MARKET UPDATE - MARCH 2010

WHERE DID MY MORTGAGE BROKER GO

Not to worry, some of us are still here. I just returned from Washington D.C. in an attempt to do my part to make sure we will always be here.

The National Association of Mortgage Brokers (NAMB) had its annual national conference in Washington D.C. to rally the troops and lobby our Representatives to help support small business; i.e. your local mortgage broker. The showing was strong, although our numbers were down to a few hundred verses a few thousand of years past. Why do you care? Because, the decisions that are being made in Washington today will change the way you finance real estate now and in the future.

There were a numbers of things that were made clear.

1. The Department of Housing and Urban Development (HUD) supports the future of small business and your local mortgage broker. Ivy Jackson, the Director of the Office of RESPA and Interstate Land Sales (HUD) stated that mortgage brokers offer one of the best vehicles to bring product to the market and will continue to be competitive in this mortgage environment. She stated that brokers currently deliver 50% of all FHA mortgages. This statement may seem contradictory to HUD’s recent implementation of the new Good Faith Estimate, HUD-1, and changes to Yield Spread Premiums, which at first was viewed by those in the industry as another nail in the mortgage broker’s coffin. Two months after the implementation of the HUD rule and the greatest RESPA reform since its inception, mortgage professionals now know that it has not effected compensation or our competitiveness in the marketplace.

2. HUD is not going to raise the minimum down payment for FHA mortgages from the current minimum 3.5% to 5% as had been originally discussed. HUD determined that the default rate is not considerably higher with 3.5% down verses 5.0% down and that raising the down payment would create an unnecessary barrier for many first time home buyers. In an attempt to increase FHA reserves the upfront mortgage insurance premium that is rolled into the base loan amount will be increased from 1.75% to 2.25%.

3. Paul Mondor, Senior Attorney, Division of Consumer and Community Affairs (Federal Reserve Board) spoke and participated in a Q & A session regarding the FED proposal and its potential to change broker / banker compensation. It was apparent that the FED is disconnected from HUD policy and the mortgage process at the ground level. I will not bore you with details, but much of what Mr. Mondor said contradicted HUD policy and was either inaccurate or flat out not true with regards to how mortgages are originated and how small businesses generate revenue. The general feeling was of unease due to the fact that such individuals are making policy changes that have the potential to affect so many small businesses and so many homeowners. The FED needs to not overstep its authority and let the new RESPA reform implemented by HUD run its course. To date the majority of reform (i.e. HVCC, MDIA, HUD Rule), although long over due in some form, has come at a cost to the borrower.

4. On December 11, 2009, U.S. House of Representatives passed HR 4173 which has been labeled the “most significant reform of the U.S. financial system since the New Deal of the 1930’s.” Although there are a number of important aspects of this bill, one part eliminated mortgage options to the consumer and ultimately would hurt small business owners. With regards to mortgage origination, this bill would have potentially given Big Banks an unfair advantage over smaller mortgage brokers and bankers. It appears that this bill has been squashed by the Senate. The House and the Senate’s inability to agree on anything have proved to be a small victory for small business and the homeowner.

5. The National Association of Mortgage Brokers (NAMB) is not the National Association of Realtors (NAR) or the National Riffle Association (NRA). The NAMB does not have the political might of the NAR or NRA. Although I knew this going in, it was the first time of experiencing it first hand; money equals power in politics. I am confident that our lobbying efforts had an impact, although it would have been nice to have a war chest full of cash to buy their attention. For right or wrong, that is how things get done in Washington. Instead of meeting with staffers just out of college, we would have been talking directly to the Representatives who we voted into office; and who we can vote out of office.

In 2006 during the height of the mortgage industry and housing boom, mortgage brokers accounted for 65 percent or more of all mortgages. Today that number is estimated at just over 15 percent. The reason for our past dominance in this industry is that we have more options than the Big Banks. We have access to dozens of different lenders that have a diverse appetite for different types of loans, property types, and borrowers. Sweeping mortgage reform and regulation, a lot too late, has had an adverse effect on the industry as a whole, felt most by under capitalized banks, and small business mortgage brokers.

This year the mortgage broker will attempt to mount a comeback. Despite all that still stands before us (i.e. New HUD rules and the FED intervention) we still have the most diverse options of mortgage products. We still offer the most competitive rates and fees. The S.A.F.E. Act mandated that all loan officers and mortgage brokers not working for a FDIC insured bank had to go through classroom mortgage education, take a state and national test, and be licensed. Loan officers at Big Banks do NOT. Mortgage brokers are and will continue to be faster, more diverse, less expensive, and now smarter than the Big Banks.

Thank you for your continued support of small business owners, and your local mortgage broker.

FORECLOSURE ROLLERCOASTER CONTINUES
Foreclosures in January posted a 15% increase over last year with over 300,000. – cnnfn.com

Government programs and loan modifications have been slow at best to help homeowners who are under water or unable to make their mortgage payments actually save their homes from foreclosure. 25% of all homeowners currently owe more than the home is worth. RealtyTrac estimated that the number of bank owned properties may rise this year to over three million.

WARNING OF RISING INTEREST RATES
The Federal Reserve in an aggressive move to help stabilize the housing market has been buying mortgage backed securities since 2008, to the tune of over a trillion dollars in mortgages. The by product of this action has kept mortgage interest rates at near all time lows.

This month the FED has stated that it will stop purchasing mortgage backed securities.
Who is going to take the FED’s place? For the past couple of years institutional buyers of mortgage backed securities, i.e. private investors, Wall Street, hedge funds, and foreign governments have been hesitant to jump back into mortgage back securities due to the unstable U.S. housing market. Although it is uncertain who will purchase all the mortgage back securities now that the FED is pulling out of the position, one thing is certain; without buyers rates will likely rise.

HOMEBUYER TAX CREDIT ENDS SOON

To take advantage of the homebuyer tax credit, buyers must be under contract by April, 30th, 2010. The home must also close by June 30th, 2010 to qualify.

INTEREST RATE UPDATE

Mortgage Type Interest Rate APR

30 Year Fixed 4.625% 4.759%
15 Year Fixed 4.125% 4.335%

Call today for your individual scenario rate quote.

Interest rates as of 03/01/10. 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%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. For any additional information, call or email me at any time.

MARKET UPDATE brought to you by:
Aaron VanTrojen
PRESIDENT
Geneva Financial, LLC
Mortgage Banker / Broker licensed in:
AZ: BK-0910215, CA: 603G564, ID: MBL6976, NM: 3693, NV: 3195, OR: ML4799, WA: 510-MB-49323
Geneva Financial, LLC NMLS License: 42056
Loan Officer NMLS License: 15420

www.genevafi.com

PARTNER
Geneva Real Estate & Investments, LLC
Real estate brokerage licensed in AZ, CA, WA.
http://www.greiusa.com/ / www.genevare.com

Office: 480-368-2000
Cell: 602-793-6383
Email: aaron@genevafi.com