At  4.375% you can qualify for a mortgage 12% higher than you can at 5.375%-say from $353,000 to $396,000.  Don’t forget FNMA and FHLMC have special refinance programs for people who may owe as much as their house is worth.  If you have a second and your mortgage is with FHLMC they have no cap on the combined loan to value.  It could be 150%.  Even if you have a low rate you could refinance even lower, keep making the same payments and reduce your principal and mortgage term faster. Ask someone to analyze it for you.

What we all need to focus on in real estate is turning around the fear.  If we turn around the fear we will turn around the marketplace.  Fannie Mae actually started off as part of the government and then was spun off to become what is called a GSE or government sponsored entity.  Bringing it and its wayward brother Freddie Mac back home is a good thing—back to basics.  Mortgage rates went down when this happened.  The mortgage credit spigot has tightened but it hasn’t turned off, it is back to basics here too.

If you have been riding the fence about what to do, now really is the time to buy, low rates and low prices.  When the stock market doesn’t do well, investors start putting their money back into real estate.  Don’t wait too long, because the investors will beat you to it and prices will begin to rise—and in fact are.  And if you have problems, you are not alone there is help out there for you.  Don’t become a statistic.  Reach out.   Let’s stabilize the marketplace, and all we’ll have to fear is fear itself.

 Why are your scores falling?    After your loan modification is approved the lender will put you in a trial period where you make a lower payment.  Unfortunately, because the loan has not officially been modified it is recorded as a “partial payment”.  One homeowner saw his score drop 100 points during the trial period, from 760 to 660.  The trial period is supposed to last three months but  for many homeowners they have dragged on.

 When the modification becomes permanent the mortgage gets reported under a new code which indicates that payments are being made under a plan.  Right now, this code has no effect on credit scores.  FICO is still studying to see if these consumers are riskier as a result of the modification.  This is contradictory to what Treasury officials are saying.  The administration felt that it is important to ensure that people seeking modifications to ward off foreclosures should not be unfairly punished.  However, it looks like the credit score powers may have different plans.

 When your loan modification becomes permanent dispute the listing with the credit reporting agencies and ask that it be updated.  You should see some relief.  Shirley Richards can be reached at 954-345-0995

What is the difference between a mortgage broker and a mortgage banker?  A mortgage broker is approved with many different lenders to submit mortgage applications in what is called the wholesale market.  For submitting these loans the broker receives a commission from the lender.  The amount of the commission earned depends on the size of the mortgage and the interest rate charged.  The client closes in the name of the lender and the mortgage is approved by the lender.  A mortgage banker has a business line of credit called a warehouse line which funds the mortgages they take.  They have their own underwriters and the loan is approved by the banker and closes in the banker’s name.  After closing the loan is sold to a lender.  The banker receives a commission from the lender again based on the interest rate.  They also may receive a service release premium which is another form of commission. 

For a few years now mortgage broker commissions, called yield spread premiums, have had to be divulged on good faith estimates.  Bankers do not have to divulge their commissions.  Now with the new form of good faith the amount of commission is ever more prominent as it is charged to the client and then subtracted out.  So bankers are earning more money per loan but not having to reveal it to their clients.  Guess what’s happening?  Right everyone’s becoming a banker.  Government intervention at its best.  And don’t for a minute think that your local banking institution doesn’t do this also.  I worked for a small bank that closed in its name and put everything through Citimortgage.  Everyone thought they were getting a mortgage with Bank A but they were really getting a mortgage through Citi.  So ask your loan officer how much they making on your loan.  If you think it is too much, ask them for a lower rate.

If all of this is too much for you and you just need some honest advice as to how to navigate it all we’re going to be holding some homebuyer seminars.  Send me an e-mail at shirl@floridamortgagecenter.com and we’ll put you on the mailing list.