MARKET UPDATE - NOVEMBER 2009

LOST IN TRANSPARENCY

There are big changes coming to the mortgage industry starting January 1st, 2010; most at the cost of the borrower.

In an attempt to add “transparency” and increased disclosure to the borrower in a mortgage transaction, HUD has officially implemented the new 2010 Good Faith Estimate. Please hold the applause. And what goodies will the borrower get with the new 2010 Good Faith Estimate:

1. A new and improved 3 page Good Faith Estimate adding two more documents to read. The old 1 page document that clearly listed fees, rate, payment, and cash to close was just too confusing for those that didn’t complete grade school.

2. Have your pencils ready. The new Good Faith Estimate has a scratch pad were you can compare rates and fees from different lenders; or just doodle. Simply putting different Good Faith Estimates from different lenders side by side was too complicated.

3. Your monthly mortgage payment is in bold print. The payment will include principle, interest, and any mortgage insurance. However, the payment will no longer disclose property taxes, homeowners insurance, or HOA dues. TOO much information. The disclosed monthly payments in bold will now leave the borrowers feeling warm and fuzzy because it appears so low. Surprise; it is.

4. And finally, HUD didn’t want to burden the borrower with knowing how much money they would need at closing. Keep your pencils out; you will have to do the math yourselves.
The new HUD approved 2010 Good Faith Estimate will be disclosed by a mortgage company near you starting January 1st, 2010. Also, changes in yield spread premiums are likely to be implemented come January 1st, 2010 which will ultimately lead to higher fees to the borrower. The anticipation must be killing you.

1ST TIME HOME BUYER TAX CREDIT ENDS NOVEMBER 30TH

Reminder: The $8,000 first time home buyer tax credit ends November 30th, 2009. Although there are talks of extending the deadline, at this point in time, if you are not under contract by months end, you will not likely make the deadline.

SO SORRY – “DENIED”

“This is ridiculous; I could pay for the house in cash. Banks send me credit offers everyday; there must be a mistake. I have bought many homes in the past without any problem. But I have an 800 credit score. Who cares what my tax returns show my income is; it just appears low because of business deductions and write offs. How does anyone think the housing problem is going to get any better if I can’t even get approved?”
Today, lenders are approving some borrowers with questionable credit scores and low down payments, and declining others with large down payments and high credit scores. The reason for this is government intervention and the elimination of “make sense” underwriting. Although many would argue that “make sense” underwriting has been gone for some time; thus the lending mess we are currently in.

The fact is that one third of all home mortgage applicants were denied in the last year. The rate of mortgage application denials was up 29% from 2006 when approvals peaked at their highest levels. Denial rates were double for African Americans and Hispanics as they were for Whites. – The Associated Press

In December, Fannie Mae will be tightening its automated underwriting system (Desktop Underwriter) once again, further tightening debt to income allowable limits. Currently Desktop Underwriter will issue approvals with debt to income as high as 55% with compensating factors. It is rumored that this will be lowered to 45%. Some industry insides believe that is will increase denials as much as 20%.

OFFICE VACANCIES SKYROCKET

“U.S. office vacancies rose to a five- year high in the third quarter, as job losses deepened and employers abandoned space in the recession, property research firm Reis Inc. said. Vacancies climbed to 16.5 percent from 13.7 percent in the year since Lehman Brothers Holdings Inc. filed for bankruptcy, New York-based Reis said in a report. Effective rents, the amount actually paid by tenants, fell 8.5 percent, the biggest year-over-year drop since 1995.” - Bloomberg

In Arizona, office vacancies reached 25%. In Phoenix, office vacancies are at nearly 40%.

FHA NEEDS A BAILOUT
 The Federal Housing Administration, the U.S. agency that insures mortgages with low down payments, faces $54 billion more in losses than it can withstand, a former Fannie Mae executive said. “It appears destined for a taxpayer bailout in the next 24 to 36 months,” said Edward Pinto, a consultant who was chief credit officer from 1987 to 1989 for Fannie Mae. The FHA program’s volumes have quadrupled since 2006 as private lenders and insurers pulled back amid the U.S. housing slump, a trend Pinto said has left it backing risky loans and exposed to fraud in a “market where prices have yet to stabilize.” – Bloomberg

FORECLOSURES HIT A RECORD HIGH

Reports in the third quarter show foreclosure filings at an all time high with Nevada once again leading the charge.

"They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes. During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008. – CNNmoney.com

“A study of the trend by the Chicago Booth School of Business and the Kellogg School of Management determined that when home price declines drop home values 10% below the mortgage balances, people start to give up their homes. When "negative equity" approaches 50%, 17% of households default, even when they can still afford their mortgage payments.” – CNNmoney.com

INTEREST RATE UPDATE

30 Year Fixed: 4.750% APR: 4.882%
15 Year Fixed: 4.250% APR: 4.476%
5/1 ARM: 3.625% APR: 3.671%

Call today for your individual scenario rate quote.

*Interest rates as of 10/21/09. 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. Rates and payments on 5/1 ARM will adjust up or down after 60 months based on current index at that time. 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
Mortgage banker / Broker licensed in:
AZ: BK-0910215, CA: 603G564, CO: LMB100021691, ID: MBL6976, MN: 40095265, NM: 3693, NV: 3195, OR: ML4799, WA: 510-MB-49323, WI: 700475
Geneva Financial,LLC NMLS License: 42056
Loan Officer NMLS License: 15420

PARTNER
Geneva Real Estate & Investments, LLC
Real estate brokerage licensed in AZ, CA, WA
http://www.greiusa.com/
Office: 480-368-2000
Email: aaron@genevafi.com

EMPLOYMENT OPPORTUNITIES

MORTAGE CONSULTANTS
Geneva Financial, LLC now hiring mortgage consultants in the following states: AZ, CA, NV, OR, WA

REAL ESTATE AGENTS & BROKERS
Geneva Real Estate & Investments, LLC is now hiring real estate agents in the following states: AZ, CA, WA. Hiring real estate brokers in all states.