We are on the cusp!

Undeniably the stock market has become a Bear market. That means that the Dow industrial average is down more than 20%. Sooner or later, those investors are going to start to move to safer investments. What are safer investments you ask? Well I am going to suggest that Mortgage Backed Securities are safer investments. For the last 12 months, this investment has been out of favor with everyone from institutional investors to foreign investors. As housing prices have fallen drastically on both coasts the middle of the country has done a good job of holding value. The Countrywide Mortgage debacle has turned a corner and is now Bank of America’s problem. The Fed has not had to rescue any more mortgage companies for the last 30 days. Second quarter earnings are being reported this week and by now all the major companies have figured out that they cannot hide the losses from the mortgage mess, so those will be dealt with in these reports.

That leaves us with mortgage backed securities in position to be an attractive investment again; especially the Ginnie Mae government loans. With over 70% of all loan applications that I am taking right now being for FHA or VA loans, I am confident that most other successful originators are doing the same. This will create a huge supply for these investments and the hawkers of these securities will have the product to sell and most of these properties will not be those that are going into foreclosure but being bought out of foreclosure by people who have the means and desire to make their mortgage payments. Sooner or later, Wall Street is going to start moving these securities and then the laws of economics will take over. As demand goes up so does price. On a bond, for those of you that don’t remember, when the price goes up the yield (see interest rate) goes down. Thus, even though there is discussion of the Fed raising short term interest rates, what they really are hoping for is that the lowering of short term rates that they did months ago will finally take hold on the long rates and we will see the 30 year fixed rate get below 6% again.

Now I realize that this is optimistic thinking on my part, but if you listen to the doom and gloom prognosticators out there saying that the economy and the stock market are still in for tougher times, someone has to be willing to bet on the bond market. Today I am that person!!!

WOW

I want to first take a moment to thank all the people who have helped me with this project. Each and every one of you has inspired me and been a tremendous resource to me. So again, THANK YOU!

A little over a year ago I made the commitment to start this blog and at that time I did it for a variety of reasons, but mostly I wanted to have a way to communicate to the people who had not met me, what I stood for in business. At that time I also wanted to raise my “google” ranking and was quite embarrassed that I was on page 16 for a racquetball tournament that I didn’t even win. So I took on this challenge of writing a blog as often as I could find the time and find something that I thought was worth sharing. I am not proud of each and every post, for as I read them again I see some of the flaws of my lack of writing skills and also I find that I may have let emotions get in the way of the point of the message. None the less, I have found personal satisfaction in writing this blog. My goals have been accomplished.

I now tell people who question what I stand for to read my blog. I direct potential clients, referral sources and even people that I am interviewing to take the time to stop by and read my postings. My “google” rank as of this minute is numbers 2, 3 and 9. There is an individual who has written a book against the war and at the moment he is #1. But I have a plan and I will usurp him at the top spot with your help. But more on that later! I have developed relationships with other bloggers who have helped me learn more about how to do this. Past clients and potential clients have found me on this blog and have contacted me for loans. Lastly, other industry professionals have read this and have commented to me their thoughts on my writings. It has made this a great conversation starter and another way to build relationships.

So how do we take over the number 1 position? All you have to do is visit this site weekly. Add me to your web browser as a live bookmark and click on the bookmark every once in a while. You could subscribe to the blog and then you will notifications when there is a new post. Please take the time to ask anyone you know to stop by this web blog. All they have to do is hit the page from any page they are viewing and that is good enough. If they choose to read the material, that will make it that much better. Educating the public about the mortgage industry is never a bad thing. Especially when there is so much bad information put out by the press and the “Dark Side”.

I appreciate you taking the time to visit today and please let me know if there is anything I can do to help you achieve your goals.

For questions or comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

FHA is the King!

As previously mentioned, the new economic stimulus package has allowed HUD to raise its maximum loan amounts for FHA loans depending upon the county of the property. For those in the St. Louis, Missouri area, that means we now can do an FHA loan for up to $281,250. The previous amount was $213,750, so that is a huge jump, almost a 33% increase.

So who can take advantage of this? You could spend days googling FHA loans to get all kinds of information about the FHA insured loan so I won’t waste you time covering everything. What I will do now is touch on the opportunities that I think will make the most amount of practical use for the clients that I see on a daily basis.

1) First time homebuyers: With the end of the conventional 100% financing (see previous post) now more than ever this will be the product of choice for first time homebuyers who have little or no money down. FHA requires a 3% down payment; however those funds can be gifted to the borrower from a relative. The gift does not have to come all from the same relative either. You can get part from one parent, part from another parent or their siblings such as an aunt or uncle and then you can get more from another relative. Thus on the $289,950 purchase price that the borrower needs $8,750 for a down payment, they can get that from various relatives or at least the part that they have not saved up on their own. They can also borrow the money for a down payment, as long as the loan is secured and has a repayment period of at least 5 years. That payment counts against their debt to income ratio, but makes borrowing against a car, a boat, a certificate of deposit or a 401K an option for coming up with all or some of the down payment.

2) Refinance to get out of an 80/20 loan. The second mortgages on these loans were priced higher than the rate on the first. Many people regretted getting them, but because of the change in Conventional guidelines, they were not able to refinance the loans since they owed over 95% of the appraised value. On an FHA loan, we can refinance them at 97% loan to value if we are paying off liens on the property. A great way to get those people out of 2 mortgage payments and into one at a FIXED rate.

3) Refinance for cash out. Both Fannie and Freddie have made it darn near impossible to get approved for conventional cash out loan over 80% loan to value. First your FICO score has to be over 720 and then good luck getting mortgage insurance on the loan. With FHA we can go to 95% loan to value and thus help get people out of the credit card debt or other challenges that are overwhelming them. It will also allow people to borrow money to improve their property, which in the near future will be a key to helping people hold their property values.

These are just a few of the ways the FHA loan can be used. For comments or questions, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.224.9824.

The End of 100%

In the ever changing landscape of lending, we had the latest and most significant change take place this past Monday. All of the Private Mortgage Insurance Companies announced that they would no longer issue mortgage insurance on any loan with a loan to value greater than 97%. On a side note I can remember when we could only do a 97% loan and then just one of the mortgage insurance companies said they would insure up to 100% and it was months before the others joined in when the LTV was going up, but now that the maximum LTV is going down, they are all are the same page and quick to make the move. Kind of like rats jumping off a sinking ship! But I digress! Now there are few instances that one of the companies will honor the 100% commitment but it is in such a limited scope that you have a better chance of winning tonight’s Powerball drawing than getting a 100% loan.

So why are they doing this? First of all they are all taking a bath financially in mortgage insurance claims on loans that are in default and foreclosure due to the current mortgage crisis. Some would argue that they have been making money hand over fist for years as their losses have been limited as the housing prices grew and mortgage rates were declining or low, but keep in mind that during that time that they had to fight to keep market share and revenues as the banks created the second mortgages that would go to 100% and in the industry it was common practice to do a first mortgage for 80% and the second for the remaining amount to avoid mortgage insurance. So let’s not rush to judgment on the profits of the mortgage insurance companies over the last 7 years. Secondly and more importantly, we are seeing house values in some areas decline. So if they did insure a loan that was a 100% loan in one of those areas and the house price has declined, they are now insuring for over 100% of the value of the house. How smart is that?

What does this leave us? Thanks to the stimulus package that was passed we know have higher FHA loan limits and in most cases the cost of the monthly mortgage insurance will be less on an FHA loan. Also, in the old days, before 100% financing, we did most loans using gifts, tax returns, SAVINGS, as a way to come up with the initial 3% for a down payment. Imagine that, you have to save some money to buy a house?

I will write more on the increase in the FHA loan limits and the opportunities that are presented by this later this week. For questions or comments on this please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

A Big Nothing!

Well the Federal Reserve cut interest rates by another .5% today which makes that 1.25% in the last 10 days. What did Wall Street do? They acted excited, but by the end of the day the dow was down 37 points. The bond market was even less excited and there was almost no movement at all. Why is the big question?

I would love to tell you that I know the answer, but I don’t. Here is my best guess as to what will happen over the next 30 days. As the heavy money has a chance to digest the Fed comments and view the rest of the economic indicators that are coming out this week they will determine what direction the market will go. This week will still be a week with potential wild movements in both directions for mortgage interest rates. As the market recognizes that the Fed may have to take further action, positions on the bond market will be taken and we will see the 30 year fixed get down to 5.5% or possible below.

Here are the economic indicators that are coming out this week:

1/30 Gross Domestic Product (Advance) (BEA) 2007 Q4 8:30

1/31 Personal Income (BEA) December 8:30

Construction Put in Place (Census) December 10:00

For more you can go to http://www.economicindicators.gov/

If you have questions or comments about this please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

What Just Happened?

In a move not seen in recent history the Federal Reserve has stepped in and lowered short term interest rates. I could go on and on about the fears of the world about the U.S. economy going into recession, but you can get plenty of that information from other sources such as http://online.wsj.com/article_email/SB120100837976106391-lMyQjAxMDI4MDIxMzAyMDM4Wj.html or http://www.forbes.com/2008/01/23/europe-interest-rates-markets-equity-cx_vr_0123markets06.html?partner=msn.

What I want to discuss is the ramifications this has on real estate and the mortgage industry.

The bond market responded to the rate cute as I would have expected. Prior to the move the market had priced in a 50 basis point cut at the next Fed meeting. All it did yesterday was add the other 25 basis points to the Fed move and now we are seeing the 30 year fixed in the 5.5% range. If borrowers are paying attention, you can now purchase a home with little or no money down and get a fixed rate mortgage for 6% or less. Housing prices are at near bargain basement prices. The Fed is betting that aside from calming the fears of the world markets, this will be the impetus that will get people back out buying houses. I personally think that we are still months away from that day. Even thought the inventory is overloaded with good houses for first time homebuyers and there are bargains everywhere you look. It will fall upon the middle class of America to jump start the real estate cycle.

For the past 3 years the middle of the price range has been the house slowest to move. The people who are looking to buy their second or third house to move into or the people who anticipate or have just received a promotion at work and are ready to get a bigger house. These are the people who need to get back into the game. For quite some time they have been standing on the sidelines hearing all the gloom and doom about the economy and they are smart enough to recognize that they could lose their job. We are a long way away from them feeling secure enough to make that move. Until then we will continue to see housing struggle.

For questions or comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

A Perfect Example!

For those of you that have followed my postings you know that I warn people about going to the “Dark Side” to get their mortgage. The “Dark Side” is those mortgage companies that you see and hear advertising for business all of the time. I realize that we all have business plans and ways to generate business. Advertising is a way to do so, but when it comes at the expense of the client, especially a client that cannot afford to pay the difference then it is not the best way to do business.

On Friday evening I received a call from a lady who was referred to me by one of my professional relationships. She had applied with a local mortgage company and was trying to refinance a loan that she owed $61,000. In her history she has a bankruptcy and she currently lives paycheck to paycheck with no savings. Because she had tremendous equity in her home she is able to refinance with little or no challenges. On a scale of 1-10 with 10 being the hardest, this is about a 4 when it comes to doing her loan. Thus I really can’t justify charging her a premium to do her loan because it would be a lot of work. More on that later, but the local mortgage company had been pressuring her to close this week and call it women’s’ intuition or just a nagging feeling she felt uneasy about closing so she mentioned it to my professional partner and she then called me. When we visited it turns out that the difference in my closing costs and those charged by the local mortgage company were $2,500. Of that $1,640 was a broker fee which was being charged instead of charging 2.5 points. Not only is that rape of a person who cannot afford it but because they are charging the broker fee instead of points the broker fee is not tax deductible. The points at least can be amortized over the life of the loan if they chose to charge points.

It is needless to say that this lady has canceled her transaction with the local mortgage company and is proceeding with Cornerstone. That is why I tell people to steer away from the “Dark Side”!

Now back to the premium for doing excessive work. On Tuesday of this week I received a phone call from a Realtor who was in a panic. Her client had been trying to back out of his purchase contract and the lender he was working with had canceled his transaction. When the client found out he had no legal grounds to get out of the contract and had to proceed or risk being sued he agreed to proceed but could not find a lender that could get him a loan in 2 days. The lender he had applied with was a national lender working his deal out of state and because they have no desire to have a relationship with either the borrower or Realtor they didn’t want to go the extra mile to get the job done. This is the type of challenge I love and I told the realtor and the client that as long as they did exactly what we told them I would be able to close in 48 hours. Since we had to drop everything we were doing to get this loan done we did charge a premium in the interest rate. Instead of making what we normally make we made an additional 1 point. I explained this to the client and they understood completely. Closing happened on time and all the parties were completely satisfied.

So there are times when people should pay a higher cost to acquire a mortgage, but unfortunately the people that should pay a few and far between and the ones that shouldn’t usually make the mistake of going to the people that will take advantage of them either because they don’t have their best interest in mind or simply their business plan does not allow them the flexibility to treat people fairly!

For comments or questions please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Are Rates Falling?

Well the year has started off with interest rates heading lower, but have they really? With Fannie Mae and Freddie Mac adding risk based pricing to their delivery fees for all loans delivered after March 1, 2008 see https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2007/0716.pdf. Who knows what the rate will be at any given time. Couple that with this announcement; https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2007/0721.pdf

And the interest rate that I thought we should have is now at least .125% higher and in some cases .375% higher. Even though the price of mortgage backed securities continues to rise and the yield or effective interest rate is falling, the interest rate for most consumers is actually going up or staying the same!

Economic news favored rates falling and currently the trend has been favorable. However this week we have at least 3 Fed Governors speaking at various functions and the minutes from the December Fed meeting will be released. The market watchers will spend far too many hours dissecting the comments from these and we will see the bond market either give up its gains or take on a whole new energy as anticipation of the next Fed meeting begins. Either way, at this point it is going to take a strong push to get the 30 year fixed back down to 5.5% or below. Mostly due to the above mentioned pricing by Fannie and Freddie, but also keep in mind that the secondary departments of the major investment banks are under pressure to be profitable with the REO departments getting killed with all of the foreclosures. Thus when they do their pricing models, expect them to error on the conservative side.

For comments or questions, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

How to start the New Year!

The last day of 2007 was a day of sadness and hope. The year was coming to an end I as I reflected upon the previous 364 days I had a chance to take inventory of the things I had accomplished in that year and identify the opportunities lost or at least not capitalized on. I also recognized the amount of time I spent on personal growth, recovering from a failed business. The decision to close that business took my heart and soul away when I did that just a little over a year ago. I don’t think that when I closed the business I realized just how emotionally devastating to me it was. When I did so, I went to work for a friend who I had played soccer with over 20 years ago and he is the type of person who is always upbeat. I used that environment to bolster my emotions while I worked through the pain and tried to plan the rest of my professional life.

As some of you may know, I spent many hours riding a bike or hitting golf balls while I tried to find what I really loved doing. I found myself mentoring and coaching loan officers and realtors, thus I recognized that being back in sales management was the calling I needed to answer. I answered that calling and have found myself enjoying the challenge each and every day. I work with a group of people that share similar vision for how to run a mortgage company. Loan officers that believe in doing the right thing and support people that truly care about taking care of the customer. We are positioned to grow if the market allows us to but will be successful if we stay the current size. If I knew what I wanted when I closed my company I could not have asked for a better set of circumstances. So again I give thanks to the people at First Integrity Mortgage; the company that hired me when I closed my company. The people there did all that I asked and gave me all the room to flourish while I found myself.

Now that I have moved on to Cornerstone I want to take the time to thank them for having the belief in my management skills to bring me back into the game. At my new company a special thanks goes to Brad Bradford for championing the concept of hiring me. Never underestimate the relationships that you form in your life. Brad was a loan officer with me at a mortgage company over 10 years ago. We never developed a friendship, but a healthy respect for how we both went about doing our business. Had I known that he would become a key part of my life 10 years later I now know that I would have done more to build that friendship. But alas, hindsight is 20/20 and unfortunately, the younger we are the less foresight we have to build those relationships. I guess that only thing we can hope is that we are smart enough to not burn bridges.

So much for the sadness, now on to the hope; As Monday’s bond market came to a close it finished the year with a strong rally. We opened Wednesday with a continuation of that rally. As of the time I write this, our pricing is within 25 basis points of our lowest point in 2007 and that was as low as we had seen since 2003. Interest rates are below 6% again and should stay there for at least the coming week. This should give me as well as the loan officers I work with an opportunity to start the year off with a few good months. With this being an election year we can hope that rates will hold steady and we won’t see any major upward movement. Although with gas going up, the only thing we know that will affect is the spending power of the American consumer. Either way, I am optimistic that the business plan that I have spent the last 3 years developing will flourish this year and all those that utilize it will reach and surpass their goals.

For comments or questions please contact ChrisScheer at cscheer@cornerstonestl.com or 314.223.9824.

Customer Service or Lack There Of!

If you have read my previous posting on Manufactured Housing you may be aware of the challenge that I had getting the appraiser to put the Make, Model, serial number and year manufactured on an appraisal of a Manufactured house. The appraisal form clearly states that this information is needed, yet the appraiser we chose to use could not find the information on the property and thus felt it was not his responsibility to locate. Over a 2 week period my assistant requested the information be added to the appraisal and each time she was told he didn’t have it or have access to it. Since this was one of my first challenges working with this assistant I let her attempt to handle the situation until it became a crisis. I recognize I should have stepped in sooner, but until you see someone perform under fire you don’t know how good they are.

At the eleventh hour I went to the internet and found the source of the information within 10 minutes. Prior to doing that I sent an e-mail to the managing partner of the appraisal company that was very direct and to the point, see the following:

We have a challenge. As you are aware, we have asked the appraiser to supply the Manufacture’s serial number, name, trade/model and date manufactured for the property on Lynch road. At this time this is the only item I need to get a clear to close, however we will not close until we have it. In the appraiser’s defense, the realtor and her clients went through the entire house tonight and could not find it. However, since there is the HUD certification label #RAD730051 as per his appraisal, this should be the basis to track down the required information. If the realtor manages to find this information then the appraiser looks bad. If we manage to find this information, then the appraiser looks bad. If HUD provides it, he still looks bad, but not as bad. If he finds it, then he gets off the hook. See the challenge? I realize that this is extra work and frustrating for everyone. However we have a client who is trying to purchase a home and helping them achieve their goal is what we do.

Feel free to call me if you have any questions or comments.

I have inserted “the appraiser” and “realtor” where the names were in the correspondence. I received no reply to this e-mail from the appraiser and when I was contacted that day by the appraiser to review the value on another property nothing was mentioned of the e-mail until I brought the situation up. The defense of the appraiser was that no other lender had ever requested this information and he felt it was not his responsibility. I reiterated that the underwriter requested that the appraiser complete this section of the appraisal, therefore at that time it becomes the appraiser’s responsibility. He continued to contend that since he couldn’t find it then it wasn’t his job to get it. When I explained how easy it was for me to obtain, he asked why I didn’t do that sooner. It became a circle of discussion with me telling him what I expected as the client and him saying that he wouldn’t do it. Later that day I addressed the situation with one of the other principals at the company whom the e-mail was sent to and he defended his partner. Going further to say that we didn’t know what we were doing.

I appreciate a business partner defending his associates, but at the point that you have a client telling you that you screwed up and that what was being requested was not out of the ordinary for out industry this is not the stance to take if you want to keep the relationship. As the lender I have a choice of the appraisers I choose and the stance this company took will keep them from getting any more of my business.

For questions or comments on this post, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Manufactured Housing

So why is it so hard to get a loan for a manufactured house? Over the past month I have had the opportunity to work a loan that was on manufactured house that had been repossessed by HUD. The client came to me saying they wanted to buy this house without having sold their current home so they could have time to fix it up before moving in. The borrower was self-employed and he felt his tax returns would not support him owning 2 homes. Based upon his excellent credit I told him we had a way to do the loan if he put 10% down. We would allow him to state his income and then when he sold his current home and was ready to pay down the mortgage on the new home we would refinance him. Things were going along swimmingly until the file hit underwriting. Even though the guidelines I had for the investor said they would do a conventional loan using stated income on a manufactured home, the information the underwriter had said otherwise. At this point most loan officers would take a pass and deny the loan. I chose to switch the loan to an FHA loan and ask the borrower for the documentation to support the income needed.

When I met with the client and reviewed their tax returns I found that they did indeed have enough income for two houses. I will be the first to admit that I made the mistake of not taking charge initially and getting all the documentation upfront and being the expert. Instead I let the client lead me down a path that was a dead end. We switched the appraisal to an FHA appraisal and requested that the realtor change the contract to an FHA contract. The listing agent, being a representative for HUD said that if the loan went FHA a work escrow would be required to repair some items they had found when they did their walkthrough after repossessing the house. The work escrow seemed minimal and the client agreed to fund the work escrow themselves.

In the meantime I contacted our investors to see who would purchase an FHA loan on a manufactured home. I found one of our investors that were willing to purchase the loan and then we sent it to their underwriters. As luck would have it, they denied the loan because it had a work escrow. Now we were in a quandary, we couldn’t do an FHA loan on a HUD repo because there was a work escrow required and we couldn’t go conventional stated with the first investor because they wouldn’t do a loan on a manufactured home. So now, I am sure most loan officers would have told the clients that they could not help them. However, I realized that the realtor involved was counting on the commission from the sale and the borrowers were truly buying a great home for them to retire to. There had to be a way to get the loan done!

We then switched back to a conventional loan and found just 1 of our investors that would purchase a conventional loan on a manufactured home. This investor had some strict guidelines on the information needed on the appraisal, including the HUD Plate and the Manufactures serial number, make, model and year manufactured. In reviewing the appraisal we found that the appraiser did have the HUD Plate information but was lacking the rest of the required information. For 2 weeks we kept asking the appraiser for this information. He continually said that it was not available. The night prior to the loan closing I googled the term “HUD Plate and on the third website showing in the search I found the information for the IBTS, a company that who will get the information for you that was needed if you have the HUD Plate information; http://www.ibts.org/faq_consumer.htm. They charge a $50 fee for normal processing or for a rush they charge $75. We faxed them the form and had the information within 2 hours. We then gave the information to the appraiser for him to add to the appraisal. By 1:00 that day we were clear to close and the borrowers had their new home.

If you can tell me why a home that is manufactured but is permanently attached onto a foundation with a basement is any different than the quickly built subdivision houses that are thrown up across the country I would be happy to learn. Contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

All I Want For Christmas

So imagine if you will; you are one of the many mortgage originators who have managed to stay in this industry through the last 3 years of cutbacks, layoffs, companies going out of business and income less than you have seen in a long time. Over the last 2 ½ weeks you have seen the 30 year fixed rate drop below 6% more than once and actually get to 5.75% for 24 hours before heading north again. You have glimmers of hope of making money again; real money! Not just closing enough loans to pay off your draw and keep your job, but enough money to justify all the pain and heartache you have experienced lately.

Wall Street is in your corner. They are pushing for the Fed to continue to lower short term interest rates. They need the lower costs of money to offset their huge losses in the Subprime Mortgage fiasco that they created. Your consumers are clamoring about the most recent Fed rate cut “does this mean that my interest rate dropped?” Instead of being able to say yes you have to say no and then spend 10 minutes on economics, Wall Street, mortgage backed securities and Japanese candlesticks to try to get them to understand the difference between short and long term rates and that one moving doesn’t mean the other will move.

You are exhausted and leave the office to try to find a real estate agent to talk to in hopes of getting a deal from them only to find that you either can’t get into their office or the agents you can find spend the entire conversation telling you how bad the real estate market is and no one is doing any business. You grow weary of bad agents and bad attitudes and get back into your car only to find that no matter what radio station you turn on you hear a commercial for a mortgage company, one of the “Dark Side” lenders who continue to prey on the unknowing and confuse most of the average and below average consumers with their lies and misleading information. Thoughts of George Bailey jumping off the bridge in “It’s A Wonderful Life” dance through your head. As you think of that you realize that the story ends happily and George gets to live his life with happy endings. Where are your happy endings?

They are right where they should be! This career, this job you have chosen to continue to pursue is your Christmas wish. It isn’t about the money. It isn’t about confused borrowers. It isn’t about competitors that don’t play the game fairly. It isn’t about realtors who let others control their minds and outlook on their career. It isn’t about whether the Fed lowers or raises interest rates. No it is about each and every borrower you do get to help finance or refinance their home. Not house, but home! You get to help people live the American Dream. It is about being the person who touches the lives of everyone you meet in a positive way. You can only be measured by how you made the lives of the people around you better. Accept that as your calling and reap the rewards of a life worth having and living!

Happy Holidays!

For your questions or comments please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Where did you go Jumbo?

I was on the phone with a past client last night that is building a $1,300,000 house and will need a loan for $800,000. When she asked about the rate on the 15 year fixed rate mortgage I tried to prepare her for the rate shock, but I almost had to call the paramedics after she heard the rate. As the fallout from the break up of the marriage of Wall Street and Mortgage Backed Securities continues, the pressing question on the mind of many borrowers is, “Why are Jumbo rates so high?” First we need to define what a Jumbo mortgage is and for that we turn to our new “bff” Wikipedia http://en.wikipedia.org/wiki/Jumbo_mortgages. Now that you know what a Jumbo mortgage is, hopefully the fact that it is the insurance companies and banks that are the ones who purchase these Jumbo Mortgage Backed Securities for their investment portfolios will help shed some light on why there is not as much demand for them. No different than any commodity in a capitalistic society, the laws of supply and demand rule the day. As the demand for these products has shrunk, the price of them has fallen. Because they are a bond instrument, back to my new “bff” http://en.wikipedia.org/wiki/Bond_valuation, when the price falls, the yield or interest rate rises. In the case of the Jumbo loans, the price has fallen so much that spread of the yield from Conventional loans is greater than it has been in the last 20 years. So we have all the Banks and Insurance Companies that would normally be gobbling these securities up straying away from them because they are mortgages.

Mortgages right now to investors are a very bad word. Jumbo mortgages are part of the 3 trillion in adjustable rate mortgages are coming due this year and next. There is too much demand for these products for the spread to stay where it is today. As I have challenged the industry before I will challenge them again. Somewhere there is an insurance company or a bank that is willing to put these loans on the books at a more reasonable price. As I type these words I am sure that those companies are out there, it is just harder to find them but we will!

For your comments or questions, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

New Money Available

The Missouri Housing Development Commission opened the registration window for First Time Home Buyers on Thursday with its fifth bond issue of the year. (http://www.mhdc.com/homes/firstplaceloans/index.htm ) What does this mean for you? If you have not owned a home for the last 3 years and if you earn less than the required amount per family, you can receive a below market interest rate and take advantage of a 3% grant towards down payment or closing costs.

Years ago when there was little hope for people to purchase a home without a down payment, this programs was the great hope provider. For the past 4 years this program had lost appeal with all of the 100% financing available. With what has happened in the mortgage industry this year, the down payment assistance program will be the best way for low to moderate income earners to achieve the dream of home ownership. HUD is looking at eliminating the Ameridream program (www.ameridream.org) and others that allow a charity to provide down payment assistance to borrowers obtaining FHA insured loans; http://sev.prnewswire.com/real-estate/20071002/DC0378002102007-1.html which will eliminate even more potential opportunities for buyers to get into homes. Thus, the MHDC program as well as other State assistance programs will become the vehicle of choice again for assisting buyers with down payments and closing costs.

As the State of Missouri continues to streamline the process to make it easier for lenders to get loans registered and as they continue to provide training and recognition for the individual loan officers I can see this as the answer to many people’s hopes and dreams.

For more information on this program or to register with Cornerstone Mortgage, a MHDC Top Ten Lender; please contact Chris Scheer at cscheer@cornerstonestl.com or call 314.223.9824.

FHA Mortgage Insurance May Change!

HUD has announced a proposal to change the cost of both upfront and monthly mortgage insurance for purchases and refinances. This change is based upon loan to value and credit score. Their reasoning is that they want to be able to serve more borrowers and keep the opportunity for home ownership accessible to as many as possible. They have imitated a rate system that has been in place in the private mortgage insurance sector for years. Depending on how good your credit is and how much you put down or how much equity you have, your cost of the mortgage insurance will go down.

Why is this good? As the secondary market continues to shy away from maximum financing i.e. 100% loans someone needs to step up to the plate to keep the ability to purchase lower priced homes feasible for most working class people. When they want and can purchase the starter home or the lower priced home, then the person selling that home has the chance to move up, which keeps the process moving right up the price scale.

You can view the proposed changes and get information on how you to can comment to HUD about this change at this address; http://hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=FR07&s1=FR-5171-N-01$[NO]&SECT5=FR07&SECT1=TXTHLB&l=50&u=../cgi/newsdoc_run.cgi&p=1&r=1&f=G

For your comments about this blog or any questions for Chris Scheer, please contact him at cscheer@cornerstonestl.com.

Licensing for Mortgage Originators?

As a mortgage professional for the last 14 years, I have been against licensing for originators. My logic was purely self serving. If I was doing business in a professional and ethical manner, I didn’t want to invest the time and or money into getting licensed. I was licensed in Illinois and when the time came to renew the license, I was too busy to do the little things that were required for me to keep my license. So now that you know why I WAS against it, let’s try to find out why I have changed my mind?

In a nutshell, there are still too many individuals and companies that are taking advantage of the consumer! The “Dark Side” has been reigned in by the changes in the sub-prime mortgage market, but like any bad fungus, they are regrouping and reforming to begin their next assault on the homeowners and would be home owners in our marketplace. If I, a busy professional am too busy to renew my license, how much effort do you think the minions of the “Dark Side” will put forth the get licensed or maintain their licenses? This move alone will chase many of the financial rapists out of business.

Now I recognize that a thief will always look for the easiest access. See the article by Michelle Singletary in the Washington Post; http://www.washingtonpost.com/wp-dyn/content/article/2007/09/08/AR2007090800159.html. However, slowing them down is the key. It is in the time that they have to look for easier avenues to get into the consumers’ houses that we have more opportunity to educate the borrower and attempt to protect them. I also think that the investors who are purchasing these loans should be held accountable. Here is the Federal Reserves report on how well the Fed has done at monitoring companies who are purchasing mortgages; http://handle.dtic.mil/100.2/ADA270233 .

How do you feel about Mortgage Originators needing to be licensed? Contact Chris Scheer at cscheer@cornerstonestl.com with your comments.

Evolution of Credit

I had a very interesting meeting today with a gentleman who runs a company called Evolution Credit, www.evolutioncredit.com. He has started this company with the thought of helping people fight the collection agencies of the world that destroy peoples credit, most of the time without the people even knowing that this is going on. The story is best told by him, but I can surmise that at a young age he attempted to purchase a home and had challenges because of a collection account for a company that he never had an account with. Being somewhat intelligent and frustrated by the months of work to remove the information he decided to start a company to help people who were in similar boat as himself.

He has a very thorough working knowledge of Fair Credit Reporting Act, http://www.pueblo.gsa.gov/cic_text/money/fair-credit/fair-crd.htm, the The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA). Utilizing systems and with clients diligent work he can improve credit scores significantly with a 12 month period. With the heavy reliance upon credit scoring in the both the mortgage lending and automobile lending arenas, this can make a huge difference in your cost to purchase a home or a car.

So what does this mean for the average consumer? With the recent changes in mortgage lending, if you want to have flexibility in the type of loan you can acquire or even to be able to qualify for a loan, you are going to have to get your credit scores above 620 to get a loan and above 700 for the premium loans. To do so will take time to manage your credit no different than you would manage an investment. Those that recognize this will benefit and those that don’t will pay a heave financial price.

Which one are you going to be? For more information on credit scoring and home mortgages, please contact Chris Scheer at cscheer@cornerstonestl.com

What is the Delay?

Here we are, one week after the announcement by the President to try to help homeowners who are struggling, http://www.foxnews.com/story/0,2933,295369,00.html

Yet not one investor, i.e., Chase, GMAC, Countrywide, Citi Mortgage, or any of the other major national mortgage banks is ready to start selling these loans. Who is going to step up to the plate to start rescuing homeowners? Right here in St. Louis there are over 600 properties in St. Louis City and County that are for sale from Foreclosure. That number has tripled in the last 6 months. We are at the beginning of the problem. At that rate, next March we will have over 1800 homes for sale that have been foreclosed upon.

If we are a snapshot of the country, why are the major mortgage banks dragging their feet?

Most people in the industry know that HUD will insure these loans, however until HUD gives written guidelines no one is will to stick their neck out and originate a loan that may not be insured. Meanwhile, people who are late on their mortgages continue to struggle with the situation. Most are taking the ostrich approach and burying their head in the sand hoping the problem will go away. While they do this their credit gets worse and their credit scores continue to fall. The guidelines that HUD will issue will dictate a minimum credit score, so while HUD drags their feet, scores are falling and people that should get relief won’t due to governmental and political delays.

I Challenge the top executives at the major mortgage banks to step up and use common sense. We all know about what the guidelines will be. Start originating these loans and let’s start helping people. You may end up with a few loans that can’t be insured, but how many people will be helped? How much goodwill will be created? How much will your servicing portfolios increase in value as you help stop the decline of delinquencies? So what if you end up with a few million in loans that you can’t sell. Get them to perform for a year and then refinance them out of the loan that wasn’t insurable. It will cost you less than what it will to have to foreclose!

Are you ready for a Mentor?

No matter where you are in your career, until you have hung it up, you need a mentor. When you first enter any industry everyone has ideas of how they should be a success, but if you take the time to look around you, you will find people who are doing things right and who are seemingly doing things right but having no success. Seek out those people that are doing things right with success and let them know you have noticed their success and you are looking to learn from them. Tell them initially you just would like to e-mail them a question once in a while and when they are ready to invest quality time, start by buying them a cup of coffee or lunch and pick their brain on what makes them successful. If you are having success, look to more successful people either in your industry or others and approach them about developing a mentor relationship. In the meantime, find someone new to mentor. By finding someone to mentor, you will rekindle the energy and passion you had when you entered your field, be reminded of you successes as you help the new person overcome their challenges and still have the opportunity to learn how others view and want to solve challenges. If you find yourself at the crossroads of not having anyone to mentor you, find a coach or mentor that will work with you for a fee. The nominal fee is often recouped in the first sale and often you are reminded of the reason that you are a success in the first place.

For more information about my mentoring program, please send me an e-mail at chrisscheer@firstintegrity.com.

The Dark Side Part 2

So how do you avoid the “Dark Side?”

Let me first say that I believe that everyone should have the opportunity to make money. The Mortgage Industry is a great place to earn a living, provide for your family and help people make dreams come true. However, with every industry there are always people who are in it only for themselves. These people prey on others who are less educated, less intelligent and sometimes less qualified. When they do, they usually abuse the system, creating large incomes for themselves while staining the reputation of their entire industry. Not to mention that the people who are usually their prey are the people who need to have a lender who will treat them fairly as opposed to taking advantage of them.

Once a “B” always a “B”. When the sub prime lending market was in its beginning, there were borrowers who would not qualify for the “A” paper loans. On more that one occasion I would hear an account rep say that “B” borrowers don’t change their habits and they don’t learn their lesson. That may be true about some people, but I believe that people can learn to manage their credit and they can learn to manage their finances. All they have to do is have an honest chance!

So what is an honest chance? Well it is putting someone into a loan program so that they can develop a budget off of. It is creating a mortgage solution that will not penalize the client in a short period of time. It is not gouging them in fees when they do come back to you eating all of their equity up with refinance fees. It is treating people the way that you would want to be treated.

As we see mortgage delinquencies rise and foreclosures happening at an alarming rate, there is a change that must take place. But it is going to have to be consumer driven. Legislation is not the key. Education of both the consumer and of the mortgage sales people will be the basis of this revolution. The consumer must learn not to fall into the trap of working with people who spend tremendous amounts of money on advertising. Mortgage originators need to learn that if you are going to stay in this business for a career, relationships are a necessity. To nurture those relationships you must take care of people so that they want to come back and refer other clients to you.

Thank you to Tracy Nolan for referring Andy Revelle.

Thank you to Andy Revelle for referring Joshua McDowell.

Thank you to Klaus Bank for the referral of Sarah Stroup and Pete Wilkens.

Thank you to Libby Emmer for referring Rob Steinkuehler.