Jay Beckingham

I always hear a lot of talk about YSP and how it's now going to be outlawed and possibly kill ALL of the mortgage brokerage business. I wonder if most people have any idea what this stuff is that's so terrible.

Here goes.

Two different rates are available to the customer on a 30 year fixed. Let's use a $100,000 mortgage as an example.

4.875% and 5.25%

If the client selects 4.875% at the closing he/she will pay .125% in points, or $125. That's as close to a par rate as I could get. Par is a rate where there is no charge to acquire the rate. As a broker I have not yet made any money, so I'm going to charge 2.022 points at the closing, or $2022. The P&I is $529.21

You'll see where that number comes from in a minute, as i'm trying to compare apples and apples, as closely as possible.

If the client selects the 5.25%, at the closing they will pay no points, but the lender/investor will pay me a YSP (yield spread premium) of 2.022 points, or $2022. The P&I is $552.20, a difference of $22.99 per month.

If you're wondering what happened to the $125, I ate it. I don't try to get that exact in my pricing, so okay the customer benefits.

If you divide the $2022 by $22.99 per month than the customer retrives their money in 87 months, or 7.33 years. They do have a lower payment during that time and may or may not benefit from potential tax breaks.

Okay, that's it! Fairly boring you may say, you got me!

A couple of observations;

These are real rates from yesterday.

These rates may or may not be below what you can get at your local bank.

Let the customer be able to choose, please, not your Congressperson!

But,

I do not believe that of and by itself outlawing yield spread premiums will end mortgage brokerage!

I was listening to a brief interview with the new FHA Commisioner David Stevens and I was stuck by the fact that we have had so many major changes at the FHA. Here's just a couple of examples of the major issues;

Capital Reserves

Stevens stated that we have over 30 billion in capital reserves. That there is both a primary and secondary reserve account AND that the loan quality has improved. Seems like all is well according to the Commish.

Credit Scores

Once again I hear that there is no credit threshold for FHA loans. I feel cheap and just a little dirty when a high ranking FHA official states there is no credit score requirement for FHA loans, which is technically true, without mentioning that these loans are being funded by institutions who definitely are credit score driven, usually with a 620 minimum.

I am aware that some companies are claiming to do loans with less than a 620 score, BUT how many loans do they really approve? One out of ten, one out of twenty, really I'm not sure. In Southwest Florida a buyer, in almost every case, needs a written preapproval letter, and I'm not putting my name on any preapprovals with less than a 620 score.

I find it interesting that the Commish stated that the average credit score for FHA loans is currently 690. They may not have a requirement, but they sure are monitoring the situation. Veeeeeeery interesting.

Market Share

An FHA market share of almost 30%, which is what Mr. Stevens claimed, is a little scary to me. Being in Southwest Florida, and having lost the ability to do any conventional loan with PMI, as it no longer exists here, I am aware that any loan with less than a 20% downpayment goes to FHA, or one of the other govern(mental) outlets.

Just for auguments sake, why wouldn't an MI company want to do a loan with a 10% downpayment (minimum), 720 credit score, and ratios of 33/38. I know that this is a restricted market, but it would be the cream of their previous product, and in all likelihood have a lower default ratio. It would also take some of the pressure off of the FHA. Once again 30% scares me, and it's rising.

Mr Stevens took office July 15th and was handed this rapidly growing organization. To a degree the FHA currently reminds me of "Jabba the Hut," it scares me a bit. Throw in the fact that it is partially regulated by the Congress and look out.

All I can say is;

Ladies and Gentleman

meet

The NEW FHA!

I tried to get a good definition of "Snowbirds," you know something colorful or entertaining, but alas I failed, they were all kinda boring. So I thought why are they called snowbirds, it's not like they fly here. From what I can tell most of them arrive by car. Maybe we should call them;

SnowTurtles!

You've seen they way they drive.

"It's over there George," says Alice, as she points accross the 3 lane roadway.

No blinker necessary, George makes a hard right into the parking lot. Many of the other drivers, admiring his skill, join in giving him the good olde traditional Florida middle finger wave. George and Alice smile and are happy with their successful negotiation of our roadways.

We get EVEN!

Many snowbirds(turtles) complain about the tax structure for their second homes. They think it's unfair, and they can't vote to change it! he, he!

When do they arrive?

The first migration will start over the next couple of weeks, with the second wave after Christmas. Things have changed since they left, certainly the real estate market has. I hope they can adjust.

Just some final thoughts;

There's a website for the gulf coast, where I live, well not where I live in the Fort Myers/Cape Coral area, because

www.snowbirdsgulfcoast.com apparently only goes as far south as Bradenton/Sarasota. I'd like to think that we're a well kept secret, but I'm sure that's not the case.

Elvis has a video entitled "Snowbird," if you all need some travelin music.

Well, we're havin a heat wave, the waters warm, the suns a shinin, so come on down.

Personally,

I'm Ready!

With 161,505 members, and growing daily, I was wondering how many different ways the members used the Rain and what they got from it?

Do you Blog?

If every member Blogged today we would have 161,505 blogs. I don't know what the average number of daily Blogs is, but someone knows. How about a National Blog Day where every member writes one and only one blog. I doubt all the members would participate, but what if we got 100,000 or maybe 150,000. Just looking at the groups, we have such diverse groups, I can only imagine the topics and the plethora of information.

What groups do YOU belong to?

If you can't find some groups who share your interests you must have your head buried in the sand, and don't worry we could start a new group "Bloggers with their heads buried in the sand." Why not? there's just so much to enjoy.

Let me share a personal example; I was born in NH and moved to Southwest Florida in 1992. Right around now the foliage in NH is Faaaaaaaaaaaaaaantastic. I belong to two NH Groups and the photos by Steve Loynd are just so beautiful. If he didn't now how much we loved them, hopefully he does now. Thanks Steve, Great job!

Do you comment? and are they well thought out?

You can add to a post with thoughtful comments. They help the readers and the writer equally in my opinion. A blog is a forum and you don't have to always agree, BUT

Be Nice!

Do you learn much and do you share it with others?

I've learned a great deal from the writings of the "Rainers." So let me say thank you all very much! Does anyone use the information as a teaching tool? I would think many of the postings have that potential.

So enough from me. What I really want to know is;

What's YOUR walk in the Rain like?

ps: you can check out Steve Loynd's photos at New Hampshire: Real Estate and Life in the Granite State. It's worth the trip!

I just got done reading a post about HUD regs regarding "flipping" and I couldn't help thinking about how this is hurting first time homebuyers in Southwest Florida.

The general purpose of this reg is to prevent unscrupulous investors from buying a property today and selling it for a substantial profit this afternoon, tomorrow, or next week without any improvements on the property being done. I thought that was capitalism, which is not in vogue right now, but we'll save that rant for another time. Before someone else brings it up I do realize that there was a fair amount of abuse here, but I would like to point out no one else followed FHA with this regulation including two other well know governmental agencies known as the VA and USDA/RD.

I wonder why not?

In Southwest Florida we are finding investors and investment companies that are purchasing foreclosed properties and doing partial or total renovations. In many/most cases the properties are fairly priced and agressively marketed.

The HUD reg locks out the first time homebuyer attempting to aquire FHA financing as the properties don't stay on the market for 90 days!

They appraise okay, and they can acquire conventional, VA, and RD financing (where available).

BUT, NO FHA!!!

How about cuttin us some slack here.

I suggest putting the flipping reg into the hands of the regional FHA offices for evaluation.

There's got to be a better way!

How about if our local politicians get off of their duffs and earn their money for a change. Get to work on this.

All I can say is;

Hey (HUD) help us out here!

Will Ya?

PLEASE!