Mortgage Report Bob Mortgage New

Just this past week, President Donald Trump issued an executive order that loosened lending restrictions instituted by Dodd-Frank. How will this, combined with the Fed’s recent uptick in interest rates, affect mortgages? Bob Johnson (AKA BobMortgage) shares his opinion in today’s Mortgage Report.

You may know him as Bob Johnson, the senior mortgage advisor at Wallick & Volk, the nation’s oldest privately-held mortgage company. Bob Johnson has helped more than 25,000 families get into the homes of their dreams, in 20 plus years of lending service.

Now with five offices across the DFW metroplex, the nation’s oldest mortgage firm is helping thousands of consumers get into homes with the most up-to-date financial information possible. Wallick & Volk brings experience and integrity into every single loan, but they also deliver a highly personalized touch that conforms to each client’s need. Is it speed of delivery, unique products, total transaction transparency, or great pricing you need? Wallick & Volk has it all in a broker-friendly banking platform that can do the impossible when it comes to home financing.

THIS WEEK: Loosening lending restrictions and increasing interest rates make for an interesting mix in the mortgage market.

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We know that president-elect Donald Trump, as a businessman, probably detests regulations as much as any other business owner. While protective, some go too far and tack on extra costs to consumers. You really need a balance — enough law to protect the consumer and punish morons who prey upon the unsuspecting, but not enough to make the burden unbearable. I have seen this happen first hand in healthcare — in fact, mountains of regulations are one reason why health care costs are so bloated.

Well, according to HousingWire,  Donald Trump’s transition team and their website say the incoming president plans to dump Dodd-Frank completely. This could be very good for the housing market. Or would it? (more…)

Mortgage loan

By Jon Anderson
Columnist

No, I didn’t dig this out of my 2008 file drawer.

According to RealtyTrac, March 2015 saw an 11 percent jump in foreclosures across the U.S. compared to February. That translates into 152,147 homes rocketing down the chute to foreclosure and the loss of people’s homes in the first quarter of 2015. In the nearly 8 years since the housing bubble popped, apmid a white hot market, people are still losing their homes to foreclosure at staggering levels.

And then there’s Detroit: actively depopulating its own city by issuing as many as 62,000 eviction notices this year to homeowners delinquent on their property taxes. It’s being called an eviction “conveyor belt” that will effect one-seventh of Detroit’s remaining population. This, after the 2008 tidal wave of 250,000 people forced out of the city, leaving behind tens of thousands of their homes. The news of Detroit’s rebirth may have been exaggerated.

These are people who managed to hang on to their home through the worst recession in 80-years, only to lose it now.

So what’s the National Association of Realtors’ response? Why to spend $7.7 million on lobbying in the first quarter of 2015 for the Mortgage Choice Act (and complain about rising flood insurance premiums). As benevolent as “Mortgage Choice” sounds, its goal is to weaken the regulatory “burdens” on residential mortgage lending.

Side note: Doesn’t every piece of legislation, PAC/SuperPAC, and fringe group sound benevolent these days no matter now evil it is?

The Mortgage Choice Act passed the House of Representatives on April 14. NAR is not alone in its support, the Mortgage Bankers Association, the National Association of Home Builders and the Real Estate Services Providers Council Inc. (shockingly, all groups who make money directly or indirectly from mortgages).

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QM And QRM Dodd Frank

The real estate landscape is constantly changing, thanks to a regulatory environment that is learning from its past. After the housing bubble burst, fueled by the sub-prime lending market crash, lawmakers were in a frenzy to control the damage. The question is, though, with regulatory belt-tightening, will there be unintended consequences? How can this actually prevent homeowners from going underwater?

That’s where staying up-to-date comes into play, and there are few experts better versed in the new mortgage alphabet soup than the folks at Guardian Mortgage. If you haven’t the faintest clue as to what QM, QRM, and Dodd-Frank are, then perhaps you should read this fantastic article from Guardian themselves:

The Dodd-Frank Consumer Protection Act, which was signedinto law in July 2010, was designed to restore consumer confidence in the housing industry. The law establishes requirements, referred to as Qualifed Mortgage (QM) and Qualifed Residential Mortgages (QRM) that must be met before a mortgage, new or refinanced, can be created.

Need to bone up? Read the whole article from Guardian Mortgage.

I hate Dodd-Frank. It’s a good idea gone rogue. And if you value the ability of qualified people to buy real estate without having to place 20% to 50% as a down payment, you should hate it, too. Dodd-Frank is like nuking an entire apartment complex to get rid of bedbugs in one small 300 square foot unit.

Yes, underwriting rules and loans to “marginal” lenders were out of control and led to the housing bust that brought down our economy. Lenders played “hot potato”, making and packaging subprime loans and selling them off to investors until, when the truth came out,  the last investor got screwed because he was left holding the hot potato — a bunch of bad loans. Of course, the fact that the ratings agencies messed up on their projections didn’t help, where is their slap? The fact that lenders were pushing ARMs and interest-only products didn’t help. And now those banks are tighter than Scrooge about lending.

But Dodd-Frank is leaving the details up to a bunch of federal regulators. First of all, we did not elect these federal regulators so I find this almost bordering on unconstitutional. Secondly, what they are going to do will make it harder for people to get mortgages and further depress the housing market. You must know that the credit crunch is about 40% of the problem with the housing market. Bank lending is down by 9% even though bank’s financial profits have risen by 136%. Lending has fallen in 10 of the past 12 quarters despite the bailout. (I’m glad the national press is starting to cover this: we bailed out Wall Street in exchange for loans on Main Street, that ain’t happening.) Dodd-Frank is putting lenders on the hook, requiring them to retain a share in the risk in mortgages they sell to investors. In THEORY, that sounds great — just like taxing millionaires.

But now that a rule to implement this provision has been written, critics say the requirement will make it so hard to get a mortgage that it will further depress the housing market and undercut a struggling economy. “I’ve been in this business 32 years and I have never seen guidelines as tight as they are now,” said Scott Eggen, senior vice president for capital markets with PrimeLending, a mortgage lending subsidiary of Dallas-based Plains Capital Corp.

The proposed rules ignore Congress’  exemptions for “qualifying residential mortgages” — hey, what’s qualifying? The regulators have decided it’s 20 percent down, caps on a borrower’s  debt to income ratio, restrictions on loan terms and other limits that would restrict the number of loans that would qualify for these exemptions. It’s like saying, in effect, only he who gets there first will get the exemptions, then we shut the door.

Will we have people camping on the sidewalk for mortgages as they once did to put contracts on homes during the boom?

Briggs Freeman’s Susan Baldwin told me that Former President Bill Clinton was on The Today Show this morning talking about this very issue. He said that banks are not loaning, they are sitting on trillions but not making loans to small businesses because they don’t have to and are paying no interest on deposits. He’s right on th money but small business, heck Bill — housing!

Great article in this week’s TIME Magazine, slim as it is, showing the difference in the 10% and 20% down payment model. Subscription required online, page 17 if you want to skim while at the check-out line.

As you may know, the Feds (Dodd-Frank) want to increase home buyer’s “skin in the game”, requiring higher down payment percentages. Time charts how long it would take certain professions to save up for 10% down versus 20% down. A lawyer would take about 7 years to save up for a 20% down payment, whereas they could buy a home in about 4 years if they only put down 10%. Someone like a residential construction worker — what do they earn? $48,000ish? —  would probably never end up owning a home unless he saved for 20 years for 20% down, whereas he could get a home in 12 years at only 10% down. Let’s look at teachers: 15 years to save up for that 20% down payment, 9 for 10% down. Time figured average home prices. The article also says consumer advocates and banks BOTH agree banks would raise rates to cover costs, and borrowers would basically be spending decades saving up enough money to qualify for a mortgage. Also, while they are saving that money, they would not be spending. My point: requiring 20% down is a disaster for our already ailing economy. My bigger point: I understand zero percent down and way easy money was bad and got us in this mess (thank you, Mr. Frank, thank you, Wall Street) but going to 20% is way too severe and would maim the real estate market. And the economy.

When I mentioned this story to Robbie Briggs yesterday, he had a good point: homeowners might resort to owner financing. But you might keep this in mind when you are listening to the candidates’ BS in the next few months: ask them — what would you do to get the housing market back on track?