By S-Crow on September 3rd, 2009 at 6:00 AM · 42 Comments
Question for discussion: In Washington State, can Loan Officers operate within the framework of a Fiduciary duty to their clients when the lending industry is structured with incentives that may be in conflict with the new standard?
Jane Kim of the Wall Street Journal wrote an excellent article in this past weekend’s issue regarding Wall Street brokers (selling investments) being placed under Fiduciary standards in dealing with customers.
Currently, Wall Street brokers are held to what is termed “suitability standard,” which is a more lenient standard than that of a fiduciary. In contrast, Registered Investment Advisers have operated for a long time under the more stringent “fiduciary” standard—a legal standard that compelled them to act in the best interests of customers. The proposed higher standard forces disclosure of potential conflicts of interest (i.e., if they make more money off of an investment offered vs. others) and promotes recommendations of investments that may be less costly to the consumer and more tax-efficient.
While Wall Street struggles with reform as part of its regulatory overhaul, the mortgage industry has also implemented reform by introducing a similar “fiduciary standard” for mortgage brokers and loan officers. Prior to this reform in the mortgage industry, those who originated loans had no obligation to work in the best interest of their customers.
“In most states, mortgage loan originators still have no fiduciary obligation to work on behalf of their client’s best interests. The state of California mandated fiduciary duties for only mortgage brokers even during the height of the real estate bubble and Washington State added fiduciary duties for mortgage brokers and loan originators in 2008 but this still leaves consumer loan company loan officers (LO’s) and bank loan officers with more of a salesperson’s status. I’m sure there are some LOs who work at a bank, credit union, or consumer loan company (they like to say “mortgage banker” or “correspondent lender”
because it sounds better) who do regularly look after their clients’ best interests but this is just mere subjectivism.”
– Jillayne Schlicke, Founder of the National Assn. of Mortgage Fiduciaries
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Categories: Opinion
Tags: Fees, lending, Mortgage Brokers, YSP
By S-Crow on July 10th, 2009 at 11:12 PM · 14 Comments
Everyday for well over a year I drive by this development hovering over Hwy 2 as you head eastbound to Lake Stevens or Snohomish. I noticed this one lonely house (with paint all over it) with a tree surrounded by vacant lots. Late this afternoon on my way home from the office in Everett I decided to drive by (pics below). I had no idea what was painted on this house until I drove right next to it. While a few may find humor in this, I do not. Sign of the times.
This morning I attended the Snohomish Co. foreclosure auction at the county courthouse and spoke with Kathy, an older woman who is a seasoned investor of these auctions. She indicated to me that about 90% of the sales are going back to the lender and will come back on the market as REO at a future date. I left at 11:30 am and I only witnessed one home (of scores on the dockets) being sold. All the other sales up to that point were delayed, postponed or went back to the Beneficiary (lender) if the bid start price was too high for any investor to bid on—generally the bank buys it back for what is owed on the first mortgage.
I think purchasing an REO (bank owned) property could be more appealing to a buyer looking to get a good buy vs. a foreclosure. There are a lot of risks in buying a foreclosure. For example, it is rare to be able to inspect the interior. The home could also be trashed by the owner just hours or days prior to the sale.
On the gable over the windows is writing that says, “Model Home.” You can barely see it.
Categories: Features
Tags: anecdote, builders, developers, foreclosures
By S-Crow on April 1st, 2009 at 9:23 PM · 25 Comments
(I didn’t want this story to get lost in the midst of all the headlines the past few days.)
From the National Mortgage News headlines:
“The Department of Housing and Urban Development is seeking expanded loss mitigation authority allowing the principal amount of an FHA-insured mortgage to be reduced by up to 30% to help homeowners avoid defaults.”
FHA has some poorly performing loans. Many of these loans that are delinquent have a history of defaulting shortly after origination whether it be a refinance or modification.
If the principal reduction takes place what will be some of the “strings” attached, if any? Two questions that immediately come to mind are:
- Will the borrower have to pay back any principal in a future date or after a sale ?
- Will the IRS treat the reduction as income?
The program of principal reduction may help keep people in their homes, at least in the short term, and reduce foreclosures. However, I’m opposed to principal reduction, in part, because in my experience a substantial number of people were irresponsible in serial refinancing and overall poor financial planning. On the other hand, principal reduction may save FHA from paying out to lenders for losses that may exceed the amount of the principal reduced to keep borrowers in their home (in foreclosure, HUD may end up taking a larger loss).
Responsible homeowners may be torn about hearing that their neighbor received a principal reduction. How would you react when a neighbor walks by your house while you are working in the yard on a Saturday morning and strikes up an innocent conversation with you about their good fortune of having their FHA loan principal reduced up to 30%? Sure it may have saved a potential foreclosure, but to the core, it has to be frustrating for the homeowner that is working their tail off to make a living and pay their mortgage as scheduled. It may be even more frustrating for a recently unemployed homeowner that is using ‘rainy-day’ savings or selling investments (what is left of it) to pay their mortgage and living expenses.
In other news: In real estate, I have always been an advocate of just watching what people do vs. listening to what they say. Jillayne Schlicke has a perfect example of this in a Forum commentary today (click her links).
S-Crow
Categories: News
Tags: HUD, principal
By S-Crow on March 18th, 2009 at 7:07 PM · 96 Comments
Opinion:
Today the Fed announced a significant plan to purchase an additional $750 Billion in mortgage backed securities from agencies Freddie Mac and Fannie Mae. The proposal is hopeful in that it will stimulate the housing market and refinance business by producing exceptional mortgage rates lower than where they are today.
Will this impact the markets in a meaningful manner that will stimulate home sales and refinance activity? I believe it may and one reason is this:
A stumbling block to overcome in refinancing relates to the challenge of finding viable sold comps to support favorable LTV’s (loan to values) needed to move forward with the refinance. An enormous number of existing homeowners have two mortgages that encumber their homes. I’m told of appraisals that have comments from the appraiser indicating specific market areas have essentially stalled in home sales along with falling home values. This produces LTV problems and can derail a refinance transaction. One alternative is for high LTV households to consider FHA which has higher LTV guidelines.
With that in mind, the additional $750 Billion in stimulus is meant to drop the rates to such attractive levels that it will encourage home sales and refinance activity. The sales going forward will theoretically place a building block or foundation for holding values at a point that will at least slow or level off further declines. This is a positive development for those both refinancing and for sellers, if it can take root. Whether or not it will take root remains to be seen due to many other factors.
Have a great day,
S-Crow
Categories: News · Opinion
Tags: bottom of market, Home Sales, Interest Rates, refinancing
By S-Crow on February 4th, 2009 at 9:43 PM · 9 Comments
It’s been tough to post here and at Rain City Guide because of work and family obligations, but here is some helpful information about petitioning to reduce your property taxes:
In escrow, now is the time we start seeing some (not all) 2009 property tax assessments show up in title reports when working on transactions. Do not be confused. These are in fact 2009 assessments that were formulated in 2008. The new assessments for 2010 are what this post is about. What? 2010? But I need relief now! Sound odd? That’s how taxes are done.
And, a snippet from the Snohomish County Assessors office:
Snohomish County updates all taxable real and personal property assessed values annually as of Jan. 1st of each year. The next update will be mailed for most properties in June of 2009 and the assessment date will be as of Jan. 1st of 2009. The 2009 assessments will be used to calculate property taxes owed in 2010.
Since real estate market values have been dropping, it’s high time to put some change back into your wallet where it belongs. The links below are for the assessor’s offices and the forms needed to submit to challenge/petition your property tax bill.
There have been very few conversations I’ve had with recent clients that have not circled back to “the market.” I don’t bring up “the real estate market,” the client does. A few times I have mentioned that they may want to take the time to fill out the forms and petition the property tax bill. Cool, they say. How do I do it? Here’s how:
- Find out what property type you have: is it a rambler? How about a Tudor? Two story with basement? Or, a garage house like The Tim’s (couldn’t resist Mr. Ellis)
- Go to Redfin, or Estately website or any other website that posts sales data that is searchable by your zip code, neighborhood or any other mechanism. Or, call your Realtor and have them pull comps (comparable) to see if they can find a few homes that have sold that would be a good case to show the assessors that they need to humbly reconsider the property tax valuation, downward.
- Always spy on what sales comps are in your neighborhood.
- When valuations drop, get moving and petition your tax valuation.
Being complacent will cost you money. Take the time to do this. Typically (check your own county assessor rules & regulations) you must file your appeal/petition by July 1st or within 60 days after receiving your tax assessor notice (see your county petition rules).
I did this and saved $1,000 per year for the 2009 tax year. That’s nearly $100 off my monthly mortgage payment (for those that include tax impounds in your monthly mortgage payment).
On a side note, it is pretty tough for anyone to not be personally impacted by this difficult economic and employment environment we find ourselves in, either by knowing of someone or a family member with job loss or equivalent (or impending job loss), but it is important to keep in mind that if you have the means to reach out and support them, do it. The smallest thing can help reduce someone’s stress. It could be me or you that needs it next.
-S Crow
Categories: Features
Tags: how-to, Legacy Escrow Service, Property Taxes, Reducing taxes
By S-Crow on November 25th, 2008 at 12:47 PM · 30 Comments
Our resources tell us phones are ringing off the hook.
I’m hearing rates for purchases and refi’s are anywhere from 5.25% to 5.125% at par. Earlier this year, I sent out an APB for people who are waiting for super rates. Here they are again. Let me know off-line if you would like a reference to loan officers who can give you a good faith estimate and get the ball rolling.
S-Crow
Categories: News
Tags: Interest Rates, Legacy Escrow Service, mortgages
