Mortgage Blog

When Florida's voters head to the polls tomorrow they will be doing more than just selecting Presidential candidates. On the ballot is an amendment to lower property taxes. It is estimated that Amendment 1 will save the average homeowner $240 per year and it is supported by both the Florida Association of Realtors and the Florida Association of Mortgage Brokers.

However, our advise is to vote No. While we would all like an extra $20 a month in our pockets, the amendment itself is short sighted. It is opposed by police and firefighters. It is also opposed by Florida's teachers. Opponents estimate that in Duval County alone the school system would lose $74 million in revenue over the next 5 years. The Office of Economic and Demographic Research estimated that the proposed tax reduction will rob the State of $9.3 billion over next 5 years. This will adversely affect funding for schools and public safety.

While it is argued that a tax cut can be offset by cutting waste and unnecessary spending, the Amendment is being backed by the same politicians responsible for running the State. We suggest that they first make the cuts in spending and then pass on the savings in tax cuts. This way the public can see just what the extra $20 a month is costing them.

For a free non-partisan explanation about tomorrow’s election please visit VoteSmartFlorida.org

One year ago no one would have believed that Countrywide Home Loans would fall on hard times. However, last week as rumors of bankruptcy spread, Bank of America jumped into the breach with an offer to buy the mortgage giant. Now the question is will BOA rescue CW or will CW drag down BOA.

Countrywide made it mark by "servicing" large volumes of mortgage loans. Under this arrangement CW would sell loan rights to investors but keep the right to collect payments. Then CW would pass on the payments to investors while keeping a little from each payment as compensation for its services. Everything worked fine until the subprime meltdown caused investors to get spooked and stop buying the loans. This left CW holding the can.

BOA is making a huge gamble that it can scoop up Countrywide at a cheap price, weather the storm and emerge as the Nations Premier Lender. It’s a big gamble because if the liquidity crisis worsens as I suspect it will, then the life preserver BOA tossed to Countrywide may turn into an anchor to drag them both down. Stay tuned!

A rate lock or a rate commitment is a lender's promise to hold a certain interest rate for you for a specified period of time while your application is processed. This prevents you from going through your whole application process and at the end of it finding out the interest rate has gone up.

A rate lock period can vary in length, and longer ones usually cost more. The standard rate lock period is 30 days and this is what we use when we quote rates unless unwise specified. If necessary we can hold your interest rate for a longer period, say 45 or 60 days, but in exchange the rate maybe higher than with a shorter rate lock term.

It is possible to lock your rate for periods longer than 60 days but for these long term locks the Lender will expect you to pay an upfront fee. We have the ability to lock rates for up to 540 days (18 months). For more information on rate locks please contact us at 800-461-2986.

1. Not shopping enough. Hard as it is to believe many people only obtain one quote when looking for a mortgage. Sometimes they go to their Bank or Credit Union and sometimes they use the lender recommended by the realtor or builder. This is a big mistake. I recommend you look for 3-4 quotes. Be fair and let everyone know you are shopping. Don’t necessarily go for the lowest bid. Be sure to take reputation into account. Otherwise it could come back to bite you later.
2. Shopping too much. If you shop around too much you greatly increase your likelihood of coming across the bad actors in our industry. Look too hard for the “lowest” rate and you are sure to find someone willing to say anything to get your business. They know you are unlikely to walk away at closing – so it works for them – at least in the short run.
3. Choosing the wrong loan. If you are on a fixed income don’t pick a high risk loan such as the “Option ARM”. This type loan gives you a low teaser rate – often around 1% - but can pile “negative equity” on your mortgage balance. Know your risk level and stick with it. A reputable mortgage professional won’t steer you in the wrong direction - which brings up number four.
4. Not doing your homework. This goes hand in hand with the first two. Research the companies you are considering doing business with. The Better Business Bureau and your States financial regulatory body are good places to start. If you are dealing with a Mortgage Broker – make sure they are a member of the NAMB (National Association of Mortgage Brokers). Ask for references. Look for someone who returns your calls, is pleasant, informative and knowledgeable.
5. Not telling the whole story. Don’t hold relevant information back from your loan officer. For example, if you are self-employed and have difficulty proving your income – tell him/her in advance. It will ensure you get an accurate quote and make the loan process run smoothly.
6. You like to look them in the eye! Don’t select a Lender just because they have an office near you or because you have your checking account there. That local office may add to overhead and mean a higher rate. Once again get 3-4 quotes and check reputations.
7. Not Reading the paperwork. Read the paperwork! Your Lender will send you loan disclosures within 3 days of your application. Pay special attention to the “Good Faith Estimate” (GFE) which will show your closing costs and the “Truth in Lending” (TIL) Form which shows your APR. At closing pay attention to the “HUD1” form which will show your final closing costs. Also important the “Note” (which shows your interest rate) and look for any mention of a “prepayment penalty”. This could cost you thousands if you plan on moving or refinancing in the near future. If you have any questions ask your loan officer right away.

One final note: I have been in the mortgage industry for 8 years. I have a financial industry background going back over 20 years. In my experience most mortgage people are honest and want to help you. Avoiding these seven mistakes should make your next mortgage experience an enjoyable one.

NAMB Says GAO Foreclosures Study Vindicates Brokers

The National Association of Mortgage Brokers praised a long-awaited Government Accountability Office (GAO) report analyzing the rash of home mortgage defaults and foreclosures.

"This study vindicates mortgage brokers by confirming what we have been saying all along," said NAMB President George Hanzimanolis. "Mortgage brokers are not to blame for the meltdown in the sub-prime mortgage market. According to GAO, the problem started with the rise of securitization, resulting in too much liquidity, which led to aggressive practices by banks and other lenders. Taken together, these forces shifted risk from lenders to investors, eliminated accountability and led to a weakening of underwriting standards. Simply put, blaming only mortgage brokers or any other one segment of this industry for this complex meltdown doesn't hold water with the facts."

GAO pointed out a number of factors that contributed to the collapse of the market, including a drop-off in home price appreciation rates and a weakening labor market in certain parts of the country. But it stressed that the easing of underwriting standards and the wider use of certain loan features such as low- and no-documentation loans and higher loan-to-value ratios contributed to default and foreclosure increases by making loans available to borrowers who could not keep up with their payments.

"The real tragedy, of course, is that GAO prjects more than one million homeowners will experience foreclosure during the next six to seven years due to this combination of circumstances," Hanzimanolis said. He urged Congress to consider the study's findings carefully when drafting legislation designed to make improvements in the mortgage market.

Reprinted courtesy of the Florida Association of Mortgage Brokers