Fannie Mae Has Paid You Back!

The Fannie Mae headquarters stands in Washington, D.C. Photographer: Andrew Harrer/Bloomberg

The Fannie Mae headquarters stands in Washington, D.C. Photographer: Andrew Harrer/Bloomberg

Alright, maybe they haven’t paid you back directly.  They have paid pack the US Government.  The Federal National Mortgage Association, or Fannie Mae as it’s more commonly known is a government sponsored enterprise (GSE).  It was founded in 1938 during the great depression as a part of the new deal.  Its purpose is to securitize mortgages made by lenders and turn them into mortgage backed securities.  This allows lenders to free up additional capital to make more loans.  This, in theory, allows for greater home ownership.

In 2008, Fannie Mae was on the brink of bankruptcy.  The mortgage meltdown had weakened the mortgage giant and its stock plummeted 90%.  They, along with Freddie Mac (another GSE), owned about half of the $12 Trillion mortgage market.  On September 7, 2008, it was announced by James Lockhart, director of the Federal Housing Finance Agency, that the Federal Government would take Fannie Mae into conservatorship.  Basically, they took control of the company.  By the end, the Federal Government (you and I) would bail Fannie Mae out to the tune of $189.5 billion.

Now, the good news; as of the fourth quarter of 2013, Fiannie Mae has repaid the entire debt bailout amount and then some.  With an annual record setting income of $84.8 billion in 2013, they were able to pay back the remaining balance of their federal loan.  More specifically, they have paid back $192.5 billion dollars to the federal government to date.  This is good news for the economy and the housing market.  While I don’t prescribe that everything is back to normal with the economy writ large, I’m optimistic.

Most people tend to put a lot of the blame on the banks for the housing meltdown.  I understand this belief and agree to some extent.  Fannie Mae is certainly guilty as well.  But, people should place blame on the department of Housing and Urban Development (HUD).  HUD changed the requirement for affordable housing loan percentages.  This was a prime factor in the mortgage meltdown.  At one point, HUD required 56% of loans to be considered affordable housing loans.  This lead to Fannie Mae (and Freddie Mac) established programs to buy $5 trillion in mortgages and encouraged lenders to relax standards.  This encouragement, in a sense, created a race to the bottom and would feed the drive for lenders to come up with any way possible to qualify people for mortgages.   These methods included, among others, the use of no-doc, ARM, negative amortization (NegAM), and no money down mortgages.

We all know what happened next; the worst mortgage meltdown in history. While their intentions may have been good, the real world impact of these policies and decisions were devastating.  In this case, it created a mortgage feeding frenzy that would end in disaster.  I’m thankful that today things are returning to normal and Fannie Mae has paid back the Federal Government, i.e. the US tax payers.

Please comment below.  Is there anything you disagree with or think I missed?  Please let me know.

New Year…New Rules For Getting a Mortgage. Joy!

shutterstock_80134762-600x401

Image Credit: shutterstock

Oh joy.  We’re well into the second month of 2014 and the new rules created by the Consumer Financial Protection Bureau are in full effect.  This agency was created under the Dodd-Frank Act to ban, among other things, the practices that many lenders employed leading up to the housing bubble burst in 2008.

The CFPB also created a new class of loans called Qualified Mortgages (QM).  In order for lenders to meet the criteria of a “qualified mortgages”, the loan can’t be interest-only and negatively amortizing.  Also, the amount of points, fees, or prepaid interest on the mortgage must not go above 3% of the loan’s value.  In addition, the loan’s loan amount cannot exceed a total debt-to-equity income ratio of 43%.  (That’s your total debt payment amounts which includes all recurring monthly obligations that affect your ability to repay).  Finally, balloon payment loans and anything over 30 years does not qualify either.

So what’s the lender get from all of this new rule-following you ask?  Good question!  If a mortgage lender follows the criteria and meets the standards of a qualified mortgage, then they are basically freeing themselves from liability claims under the Truth in Lending Act (TILA).  Consumers won’t be able to use the ability-to-repay defense against the lender.  In other words, if the lender meets the QM criteria, they’re placing themselves in a “safe harbor” and consumers won’t be able to sue the lender if they default on the loan.  Sounds good, right?  Okay, maybe you don’t really care about the lender that much.  It is something to keep in mind before pushing the limits on those payment amounts.

An interesting question is about the necessity of these rules, or for that matter the necessity of another bureau to “protect” us.  Lenders already started implementing these kinds of standards before the CFPB rules went into effect. (You probably know this already if you applied for a loan last year).  According to the CFPB’s own publication, 95% of current mortgages already meet this criteria  Whether lenders changed their guidelines in anticipation of these rules or if they were just prudent business decisions can be debated, but the fact still remains.

So really, there won’t be any dramatic change in the way lenders currently operate and the way you apply for your next loan.  The biggest changes may come to the way some full service companies where real estate agents, brokers, title agents and mortgage brokers are all working together.  It may be difficult for them to keep their total fee amounts below 3%.  It will be interesting to see how (if) the CFPB addresses this.  Time will tell.

There’s a lot to this.  If you have any thoughts on the new rules, or questions, post them below.  I’ll do my best to answer them or at least point you in the right direction.  Don’t agree with me?  Please let me know why by commenting.  Thanks for reading.

Is the mystery of your credit stopping you from shopping for mortgage rates? No? Maybe it should be!

credit-score-meter

It’s absolutely something that every prospective home buyer should think about.  “What’s my credit score?”  And, more importantly, how’s is it going to affect your credit score?  What’s in your credit report?  Is that Old Navy card you signed up for in college still in there?  Knowing these things makes up some of what you should know before you sit down to check your mortgage rates.

First off, I’m not saying you shouldn’t sit down with a licensed mortgage lender.  They are good at what they do.  What I am saying is that you should know what they’re going to find in your credit report before they do.  By this I mean that you should have already checked your credit reports and scores from all three major credit reporting agencies (TransUnion, Equifax, and Experian).

Every time a lender checks your credit report they do what’s called a “hard inquiry.”  The record of that inquiry goes into your credit report.  It’s unavoidable and too many hard inquiries can have a negative effect on your credit.  (What the!?)  And to top it off, your credit report, once pulled, will only be usable by a lender for a short period of time (usually 90 days).  It can potentially take longer than this to fix any errors that may be found.

So, here are some suggestions for what you should do BEFORE you sit down with a lender:

  1. Get a copy of your 3-bureau report and scores.   You can do this for free (really, free, no sign-ups or cancellations) at Credit Karma.  They will provide you with your 3-bureau report and scores.  The numerical scores provided will be your “Trans Union” and “Vantagescore” credit scores.  This is important to know because most lenders use FICO (Fair Isaacs Company) scores, which will most likely be different.  It’s nothing to worry about, bit it is something to keep in mind.  Click here if you really want to know the differences in the scoring types.  The main point is to get your credit report and review it for errors and accuracy.
  2. Dispute and correct  errors, incorrect information, or accounts that aren’t yours.  You must do this with your reports from all three credit reporting bureaus.  Remember, under the Fair Credit Reporting Act (FCRA), you have rights as a consumer about what’s in your credit report.  This includes having incorrect or false information fixed or removed.
  3. If your have negative, but accurate, information (like missed payments, collections or charged off credit cards) then talk to the company reporting the information to the credit bureau and ask them about removing it.  Many are willing to negotiate with you.  Please remember; if you elect to pay off a collection, get it in writing first that they will remove it from your credit file.
  4. Dispute inaccuracies, remove negative accounts, and input notes about anything that may be negative like a collection or charge off.  You can have copies of disputes and explanatory notes about accounts added to your credit report.
  5. If you get some push back from companies about the information they are reporting, don’t give up.  Be persistent, be friendly, and remember that you have options.  Repairing your credit file is a process.  It can take time.

By no means is this list all comprehensive.  The basic point is that you don’t want to go into the lending office blind.  Know what lenders are going to see.  Print out and carry a copy of your report with you.  There’s a lot to credit and it can become complicated.  As a stroke of good measure, it’s always a good idea to check your credit report regularly.  You can also do this through Credit Karma.  It’s a good way to stay ahead of problems so that you don’t’ have to scramble last second when it comes time to buy your next (or first) home.

This credit stuff can get complicated.  Please post any questions you may have below or send me an email.  I’m happy to help.  Cheers.

Spring is almost here…well not quite, but does that mean it’s time to buy a new home?

home-prices-300x224Alright, so spring isn’t quite here yet, but it’s around the corner.  That means that home buying starts to ratchet up. The weather warms, it doesn’t hurt to roll down your window at the Starbucks window, the sun is out more than nine and a half hours each day and you just want to fork over $150,000 or more on a new pile of bricks.  Of course you do but you may be wondering if right now is the perfect time.  What if next week the weather is a degree warmer?  What if interest rates are a fraction lower in a month?  What if home prices go down? What if, what if?

Let’s start by talking about the market a little.  Right now the median closing price of a single family home in Washoe county stands at $232K.  That’s the median close price, not the listing price.  The median listing price stands almost $100K above that at $330K.  These closing prices represent an average $30K increase year over year from January, 2013.  Does that mean prices are too high?  Maybe, maybe not.

Here’s the good news if you’re a looking to buy; there were only 379 homes sold in January, 2014.  These numbers are close to the market numbers of January, 2010.  This represents a good opportunity for homebuyers.  Lower numbers of homes sold coupled with a relatively high number of homes listed (781) may mean a favorable market for buyers.  But, remember that the string of cold weather could have played a part in this and been some of the reason buyers are holding out.

Should you start looking now?  If you can stand the cold, yes.  Interest rates on a 30–year fixed mortgage still stand at 4.48%.  Historically, that’s still very low.  That’s lower than they were in the beginning of 2011. I make this point because I cringe when people get too hung up on rates and stay glued to the internet waiting to see if the rates will tick up or down a couple base points.  Don’t do that.  We’ve be spoiled over the last several years with interest rates.  They’re still low enough.  If you want to buy a home, then pay off some credit card debt, keep putting into the savings account and forget about the new 75” LED TV (for now).

While demand is lower, it doesn’t mean that prices will drop.  It does mean that you should get out there and take advantage of sellers who may be getting desperate and buyer “competitors” (of yours) staying in and not making offers.  Thanks for reading and please take the time so sign up to receive updates or comment below.  Cheers.

Hello and welcome to the newest premier real estate blog online!

4913171-home-for-sale-real-estate-tablet

Hello everyone and thank you for visiting my site.  I’m truly excited for this opportunity to share with the world my love and passion for all things real estate.  I’m bringing my knowledge and experience from years of following the industry, attending seminars, completing live courses, completing at-home study courses, and talking/networking with other real estate insiders, industry leaders and investors.  I have spent well over $100,000 to date on my quest to figure out the world of real estate and to learn as much as possible from as many points of view as possible.  That’s how crazy I am about this stuff.

I’m also a proud co-founder of Soaring Property Solutions, Inc., a real estate solutions company in Reno, Nevada that provides help and answers to home buyers and sellers.  We specialize in our ability to purchase homes from people who are stuck in situations that would make most real estate agents turn and run.  When traditional financing can’t be used because of the homes condition, a cloudy title, tenants in place, or anything else that may make “going the traditional” route difficult or impossible, we can help!  If you want to sell a home quickly without hundreds of strangers passing through and judging your home, we can help!

I work with a national network of real estate industry insiders, investors, rehabbers, buyers, sellers, and lenders.  This puts me in a unique situation to provide you with the information, answers and solutions you need.  This site will serve to be my voice online.  It’s my way of passing it forward and sharing with you all that I know and continue to learn.   Let this site serve as your focal point for real estate news, market information, trends and opinions.  I’m excited to share with you and provide content that will help you, entertain you, answer your questions and maybe even save you some time and money.

Please click on the right to follow me and receive updates.  The information posted on this site will be informative and interesting.  Check back in the following days and weeks for updated original content, news, and opinions.  Also please consider emailing me or leaving a comment.  I always appreciate open discussion and look forward to hearing from you.  If there is anything specific you would like to see, please don’t hesitate to share your thoughts.  I want this blog to be the go-to blog in Northern Nevada Real Estate!

Do you have a house that you are trying to get rid of?  Are you looking for answers or interested in hearing what Soaring Property Solutions can do to help?  Let me know and I’ll custom tailor a plan that fits in with your unique situation, timeline and desires.  Facing bankruptcy, probate, divorce, or are you relocating?  Call us today, we can help!

LightHouse Logo 04