Ed's Blog

With the New Year starting, I wanted to update you on some important news on the mortgage front. Here are the top three items.

1) Risk Based Pricing Has Truly Arrived. Fannie Mae, Freddie Mac, and others are relying more and more on pricing adjustments for things like loan to value and credit scores. Even borrowers with excellent credit scores (for example between 720 and 760) will find themselves paying slightly higher interest rates when going over 70% loan to value and 75% loan to value respectively. For those with lower credit scores the increase in pricing will be very significant that these higher loan to values. Borrowers in the 620 to 680 credit score range could find themselves paying anywhere from ½% to 1% higher in rate than they would have previously. Ouch!

What does this mean? Borrowers need to plan ahead now more than ever concerning their credit profile. We can help by obtaining borrowers credit reports early in the planning stages of seeking a mortgage. Not only can we tell borrowers were they stand, but also, we can outline some strategies and options for improving their credit scores.

2) Interest Rates Remain Very Low. You will be glad to know that interest rates remain at historically low levels despite the slight increase from the rock-bottom rates of a couple of months ago. And for some loans, especially those in the so-called jumbo category, rates have essentially remained the same. This is good news for people wanting to finance higher priced properties.

3) A Big Winnowing Process Has Taken Place in the Loan Origination Business. Starting January 1, 2011, most independent loan originators (e.g. mortgage brokers and loan agents working for them) have to be licensed through the standards of the NMLS (National Mortgage Licensing System). This means they had to have a criminal background check, credit check, demonstrate financial responsibility, have 20 hours of mortgage specific education, and pass federal and state tests. As amazing as it may seem, for many years many loan originators did not have to do any of the above. Even now, loan originators working at banks and some other institutions do not have to meet these standards. To check on whether an individual or company has met the NMLS standards, go to the website www.NMLSconsumeraccess.org.

For years I have been actively involved in the California Association of Mortgage Professionals (formerly California Association of Mortgage Brokers), and for years we advocated for stricter standards such as these for loan originators. Too bad it took a near collapse of the housing market for some of these changes to be implemented.

Some Inspiration

As I’m writing this, it’s the 25^th anniversary of Martin Luther King Day. I’ve long been a great admirer of Dr. King. His eloquence and his passion continue to burn brightly in my mind, heart, and soul. I thought I’d pass on a few of his quotes that that were passed on to me recently:

· The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.

· Our lives begin to end the day we become silent about things that matter.

· Whatever affects one directly, affects all indirectly. I can never be what I ought to be until you are what you ought to be. This is the interrelated structure of reality.

· Faith is taking the first step, even when you don’t see the whole staircase.

Here’s wishing you a terrific 2011.

Let me know if we can help you or someone you know with any mortgage financing needs.