Utah Mortgage Pro

Utah Down Payments

How much of a down payment do I need?

By far the most common question I receive from borrowers. In Utah we have several answers to that question. You have No Down Payment options such as Utah Housing loans, USDA rural development loans and of course for our military personnel you have the VA loans, all of which require no down payment. Credit score requirement are a little different for each loan and there are some income limitations but for the most part with a 640-660 fico score you will be able to qualify for one of the no down payment options.

Then you have your FHA and Conventional (Fannie Mae & Freddie Mac) loan options as well. FHA currently is requiring 3.5% minimum down payment while conventional lenders are requiring a minimum of 5% down payment here in Utah and across the country. Mortgage insurance is the biggest difference with conventional and FHA loans. FHA at the time of this post is requiring a 1% upfront mortgage insurance premium and a 1.15% annual mortgage insurance premium billed monthly. Conventional mortgage insurance differs for every fico score range and loan to value but with a 720+ fico and 5% down payment a typical mortgage insurance premium is .67% annually which is billed monthly. FUN STUFF huh.

Now that the government has come together and agreed (hopefully) upon a resolution to the debt ceiling issue we have been facing this last month, it looks like we can all get back to focusing on the economy once again and getting this housing market back on track. Home prices in Utah have been stabilizing, in fact in a recent conversation I had with Kevon Inouye a local appraiser here in Orem, Utah he said depending on the city he is seeing stable home values and sometimes he is seeing increased values making it hard for him to support or justify a home purchase price. That was music to my ears when he made that comment about our market. We can all hope that will continue as we wade through the majority of the foreclosures and short sales.

Adam Weston of Rese Realty in Pleasant Grove, UT was telling me last week that it seems like every well priced home either bank owned, short sale or market sale has multiple offers on it within the first 2 weeks. He expressed the frustration of once again trying to educate buyers on the fact that if they don't put forth their best offer first they will probably miss out on the home. Buyers are now used to hearing story's about how their brother in law was able to haggle with the sellers or bank for weeks (being the only offer on the table), they were able to have the take it or leave it mentality with the sellers knowing that they were in the drivers seat.  "It is going to be a whole reeducating process all over again with buyers teaching them that the pendulum is swinging back to the sellers side with more offers coming in the buyers no longer hold all of the cards."  Says Weston

If there is 1 thing that I have learned in this business it is that the Real Estate Market in Utah is always changing. There is always going to be something new to educate borrowers and buyers on whether you are a real estate agent or mortgage loan officer, there is always a new rule, regulation, economic factor or market swing to take into account. If you are standing still in this business then you are getting left behind!!

Cheers to keeping you informed and in the drivers seat.

Stetson Lowe - Utah's Mortgage Expert - 801-318-4996

Sanity in Mortgage Lending Guidelines coming to Washington???

Wow...for the first time in a long time I just came across some potentially good news for a great piece of mortgage legislation. The "Helping Responsible Homeowners Act of 2011" has been on the table since January. As with most good ideas I figured this one would be shelfed as fast as it was printed. It was brought to my attention today by Rob Chrisman from www.mortgagenewsdaily.com that apparently this legislation may not be dead and in fact it may be gaining some traction.

Here is what he said: "Yesterday officials held a conference call promoting the "Helping Responsible Homeowners Act of 2011." Originally introduced in January, the bill aims to remove the barriers that keep non-delinquent, existing borrowers from refinancing. Those in the mortgage business should be interested to know that they are proposing to eliminate LLPAs and adverse delivery charges for loans - the GSEs could not charge any additional upfront fee beyond the standard guarantee for a qualified mortgage. (In effect, this would lead to only one standard guarantee fee for all borrowers.) It would remove LTV limits for underwater borrowers so mortgage refinancing would not be limited by the LTV of the borrower. (Currently, borrowers in the HARP program can have a maximum LTV of 125%. Removing this constraint could allow up to 10-15% of borrowers in the 2005-07 vintages to be eligible for GSE refinancing.) It would remove the second-lien barrier to refinancing so that servicers and creditors that refuse to have their second liens "resubordinated" in the refinanced mortgage would be prevented from originating new GSE loans. And it would ensure that higher LTV borrowers receive a fair mortgage rate, suggested at no more than 40 basis points higher than the GSEs' 60 day commitment rates."

It has never made sense to me why Fannie Mae and Freddie Mac (GSE's) would not allow borrowers who were making their payments on time to refinance these loans in some sort of streamline program where appraised value is not important. If your main goal is to keep home owners in their homes and to help them to continue to make their payments on time, why then would you not throw them a preverbial bone? Trip and fall all over yourselves to find a way to work with those that havent made a payment in 6 months but leave the ones who are busting their hump to makes ends meet high and dry??

Statistics have shown that more then 20% of the borrowers who recieve a loan modification are in default (more then 30 days behind) again within 1 year. Yet we are cutting loan balances and dropping rates to as low as 2% for these folks. Now I want to be very clear here, I am not saying that we should stop loan modifications for those who are at risk of losing their homes. I am saying that I think a bill like this allowing Fannie and Freddie to loosen their refinancing guidelines for those who have and are making their payments on time makes a lot of sense.

It would be a nice shot in the arm for the economy to have 10-15% of home owners who still have rates in the 6% range to drop more then 1% off of their interest rate which would save the average home owner here in Utah about $183.33 per month. That is a lot of potential cash that could find its way back into our local and national economies each month.

I am hopeful but still not holding my breath, I have learned over the last couple of years the hard way that Sanity and Mortgage Lending Guidelines and legislation don't often keep the same company.

Stetson Lowe -Security Home Mortgage-

Utah Forclosures - How do we "shack" up?

A few years ago I was on a mission to find that perfect foreclosed home that you could fix up and flip.  A lot of the home's that I was finding as I was scouring Utah County looked just like this home pictured above.  I would systematically find the home, look at the county records for age, square footage and size of the lot.  I would then have a friend of mine pull comparable sales for me to see what it would go for once it was rehabbed.  I would then formulate a ridiculously low ball offer that would have allowed me to hit a home run on every house.   Needless to say I never connected on any of those pitches or offers as they were.

Today the foreclosure landscape in Utah has changed dramatically.  You can now find beautiful homes that may have been in the parade of homes just a few years back on the auction block.  I had lunch with an investor a few weeks ago that purchased and sold over 100 homes in 2009 at auction.  I picked his brain on how he did it.  What he looked for in every house, and what he found?  His answers were almost comical as he expounded on his experiences with buying home's often times site unseen. 

He said he still gets a little bit of Adrenalin running through his body when he enters the house he just purchased for the first time.  Will it be a meth house? Will it be infested with mice? Will it be a horrible floor plan that no one will ever want to live in?  Will it be a gem only needing new carpet and a coat of paint?  More often then not he told me he is on the phone with his contractors as he is walking through the home for the first time lining up the dumpsters to be delivered so they can start the wonderful task of stripping the home down to the bare floors.

One can imagine the feeling of victory when you walk inside a home that is only a weeks worth of work away from being ready to list.  On the other hand I can only imagine the feeling of walking into a home I just purchased and knowing that it is 3 months and $100,000 away from being ready to list.  I guess in that business you win some and you lose some, the key is to win more then you lose.

An article just published in the Salt Lake Tribune outlines how hard Utah has been hit by this latest wave of foreclosures.  It gives some pretty amazing statistics on how our foreclosure filings have increased by over 100% in Utah in the last year.  Click on this foreclosure link to read the full article.

If you are interested in buying foreclosed homes in Utah, rehabbing them and selling them for a profit then you should definitely get in touch with someone who has experience in doing it.  There are so many pitfalls to watch out for as well as unwritten rules at the court house auctions that you should learn before you ever take the plunge.  From reading the SL Trib article it sounds like we are going to have plenty of homes to bid on over the next 12 months.  Thats good news for investors as it will allow you to be more choosy in the homes you bid on and the amounts you are willing to pay for them.

I am going to be working on a free report dealing with buying bank owned homes both at auction and as REO's.  Email me if you are interested in a copy of the report and I will be more then happy to send one out to you.  If you have had experiences good or bad with buying foreclosed properties and wouldn't mind sharing what you have found leave us a comment at the bottom of this post..

All the best,

Stetson Lowe - www.utahloantips.com- stetsonlowe@gmail.com

The Lowe Down - by Stetson Lowe

Tonight as I sit here and unwind from yet another hectic day in the office I felt impressed to get out the laptop and share some insider mortgage insite.  There is so much going around out there about the mortgage industry and today's economy but I am going to hit you plain and as simple as I can, and I will not patty cake you.

I had a very candid conversation today with an executive from a national bank.  One of the biggest in the US today.  It was interesting to hear his point of view and to see what we agreed on and to see what we admittedly disagreed on as well.  One of the most interesting facts he brought to my attention today was in regards to the Fed's "setting the rate" so to speak in the bond market.

This is something that the government did in the student loan sector of the banking world some time ago and it has all but alienated all of the lenders from that industry so that now the government is the only player in the game.  They are standing there holding the bag on almost all student debt today which makes the industry far less competitive and all but impossible to navigate for borrowers.  You see it is not worth it for private investors and banks to play along with the government in a game that is rigged.  One where it is hard to turn a profit and the red tape and bureaucracy force the lenders to spend more then they earn just to stay compliant.

This fiscal policy has failed miserably and yet the talking heads in DC seem to think that this same policy should be adopted in the mortgage industry as well.  Yeah that usually works, if at first a policy doesn't succeed do it again in another industry?? Whatever...

Back to the Feds setting the rate.  This is where they are basically buying coupons (bonds) at a certain rate no matter what the market is dictating that day or no matter what supply and demand are bearing.  Essentially falsely inflating or deflating the rates for that day in an attempt to "set a target rate".  It has been proven that our market is much more effectivein setting its own rates from day to day and from week to week then the government falsely trying to replace supply and demand.  I'll take free and open markets any day of the week for a healthy economy.  I am not saying that there is not a need for the government to sure up a badly damaged credit market, I just think they may be going about it the wrong way.

What I am seeing in the wholesale and retail markets is Banks so unsure what the feds next move is that they are loosing interest in the game all together.  I believe that it was Chase that all but completely pulled out of the mortgage business at the end of January.  They are "over it" so tospeak in all the games and tricks that the government is trying to pull.  Basically saying "we are out" let us know when things get back to normal and then maybe if we feel like it we may jump back in at that point.  Until then we can more then replace our mortgage income by buying up troubled banks for pennies on the dollar and then selling off their assets piece by piece making billions of dollars, oh and by the way we will take a multi billion dollar line of credit from the government to help us do this if they are stupid enough to give it to us.

We now have 28 major players left in the Mortgage Market.  Just over 2 years ago there were over 200 lending institutions, private equity firms, insurance companies and more fighting over these bundles of loans....fast forward to today there are 28.  Less demand means over abundance of supply, couple this with Fannie and Freddie changing their guidelines almost every single month and mortgage insurance companies announcing at the drop of a hat that they will no longer insure mortgages with this credit score or that loan to value and you have what we are facing today, banks that are so gun shy that they are going to get stuck with loans that are unsellable on the secondary market, uninsurable thereby making them unsellable, or with rates that are far to low to attract any buyers in a market that has had less and less interest domestically and internationally.

I hope that this has shed some light on what is really going on in the mortgage market today.  Why yields are at or below all time lows yet the yield spreads are as large as they have been in a decade. And why underwriting times are longer and longer and why you hear it is harder to get approved today for a loan then even 2-3 months ago.

2003 was the largest mortgage origination year ever with over 4 trillion dollars in mortgages originated during that year alone.  It is predicted that if rates stay low there will be a demand for 15 trillion dollars in mortgages to be originated between refinances and purchases this year (2009) in the US.  That is 4 times the all time record and with only 1/10th of the banks actually funding loans compared to 2003.  The numbers don't add up and something has got to give or we will see 4-5 month turn times to close a loan...it feels like a train wreck waiting to happen.

If I were the one setting policies I would see how we could make the mortgage market more attractive to investors with incentives, warranties and tax cuts.  I certainly would not be competing with or falsely setting a market to the detriment of that market.  Hey but that's just me.

The key to obtaining financing this year is going to be working with someone that will help you navigate through these treturous waters that are the mortgage industry today.  I am here to help, so give me a call 801-318-4996 or email me at stetsonlowe@gmail.com and we can get the ball rolling right away.

Dedicated to giving you the inside scoop.

Stetson Lowe - The Mortgage Insider - www.utahloantips.com

THE GREAT BAILOUT OF 2008

In this tumultuous year of 2008 that will undoubtedly go down in history as one of unprecedented government intervention in the private banking and business sector, Sunday September 7th may very well be the day they talk about in economics classes maybe even high school history classes. 

September 7, 2008 was the day I predicted would come in a blog post back on July 7, 2008(read it for yourself if you don't believe me).  It was on that day even in the midst of Henry Paulson the United States Treasury Secretary stating that Fannie Mae and Freddie Mac were well funded and had adequate liquidity and that the US Government would not need to step in or take action, it was on that day that I predicted that in fact there would be a Big Huge Government bailout as I called it.  Well as it turns out I was right on about one thing, that there would be a government bailout, but I have to admit that even I may have underestimated just how Huge this bailout would be.

September 7, 2008 Paulson announced the Governments plan to take over Mortgage Colossal Fannie Mae and Freddie Mac.  This is NOT just a plan to lend these Government Sponsored Entities more money at discounted rates which the FED had announced (1 week after my prediction) would be the case if it became necessary.  This is a full fledged take over of the companies, the kind where the government walks in to the CEO's offices and says thank you but your services are no longer needed please kindly show yourself to the door we'll take it from here.

Many are outraged that the CEO's are being kindly shown the door when they feel that both have been involved in some of the biggest accounting scams in modern day history.  Accounting errors to the tune of around 6 billion dollars.  Just to give you an Idea of how massive an error that is I will compare it to a little company we all remember called ENRON.  The CEO of that company and accounting overstated earnings to the tune of $550,000,000, compare that with the $6,000,000,000 in earnings restatements that came after a government probe of the Fannie and Freddie.  We all know what happened to the Enron executives still in prison and dead.  What has happened to the Fannie and Freddie execs that were padding their earnings in a way that would have made the Enron execs proud?  From what I have heard so far they took early retirement and are probably sipping on pina coladas somewhere in  the Cayman Islands.  Oh it was not without punishment, one of the CEO's a former adviser under president Clinton was fined 24 million for his wrong doings. 15 million of that fine came in forfeiting stock options he still held which enabled him to buy stock at $71 per share.  When the order was made the stock was at $9 a share, Ooohhh you guys really showed him forcing him to give up $15,000,000 in options that you couldn't have forced him to exercise at gun point.  Abetter thing to do would have been to make him exercise those options and buy that stock at $71 per share don't you think?

Sorry about getting off on that tangent, I don't have a lot of patience for the individuals who are ultimately responsible for the whole mess that our industry, our market and our country are in right now that is directly affecting my own family and those of millions more.

The Take Over and What it Will Mean To Us

It was necessary lets just get that out of the way right now, it was necessary to ensure the stability of our lending market going forward.  Do I like it?  Absolutely not!  When was the last time that the government ran any for profit business and did a better job then the private sector?  Granted anyone could have done a better job then the scandalous bonus seeking greed filled execs that have been there over the last 8 years, but prior to that Fannie Mae and Freddie Mac and provided an absolutely necessary and vital role in our US Housing Market and thereby in our Economy as a whole, and they have done it pretty well.  What I would like to see is for there to be some accountability, some punishment handed down to the preferred share holders of Fannie and Freddie, a literal wake up slap for those that have continued to invest in these companies over the last 4 years that they have been under continued investigation and shown that they were at fault for some serious wrong doing.  As it stands right now the stock holders are not going to be wiped out.  Which means that they are not helping to offset the amount of money that the US Government and we as the tax payers are going to invest to stabilize and rebuild these firms. 

How Much Is This Going To Cost?

I laugh now as I think back to when the credit crisis first began and there were analysts who went out on a limb and said they thought the crisis might cost US Banks upwards of 200 billion.  We flew past that number in about 4 months and the limb those analysts went out on must have snapped like a twig under the weight of that mis guided estimate.  Oh what the banks would give now to have the bleeding stop at 200 billion.  Some of the latest reports are that we are nearing the Big T 1 Trillion for US Bank.  Fannie and Freddie alone could exceed that number and could be as high as 1.2 Trillion that the US Gov will need to pump into these deflated and defeated lenders over the next few months and years.  I would only hope that the government will turn them back over to the private sector as quickly as possible, it doesn't need to be a complete charity act the Fed's should make a profit on the deal where possible but I would implore them to sell them back to the private sector as quick as they can.  Give Mitt Romney a call as well, he would be up to the task of reshaping and reforming these companies and he happens to have 4 years on his hands before he will get the Nod from the GOP for president. 

Your comments are welcomed.

Keeping you informed,

The Mortgage Insider - Stetson Lowe - UtahLoanTips.com

I dont agree 100% with all of the views expressed in the video below but I do believe there are some valid points made and therefore have chosen to add it to my blog. Enjoy.