Ed's Blog

Two great pieces of news came out this week.

1) Conforming Jumbo loans are now available on 2 unit properties. Depending on the median home prices in your local market, you could be eligible for up to $934,200 at a great rate (this is up from the $533,850 for conventional conforming 2 unit loans). Awesome!

2) Owning and renting have now become comparable in cost in many hard hit areas of California like Vallejo, Fairfield, and Sacramento. This has brought out lots of first time home buyers and investors who can do the math and see what deals are available when this phenomenon occurs in California. This is further indication that we may be at or near the bottom of the current downturn in some markets. (Even some newspapers are starting to get this.)

And in a bit of personal good news, I am continuing on as a statewide Vice President for the California Association of Mortgage Brokers (CAMB). This year my focus will be on finance as well as some PR (I’ll be training a new PR chair). Stand by for more news on what we’ve been doing to help homeowners who are struggling and to help legislators so we can get some stability back into the lending market.

Last week, the National Association of REALTORS® released new (and once again positive news!) Pending home sales rose 6.3% in April of this year, bringing the number of homes which are under contract for purchase to the best levels since October of 2007.

Although prices are still down quite a bit, and these numbers are down since the same period in 2007, there is no denying that this is a positive indication that things are slowly turning around in the housing market.

Other positive news from the NAR’s report includes a revision of an earlier prediction that home sales would drop by 4.7% this year. NAR is now predicting a decline of only 4.5%.

Although a revision of .2% may sound like small potatoes, consider that NAR’s Chief Economist Lawrence Yun had this to say:

“Bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines, but it's unclear if they are investors or owner-occupants."

Naturally, there are those who will say that we should still be concerned about our housing market, and I’m certainly not disputing that it’s far from perfect. But it’s important that we recognize the positive steps that we’re making.

Don’t forget to contact the team here at Smith Craine if you’re interested in becoming one of these “bargain hunters” who are capitalizing on the reduced home prices. We’ll gladly point you in the right direction of some potentially incredible bargains! Call us at 415-406-2330.

In a move only to be described as encouraging, Fannie Mae recently reversed its decision to automatically reduce the amount of loan you may qualify for, should you be interested in buying a property in a “declining market” or refinancing your home if it happens to be located in a declining market.

This decision comes on the heels of some other very positive indicators that the housing market is recovering. These include:

· Interest rates remaining low

· Interest Rates for Jumbo Conforming Rates on par with traditional conforming loans

· Lenders are starting to make exceptions to strict guidelines (though only in special cases)

· Bank Owned Properties are starting to sell once again

· Lenders have announced losses, but the losses are less than had been predicted

· Economic indicators such as stocks rallying have been positive

There are undoubtedly many arguments that the housing market is not quite out of the woods yet, but consider that many times, by the time we realize that it’s a good time to invest or refinance, the best opportunities have already come and gone.

What do you think?

It is with cautious optimism that I’m going to go out on a limb and say that the worst of the “housing crisis” or “mortgage meltdown” may be behind us. Now, the idea that we’ve seen the worst of the “credit crunch” is merely my opinion, but it’s based on the following observations which individually don’t indicate much, but collectively lead me to believe the market is beginning to stabilize.

*Bank Owned Properties, aka REO’s or Real Estate Owned Properties are beginning to receive multiple offers from interested buyers in some markets. These are properties that were repossessed by the lender, after the owners failed to make their mortgage payments. This is a good sign as it means that buyers and investors are coming back into the markets.

*Rates are holding steady. In fact, Jumbo Conforming rates (as I mentioned last week) are much closer to traditional conforming rates, opening a window for trade-ups, for new purchases, etc.

*Lenders are not taking as big of a write down as many had predicted. In fact, Freddie Mac recently revealed that although they did take a sizable loss of late, it was far less than they had expected to take.

*Lenders are starting to allow exceptions in underwriting, meaning that they will allow for certain “out of the box” exceptions to rigid guidelines. This is certainly the rarity, not the norm, but it’s still an indication that a bit of trust is being restored in the lending industry.

I’m not saying that we’re heading straight back to the top. We’re not. It’s going to take a while to get out of the pit we’re in, just as it took a while to get to the state we’re in. I’m merely suggesting that perhaps we’re not quite at the very bottom anymore, and we’re slowly beginning to see the light at the end of the tunnel.

Stay tuned!

The interest rates on the newly coined “Conforming Jumbo Loans” have plummeted, and the calls have been pouring in. Let me explain:

Just a few weeks ago the interest rates on Conforming Jumbo Loans were nearly a full percentage point higher than the interest rates on Conforming Loans. Example: a Conforming Loan (under $417K) was carrying an interest rate of 5.75%. By contrast, Conforming Jumbo Loans were carrying an interest rate of nearly 6.75%. That’s a big discrepancy.

But, that is water under the bridge for now. Conforming Jumbo (above $417K but below $729,500K) interest rates are now only .25% higher than Conforming Loans. Example: a conforming loan is at 5.75%, the Conforming Jumbo is now right around 6%.

And one last bit of good news. Freddie Mac (one of the two Government Sponsored Entities or GSE’s) has just announced that it would buy more Conforming Jumbo loans. That’s one small step for homeowners and buyers, and one giant leap towards a return to stability in the housing market.

Stay tuned!

A report released a few days ago announced that foreclosure filings in the U.S have jumped a whopping 112% in the first three months of 2008 when compared with statistics from the same time in 2007. So far this year 156,463 families have lost their homes to foreclosure. Clearly, this is not good news. In fact, in my book, even one foreclosure is one too many.

I would love to personally be able to save the homes of anyone on the brink of foreclosure, but unfortunately, I don’t have that kind of money.

I write today in hopes that anyone who has received a notice of default, or is fearful that they won’t be able to make their mortgage payment in coming months reach out for assistance NOW. There are still options. But you need to take the bull by the horns and seek out those options. Smith Craine Finance is here to help. Call us at 415-406-2330.

On another note, I would like to remind investors of what an incredible time it is to be a buyer. Your real estate purchasing power hasn’t been this strong in years. Despite the drumbeat of negative news, I believe there are situations that warrant your attention. In fact, several days ago, the San Jose Mercury News ran a front page, banner headline article that discussed the fact that bank owned properties are now getting multiple offers in much of Santa Clara County!

If you’re looking for great investment opportunities, we can help. Smith Craine has been helping first time and seasoned investors for more than 2 decades. Call us or email us if you’d like some help financing and finding the properties you’ve been dreaming of investing in.

Until next time…

In the last couple of weeks we’ve started to see a little movement toward better pricing and underwriting for the new “conforming jumbo” loans (those loans from $417,001 to as high as $729,750). Even though this is happening, albeit slowly, I believe we need to keep the pressure on politicians, lenders, and Wall Street to improve the pricing, underwriting, and availability of these loans.

I’d like to share with you a call to action we created at the California Association of Mortgage Brokers. Feel free to pass it along to your legislative representatives and media contacts.

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While the California Association of Mortgage Brokers (CAMB) welcomes the new higher conforming jumbo loan limits that were approved by Congress, these loans are currently having far less impact than homeowners need in these tough times. We call on legislators, regulators, lenders, and Wall Street to take the following steps so that these new loan limits can have the far-reaching positive impact that was intended for borrowers in high cost areas.

1) CAMB calls for legislators to make these new higher loan limits available permanently. Residents of Hawaii and Alaska have enjoyed higher conforming loan limits for years. These loans have performed well for lenders, borrowers, and investors alike. Borrowers in other high cost areas should enjoy the same opportunity to have conforming loan products available to them.

2) CAMB calls on regulators and Fannie Mae and Freddie Mac to adjust the guidelines on these new conforming jumbo loans. Currently the underwriting guidelines are far stricter than those for conforming loans in non high cost areas. The result is that many otherwise qualified borrowers are unable to take advantage of the relief that these loans would provide. We ask that these loans be underwritten to the same standards as standard conforming loan amounts. These guidelines have worked well, including in Alaska and Hawaii where higher loan limits have been in place for years.

3) CAMB calls on lenders to ramp up their production capabilities for the new conforming jumbo loans. To date, most lenders have not made these loans available for their most automated and streamlined underwriting processes. Making this change will help speed up the approval process for borrowers.

4) CAMB calls on Wall Street to price and buy these at rates and prices similar to those for standard conforming loans. For years, higher conforming loans from Hawaii and Alaska have had the same interest rates and costs as standard conforming loans from other states. We believe that these new higher loan limit conforming jumbo loans deserve pricing that is on a par with what consumers pay in Hawaii, Alaska, as well as all other states for standard conforming loans.

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I just wanted to comment on a couple of significant issues that have taken place this week.

The market swings are continuing to defy logic, but the following occurrences could indicate that stabilization may be on the horizon yet!

· After the FED bailed out Bear Stearns, the markets panicked. Many assumed this was indicative of the unavoidable second coming of the Great Depression. Au contraire! News arrived almost immediately that Lehman Brothers Holdings actually raised $1 Billion more in liquidity than predicted (in one night!) What does this mean? It means that investors are still investing in financial institutions, though with caution.

· This week, mortgage rates have stabilized a bit. The gap in interest rates between the new “conforming jumbo loans,” and conventional loans is narrowing. However jumbo loans are still higher than we’d like to see. All the same, better pricing is a great indication of stabilization.

· The talk of overhauling our financial regulations hit a peak in the media Monday, insinuating the reform was imminent. Of course, with all things legislative, this financial overhaul will take time. Thankfully, it doesn’t appear that any hasty decisions will be made. This is fantastic news as the chance of an over correction (sparking new housing woes) are reduced.

· Finally, on the first day of Q2 stocks rallied, Wall Street surged and the Dow closed way up from predictions (more than 390 pts to be exact.) That was no April Fool’s joke! This is leading many to think that we may have seen the worst of the credit crunch.

I’ll continue to do my best to keep you informed of significant market changes. Please don’t hesitate to contact us directly though, for answers to any of your mortgage questions. We’re here to help you navigate these turbulent waters!

Another day, another confusing housing report. Last week the National Association of REALTORS® released a report announcing that existing home sales rose last month for the first time since July 2007. Of course, this good news didn’t make headlines.

This report was buried deep within other reports proclaiming that the drop in home prices has reached an epic level. How are home buyers, homeowners or sellers to understand the implications of these reports, when they are about as easy to understand as quantum physics? That is, they can completely set your mind spinning!

That’s frankly why I take to this blog regularly. As a 25+ year veteran in the mortgage and real estate industry, I strive to minimize the hype by providing objective updates on market conditions.

Whether the housing reports are good (home sales were up last month), bad (see my last blog), or lie somewhere in between, it is my goal to report all of the news, to help you decide for yourself if a home or investment property purchase or refinance is right for you.

While I do try to blog frequently, sometimes things are happening so fast, that I don’t have time to report every little change. But, please remember that the entire team at Smith Craine is constantly studying all of the changes in the market, and watching the rates with hawk-eyes.

So, if there is something you have a question about that isn’t covered in my blog, I encourage you to give us a call at (415) 406-2330.

Until next time…

I wanted to give you several observations on how the mortgage market is behaving lately.

1) Mortgage Markets Are Still Unsettled. Despite strong actions from the Fed, mortgage market rates for anything except traditional conforming loans ($417,000 and under for SFR’s) remain sticky on the high side. In Wall Street jargon, “risk is being repriced.” Anything other than traditional conforming loans is priced from 1%-2% higher than it has been historically. Ouch!

2) Underwriting Is Getting Tighter. Sounds like déjà vu all over again as Yogi Berra used to say. Most programs are more restricted than even a week or two ago. Some loans are gone altogether. For example, Fannie Mae and Freddie Mac have discontinued conforming “stated income stated asset” loans effective the end of this month.

3) New Conforming Jumbo Update. We have been getting pricing and guidelines on these over the past 10 days or so. The good news is that the rates on these are a little better than jumbo rates have been. But the underwriting is strict. Full doc only for instance.

4) Deals Are Still Happening! Despite some of the problems outlined above, deals are still happening! Don’t be discouraged by the negative news you read. Underwriting may be more restrictive, but there is still a lot of money to lend out there. And the people who are buying are happy with the deals they’re getting. In some markets that means incredible prices. In other markets that means less competition. But the feeling is the same- they’re happy to be buying!