New MHDC

Here we go! It is actually going to happen! The new rates for the 2008B are as follows:

CAL for Government loans 6.9%

NON CAL for Government loans 6.45%

CAL for Conventional loans 7.3%

NON CAL for Conventional loans 6.85%

The window for reservations will open at 8 am on Monday August 4th. As soon as you have a confirmed reservation you may close loans. All loans in this bond issue will be sold to the new master servicer US Bank. Training with the master servicer will start on Tuesday August 5th in Columbia and on Wednesday August 6th in St. Louis. I will go over the changes to the program in depth at the training but I will state the changes briefly in this email.

Rates

As you can see we will have 4 rates instead of 2 due to the conventional market. Only Fannie Mae's My Community Mortgage or Freddie Macs Home Possible programs can be used with this bond issue. There will be no charge of 1.25% for LLP and adverse market fee in this issue only. However, there will have to be a $175 servicing fee charged to the borrower for the all CAL loans.

Down payment Assistance

As you can see I have changed the acronym from CAP to CAL. This stands for Cash Assistance Loan and will help differentiate between the two programs. The assistance will still be 3% of the loan amount but it will be in the form of a soft second mortgage that will be forgiven over a 5 year period. The loan will actually diminish 1/60 per month over the 5 year period. The borrower will then be given a 1099 every year for the amount that was forgiven that year and will have to claim that as income on the federal tax return. If the borrower sells or refinances the loan in the first five years the remainder of the amount will have to be paid back. We have been discussing the just-enacted housing stimulus bill with FHA staff and they told us today that the just-enacted housing bill does not impose a 100% CLTV cap on FHA loans. It imposes a 100% LTV cap on the FHA-insured first mortgage and requires the FHA mortgage insurance premium to be counted toward the LTV ratio for purposes of the 100% cap. HUD will continue to allow second liens from state housing agencies that result in CLTVs that exceed 100%.

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

FOR IMMEDIATE RELEASE

Contact: Carol Lundgren

314-726-6111, ext. 203

ST. CHARLES COUNTY HOME PRICES RISE 4.4% OVER APRIL 2007

Average Sale Price Up Over $9,000 in 12 Months

Despite statistics in other parts of the country and across the Metropolitan Area, the median home price actually rose 4.4% over last year in St. Charles County. According to figures just released by the St. Charles County Association of Realtors (SCCAR), the average sale price of a home in St. Charles County was $220,791 in April, up from $211,450 in April 2007.

“That’s exciting news for St. Charles County homeowners and homebuyers,” says Keith McCulloh, SCCAR president. “All real estate is local, and these statistics prove that St. Charles County remains a great place to invest in a home.”

McCulloh adds, “The rise in home prices reinforces the fact that buying a home in St. Charles County remains an excellent long-term investment and means of increasing your family wealth. For example, if you purchased your home in St. Charles County in April of 2003, you paid an average of $168,123. Today, that home’s value would have increased by a full 32 percent. That’s a return that would have been hard to beat in other investments, plus it’s tax free.”

In addition, SCCAR figures show that the average home took 94 days to sell in April, up only 14 days over last year. “Again, while you read and hear dire stories about homes sitting on the market for extremely long periods of time, the St. Charles County story is unique. Three months is definitely not a long time to sell a home, so sellers should not be scared off by what they’ve heard,” McCulloh points out.

For more information, call 636-946-4022, or visit www.RightTimeForRealEstate.com.

WILL MY HOUSE EVER SELL?

As you went out into the yard to pick up this newspaper, there was the “For Sale” sign in your front yard. You look at it and shake your head as you wonder if it will become a permanent part of your landscaping. You resist the temptation to see if the sign has grown roots as you walk back to your front door!

If this describes you, you have probably decided that the “self-proclaimed experts” in the media are right; the real estate market is terrible! After all, no one has bought your house! Yes, the real estate market has slowed, but homes are still selling all over the St. Louis region. Plus, despite what you hear in the media, many homes are selling relatively quickly! In March, the average home in St. Charles County sold in 90 days, which is an increase of only 8 days from the average in March of last year!

So, what separates the house that sells from your home with the sales sign that has grown roots in your front yard? In any market, it is all about the basics. No matter what the market is, location, condition and price determine how fast your home will sell! Now more than ever, it is important that you remember the basics! Now more than ever, it is vital that you have a Realtor beside you to help you market and sell your home!

Different neighborhoods have and will always command different prices depending on market conditions. Occasionally, changes in traffic patterns, development and other issues will change the value in a neighborhood. Your Realtor can help you determine the market price in your neighborhood. Since most of us can’t pick up our home and move it, we will talk more about condition and price.

One of the reasons that now is a great time to buy is that there are a lot of homes for potential buyers to choose from. Now more than ever, it is important to remember our mother’s advice when she told us to put on clean clothes or wash our hands because, “You never get a second chance to make a first impression.” You cannot count on a buyer’s ability to look beyond the clutter or the maintenance that needs to be done and see the “inner beauty” of your home! That won’t happen in any market and, particularly, when that buyer has a lot of homes to choose from.

Your Realtor will help you look at your home objectively through the eyes of a potential buyer. Needed maintenance should be completed before your home goes on the market. Moving is a great time to get rid of “stuff” that has been in your closets or in your kitchen cabinets unused or unworn for ages. To help your home make its best impression, clean house now rather than when it is time to move!

Your Realtor will also help you determine if your home needs more tender loving care before it goes on the market. It is important that your yard is neatly manicured, weeds pulled, dead plantings or branches removed, etc. If you don’t have the time, you may want to hire a teenager in the neighborhood or a service to keep up your yard while your home is on the market. Also, a fresh coat of paint is a great way to make your home shine. This is especially true if your tastes run towards the eccentric or non-traditional. Again, don’t expect potential buyers to share your tastes or realize how easy it would be to paint. It won’t happen!

It is important to remember that the market, not your Realtor or a potential buyer, determines the right sales price for your home. The value of your home is not based on how much you have spent on improvements, how much nicer your home is than the others in the neighborhood, how much you owe the bank, or how much you need to clear to afford your new home. Your Realtor will compare your home to others that have recently sold in your neighborhood to determine the right price.

Your Realtor has the knowledge and information to evaluate your home and arrive at the correct sales price. Unfortunately, in the current market, the right price might be less than you were hoping. Yes, you have the option of pricing your home higher than your Realtor suggests and reducing it later. Quite simply, that does not work! Many studies have shown that homeowners that try this strategy end up settling for less than they would have received if they had listened to their Realtor from the beginning.

The good news is that with few exceptions, most homeowners in this market can sell their home for more than they paid for it! Your home remains the best long-term investment available to your family. Plus, most of us will still need a place to live, so you will probably make up the price difference when you begin to look for your new home!

Remember, having a Realtor beside you is the only safe way to buy or sell a home. For more information on why 2008 is the Right Time for Real Estate, call your Realtor today and visit www.RightTimeForRealEstate.com.

Declining Markets

As the foreclosures and short sales begin to take effect on the housing market one of the single biggest changes that is occurring is the dreaded “Declining Market” label attached to a property in the appraisal. I have seen investors make the predetermination that certain zip codes, cities and counties are in declining markets and thus they are lowering their exposure by reducing the maximum loan on the properties in that area. Other investors have said that they will only apply declining market guides if the appraisal states that the property is in a declining market. Either way, when the declining market rules come into play, the only person that loses is the borrower.

Here are a few examples:

· The borrower is planning on putting only 5% down to purchase the property and the investor has deemed that entire zip code to be a declining market. They will only lend on the property if the buyer puts 10% down.

· An investor is planning to purchase a home with 10% down and the appraiser notes that the property is in a declining market. Now the investor has to put 15% down to get the loan.

In both cases if the borrower has the additional 5% it is an inconvenience, but the transaction will still go forward. But if the borrower does not have the additional 5%, then the deal is dead. In most cases the seller has lost valuable days marketing their property while the waiting for the buyer to get loan commitment.

Now that we know the challenges this brings I will discuss the inadequacy of how this is applied in my next post.

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.

Gentlemen Start Your Engines

Fasten your seatbelts mortgage professionals. This week President Bush will sign into effect his economic stimulus package. The stimulus package contains several features designed to improve the troubled housing market.

It would increase the Federal Housing Administration's loan limits from $362,000 to $729,750 and those of two federally sponsored entities, Fannie Mae and Freddie Mac, from $417,000 to $729,750. The FHA insures private loans made by FHA-approved lenders, while the other two buy and sell loans in the secondary market.

The measure would also enable the FHA to become more active in dealing with the direct impact of the housing crisis, permitting more borrowers facing defaults to refinance subprime loans through the federal agency.

So what does this mean to the mortgage industry?

1) Every loan that was a “Jumbo” loan that was originated in the last 4 years in all probability will be now a conforming conventional loan. That could mean a drop of up to 1.25% in the interest rate for borrowers. On $600,000 that is a savings of $489 a month. You can bet those borrowers will be clamoring for the chance to save money. Especially when the package may call for the change in the loan limits to only last for 12 months.

2) All those borrowers who have conventional loans that are over the current FHA loan limits will get a chance to refinance their first and second mortgages up to 95% of the value of their house depending upon the new FHA loan limit in their geographic area. These are the people that Fannie and Freddie have turned their backs on with the current mortgage crisis. As delinquencies rose credit standards have tightened.

3) Pipelines will swell and people will be hired to handle the increase in volumes.

4) Real Estate will recover in the following years as people have had a chance to re-adjust their budgets and dig out of the mess that was created.

For all those out there that would like to comment on this or who have one of those Jumbo loans, please contact Chris Scheer at 314.223.9824 or cscheer@cornerstonestl.com.

Latest Update on MHDC issue

The 2008A bond issue is being priced today and tomorrow, so we should open for reservation on Monday February 11, 2008. The rates will not be determined until later this week. I will send another email out later this week stating the new rates. This bond issue is 50 million dollars and only 5 million will be for NON CAP loans but we do have the flexibility to do all CAP loans in this issue. I will warn you that the rate will not be very attractive due to the current market conditions.


If you are a first time homebuyer or know anyone who is this is a great chance to get help on your downpayment and closing costs. For more information on MHDC go to www.mhdc.com.

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

Market Update January 25, 2008

The very same group of lawmakers that were on a mission at the end of last year to pass a bill that “reformed” the mortgage industry by putting heavy re­strictions and potential penalties for providing consumers much needed diver­sity in mortgage products, is now “coming to the rescue” of some struggling consumers by passing a stimulus plan that includes a way for more homeown­ers with viable credit to finance even larger loans and put a few hundred dollars extra in their pockets.

Industry analysts have been saying for weeks that low mortgage interest rates are not enough to help turn away the wave of potential foreclosures that are beginning to flow into the conforming mortgage market. The “reform” scared many lenders straight back to lending guidelines from the 90’s which severely hindered many homeowner’s ability to take advantage of the current low rates.

The stimulus package that has been approved by the House, and is going to the Senate next week, will give relief to some of these homeowners. As part of the proposed package, the current conforming loan limit would be increased to as high as $729,750 which will allow many homeowners with jumbo loans to refinance at lower rates. It might also allow homeowners with combo loans to possibly refinance into one lower monthly payment and rate. These increases are also being offered to FHA loans as part of this package to allow the Federal Housing Administration to help in the recovery efforts. Additional benefits could be felt by homebuilders and realtors who have struggled to sell properties at the higher price point or who can’t get buyers off the fence due to poor con­sumer sentiment about the market.

It’s now time to hold your breathe as this package is put before the Senate. Although some Senators are commenting publicly that they would like to see it fly through as well, history shows that it only takes one person with their own agenda to stop the progress of any package. If it goes through, we might be seeing the beginning of a refinance rally which would be welcome by many in the industry.

For questions or comments, 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.

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.

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.

Downpayment Assistance Rule

For the past few years, FHA has allowed charitable non-interested parties to supply the down payment to a borrower on FHA loans. Unfortunately, this practice caused housing prices to be inflated as the seller would raise their price and then contribute the increase to the charity as a donation. The charity would then give a gift to the borrower and thus have the down payment for a home with an FHA mortgage. The challenge is that the borrower had no vested interest in the house and when times got tough it was easy for them to walk away since they would be losing nothing other than a home with an inflated price. Selling the home was difficult in a flat or declining real estate market. This practice is one of the logs on the bonfire of the mortgage industry that is burning across our nation. Here is the latest on this practice:

FHA will issue official guidance regarding implementation of the regulation regarding a mortgagor’s cash investment. In the interim, to address the questions raised by many industry partners, FHA is providing the following information:

1. Nehemiah Corporation of America, due to a previous Settlement Agreement and as discussed in the rule, is granted relief from the effective date of the rule until April 1, 2008.

2. HUD has agreed to grant the AmeriDream Downpayment Assistance Program relief from the effective date of the rule until February 29, 2008.

3. All other similar downpayment assistance providers have not been granted relief from the effective date of the rule, which is October 31, 2007.

Provided that the homebuyer has entered into a contract of sale (including any amendments to purchase price) on or before October 31, 2007, FHA will recognize the gift if made to the homebuyer and properly documented as an acceptable source of the downpayment.

To read the final rule in its entirety and for more information please visit: http://hudclips.org/sub_nonhud/cgi/pdf/4846a.pdf

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

You Can't Wait!

Guess What? You Can’t Afford to Wait!

If you had a crystal ball and could see what direction interest rates and house prices where going you wouldn’t be reading this blog. Now that you have had a chance to think about that and agree with me on that premise, let’s move on to the bigger issue which is “You Can’t Afford to Wait!”

If interest rates go up while you are reading this blog you will lose money! Why you ask? Because you could have locked into an interest rate for a period of time and by waiting you may have missed that opportunity.

What are you waiting for? When are you going to:

Purchase your first home?

Purchase your next home?

Invest in real estate?

Refinance your home?

Get a home equity loan to improve your home or pay off bills?

Do anything?

If rates go down while you are reading this you will lose money. Why you ask? Because now you will get greedy and wait for them to go down further. By the time you figure out they are at their lowest point they will be on the way back up again. Remember, pigs get fat, hogs get slaughtered.

If you don’t make an offer on that house you like, someone else will. Maybe not today, but sooner or later someone will purchase that house. The sooner you do it, the sooner you get a chance to lock into building equity and creating wealth. I subscribe to the theory that there is a house out there for everyone and sometimes you want to buy the wrong house. But that is why you should have a good buyer’s agent representing you. They will make sure that you buy at the right price for this time and that the house is the right house for you at this time.

If you are thinking about buying investment property, what are you waiting for? The next 12-18 months will be the best time to purchase single family investment property here in the United States for at least the next 20 years. Every day that you wait to start you are passing up the chance to build your real estate fortune!

If you wait to get that home equity loan it might not be available to you when you want. The loan programs that were available in March 2007 have changed. Credit score minimums have changed, loan to value limits have changed. House prices may have fallen your area limiting how much you can borrow. Waiting will cost you $$$$$$$$$$$$$$.

For comments on this or other postings please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

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.