Over the past few years the real estate industry has gotten a somewhat unsavory reputation. Being in the industry myself, I’m biased to tell you that most real estate professionals are high quality, upstanding “business citizens.” However, as with any big purchase or transaction, smart consumers do research independent of people who stand to benefit in some way. Here’s some tips on ways to protect yourself and identify some potential problems from the start as opposed to looking back after getting shafted and thinking “If only I would have checked that!”
Check to be sure the company you’re working with is in the Better Business Bureau.
Visit the Better Business Bureau’s website and go with a company that is listed. This really should be standard practice when you’re considering making any larger purchase. The BBB is a clearinghouse of any negative feedback and in my experience it’s generally extremely accurate. The only warning here is not to let a single, irate complaint hold too much value as it could be a competitor or crazy-ish person but definitely take repeated negative feedback into account.
Call your state Real Estate Commission or Department of Real Estate.
Mortgage companies and the loan officer you were work with generally are required to have a license to broker your mortgage. It would take a pretty brash person to do so without such a license but stranger things have surely happened. I’d recommend taking a moment to Google “Your State” Real Estate Commission and calling to inquire about any possible violations or complaints filed against the company you’re planning to work with.
Ask the company if they’re properly bonded and insured.
You probably here the phrase “bonded and insured” all of the time but do you really know what it means? Bonded refers to the fact that the business holds a surety bond. In the case of a mortgage broker, ask if they have a mortgage broker surety bond. If your broker looks at you puzzled and can’t answer the question, it’s probably best to head down the road to your second choice. Insurance refers to the fact that the broker has errors and omissions insurance that will protect you should they make some sort of error (kind of self explanatory!).
The moral of the story is to be a smart consumer and don’t take anyone’s claims at face value. That’s what got us into this mess! At every point in the mortgage process, take a step back and spend a few moments verifying what you’re doing and doing a bit of quick research online. Good luck and happy home buying!
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The story repeats itself across the nation. Desperate homeowners that need an urgent loan modification to save their home phone their loan providers with little or no result. One borrower in Dallas explains relates how he is on his second counselor and he hasn’t been able to talk to either of them.
A common theme among frustrated borrowers is that they cannot speak to a decision maker. The current financial crisis has thrown people used to being in control of their financial situation into situations they are not used to handle.
Whichever way you look at it and there are a few, loan modifications are moving slowly and there are not clear signs of things changing. Treasury Secretary Timothy Geithner and Shaun Donovan, secretary for Housing and Urban Development have already expressed their opinion that “much more progress is needed” in a letter to mortgage companies.
What makes things worse for loan providers like Bank of America and Wachovia that are doing poorly in their loan modification turnover is that the performance among banks is inconsistent with some banks showing much healthier figures. The government wants results and his paying a hefty fee to get them, from their perspective it does seem that banks are simply not pulling their weight.
The perspective of banks is of course completely different. They understand the financial pressures everybody is experiencing because most if not all of the large banks have required and accepted financial help from the government to boost their own coffers. However banks will explain that they are simply not geared or designed to be mass producers of loan modifications.
Historically banks have limited themselves to lending, collecting and processing mortgage payments now they are in the process of reinventing themselves as loan modifiers, sometimes rearranging their whole outfits to meet the increasing demand. As John Dalton, president of the Financial Services Roundtable’s Housing Policy Council says : “It’s a new ballgame”. The figures are quite scary, there are 3 million people at this moment who are 60 days past due on their loans. Banks are simply not designed to deal with this volume of delinquent debtors.
Although there is no arguing the inconsistency between banks performance it does not require heroic amounts of empathy to understand it is not going to be easy for businesses to rearrange the way they work and provide services.
Think of a lemonade stands that sells readymade lemonade and suddenly has to deal with hundreds of customers who simply want more sugar stirred into their “old” lemonades. You are going to have to hire lemonade sugar adders and stirrers while you are trying to continue your main line of business.
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Fannie and Freddie are on soaring. For five days in a row Fannie Mae and Freddie Mac mortgage securities have rose. Interesting the rise in mortgage bonds is not due to an increase in the mortgage refinancing and modifying but in a reduction in refinancing, well below the forecasted levels.
Bloomberg.com reported yesterday a rise in Fannie Mae’s current-coupon 30 year fixed rate mortgage bonds of 0.09 to 4.8 percent. This is the highest since June 18.
What has driven this rise in Mortgage Bonds?
The Treasury Department has published reports with higher benchmark rates due to a recent report that showed a slowing down in the number of jobs lost in the United States.
What are the effects?
This rise in mortgage rates has caused refinancing to slow down. This is evident when you see the drop of 21 percent on the number of prepayments last month to Fannie Mae and Freddie Mac securities. This drop was sharper than analysts predicted triggering the rise in mortgage bonds.
The rise in mortgage rates after record lows in interest rates has slowed down the number of mortgage refinancing, making it much harder homeowners without the best credit rating to get their mortgage refinance approved.
How Is The Obama Administration Reacting?
The Obama Administration announced a loosening of Fannie Mae and Freddie Mac rules in order to boost the number of borrowers that refinance and modify their loans by increasing the percentage of the home value the mortgage can represent to 125% of the house’s value. This helps homeowners that have seen the value of their house drop refinance.
Fannie Mae and Freddie Mac are also planning to reduce their home financing costs. Currently even the government sponsored mortgage companies charge up to 2% of loan balances with sub-premium customers with low equity or credit scores.
The Bottom Line
An increase in mortgage bond rates is not necessarily good news for borrowers as it will increase interest rates but the rise is being pushed by lower unemployment growth which is a good news for the overall economy. Government mortgage companies Freddie Mac and Fannie May must also reinvest their “profits” in aiding borrowers in trouble by either reducing their fees or the principal on loans which can be good news for borrowers in the future.
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When buying a home, use the tools at your disposal to compare costs and terms and negotiate for the best deal. Your local newspaper and the Internet are good places to start shopping for a loan. You can usually find information both on interest rates and on points for several lenders. Since rates and points can change daily, you’ll want to check your sources often when shopping for a home loan. Knowing your current Credit Standing helps.
Home loans are available from several types of lenders such as commercial banks, mortgage companies, and credit unions. The rates quoted by any given institution will vary, so you should contact several lenders to make sure you’re getting a fair rate. Home loans are also available through mortgage brokers. Brokers arrange transactions rather than lending money directly; in other words, they find a lender for you.
Before you start talking to lenders, determine the amount of a down payment you can comfortably afford, and then make sure to find out all the costs involved in the loan. Knowing just the amount of the monthly payment or the interest rate is not enough. When talking to different lenders, make sure you keep the loan amount and down payment constant, this way you can more properly compare the competitors.
Once you know what the options available to you are, negotiate for the best deal that you can. Lenders and brokers can and may offer different prices for the same loan terms to different consumers, even if their loan qualifications are exactly the same. Additionally, there’s no harm in asking lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere.
Here’s one approach; Ask the lender or broker write down all the costs associated with the loan, after its on paper see if the lender or broker will waive or reduce some of the fees or agree to a lower rate or fewer points. By having all the costs written down, you can make sure that the lender or broker is not agreeing to lower one item while raising another to make up the difference.
Don’t assume that minor credit problems or difficulties stemming from unique circumstances, such as illness or temporary loss of income, will limit your loan choices to only high-cost lenders.
