To answer the former, jobs numbers, Europe, corporate earnings, and other factors have all helped rates. The problem is that the uncertainty of economic problems worldwide creates additional  volatility , so the extremes are exaggerated a bit. Best advice is to not chase 1/8 in rate but instead focus on  choosing the right lender and program for your needs.

Several prominent experts recently commented on how tight lending has become . I’ll concur that lending is tighter than it was a decade ago , but back then, anyone could get a loan. Most experts agree that there is more documentation , more paperwork , and  more verification required now , and that is causing loans to take longer to settle.

Moreover, many are blaming Dodd-Frank and the uncertainty and ambiguity contained therein. Big Banks and non-bank lenders are hesitant to think outside the box to help a consumer and get penalized years from now. Regulation is needed but over- regulation will stymie any progress. For example, in the 90s and early 00s, it was common for lenders to accept contractual language requiring them to repurchase loans if values dropped by 10% of the appraised values. During the housing boom, greed and/ or apathy allowed many to agree thinking”How can values drop”?

The language was there to curb abusive valuations , so some focused on the fact that they only utilized experienced appraisers. Few, if any, predicted the housing fallout or the massive buybacks that followed. The point is: many lenders went under or suffered losses for the buybacks from this one rule, though it wasn’t about fraud. That wound is still fresh, so until exact language is enacted on many areas, expect more delays, over- verification, and stressed out mortgage processors.

While the jobs numbers are not encouraging, mortgage firms are hiring. The drop in rates, improvement to HARP for underwater borrowers, upcoming improvements to FHA refinancing and home buying rebound have physically and mentally taxed underwriters, processors, loan officers and consumers .
Many firms are staffing up. In fact, big banks are cutting jobs and non- bank lenders are adding quality people. Good news for lenders and consumers alike.

So to all the mothers out there, Happy Mother’s Day. And if you know a mortgage processor, underwriter, loan officer, etc that is also a mother, give them an extra hug and thanks. You have no idea how much they will appreciate it!

As the housing market turns, expert agents are marketing homes properly and selling homes quickly. In some cases , in a matter of days and even obtaining multiple offers . Moreover, marketed correctly, some are getting more than the list price!

However , with the wrong agent, the home is ignored and the seller has to reduce the price simply to get attention. As homes sit, they become seemingly tainted , as some buyers think that the home is undesirable. ” We picked an agent that was recommended by a friend. She was friendly when we signed to list but we never heard from her again . The home never had a single showing and she didn’t invest a nickle in marketing. Once the contract expired, we hired another agent after significant research and the home did sell “, explained a couple from York, Pennsyvania that asked to remain anonymous since the agent is a close relative of their friend that recommended the agent .

But here is where sellers misjudge the importance of the right agent: The reason that they are selling is usually to buy elsewhere. When a person writes an offer to buy , they list a contingency clause about selling their home. Some will accept as is; some will ask for a “kick out clause”- if another buyer makes an offer, you have a set time, usually 24-48 hours, to remove your contingency or lose the deal. Some may not accept your offer.

Now, if you have not sold your home yet, do you think you will in 24 hours? Will your lender approve you if you can not sell and have to rent? Are you handcuffed from buying until you sell? From this perspective, it is easier to see the importance of choosing the best agent for your situation. ask for references from your agent but investigate on your own. The internet is an easy way to find past clients and to see how long the homes lingered or how quickly they sold. Your lender is another reference point. Ask the agent how much money they plan to invest in marketing your home and how they plan to market. And ask for a breakdown of what you will net from the sale in various scenarios .

Ryan Humphry, a Maryland developer, says that he accepts offers with contingencies in his homesites but he sees cases where the homeowner loses the chance to buy because their current home doesn’t sell. He usually advises them to find a new agent and to buy a home to be built in his development.

Selling a home and buying another one can be stressfull, especially when trying to meet imposed deadlines. The right realtor can mitigate that stress and help you turn it into an enjoyable experience. Do your ” home work” when picking the realtor and you will increase your odds of acing this test.

Housing is rebounding , although a dozen different studies came out this week offering varying conclusions. Ome state housing has bottomed ,but prices are in decline. Others say we are about to bottom and prices are rising. Still others state that housing is dropping. Potential buyers and sellers are confused by the conflicting data, but realize that these are national studies. Ask you realtor or lender for a localized snapshot.

Entry level buyers are an important factor in housing. Congress, however, continues the pattern of allowing important items to reach the 11th Hour , creating more uncertainty and thus hurting the economy. Student Loans are in the news as the rate set by Congress in 2007 is set to expire and almost double this July.

The Millennials- today’s twenty somethings, are needed to continue housing’s rebound. Wondering if your student loan payment is about to jump is not going to cause them to consider housing. Moreover, according to The Treasury Department, the unemployment rate for those 18-29 is far above the national average, coming in at 12.4%. Add in an average of $45,000 of credit card, auto and student loan debt , it is easy to understand their fears.

Financial Literacy scores are dropping and three fewer states require a Financial Literacy course in order to graduate, with only 13 states in that category now. My guess is that Congress will address student loans before the expiration date, with either a short extension and/ or a graduated increase. Alienating voters, especially young ones, is not how one gets re-elected.

And, student loans are not the only item about to expire. Flood Insurance needs Congressional approval for funding and that is set to expire in late May. As we inch closer to that date, lenders will start suspending loans that require flood insurance causing a huge traffic jam and detour on the housing highway. Sadly, our elected officials seem to allow this every time that flood insurance is set to terminate.

I am still bullish on housing, but with a long term bias. Refinancing activity is helping consumers with monthly savings and that spending is important to any recovery. Remodeling is near an all time high, also adding to the idea of stabilization in housing. There are still strong headwinds aiming to steers off course, so a little action from DC is needed, and well before the last minute.

If you have student loan debt, plan as if it will increase. If it does, you are ready. If it doesn’t, you should apply the apportioned extra towards your bills. It sounds painful, but that is a financially literate action. If you are refinancing or buying a home that requires flood insurance, you should act quickly to avoid being the one left standing as Congress plays musical chairs .
If you are an elected official, consider learning how to operate the reminder feature on your smartphone’s calendar.

Diedra Shaffer, a 15 year lending veteran from Maryland shared a story about a client that had 5 different jobs in six years. Not unusual, given the employment market, but what caught her eye was the paystubs. The withholdings seemed out of the ordinary for the pay scale, so she requested written verification of the employment.

That request was always met with various excuses as to the delay. More due diligence exposed serious concerns so she explained to the borrower why he needed proof to move forward which resulted in an obscenity filled demand to assign loan case number to another lender. That lender somehow ignored the obvious and funded the loan.

Out of curiosity, Diedra looked up the loan four months later and discovered that her decision was correct- that borrower made one payment and defaulted! Taxpayers lose again.

Another loan officer shared a story of a couple looking to buy a single family home and rent their town home. They were already “approved with a lender where their friend” is a loan officer but their realtor encouraged them to get a second opinion. Sage advice!

Their friend issued an approval letter without reviewing their income ,despite over 2/3s of it from a self employed business. The second lender requested and reviewed tax returns and explained that after the deductions, the adjusted income was no where near enough to qualify or the purchase. Sadly, based on their friend’s advice and bogus approval, they already accepted an offer on their town home.

These examples illustrate both consumer fraud and lender negligence. They also demonstrate the importance of selecting experienced professionals for your realtor and loan officer. As rates remain low and housing trends positive, enthusiasm can be a breeding ground for problems. Ask questions; interview your lender and agent ; and remember the old adage : ” If it sounds too good to be true……”

On April 1,2012 , FHA implemented a rule that required all borrowers with  $1000 or more in collections to pay off the collections in full compared to paying the collections down. Under the guise of improving their bottom line, FHA assumed that this was a good idea. Outcry was fast and furious, so FHA relaxed the rule to allow an exception to be considered if the borrower provided a written explanation of a ” life event”  as the cause of the collection.

Now, some will argue that those with collections are higher risk, etc. However, the problem lies in the way some collection firms operate. There are still unethical firms placing collections against innocent borrowers. Some attempt to collect phantom debt – old debt previously paid, and utilize scare tactics to get consumers to pay again.

Even credit scores consider collections over two years old as no longer detrimental to your score. But, collection agencies know this and “sell” older debt to sister firms thus requiring payoff or investigation, delaying refinancing and purchases. Given the low rate environment and housing turnaround, this tactic works well.

FHA was created to help both first time and low to moderate income borrowers- the exact demographic that would be most harmed by the rule. JP Morgan and other firms estimated that 10-20% of the market would be hurt by the rule. Add in a robust spring for housing and it is easy to see that this rule is poorly timed and poorly aimed.

On April 1, FHA also increased the mortgage insurance premiums on both upfront and annual costs. However, in June, thy will lower the mortgage insurance for FHA borrowers trying to refinance. Two out of three ain’t bad, as the song states.

FHA is at the age where most require progressive lens in their eyeglasses (formerly known as bifocals). That could explain some of the myopic thinking of late , but given some recent admissions of ” mea culpa” by the agency, there is hope that the new prescription has a rosy tint.  Amen, as housing needs it!

For this column, I contacted a dozen realtors in several states to collect examples of unethical behavior by some realtors. In central Pennsylvania, one agent came up as the epitome of what to avoid by every agent.

In fact, several agents avoid showing his listings and have offered similar stories about how the homes never sell due to his actions. One agent shared how this person tried to take money that the seller was providing the borrower because in his eyes” the buyer did not need that much and he could use it”.

A buyer shared a story how after placing a deposit, learned about serious problems in the small development, including tainted water, sewer issues and more. The buyer requested his money back  based on these issues only to have this realtor tell him that it was untrue and that he never heard of anything like that. The very next day, the local paper ran a story about it and this agent was in the article! Despite the irrefutable evidence, the buyer only received their deposit refund after threatening to complain to the Ethics Board.

Most agents suggest that buyers look up ethics violations against realtors. While there are always three sides to a story (their version; the other‘s version; and something in the middle), few agents complain against their peers, so if there are fines, it is very telling.

A prominent Howard County, Maryland Realtor shared a story about an agent that does a lot of marketing but “lacks integrity”. She also shuns his listings but considered submitting an offer when she noticed that his wife was the listing agent.  She called the wife and got the info and went back to the buyer to prepare the offer.  Moments before submitting, the infamous husband called and claimed that he has 2 other offers so she may want to raise her price.

She explained to the buyer that getting into a bidding war was their choice but they also liked other homes and gave them the choice. The admitted it sounded fishy given the timing and actually found a better deal with more features, a lower price and more seller help.

A few days later, the wife called asking where they offer was. She was told what her husband had relayed and she stated that there were no other offers. In fact, she was counting on this one as the home was not getting any activity. Read between the lines and you can see why experienced agents avoid showing homes listed by the “rogue’s gallery.”

If you are a seller, these examples illustrate why it is important to interview agents and ask for references. You can look up listings from months or years past and contact the sellers (deeds are public record) and get accurate information.

Spring is symbolic of rebirth. Flowers and trees reemerge from their winter slumber. The colorful blooms offer a sign of optimism and joy. Spring is also symbolic of housing and this spring is more so due to the past few years of an extended “winter “for housing is now showing a turnaround. There are great Realtors ready to help you buy and/or sell but there are some that will be salt in your garden- nothing will grow.

Choose wisely, great agents are not hard to find.  Bad ones are hard to forget. If you need a great Realtor, we are happy to provide a few for you to interview.

One hacker bragged how easy it is to infiltrate the sites and by matching the consumer information with information from other public sites , they create more value. Sadly, while consumers can take steps to protect themselves in their actions , credit sites, retail sites and even government sites are vulnerable and under attack.

Experts state that identity theft victims usually lose over $1000 and a year of their lives attempting to fix the damages. The best advice is to check your statements monthly. A common practice by scammers is to charge your card a nominal amount for a month or two. If the consumer does not dispute it, then they hit it for a big amount. Remember that credit cards offer consumers protection, usually $50 maximum loss whereas debit cards can be wiped out by thieves.

Some insurance firms offer identity theft insurance , and the cost is reasonable. One drawback is that it is reactive rather than proactive. By that, it helps you after you are victimized rather than prevent it from occuring. The good news is that they handle everything for you, making a stressful situation a little more tolerable.

A Credit Freeze is another option. While I m not a huge fan of credit freezes , if you are able to work within the parameters it will prevent thieves from opening new accounts in your name but does not protect against current accounts being compromised. If you are able, a credit freeze placed on your children could be an intelligent move. Minors are the fastest growing segment of identity theft, mainly due to the fact that the victims are unaware until they turn 18 and attempt to utilize credit.

Credit Monitoring services are another idea. It comes down to deciding if it is worth the price each month. For unbiased information on Identity Theft check out the FTC site : http://www.ftc.gov/bcp/edu/microsites/idtheft/ .

Americans are dependent on credit. As students prepare for life after high school, credit is important . Whether it is for financial aid, a new job, or a major purchase. As home buying improves, people rely on financing. Identity Theft can stall or delay this part of the consumer segment of the economy thereby hurting not only the individual but society as a whole. Arm yourself with information as that is the best weapon against these thieves.

The old adage was that if stocks did well, rates did poorly as money left the safety of bonds for the gains in stocks. This still holds true, just not of late as the rapid rise in stocks has not caused a similar increase in rates.

What does seem to hold true is that bad economic news is good for rates. As evidence, rates have been low during the recession since 2008. The combination of bad news coupled with Fed policy, specifically, Quantative Easing, has kept a lid on low rates. In fact The Fed has helped rates remain low this past week with their purchases of Mortgage Backed Securities .

So, what are some factors that may keep rates low? There are many but some may have more influence than others. First, The Fed will continue to buy MBS at a level needed to help for the foreseeable future. Next, Israel just voted in majority to authorize attacking Iran. This does not mean it is imminent, or that they will but it clears the way. Rising oil pices could help or hurt. As energy costs  increase, so does inflation and that would force Bernanke to consider raising rates, which in turn could affect mortgage rates. Of course, European and now Chinese woes could bring more help for low rates.

However, there are factors that could increase rates, such as continued good news in jobs, housing ,stocks and other areas. I have spoken to job recruiters in various fields and all are busy placing applicants, so jobs have found a strong support level. Consumer confidence seems to be optimistic and the upcoming election will play a role.

A recent study showed that almost 80% of underwater homeowners are current on their mortgages with over 50% of seriously underwater homeowners current. That is a huge boost to the moral compass given so many high credit score borrowers opted to walk away despite the ability to afford the mortgage.

With HARP 2 round 2 going into effect soon, underwater borrowers will be able to benefit from refinancing. Another study this week ( albeit a very small sampling) indicated that less than 30% of consumers knew what HARP2 is! Just in case, it is the Fannie/Freddie program to help underwater homeowners. The point is: many believe that in an election year the government will do what it takes to help rates and to help stressed out voters that owe more than their home’s value.

After that, it is anybody’s guess. History shows that a 1 to a 1 1/2 % rate increase in a transition year should be expected. Finally, the lastvweek of March will be especially hectic for loan settlements as borrowers and lenders push to get in before the FHA mortgage insurance increase on April 1,2012. If you plan on closing on a loan this week, call your lender and try to be flexible.

The National Association of Realtors estimates that 25% of loans are denied but some areas are experiencing as high as a third of all transactions denied. Now, some fall out is due to home inspections uncovering items of concern and the parties are unable to agree. In other cases, the home appraises below the contract price and that can kill a deal. Sometimes, the buyer loses their job. Bottom line- reasons beyond the control of the buyer are prevalent, but maybe we should focus on what a buyer can control to help mitigate these figures.

Switching jobs is a big factor. If you are considering changing employers or even industries, check with your loan officer before doing anything. This action could delay or possibly prevent your loan from closing.

Be candid with your lender. If you have concerns about documentation or your employment, sharing this info will help to find other available options. Hiding information is not wise. It will be discovered and your loan will have “red flags” all over it, with underwriters analyzing every aspect and detail.

Nurses that work for agencies, sometimes switch back and forth to hospitals. This may result in losing loan approvals. In most cases, they go from salary to hourly and that will not fly. Another trend is health care professionals taking three-month jobs out of state with all expenses paid and usually a higher hourly rate.

The dilemma is that the agency that they left is unable to complete the employment verification needed for the loan properly, since the applicant is gone. In addition, Police officers that work security now need two years at same security detail/firm in order to include the income. Previously, one year sufficed.

Another area concerns loan officers unable to say no to the clients when the borrowers are clearly over extended. Years ago, lenders  could allow the borrowers to pay down or pay off debts to qualify (purchases).  Today, this is heavily frowned upon and almost forbidden…at least after the loan application was taken and credit was pulled.

Pay down is essentially forbidden. Pay off, however, can be possible but the borrower really needs to be in a good cash position to allow this.  And of course, pay off of revolving debt  is an absolute no-no.   Previously, one could pay down debts to less than  6 months ,so it could be excluded.  Now, underwriters view this as affecting borrower’s immediate cash flow for the first 6 months of a mortgage. Unfortunately, the first 6 months are the danger zone for early payment default.

Finally, unusual deposits must be documented and non-sufficient funds; habitual overdraft and other fiscal concerns can prevent you from closing on your loan. When getting gift money, make it one check and make copies as well as a paper trail.

There are many other examples, but space is limited. I will cover more in another column, but for now, please understand that lending is not as bad as most believe, as long as you are prepared and you document properly. If we can help more borrowers understand some of the common errors, maybe we can reduce that fallout rate and really see housing climb!

In essence, FHA went from the star player to riding the bench . Even with slightly higher rates, the others still offered lower payments and less hassle, especially with appraisals. As the housing market collapsed, FHA saw the game change from their bench seat and ended up a leader in the new version of musical chairs played out in the lending world. Within two years, essentially all that remained were Fannie, Freddie , VA, USDA and FHA.

While USDA and VA continue to offer 100% financing and enjoy much lower delinquency rates, the others saw delinquencies increase and their solvency deteriorate.
Guidelines were tightened myriad times, and usually with little warning. This did not stop the bleeding or the defaults but did contribute to starving  the oxygen that housing needed to continue. The embers cooled as the economy tanked. Congress, realizing that all recoveries are led by housing decided to create tax credits to encourage home buying . Kind of like the Mayor in Jaws pressuring the frightened tourists to get back in the water.

By most accounts, it was a failure . Tax dollars rewarding those that most likely would have purchased regardless. Add in the fraud, miscalculations, etc. , and even Congress shouted ” mea culpa”!
So they came out with another version. Similar results. Great idea with poor execution . FHA regains the starting position it lost previously, but is out of it’s league. Delinquencies climb as market share explodes and profits vanish. Despite existing below the level mandated by Congress for awhile, it is agreed that FHA must increase revenue so they start a campaign of increasing the annual and up front mortgage insurance premiums. After all, consumer choices are limited, so with a mini- monopoly , why not?

Conventional loans start to retake some of the market as a result but FHA  just announced that they are increasing premiums again- just in time or spring house buying season! Reminds me of the trick retail stores play by marking up the price of snow shovels the day of a winter storm. Thus far, it does not seem to have tempered the market, but it is a dangerous gamble. FHA needs the money, but if fewer people buy, they still could  take in less money even with an increase.

Now for some good news: the majority of FHA homeowners have been uninvited to the huge refinance party happening nationwide as homeowners enjoy huge savings offered by historically low rates. The increased mortgage insurance from FHA negates most, if not any savings. Perhaps an old dog can learn new tricks since FHA announced this past week that effective June 11, 2012 ( rumor is possibly sooner), FHA is lowering the cost of the insurance premium on existing FHA borrowers on loans endorsed before June 1, 2009.

No appraisal is required, so equity is not a concern and given the rate differential from that period to rates today, most homeowners will realize significant savings. Some have complained that the wait is too long. Perhaps, but FHA borrowers tend to have lower scores, so the time can be utilized to increase the scores. In addition, the time allows you to call 1-888-opt-out to get your name and information removed from the list credit agencies sell when your credit is pulled.

DC loves acronyms but with the newest announcement, FHA may change from Frustrating Housing Administration to Finally Help Arrives. After all, who wouldn’t love some extra cash each month?