Need to Sale, but Underwater?

With almost half of Colorado home owners underwater on their home there are a lot of people wondering what to do when they have to move? Bankruptcy? Foreclosure? Short Sale? Or do you keep the house and convert in to a rental?  None of the options are great, but what is the best of all evils?

There is no right answer for every one, however, more lenders are starting to allow clients to purchase a new house after a short sale is completed with NO seasoning requirements.   FHA announced this change in guidelines in December of 2009, however lenders still required applicants to wait 2-4 years after a short sale to be eligible for a new mortgage.  A majority of lenders still require borrowers to wait, but there are a few lenders that will now let you obtain a new mortgage immediately.

However, there are additional guidelines you must meet to qualify for a new mortgage without waiting at least two years.  If you are considering a short sale on your current house and purchasing a new home you must:

1. Have no delinquent mortgage payments in the last 12 months and your mortgage must be current at time of closing.
2. You can't have any delinquent payments on any installment debts in the last 12 months.
3. You can not complete a short sale just to take advantage of the market.  You need to be able to show that moving is necessary (increase or decrease in family size, moving to a different geographic area)

If you have any questions or are planning to do a short sale please call us for more information.

How Guidelines Changes Affect You

There has been so many changes in the mortgage industry nationally and in Colorado over the last few months it's tough to keep track. Our business has been constantly changing for the last 3 years, but over the last few months we have seen big changes that will affect you trying to obtain a loan. Below I have listed the big changes and how they will affect you.

Qualifying debt-income ratio has been lowered by most companies to 45% from 50%. The tougher guidelines decrease your purchase ability. If you household income is $4,000/month your purchase power has been decreased by over $30,000.

When FHA increases their fees this spring (upfront and monthly mortgage insurance) you will not only be paying more you will also be buying less.

CHAC in Colorado has recently changed their guidelines AGAIN, but this time it's to the home buyer's benefit. CHAC will once again provide down payment assistance to most home owners in Colorado. They do not lend in all cities and counties so for more information please contact us.

The new GFE which was instituted at the beginning of this year, doesn't do much but create a new headache and more paperwork. If you not seen this form you will get a good laugh once you receive it.

It's important that you understand how much the process and guidelines have changed before you begin the process of refinancing or purchasing a new home. Please call with any questions or advice. Or you can visit our website www.colomortgages.com

There is Not Much Time Left

No I'm not talking about the tax credit. While the home buyer tax credit has received the most attention, the government's mortgage backed security (MBS) program has done more for the real estate market and may have a bigger impact when it's over.

The federal government allocated $1.25 TRILLION to purchase MBS to keep mortgage backed rates. In fact, they have become the ONLY player in the MBS market. The MBS purchase program is set to expire at the end of March. Once the government leaves we will see rates increase, the question is how much? Some experts believe we will see an increase of at least 1% immediately and possibly 2%-3% higher by the end of the year.

What does this mean in dollars? If you have a $200,000 loan currently you could receive an interest rate of 5% which would give you a payment of $1,073. If rates increase to 6% your payment will increase to $1,199. The difference of $125/month or $1,500/month or $45,000 over the life of the loan.

If you thought of refinancing, have a rate above 6%, have an adjustable rate, or purchasing a new home, do it now. Go to www.colomortgages.com and apply online for free.

HAMP and Another Short Sale Disaster

New numbers were published by the government a few weeks back with regard to HAMP, the government's loan modification program. And I was surprised they would release the numbers! Any one who has tried to obtain a loan modification, this might not be too big of a surprise, until you find out how much the government has paid out.

Since the program started earlier this year over 3.1 million have applied for a short sale and the lender has requested initial documents to process. Out of 3.1 million people only 31,000 have received a permanent loan modification, that's only 1% and well short of the 4 million people our government promised to help!!!! While, lenders and the government guidelines are to blame, it's not all their fault. There are a lot of people that don't send in the paper work or are just plain tired of the headache tying to obtain loan modification and give up.

As I have said in the past, if you don't have professionals helping the public, the success rate of any loan modification program will be low. There is just too much paper work and too much to know for the average American to handle.

Now here is the real kicker. For helping 31,000 Americans lower the mortgage payments lenders have received over $27 BILLION in incentives from the government. $27 BILLION!!!! ARE YOU KIDDING ME!!! If the government would have paid off mortgages of $200,000, they could helped 135,000 home owners pay their mortgage IN FULL!!!!

HAMP has become another bank bail out, with out all the bad press that TARP received. This is amazing, that we would pay $27 BILLION to lenders to help on 31,000 people. And now the government has not only created a similar program for short sales, they have also increase the HAMP funds to $50 BILLION.

The bottom line is, that lenders are getting RICH without providing any service or product, and we are paying for it. The loan modification and short sales that we are paying for, lenders would have done regardless of a government incentive program, as it SAVES them money. And I have heard countless stories and worked on loan modifications for friends that qualify for HAMP and are being denied for no reason, except that they don't help the bottom line of the lender.

If you are working on a loan modification, good luck and hopefully it's the lenders financial best interest.

Say it Ain't so, Joe

Lenders are once over reacting and creating another mortgage mess. This time they are eliminating programs for qualified borrowers making it tougher for people to purchase or even keep their homes.

Every day I hear of new guidelines or lenders eliminating products eliminating another set of borrowers from purchasing or refinancing their house. There are very few lenders offering 100% LTV loans even if you have great credit, income, and assets it's a lot harder to obtain financing then it was a few months ago.

Self-employed borrowers options to obtain financing is also becoming scarce. A lot of self-employed borrowers typically use stated income loans because their tax returns do accurately reflect their cash flow. However, many lenders are eliminating their conforming stated income programs making it tough or impossible for them to obtain financing. If they can obtain financing the loan amount for which they will be approved will be much lower than before.

These two changes are going to eliminate a lot of borrowers from the real estate market and will also probably help increase the foreclosure numbers around the nation. There are some alternatives for borrowers, such as FHA and others but they will not be able to help a lot of these people. Not good for the real estate market and not good for the value of your house.

Why are lenders over reacting? There are a few reasons, supply and demand on the secondary market and mortgage insurance companies are facing problems with their current portfolio of loans that they insured over the last few years.

If you need help navigating through mortgage chaos to find financing that meets your financial needs, please call and we would be happy to help you or guide you in the right direction.


Prosperity Financial - Your Mortgage Manager

http://www.3bed2bath.net/ http://www.colomortgages.com/ http://www.myprosperityfinancial.com/

ARMs Making a Come Back???

Over the last 12 months we have seen a decrease in adjustable rate mortgages (ARMs). The main reason for the decrease was that borrowers could obtain a fixed mortgage at the same or a better rate them ARMs. However, ARMs are now offering significant lower interest rates than their fixed counterparts. Currently a 5/1 ARM is averaging about 0.875% lower than a 30 year fixed.

Does the discount on ARM loans mean it they are the best choice at this time? It depends on your situation and goals. If you are planning on staying in your house for more than 5 years it probably doesn't make sense to take the lower rate. On a $200,000 loan you would save almost $110/month if you went with ARM loan, but you would have to refinance your loan to avoid your rate increasing. Therefore, you would save $6,594 over 5 years on your mortgage payment, but would spend $3,500 in closing costs to refinance and would be gambling that you could get a fixed rate as good or better than you could today.

There are also other factors that you would need to consider that may limit your ability to refinance such as; income and liabilities, real estate market, and changes in the mortgage industry. Many people have learned this lesson the hard way in the last 6 months. They were able to save thousands of dollars over a few years, but the real estate market changed or their income decreased and they were unable to refinance.

ARMs are still great options and can save you a lot of money, here are some situations when to consider an ARM:

• You plan on selling within the fixed term on the ARM


• You plan on refinancing or paying off the loan within the fixed term of the ARM


• You know you will be making more money in the next few years and want to purchase a house that will meet your future needs and an ARM will allow you to afford the house and you can refinance to a fixed rate mortgage within the fixed term of the ARM.

Before refinancing or purchasing you should always think about your immediate needs and future goals and plans before deciding on a mortgage program. If you need help with deciding which loan will be best for you please feel free to contact us.

Prosperity Financial - Your Mortgage Manger

Lafayette, Colorado

http://www.3bed2bath.net/ http://www.colomortgages.com/ http://www.myprosperityfinancial.com/

Feds Cut the Rates Again - What Does it Mean

Every time the Federal Reserve cuts the rates the phone calls I receive appear to be ten fold of a normal day. Every one is curious what it will do to their mortgage rate, does it make sense to refinance now? What almost every one doesn't know, is the when the Federal Reserve lowers the Fed funds rate it doesn't necessarily correspond to an equal drop in mortgage rates and often mortgage rates increase. Let's see if I can keep this simple...

When the Fed lowers the fund rates it has a direct effect on short term rates, (credit cards, lines of credit (HELOCs). So you can expect the interest you pay on your credit cards and home equity loans to decrease (unless if you have a Capital One card, they have been known to raise their rates when the Fed cuts rates). However, you will now earn less on money you have invested in CD's, money markets, and savings account.

Unlike short term rates, mortgage rates are determined by the market and adjust according to the market (some days it will adjust multiple times a day and others none at all). The Fed lowers the funds rate to try to stimulate the economy by enticing people to spend money and the stock market usually has a positive reaction to rate cuts, at least in the short term. When people are investing their money in the stock market there is less money to invest in bonds. The 10 year bond is a good indicator of where mortgage rates are heading. If the bond market is not doing well, mortgage rates increase.

There is obviously a lot more than this, but this at least will give you a good idea on how mortgage rates work. While, we saw an increase in mortgage rates today, I believe the optimism in the market will be short lived and we will see rates fall again, at least for a day or a few hours like it did last week. So if you are thinking of refinancing, stay tuned as this next week or two will be the best time to do it.

Prosperity Financial - Your Mortgage Manager
Lafayette, Colorado

http://www.colomortgages.com/ http://www.3bed2bath.net/ http://www.myprosperityfinancial.com/


Purchase - Refinance - Debt Consolidation - Cash-Out - Home Equity - Great Rates

What you Don't Hear About in the Tax Rebate Bill?

As always, politicians can't just try to help the masses. There is always a hidden clause that finds it's way in to bills even though it has nothing in common. Most of us have heard about the tax rebate that we may receive due the economic stimulus bill the house passed, however, I bet most of you don't know that there is a clause in there that will raise the conforming loan limit from $417,000 to a maximum of $729,750.

Nancy Pelosi, a California Representative was able to include a one year increase in Fannie Mae and Freddie Mac's loan limits in to the "Tax Rebate" bill. An idea that has been discussed over the last few months with regard to mortgage reform, but many experts believe it will help on a few and will most likely due more harm than good to the overall market. Pelosi, knowing she would not be successful in passing a bill that only raised the conforming the loan limits, is now trying to piggyback on a bill that will most likely pass (what politician won't vote for a tax rebate in an election year????).

Raising the conforming loan limits would force Fannie and Freddie to assume more risk, forcing them to raise rate to account for the risk. So while, raising the loan limits would help very people (mostly California home owners and the real wealthy), the rest of us will be stuck paying higher interest rates.

You have to love politicians? I still don't understand how they can screw up every thing they do.


Prosperity Financial, LLC - Your Mortgage Manager

Lafayette, Colorado

www.colomortgages.com www.3bed2bath.net


Purchase - Refinance - Cash-Out- Debt Consolidation - Home Equity - Great Rates

Fannie and Freddie Not Helping Many Colorado Cities

A few weeks ago Fannie Mae labeled most of the Denver Metro Area cities as declining markets, and it appears Freddie Mac will follow suit. What does this mean to you? Why do you care? How will it affect you?

To begin for those of you who don't know, Freddie and Fannie are the two largest suppliers of mortgage funds in the nation. The designation of a declining market by both companies will make it more difficult and impossible for some to purchase a house. Fannie and Freddie both determine declining markets based on your zip code.

If you are trying to purchase or refinance a house in a declining market both companies will reduce your borrowing power by 5%. The max you will be able to borrower is 95% of the value of the house, and in some cases lower.

This designation will make it extremely difficult for many real estate markets to improve, and it will surely have a negative impact on many markets. For example, let's take the Highlands neighborhood in Denver, this neighborhood has seen some of the highest appreciation in the state over the last 2 years. However, some how this neighborhood has found itself on the declining market list, which means any person trying to purchase a house using a conforming loan will have to put 5% down. They could try an FHA loan, but currently most of the houses in this neighborhood would not meet their guidelines. Due to this new guideline, there are will now be less qualified prospective buyers, lowering the demand for houses in this neighborhood, forcing sellers to lower the price of the house if they want to sale.

The declining market will also make it impossible for many A paper borrowers to refinance their house if they are currently in ARM, which may force people with great credit into foreclosure, reducing the value of the neighborhood further!!!

On the other hand, this may help cities/neighborhoods that avoided the list. For instance a majority of Broomfield is on the declining market list, while neighboring towns to the north (Erie and Lafayette) are not. Prospective buyers looking to purchase in the north part of Broomfield, are now likely to look at houses in Erie or Lafayette if they don't have 5% down or don't want to put 5% down. Good for Erie and Lafayette, not so much for Broomfield.

For more information on the declining markets in Colorado, or to see if you are in a declining market, please email or call me.


Prosperity Financial - Your Mortgage Manager
Lafayette, Colorado

http://www.colomortgages.com/ http://www.3bed2bath.net/


Purchase - Refinance - Cash-out - Debt Consolidation - Home Equity - Great Rates

You Have "A+" Credit, the "Cerdit Crunch" Won't Hurt You? Or Will It?

Talking with many people within the industry and clients many people don't understand the the mortgage industries problems are more than subprime loans. And more than Alt-A loans that offered 100% interest only loans. While the subprime crisis spread to Alt-A lenders fairly quickly, A paper or conforming loans escaped the "credit crunch." However, conforming loans may not be able to escape the "credit crunch" forever.

While, it's tough to predict what will happen in 2008 given the market uncertainties, there is a chance the conforming lenders may be the next in line to take a hit. While, Fannie Mae and Freddie Mac have remained stable over the last 6 months, they are not out of trouble yet. If you ask 10 experts about their forecast for 2008, you will receive at least 9 different answers and they all base their forecasts on whether Fannie and Freddie will be able to steer clear of the credit crunch.

The main concern remains, will foreign investors continue to invest in American mortgage backed securities. If foreign investors become reluctant to invest their money in mortgage back securities Fannie and Freddie will be certain to experience problems 2008 and we may see rates increase to 7%-8%, which will hurt the real estate market even more. However, if foreign money supply continues the conforming market should be able to avoid the problems that have faced the subprime and Alt-A sectors.

We have also seen private mortgage insurance companies, such as MGIC, tighten their guidelines and are more reluctant or will no longer insure lower credit scores. This new trend has made it even tougher for people to obtain financing for a new home and/or refinancing their current mortgage.

I remain optimistic that Fannie and Freddie will remain stable through 2008 and the mortgage industry will be in better shape by the 3rd quarter in 2008. However, to be honest this is just a guess from my research and experience, hopefully, I'm right.


Prosperity Financial
Lafayette, CO

Your Mortgage Manager

http://www.colomortgages.net/, http://www.myprosperityfinancial.com/, http://www.3bed2bath.net/


Purchase - Refinance - Cash-Out - Debt Consolidation - Home Equity - Great Rates

Colorado Mortgage Brokers Taking All the Blame?

Almost every day I turn on the news and see a new story about different bills in the Senate or House of Representatives or Colorado's legislative branch or the Federal Reserve trying to curb the foreclosure epidemic and they are always focused only on mortgage brokers. This is especially true for Colorado mortgage brokers. A majority of the new regulations passed by the Colorado legislative branch and signed by the governor only apply to Colorado mortgage brokers.

I will agree some thing must happen to help curb the fraud and dishonest practices that have occurred in the mortgage industry. However, these new rules/laws/regulations should apply to all mortgage professionals regardless of who you work for. These problems are not specific to mortgage brokers and I'm confident that a large portion if not the majority of the issues you hear in the news are a bigger problem in the larger banks.

There have been many surveys and reports that show consumers receive better interest rates, closing costs, programs and SERVICE from mortgage brokers, than they do from banks and direct lenders. There are a few reasons for this:

1. Mortgage brokers have the ability to shop multiple lenders and find the best mortgage for their client, a bank or direct lender only has access to the products their company offers. The mortgage brokers ability to shop with multiple lenders and programs ensures that they can find the best mortgage program for you at the best rate available.
2. Mortgage brokers don't have an endless marketing budget and most of their business is obtained from referrals and past clients, so they are more likely to work harder and offer better rates to earn repeat and referral business. Repeat and referral business is not as important to loan officers at banks because they know their marketing and banking customers will always bring more clients through the door.
3. Mortgage brokers have more flexibility than banks and direct lenders because they have lower overhead, therefore, they can offer better mortgage programs at lower rates with lower closing costs. To give you an example, I have a friend that works for a large bank here in Colorado and his rates are typically 1.5% higher than what I offer and his closing costs are usually $4,000 more. Why would people pay so much more? Because consumers trust their bank and they don't shop around (banks know this and therefore charge higher rates).
4. The mortgage industry, like many sales industry, has a high turn over rate, especially within banks and direct lenders. Many loan officers that work at banks and direct lenders change company's every 6-12 months. This job hopping leads to less accountability for loan officers, as they have left the company before a borrower realizes they have received a bad loan.

Again, I think there are bad actors on both the mortgage broker and banker channels, but for some reason mortgage brokers are being singled out when it comes to new rules/regulations/laws. I believe if we truly want to protect the consumers, all mortgage professionals should be required to follow any new rules/regulations/laws including, licensing, E&O insurance, and industry education.

Prosperity Financial - A Proud, Honest Mortgage Broker

Your Mortgage Manger

Lafayette, CO

http://www.colomortgages.com/ http://www.myprosperityfinancial.com/ http://www.3bed2bath.net/

Purchase - Refinance - Cash-Out - Debt Consolidation - Home Equity - Great Rates

Mortgage Industry Update - What the News Doesn't Tell You

I thought this would be a good time to give every one a quick update on the Colorado mortgage industry. Every time the Fed lowers the fund rate we receive a lot of inquiries on what is happening to the mortgage rates. Along with the Federal Reserve lowering the rates over the last few months, there has been a lot of mortgage talk in the news lately; subprime/ARM bail out, guideline changes, and mortgage reform.

We will start with the Federal Reserve lowering the rates and where rates stand now. Typically, the Fed's lowering the funds rate has little or no impact on the mortgage rates, however, it will lower your rates on credit cards, home equity line of credits, and short term mortgages. It also may have an impact on your ARM, depending on what index your loan uses. Please call us and we will review your current loan with you to see what, if any, affect it may have on your ARM. With that being said, mortgage rates are still great. You can purchase a house with NO MONEY down and receive a 30 year fixed rate of 6.25%.

The subprime/ARM bailout has been receiving a lot of news lately. I'm not going to go in to specifics or if I agree with the plan or not. What you need to know, is the current plan will help very few people in America and you should not count on the government to help you save your house. If you are having a tough time paying your bills or your loan is going to adjust in the next 12 months, contact us immediately before it's too late. There is a lot we can do to help you restructure your mortgage and advice that we can provide to help you through these tough times. At the first sign of trouble call us, it's better to be safe than sorry and you will be surprised what we can do.

There has been a lot in the news about guideline changes and it's a lot tougher to obtain a new mortgage now. While a lot programs have disappeared or changed guidelines, most of the programs that were affected were exotic mortgages (interest only, negative amortization, hybrid ARMs). There a lot of great mortgage programs that are available and offer great rates and flexible terms, like no money down purchases.

Ahh, and now my favorite subject, mortgage reform. Although mortgage reform has not been in the news as much as some of the other topics, it probably has the biggest impact on you and all home owners. I always get a kick out of people trying to make rules, laws, and guidelines for industries they no nothing or very little about. It reminds of the the Holiday Inn commercials, where people are playing roles they no nothing about but are ready to handle they situation because they slept at Holiday Inn. To give you an idea on how bad are elected officials can screw things up, there was a bill introduced in Colorado that would require you to have $40,000 in equity in you home at all times regardless of the value of your house. Which means, you would have to have at least a $40,000 down payment to purchase a house. The good news on this front, it appears that are elected officials have received some good advice from professionals in the industry and are not going to screw things up too much. However, I would recommend every one to stay tuned and be involved.

Once again, for the most of us our house is the largest asset we have and biggest purchase we will ever make in our lives, make sure you do the proper research and ask questions any time you become confused. Don't be that that person that spends more time planning lunch or their weekend than their financial future.

Prosperity Financial
Your Mortgage Manager

http://www.colomortgages.com/
http://www.myproserityfinancial.com/

Lafayette, Colorado


Purchase - Refinance - Cash-Out - Debt Consolidation - Home Equity - Great Rates