Gads I haven’t posted in quite some time. Summer has flown by. The wholesale mortgage landscape is going crazy right now - subprime lenders are dropping like flies. It’ll be interesting to see how it all plays out.

In other Utah news… football season is almost here and this year should be a fun one for Utah fans. Sorry BYU fans - you’ll most likely be back to another losing season

Home prices here haven’t started falling, that I know of, but I suspect it won’t be too long til we catch up with the rest of the country. Hold on tight kids it’s going to be an interesting ride.

For those of you who aren’t already aware, the mortgage business is going through a period of self-correction right now. By that I mean there are several loan programs that have drastically changed or gone completely extinct over the past month or two. This is both good and bad news.

Many have criticized the biggest lenders for accepting borrowers over the last decade or so that were too risky for traditional tastes, without making adjustments for more equity or mortgage insurance. Some even believed this would ultimately create a “credit bubble” that would eventually burst and cause widespread turmoil in housing both for businesses and homeowners. Well, we’re sort of seeing that right now. Foreclosures are way up and lenders are dropping like flies. The stock market has taken a beating because of all this as well.

The bad news is that it’s now harder for people with bad credit to get home financing and/or refinance their current loans. The good news is that hopefully the industry will learn a great deal from this experience and be able to prevent such a situation from occurring again in the future.

So, more than ever, if you want to buy a home be sure to make your payments on time, save up a little money for a down payment, and try not to overextend yourself with debt.

Somehow, I doubt there will ever be a satisfactory answer to the question “why?” relating to the killing spree last night at Trolley Square.  Words fail to express what one feels and thinks at times like these, yet a desire to reach out to victims and families of victims won’t allow for comfortable silence.

I live two blocks from Trolley Square, and though safely hidden behind locked door and (as it turns out) far from any danger, the beat of helicopter blades overhead and sirens two streets away made the surreal images on the television a tad more real.  I can’t even imagine what the experience must have been like for those in the mall.

To those around Salt Lake who are now struggling with loss from last night: God bless you!  Though I probably don’t know you, I feel for you and hope the best for you.

Inman News published a report that we may be seeing some new legislation that would mortgage fraud a second degree felony here in Utah.  We’re currently the second worst state in the nation for mortgage fraud (source), per capita.

As it stands now, the bill would view mortgage fraud much like racketeering, which would allow the state to seize illegally gotten assets in order to provide restitution to victims.

This would be a welcome change, in my opinion.   I’m not big on bigger goverment, but this is clearly a case where the goverment should be involved because it involves the enforcement of property rights.

Rep. Paul Ray from Clearfield is helping push this through - thanks Paul!

Interest rate movements are about as well understood as some of the decisions made by Utah Jazz management.  Most of us can only scratch our heads and wonder why things happen the way they do.  However, that doesn’t mean a quick analysis of change won’t yield some beneficial insight.

What do higher interest rates mean to you?  The question obviously has many follow-up questions that must be answered before any true analysis can take place.

Are you currently looking to buy a home (but without a locked-rate)?

If you own a home, is your mortgage fixed or variable?  Are your payments going to increase in the next three to six months?

Are you planning on selling your home and buying or building a new one?

In an attempt to provide information that is useful in answering each question and similar variants, I want to outline my thoughts sort of like painting a broad picture from which inferences can be taken.

So first of all, higher interest rates immediately translate into higher monthly payments when all else is equal.  Pretty basic - something everybody knows.   However, all else is usually not equal.  If you’re on a variable interest rate, your payments may not adjust for several months, or perhaps they won’t adjust for a couple of years.  You would be wise to find out when your payment might adjust and what it will likely be adjusting to.  You can find out by calling the lender where you send your monthly payments or by visiting their website (in most cases).

If you’re shopping for a home, you might want to lock-in your interest rate soon and avoid any additional upward movements in the rate.  A small move upward can dramatically affect your maximum loan amount, which is dependent on your debt-to-income ratio.  Higher payments mean a higher debt-to-income ratio, which means less purchasing power for you.

Less purchasing power brings us to the point I wish to make next.  It is possible, though it’s only happened once or twice in America’s history, that real estate median prices could fall if interest rates spike up and are sustained for a couple of years or more.  Falling home values can have a major impact on you if you need to refinance out of an adjustable rate mortgage into a fixed rate mortgage or if you need to consolidate some debt.  You’re able to do less when you have less equity in your house.

While it’s fairly reasonable to say that nobody knows when interest rates are going to go up or down or what they’ll do next, it is possible to have a plan of attack once they do make a move.  Right now rates are on the rise and if you’re smart you’ll assess your mortgage situation and act accordingly.

I recently posted about the IRS rescinding tax-exempt status from several non-profits acting as down-payment-assistance (DPA) charities, and how this would hurt buyers with low down payment money and some bumps in their credit.  Well, there’s still at least one DPA organization that is conducting business as usual, with full endorsement from the IRS and the FHA.

Buyers Fund is actually based in Utah - Provo to be exact.  They have issued a news release confirming their status as non-profit, with a link to the IRS website where you can lookup their charitable status on your own, if you like.  I did the search and sure enough, there they were.

(As a sidenote, you can look up the status of any organization that claims to be a charity on that page.  Might come in handy the next time you want to donate to a disaster relief fund of some kind.)

So what this means is that Borrowers who qualify for FHA loans are still able to also qualify for a 3% down-payment-assistance grant from Buyers Fund, making it easier to purchase a home.  FHA is a great program for many borrowers because it allows for dings in credit, has low down-payment requirements, and much better rates than subprime mortgages.  And believe it or not, FHA is one governmental organization that is completely self-funded and has been for many years.

There is a great deal of m&a (mergers and acquisitions) happening in the mortgage world right now.  The latest news is that Accredited Home Loans will be acquiring Aames Investment Corp. The company believes they will become the sixth largest retail mortgage originator in the country once the acquisition is complete.
Both Accredited and Aames do a great deal of mortgage origination (mortgage pros call that “retail”) and they also act as investors to smaller mortgage brokers (more commonly referred to as “wholesale”).  What’s interesting is that both Accredited and Aames specialize in non-prime loans, so their overall portfolio of loans is somewhat restricted to a higher risk category.

For consumers, this doesn’t necessarily mean a whole lot, other than if you currently have a loan serviced by Aames then you’ll probably start getting mail with Accredited envelopes and letterhead.

Wow. That’s all I could think when I read the following from Inman News:

Ask most home builders these days what they sell, and they’ll say a lifestyle. In most cases, this means a house on the outer fringes of suburbia with a yard for the kids and a garden for the folks. The house has plenty of room to pursue hobbies, entertain friends, bond with the family and get away from it all in a spacious master suite.

But is this lifestyle a sustainable one for the long haul? That is, in meeting our own needs in this fashion, are we compromising the needs of future generations? The needs of our children and our children’s children? In a word, yes.

If we continue to build more than a million such houses every year, the long-term effects will not be good, so say architects, builders, environmentalists, ecologists, engineers and developers in recent interviews. Dan Chiras, an Evergreen, Colo., environmentalist, teacher and home builder was quite specific.

“We cannot keeping spreading out across the country, gobbling up farmland at the rate of 3,500 acres a day to create roads and highways, single-family houses and suburban shopping centers. We need the productive farmland to feed our growing population–as many as 120 more million people may be living here by the year 2050. In the near term we need the forests to absorb the astronomical amounts of carbon dioxide that we are producing daily, and we need the pastureland to absorb rain and reduce flooding. All the paving, roofs, sidewalks and driveways that come with every subdivision create impervious surfaces that compromise nature’s ability to control flooding.”

Not only are we gobbling up land to create new communities, but we are also using vast resources to build the houses.

“For almost every new 2,300-square-foot house, we have clear cut an acre of forest somewhere,” Chiras explained. “To produce all the metals and minerals used in construction, we have dug a hole in the ground somewhere that is equal to the entire volume of the house.”

Read the rest of the story here.

Unless you’ve been hiding in a cave, you know that suburban expansion has been widespread in Utah for many years now. I think most people understand some of the basic complications that arise from this sort of development plan, but I, for one, never took into consideration half of the “costs” that author Katherine Salant identifies in her article at Inman.

It will be interesting to see what happens if gasoline really does hit $5 a gallon this summer, as predicted. Those who are commuting will take a serious hit to the pocketbook if it happens, but will it translate into more people looking to move closer to their place of employment? Will urban real estate prices in Salt Lake rise while suburban development stalls? Could happen. Time will tell.

It came earlier than anticipated (after several other delays).  I’m glad to report that I’m now officially able to originate mortgage loans in Utah again.  Actually, I’m able to originate in several states as well.

Now I’ll have to find more to post about than the licensing process… stay tuned.

While I’m twiddling my thumbs waiting for my Utah mortgage lender license to show up in the mail, I figured I’d make a quick post regarding one of the delays at the State office. You see, Utah recently introduced a new rule that all loan officers must work under a Principal Lending Manager (PLM). The PLM must take a state exam and possess the required education and experience. Now consider this:

The deadline was May 1st, and with 2,200 licensed entities in the state, there were only 68 licensed PLM’s as of March 27th. (more here)

Two possibilities arise from this scenario, each of which is holding up the processing of my licensure with the state. First, there have been many, many PLM applicants (try 1,000+) over the past 30 days, with each application being processed by the same people that are eventually going to process my application (a total of two people). Second, there have been many loan officer change requests, which are also processed by the same people who will (hopefully) process my application soon. The loan officers are submitting change requests (required by state law) because they want to be in compliance as of May 1st, and if there is no PLM at their current institution then they must look elsewhere.

So, this is all resulting in a longer-than-typical processing time for new applicants. It’s a bit of bad timing that I submitted my application while all this was going on. Anyway, two or three additional weeks isn’t that bad. It could be worse, I suppose.

Overall, the PLM requirement will be a good thing because it should help to reduce the amount of mortgage fraud in Utah over the long-run as a natural result of tiered personal responsibility.