MARKET UPDATE - SEPTEMBER 2009

1ST TIME HOME BUYER TAX CREDIT

Reminder: The $8,000 first time home buyer tax credit ends December 1st, 2009.

DON’T SHOOT THE MESSENGER… OR LOAN OFFICER

Despite what you may be reading or watching on the news these days, banks ARE lending money. Lending guidelines have gotten tighter and you will now be required to put more money down and verify income to qualify for a home mortgage (not yet requiring a blood sample or rights to your first born), but if you qualify money is readily available. So what is the problem?

1. Government
The banking and lending industry has already self regulated itself over the past few years by requiring borrowers to verify income, put more money down, etc. The government, slow to react is now implementing new regulations that seem to only create delays and increased costs that inevitably roll down to the borrower. The Home Valuation Code of Conduct (HVCC) is viewed by most in the industry as a total disaster. Mortgage Disclosure Improvement Act (MDIA) which allows the borrower three extra days to review a document they will not likely understand regardless of timeline has the potential to add to closing turn times.

2. Fannie Mae & Freddie Mac
The two now controlled government mortgage giants are increasingly critical of the mortgages that they will purchase. Banks and lenders that sell to Fannie and Freddie in turn have to scrutinize the loan files in underwriting so they do not get stuck with unsellable loans. This stringent underwriting is also being applied to government FHA and VA mortgages. What does that mean to the customer; slower underwriting turn times and you will be conditioned to death. Be prepared to document and disclose everything.

3. Bank Failures
On August 14th, Colonial Bank collapsed. On August 22nd Guaranty Bank was seized by the FDIC. Both of these institutions were major players in warehouse lending; which means they provided lines of credit to mortgage banks to fund loans with. This will inevitably slow turn times for many lenders as they lose lines once provided by Colonial Bank and Guaranty Bank.

Earlier in the month, Taylor Bean and Whitaker, one of the nation’s largest mortgage banks, failed. When the bank announced it’s closing, it orphaned tens of thousands of loans. If you were unfortunate enough to have a loan placed there when it failed, you got to start all over again with the process. All those orphaned loans needed new homes, which inundated an already overwhelmed system with new loans; that needed to fund yesterday. Banks are just not prepared to handle the volume.

81 FDIC insured banks have failed so far in 2009.

Conclusion
When your loan officer asks for condition after ridiculous condition, and you seem to hit every speed bump in the road, please do not shoot the messenger. Loan officers are not trying to make your life miserable with ridiculous demands and conditions. Loan officers do not write laws that slow an already inefficient industry. Loan officers can not predict bank failures. And loan officers only get compensated for their efforts when your loan funds. If you are working with a competent and experienced loan officer, these issues are not their fault. The process is as equally painful for us, and we choose to do this everyday. Have patience. Provide requested documentation in a timely manner. Do not schedule the movers until you fund. Remember, everyone wants your loan to fund; and it will.

THE HOUSING MARKET TURNS

“More Americans signed sales contracts to buy homes in June than in May, the fifth consecutive month of increases. The National Association of Realtors said its Pending Home Sales Index rose 3.6% during the month. That was 6.7% higher than June 2008. It was the fifth straight month of increases, the first time that has happened since July 2003.” – cnnmoney.com
Sales of existing homes rose in July for the fourth consecutive month. According to the National Association or Realtors home sales were up 7.2% from June, which was the largest monthly increase on record.

The consumer needs to keep in mind that these are National figures. Hardest hit areas such as California, Arizona, and Nevada will likely see the fastest turn around as long as unemployment does not put continued pressure on the housing market. Phoenix is already experiencing a new housing boom. Las Vegas housing recovery is still combating the casino business downturn. Many states are just now experiencing drastically falling home values and will not see signs of recovery for some time.

FORECLOSURES SURGE

Foreclosures are up 32% from July 2008, with a reported 360,000+ new foreclosure filings. “In fact, one in every 355 U.S. homes had at least one filing during July. July marks the third time in the last five months where we've seen a new record set for foreclosure activity.” - RealtyTrac

Top Foreclosure States (based on foreclosure filings in July 2009):
1. Nevada 1 in 56
2. California 1 in 123
3. Arizona 1 in 135

THE SHRINKING SUPPLY OF CREDIT

Colonial Bank was the largest remaining player in warehouse lending. Warehouse lenders provide short-term financing to mortgage bankers. On August 14th, Colonial Bank collapsed. Days later on August 22nd, Guaranty Bank, another major warehouse line provider, was seized by the Federal Government at a cost of $3 billion to the FDIC. Guaranty Bank is the 11th largest bank collapse in US history, and the 3rd largest of the year. It was not long ago that these mortgage bankers originated more than 50% of all U.S. home loans using lines of credit provided by warehouse lenders.

“Today, the warehouse lending market is decimated. In 2007 it was worth an estimated $200 billion; now there is just $25 billion available -- 25% of which belongs to Colonial. With Colonial's failure, those funds could become even scarcer.” – Bloomberg

INTEREST RATE UPDATE

Mortgage Type Interest Rate APR

30 Year Fixed 4.750% 4.882%
15 Year Fixed 4.250% 4.476%
5/1 ARM 4.000% 3.807%

Call today for your individual scenario rate quote.

*Interest rates as of 08/25/09. Conforming interest rates. Not applicable for FHA and VA loans. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 740+ credit score. Owner occupied only. ARM Margin: 2.25% ARM Caps: 5/2/5 ARM Index: 1 Year LIBOR. Purchase and rate in term refinances. Not all applicants will qualify.


For any additional information, call or email me at any time.

Sincerely,

Aaron VanTrojen
President
Geneva Financial, LLC.
Office: 480-368-2000
Email: aaron@genevafi.com

Geneva Financial, LLC is a mortgage banker / broker licensed in: AZ, CA, CO, ID, MN, NM, NV, OR, WA, WI.