARP rules, if there is no MI on the existing loan, none is required on the new loan. If there was MI on the old loan, as in Doris's case, it will be carried forward on the new loan, provided the PMI firm agrees. But if the current LTV exceeds 105%, they won't agree unless the new loan is being made by the existing servicer. Doris was not aware that only the lender servicing her loan can shift the mortgage insurance policy from the existing loan to a new one. Fannie and Freddie ought to inform potential HARP borrowers who have mortgage insurance and LTVs greater than 105% that they can only refinance with their current lender, and they should examine whether there is anything they can do to remove the PMI roadblock. Ethan is an underwater borrower in good standing whose loan is not owned by Fannie or Freddie. His only possibility of a refinance is the new FHA program, but that program requires the existing lender to write down the balance to 97.75% of house value. Since Ethan is making timely payments, the lender has very little incentive to do that. Ethan had no say in who ended up owning his loan; from his perspective it was a coin toss that came up tails and made him ineligible for HARP. The out-of-luck group to which Ethan belongs includes a large number of subprime borrowers who meet their obligations faithfully while paying rates up to 9% and even higher. There is no good reason why such borrowers have to be left entirely out in the cold. While including these borrowers in HARP would expose Fannie and Freddie to risks they did not have before, the agencies could set payment performance requirements and charge risk premiums large enough to protect taxpayers while still offering many of these borrowers substantial relief. Treasury should have the agencies develop a HARP1 program covering loans they do not now own that would be subject to underwriting rules and price adjustments consistent with the government breaking even. 6:46 pm cst  Friday, January 7, 2011 10 Real Estate Tips for the New Year for Buyers and Sellers Yahoo published today a very interesting list of tips for real estate for 2011. I've reprinted it below. My favorite? "Smoke Out Pervs" LOL Tip 1: Sellers: Redefine "Market Value" If your home has been on the market far too long, there's a good chance you're not facing market realities. The value of your home isn't what the tax assessor says it is, or the sum on that two-year-old appraisal you have filed away. It's not what a similar-size home that sold across town. It's what a buyer is willing to pay today. To arrive at that sum, the sales prices of foreclosures and short sales must be factored into the equation, along with the average value of seller concessions in your submarket. These factors are advanced by the Federal Housing Finance Agency, or FHFA, in its appraiser code-of-conduct revisions to ensure more accurate documentation of market conditions. If your agent tells you that you're overpricing your house, he or she may not just be trying to grease the wheels for a quick commish, as you might suspect. Tip 2: Buyers: Hire Personal Peeps As tempting as it is to share the seller's agent to save a couple grand, don't. The same goes for using the other party's inspector and appraiser. They were hired by the seller and have a fiduciary allegiance to the person who's paying them. Don't automatically opt for real estate professionals referred to you by your agent either. A huge capital purchase is not the time for such friendly accommodations. Briefly interview three of each by phone. Make sure your appraiser and your inspector (and perhaps a separate termite inspector) are appropriately state-licensed or state-certified and, ideally, have been practicing for at least five years and have done more than 200 inspections or appraisals. Compare the results of your inspector's findings with the inspection findings of the other party, and you're likely to stumble on disparities or omissions. Tip 3: Sellers: Extend the Selling Season Spring is the best time to find the broadest universe of buyers and sellers. Parents don't want to uproot their kids from schools mid-term and would like to settle in a new neighborhood by mid-summer. Many sell at the same time they buy. These days, "spring" really means late winter. So if you're going to sell in 2011, get your house ready for showings by late February. That will give you nearly five months until this buying-and-selling group starts dwindling by mid-July. Tip 4: Buyers: Check the Seller's Addition Based on mounting concerns expressed in Bankrate reader mail, prospective buyers should add the following move to their due diligence lists when scoping out a home: Check for illegal additions. Revenue-starved cities are cracking down on unpermitted work. They focus on current owners, not the original step-skipping "perps." Unpermitted room additions, kitchen remodels and garage conversions are just a few areas that can haunt an unsuspecting buyer. A good agent, home inspector or appraiser should be able to spot such unpermitted work, especially if square footage doesn't match tax assessor records. If you do buy unwittingly, you'll be responsible to bring the work up to code. Tip 5: Sellers and Buyers: Gather Micro Data Regional real estate sales information never tells the full tale of a housing market. Search local daily newspapers, business journals and websites to find the latest foreclosed homes, housing backlogs, current versus historic median selling prices, and the average time on the market of for-sale homes in your specific ZIP code, submarket or neighborhood. The website City-data.com is a good start for this. On a broader scale, look at population income levels, unemployment rates and the contraction or expansion of major local employers. Homes near universities, hospitals and other major employment centers usually hold their value better and resell faster. A great product and great location, at least to some degree, will transcend local trends for buyers and sellers. Tip 6: Buyers: Smoke Out Pervs Do a sex-offender search. The National Association of Realtors, or NAR, says it's the job of local police agencies, not Realtors, to be gatekeepers of registered sex-offender data. So do your homework. The National Sex Offender Public Registry contains national offender listings. And know that most agents are obliged to honestly answer direct questions. So ask: Do any registered sex offenders currently live anywhere in the neighborhood? Do any former registered sex offenders live anywhere in the neighborhood? Tip 7: Sellers: Feel What the Buyer Feels Put your ego aside, sellers. Your for-sale home is no longer about you -- it's about the buyer. So be empathic. What would you expect to see on a tour of a for-sale home? Even though you're essentially marketing brick, mortar and land, the emotional response you elicit in a buyer is often what seals a deal. Neutral colors allow buyers to picture themselves in your house. To appeal to their olfactory pleasure senses, employ the age-old tactic of baking fresh cookies before potential buyers arrive -- then leave them for your visitors to enjoy. Or at least light a candle or two. To convey an inviting atmosphere, de-clutter the place with renewed vengeance, stow away your inexpensive or tattered furniture and box up cherished mementos. Remember that the illusion of space is almost as important as the space itself. Tip 8: Buyers: Keep the Dream Alive After Foreclosure Lost your home to foreclosure? In most cases, that won't keep you from owning another home as far into the future as you likely feared. It's true that a foreclosure can remain on your credit record for up to seven years, but government-backed mortgage guarantors Fannie Mae, Freddie Mac and FHA typically impose just a minimum of just three years before they'll back another home loan -- if your foreclosure was due to extenuating circumstances such as job loss, relocation or illness. Next time, you might be asked for a bigger down payment, as much as 20 percent, and slightly higher interest rates. So start saving now. Tip 9: Buyers and Sellers: Set Your Goals in Writing Certainly you should get all relevant real estate promises in writing, but that's not where we're headed. Keep a log of the entire process of buying or selling a home, including your objectives, home-tour dates, buyer and seller feedback, offers, expenses, contracts, repairs, contractors hired, agent communiques, neighborhood observations, everything. It will give you a clearer picture of what you've done, what you're doing and what to do next. Studies have shown that goals are more likely to become reality if you write them than if you don't. Tip 10: Buyers: Play the Field Don't leave yourself open to heartbreak. Buyers pursuing heavily discounted short-sale and auction homes should research several prospects, because there may be plenty of other suitors. Many a would-be buyer has been left at the altar of lofty expectations after watching another guy or gal swoop up that perfect home at the last minute for just a little more money. Most successful auction winners and short-sale buyers start out by targeting several homes so they won't be left in the lurch if, or when, one deal falls apart. With so many parties involved in these transactions, including brokers, agents, lawyers, loss mitigators, appraisers, lenders, special servicers and inspectors, a lot can go wrong. Some Realtors estimate only about one-fifth of attempted short sales are successful.   11:07 am cst  Monday, January 3, 2011 Hiring the Right Real Estate Lawyer Written for ChicagolandRealEstateLaw.com by Chicago Real Estate Blog Chicago has always been a hot-bed of real estate development and many people and industries invest in the market. When you decide to purchase a property, it is important to know as many aspects of real estate law as possible.  You should collect information on the rules and regulations of purchasing a property and additionally, hiring a real estate lawyer is a necessity. He or she will help you in the whole process as well as give you valuable insights on property taxes and choosing an insurance company.  There are many occasions in which you might need the assistance of a real estate attorney. Purchasing a residential or commercial property is just one example. Other cases might include dealing with a foreclosure or short sale, loan modification, new construction projects or even renovation works on your existing property. Hiring an attorney might not be the most enjoyable thing to do, but in most cases, it is the wisest decision you can make. Some people who already have a personal lawyer choose not to hire a real estate lawyer and that can be a fatal mistake. It is like going to a General Practitioner for a kidney transplant. General practice lawyers know how to handle many simple legal cases but for something specific like a real estate related case, a real estate attorney is the right choice. However, feel free to ask your lawyer about a real estate attorney that he or she recommends. Besides that, you can consult with the Illinois BAR Association. You can even start your search somewhere simple like the yellow pages. Also, there are websites galore with advertisements for real estate law firms. Although finding a lawyer through an advertisement is one option, people’s recommendations are usually the best. So if you have family or friends who have handled similar cases in the past and succeeded, you might want to contact their attorneys. Otherwise, your local real estate brokers or realtor associations can give you suggestions and contact details of real estate lawyers.  Before making a decision on an attorney, you may need to discuss your case with several lawyers from different firms. Three is usually a good number: not too few and not too many. You need a real estate lawyer who is able to give a fair evaluation on the case. If an attorney has experience handling similar cases to yours successfully, that’s definitely a plus. Another important thing factor is your comfort level in communicating with potential lawyers. Talking about fees during your initial consultation is not taboo because you need to determine your budget. When you finally agree on one real estate attorney, review your contract carefully and thoroughly before signing anything. It may seem like  common sense, but some people forget to do that when they are trying to rush through a deal. If you think there is something on the contract that needs to be changed or modified, tell your real estate lawyer immediately.  If you have a case that eventually leads to a courtroom, you need to remember that no matter how expensive, experienced or famous your real estate lawyer is, no one can guarantee the victory. Everything depends on the court, judge, juries and how you and your attorney present the case. Nevertheless, your chance of winning is bigger when you hire a highly experienced real estate lawyer. 3:51 pm cst

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