Category: Priority Lending Blog

We’re from the Government, We’re Here to Help You

Fannie Mae, later this year, will be rolling out a new program called HomeReady to help lower- and moderate-income borrowers purchase homes. This will be integrated into their Desktop Underwriting program and will automatically flag potential borrowers for inclusion in the program by utilizing the DU findings. Here are some details:

• HomeReady will eliminate or cap certain loan level pricing adjustments (LLPAs) such as those associated with credit score, LTV, etc. – possibly translating to a low mortgage rate
• A non-borrower household member’s income can be considered when determining the borrower’s DTI ratio
• Will also allow income for non-occupant borrowers, such as parents of a borrower, to be used to supplement qualifying income

More details will be released soon – we’ll keep you updated. Stay tuned . . .

Gas: Unleaded, Diesel, or 3-Bedroom Colonial
According to a recent study from Florida Atlantic University and Longwood University, a strong indicator of home prices is what you pay at the pump. The study encompasses a 10-year span and reveals the following:

• For every $1 decrease in gas prices, the average selling price of a home CLIMBED by 2.4% (that’s about $4,000 more per sold property included in the study)
• Also, for that $1 per gallon decrease in gasoline price, the average time to sell a property falls by 25 days
• AND, that same $1 decrease was also shown to increase a seller’s chances of closing the sale by about 20 percent

The analysis of the results explained: When prices at the pump are lower, consumers have more disposable income, which equates to a larger pool of prospective home buyers. Food for thought: on the other side of the same coin, one might be able to pick up a relative bargain when gas prices are high.

Fast . . . So They’re Not Furious

InSellerate, a lead-generation company, conducted a study that yielded some very interesting insights:

• 32% of consumers expect a company to respond to an online inquiry within 30 minutes
• 42% of consumers expect contact within one hour
• More than half of the companies studied (56.34%) did not respond to the online or email inquiry at all

Of those companies that did respond, the average response time exceeded 24 hours, and the primary response vehicle was email, which is a passive, relatively non-effective method of contact. The take-away thought from all of this is “no kidding”, of course, but it underscores the wisdom that a lead is only as good as the work you put into it.

Safety Over Sales
According to a USA Today article, realtors in Iowa are taking steps to ensure the safety of all agents. The initiative includes an optional seller contract that prohibits any agent from showing a property to someone they have not previously met and identified. Ideally, the agent should insist that the buyer meet them at the agent’s office where she/he can check ID. If that’s not possible, the agent is encouraged to meet in a public place like a coffee shop. The conventional wisdom behind this, of course, is meeting prospective buyers in public and checking their ID discourages would-be attackers and allows agents to spot red flags in a safe place.

Real estate brokerages and other firms all over the country have joined Open Door Partners (www.meetmeherefirst.com). This is a service in which participating companies open their facilities for agents – even from competing companies/brokerages – to meet with prospective buyers before going out to view a property. The site enables an agent to input an address and find participating companies within a specified radius. In those instances when such a company is not close, it will list a Starbucks location that is convenient.

Bark First, Delay the Bite
There are pending bills in both the Senate and the House to provide a hold-harmless period from the enforcement of TRID through the end of the year. The main argument is that a grace period is necessary to assure companies have sufficient time to test their systems to comply with TRID without the fear of any repercussions. Priority Lending has been ready since the early summer – we’re THAT good.

Going to the Fountain of Youth

A recent New York Times article (“Attracting Young, Diverse Mortgage Bankers – Aug. 21, 2015) details the efforts of a company called Radius Financial Group to reach out to and cultivate younger candidates to become Loan Originators, among other things. Keith Polaski, COO and a founder of Radius, describes the mortgage banking demographic as “55-plus-year-old white guys and gals,” and states, “If we don’t do something about creating the next generation of mortgage bankers, we’re going to old ourselves right out of business.” It’s a logical connection that younger homebuyers are going to gravitate toward a younger demographic of both mortgage bankers and real estate agents.

Dave Stevens of the Mortgage Bankers Association echoes this sentiment and has approached realtors to establish training programs for younger professionals. The mentality behind this, of course, is to create a dynamic that presents a younger “face” to the up-and-coming homebuyers. And that’s where the training is crucial: while it’s nice to have the young “face”, it’s absolutely vital that knowledge and expertise are a part of the overall package.

With that said, the 40-plus-year old buyers should not be discarded – there are a lot more of them than those who are under 40 – but it’s clear that the market for the younger buyers is only going to grow. Business as usual is not going to attract these younger buyers – let’s be sure not to “old ourselves right out of business.”

Bi-Weekly Mortgage Payments Doubling Your Pain?
It’s a classic means of paying down your mortgage faster: take your monthly mortgage payment (PITI), cut it in half, and make that half payment every two weeks. By the end of the year, you will have made 26 of these payments for a total of 13 full payments. Nothing wrong with wanting to pay off your mortgage early!

Recently, however, a payment processing company called Paymap was fined $5 million by the CFPB for defrauding their customers. In addition to making completely unsupported claims of how much a consumer will save though this bi-weekly payment program, they were telling their customers that the mortgage payoff schedule was “every two weeks” – in reality, Paymap was withdrawing the payment amount every two weeks from their customers’ accounts, but they were waiting until the first of the next month to transfer the funds to the mortgage servicer. The payment schedule did not change.

Two recommendations to avoid such a debacle:

Pay an extra “twelfth” in your monthly mortgage payment. For example, if your mortgage is $1200, add another $100 to your payment for a total of $1300. At the end of the year, you will have made the equivalent of 13 monthly payments. No muss, no fuss.

Or, give your mortgage a “raise”. If you receive a raise of 5% at work, add 5% to your mortgage payment. By tacking on a “raise” of $50 to $75 each month, you’ll significantly reduce the number of years on a 30-year mortgage.