TEAM EMPOWERMENT MORTGAGE CHATTER: April 12; 4 Financial Reasons to Buy Now; Fannie Mae Brings Back REO Buyer Incentives; Regulators and Real Estate Legislation; Zillow Acquires Postlets

“Imagination is the true magic carpet.” — Norman Vincent Peale: Was a minister and author of inspirational books


As Dean Hartman said last week, the purchase of a home is a personal decision. However, we want to give everyone four great financial reasons why you should not wait before taking the plunge into homeownership.

Interest Rates Are Increasing

Interest rates have increased almost 3/4 of a point in the last six months. Most experts expect rates to continue to increase through the year. Interest rates along with price determine the overall cost of a home. Even with prices softening, if interest rates rise, it may be less expensive to buy now rather than wait.

The 30-Year Mortgage May Disappear

There has been much debate regarding government’s role in providing support for homeownership. There are several experts who believe If Fannie Mae and Freddie Mac’s roles are eliminated, or even limited, it may be the end to the 30-year mortgage. This concern is addressed in MSN Real Estate’s Is it curtains for the 30-year mortgage?

QRM Requirements Could Be Much More Stringent

Here are proposed changes to the requirements for a “qualified residential mortgage“:

Certain mortgage types would be eliminated

You would need to put a minimum of 20% down

You would need a minimum 690 FICO score

The ratios of income to both the mortgage payment and overall debt would become much more conservative (28% and 36%)

There would be loans available to purchasers who don’t qualify under the new rules. However, they will probably be more expensive to the buyer (both in rate and costs).

Rents Are Expected to Increase

The qualified residential mortgage is decreasing and the demand is increasing. That will lead to an increase in rental costs throughout the year. The Wall Street Journal this week quoted a report by Reis, Inc:

“Expect vacancies to continue declining, and rents rising through the rest of 2011 at an even faster pace.”

Bottom Line

You may be waiting on the sidelines to see if prices will continue to depreciate before you purchase a home. The mortgage expense is a major piece in the overall financial picture of homeownership. Make sure you consider it when timing your decision.


RPM Offers HomePath Financing (See Flyer Below)

Fannie Mae is once again offering closing-cost assistance for buyers who close on a home in the mortgage giant’s real-estate owned (REO) inventory, but in most states will not bring back cash bonuses it previously paid to buyers’ agents.

Buyers who put in initial offers on or after April 11, and close on the sale of a Fannie Mae HomePath property by June 30, will be eligible to receive up to 3.5 percent in closing-cost assistance.

The offer is only good for buyers who intend to occupy the home they are purchasing as their primary residence — second homes and investor properties are not eligible.

Offers submitted before May 15 have the best chance of qualifying, Fannie Mae said, as offers submitted after that “are particularly questionable for closing” by the June 30 deadline.

It’s essentially the same deal Fannie Mae offered to buyers last year. In the last three months of the year, Fannie Mae was also offering a $1,500 cash bonus to buyer’s agents on each sale of a HomePath property.

In announcing that it’s restoring its closing-cost assistance for HomePath buyers, Fannie Mae said it will offer a $1,000 bonus to buyers’ agents in California and Washington whose clients close on a HomePath property by June 30.

Fannie Mae pays listing agents representing its REO properties a standard commission of 2.5 percent, with a guaranteed minimum of $1,000. Buyer’s agents are paid commissions equal to 3 percent of the sales price.

In its most recent annual report to investors, Fannie Mae said it acquired 262,078 homes in 2010, up 80 percent from 2009. REO sales picked up 51 percent, to 185,744, leaving Fannie Mae with REO inventory of 162,489 homes valued at $14.9 billion at the end of the year. The company also said $212.8 billion in mortgages guaranteed by the company were delinquent by 60 days or more.

“Given the large number of seriously delinquent loans in our single-family guaranty book of business and the large current and anticipated supply of single-family homes in the market, we expect it will take years before our REO inventory approaches pre-2008 levels,” Fannie Mae warned.


Maybe a federal government shutdown now and then would be a good idea — certainly for the current crop of financial regulatory officials. Twice in the past six months they have taken congressional mandates that significantly affect real estate transactions and home mortgages, and mangled them badly.

Cases in point: The long-awaited appraisal reform regulations that took effect April 1, and the “qualified residential mortgage” (QRM) proposals that were called for in last year’s Dodd-Frank financial legislation. In both instances, regulators took straightforward statutory language and arrived at rules that vastly altered clear congressional intent.

When the Fed produced its rules implementing the Dodd-Frank language, an entirely new concept emerged on “customary and reasonable” appraisal fees. The Fed created a “safe harbor” — a loophole — for lenders and others to arrive at their own definitions of fair fees by incorporating recent amounts paid by appraisal management companies.

Anybody who’s been active in real estate in recent years knows that, spurred along by the infamous Home Valuation Code of Conduct (HVCC) promulgated by Fannie Mae, and Freddie Mac under pressure from New York attorney general (now governor) Andrew M. Cuomo, appraisal management companies now dominate the home-valuation business.

QRM, the “qualified residential mortgage” proposal. Last year’s Dodd-Frank legislation assigned the task of coming up with a nationally recognized “safe” mortgage standard to six federal financial regulatory agencies, including the U.S. Housing and Urban Development Department, the Federal Housing Finance Agency, the Federal Reserve, Federal Deposit Insurance Corp. and the Comptroller of the Currency.

The congressional intent, according to sponsors of the QRM amendment, was to devise a standard that would incorporate the key features statistically associated with on-time payments of home loans. The law suggested such features as:

Full documentation of borrower income and assets.

Rigorous underwriting standards to ensure the borrower has the capacity to repay the debt.

Avoidance of loan structures that increase the probability of default, such as balloon payments and negative amortization.

Mortgage insurance and other credit enhancements.

A highly restrictive QRM with a mandatory 20 percent down payment for home purchases, 30 percent minimum equity for refinancings, and mandatory debt-to-income ceilings of 28 percent (housing expenses) and 36 percent (total household monthly debt load).

Fortunately, the QRM is still a proposal open for public comment through June 10. You can bet there’ll be a lot of it.


Property search and valuation site Zillow has acquired listing syndication platform Postlets, the site announced today.

Postlets offers tools that allow users to promote properties and distribute property listings information for free to 13 real estate and social media websites, including Zillow, Trulia, Yahoo Real Estate, Facebook and Twitter, among others.

The company was founded in 2005 and has more than 500,000 registered users who currently distribute more than 350,000 for-sale and for-rent listings nationwide, Zillow said.

Zillow has no plans at this time to make any changes to the user experience on Postlets, the company said.

“Postlets is a great tool for agents, property managers and landlords looking to promote their listings and manage their online presence, for free,” said Spencer Rascoff, Zillow’s CEO, in a blog post. “As part of this acquisition, Postlets will continue to send listings to its current distribution partners.”

Financial terms of the deal were not disclosed. Postlets’ two employees, co-founders Asher Matsuda and Raymond Chen, have joined Seattle-based Zillow as full-time employees, and will will remain based in San Francisco.

Move Inc., operator of Zillow competitor, acquired  national listings syndication platform ListHub in September 2010 — that platform distributes listings information to Zillow and Trulia, among other sites.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s