Joseph Metzler MMS UMB

Home Buyer Tax Credit BILL vs Current Home Buyer Tax Credit

Prepared February 5, 2009 - Subject to Change

Down you have limited down payment funds? Do you need a zero downpayment type program? YES YOU CAN buy a home in 2009 with JUST $100 DOWN.

Visit www.just100down.com to learn all about the HUD Repo program.

The Joe Metzler Group at Mortgages Unlimited Inc. lends for properties in Minnesota, Wisconsin, and Florida. Apply online at www.JoeMetzler.com

Mortgages Unlimited Inc

Protecting yourself against predatory lenders, mortgage scams, and Bad Loan Officer screw-ups

Mortgage rates are still great. That's great news for veteran loan hunters.

But for inexperienced shoppers who don't watch their backs, the mortgage business can be a scary place to travel.

The internet especially has make it easier for sly mortgage lenders and brokers to mislead and take advantage of naïve consumers using any number of tricks, from quoting bogus rates over the telephone to slipping gratuitous costs into their loans. To avoid these problems -- as well as other trip-ups posed by the confusing mortgage process itself -- consumers have to brush up on their shopping skills.

Market is ripe for tricks and trip-ups
In the past few years, when the market was hot, a lot of rookie Loan Officers and small brokers came into the market that may not have the experience level you're comfortable with. There was money to be made, and it was easy. Just sit back, and the phone will ring with customers wanting to refinance. The number of lenders and Loan Officers TRIPLED from 2001 to 2005. Lending volume also TRIPLED to the highest numbers in history!

Once that big refinance period ended, and mortgage volume returned to pre 2001 levels, these newer people are desperate to stay in the business. They will say and do anything to capture a deal. 80% of current Loan Officers came into the business AFTER 2002.

Now that we have great rates again in early 2009, here come the bad guys again!

The reality is that most lenders and brokers aren't out to fleece customers and the complexity of the home loan process -- rather than anyone's malfeasance -- takes the blame for some of the obstacles consumers face. Many trip-ups don't rise to the level of "predatory lending" either. Nevertheless, they can cost borrowers serious time and money, and guarding against them becomes even more important during the boom times.

There's kind of a range of games that get played and they're pretty broad, from fairly benign stuff to outright fraud.

Problems can pop up long before a borrower fills out any paperwork. Indeed, just finding out how much a mortgage costs can be confusing.

Sept. 2008: Once again, the Minneapolis / Saint Paul Business Journal has recognized Mortgages Unlimited as one of the top 25 locally owned mortgage lenders in Minnesota. Who are you thinking of doing business with?

Be as specific as possible
Many potential customers simply call lenders up and ask, "What's your rate?" But they fail to indicate what kind of loan they need, how long of a lock period they want, how many discount points they're willing to pay, how long the rate is good for or anything else. Consumers have to specify all of these things or lenders can pretty much say whatever they want, then provide different figures when the customers come in and blame the lack of specificity.

A loan with a lock period of just 15 days, for instance, usually has a lower rate than one that a consumer can lock in for 60 days. Most consumers opt for loans with longer locks because they need more than two weeks to close. But loan officers sometimes quote rates on their shortest-lock loans over the phone or in print just to sound cheap, knowing full well that many callers will never be able to obtain those loans. Companies can provide interest rates that include several discount "points" to make their rates look better, even though most of our customers either can't or don't want to put down several thousand extra dollars at closing for "points" to lower the interest rate.

In most of newspapers, once a week or more, they'll have a list of rates by lender. But frequently you'll find the rates they put in the paper were rates that were really never available. They kind of low ball their rate. When you come in, they'll tell you the market has moved and the rates are now higher. They get away with this because the rate they list in the Sunday paper is usually submitted on Thursday. You read the paper on Sunday, then call the lender on Monday...

Figure in the fees
Borrowers often forget to ask about fees, and don't compare lenders based on their closing costs. That allows companies to pad their bottom lines by adding "processing fees" and other miscellaneous charges to the loan at closing. Lenders don't control certain fees for services provided by third parties, such as title searches and appraisals. But they can adjust their own fees.

Don't believe everything you read
It's a competitive business. Lenders understand this, so creative advertising is everywhere. Consumers need to watch out for advertising tricks, too. Companies have been plugging "no cost" refinance loans lately, but the tagline really means "no out-of-pocket costs at closing." Borrowers pay higher rates on these mortgages and lenders use the extra money to pay the costs themselves. There is no such thing as a no cost loan!

The annual percentage rate, or APR, found in advertisements can be misleading as well. Mortgage lenders don't always include all the fees they charge in the calculation that determines APR, so customers who use that figure to shop rather than an itemized breakdown of rates, points and fees may end up comparing apples to oranges.

Of course, it's difficult for borrowers to compare fees when they don't know what they are. By law, lenders and brokers don't have to give what's called the Good Faith Estimate document to customers until three days after they apply. But there's nothing preventing shoppers from asking for it before committing to anything. Reputable lenders will provide one. Please read my article- Beware of the Bad, Good Faith Estimate, so you know what to look for when you do get your estimate!

Banker, Broker, or Direct Lender. All are "Loan Officers", so who is best?
When you're looking to get a mortgage loan, you may work with a loan officer, but where they work makes a difference! People often confuse the lender types even though all will glean the same results: a home loan. However, it is important to understand the difference between the three types of lenders so you know what to expect from them during the mortgage application process.

Currently the industry is seeing the biggest problems with loan officers exactly where most customers wouldn't expect. The big banks. Why? Most states have enacted strict guidelines for non-bank lender and brokers. These include criminal background checks, mandatory education, stricter underwriting guidelines, mandatory disclosures, and more. BUT, state banking laws can not trump federal banking law. Federally Chartered Banks (all the big bank names you know) only have to follow less restrictive federal law. Basically they get to do whatever they want! Thanks Washington!

Currently, bank employees are NOT required to get background checks, have any up-front or ongoing education, and do not have pass a test to get a license.

Know the score
After customers apply and have their credit scores pulled by their lenders, they should ask for those too. Companies have no obligation to share them, but those scores often dictate whether borrowers get loans and how much they have to pay for them. Customers who obtain their scores can get rate quotes tailored to them, rather than receive quotes that may apply only to borrowers with better or worse credit.

If I would say at the application stage to my lender, "Hey, when you pull my credit report, will you tell me what my scores are?" and he said no, I think I would go somewhere else. Why not go with somebody who is willing to tell you? You need to know.

Last-minute maneuvers
Closer to closing, borrowers also have to watch out for counteroffers from their current mortgage lender. When borrowers refinance their loans, their new lenders request "payoff letters" from their old lenders. These letters spell out exactly how much the old lenders are entitled to at closing and are often the only indication that a borrower is refinancing.

To avoid losing customers, lenders who are about to get the boot sometimes swoop in and offer to lower their borrowers' rates or refinance them into new loans themselves. While the offer may sound competitive, they almost always are aren't so.

Another source of confusion is the assumption that your current lender can do a loan for lower fees. The vast majority of the time this is NOT true. Loans are 'packaged' to be resold. The vast majority of lenders resell their loans and therefore any changes to the original loan require a complete new package, new closing, new note, new closing costs, new appraisal, new everything, etc. Plus, they usually come very late in the process. Borrowers who accept them can end up having to forfeit application fees or other monies to the lenders they planned on using.

By learning about all of these miscellaneous traps, consumers can take advantage of today's lower rates and refinance without worrying about being taken for a ride. After all, experts say, preparation is the best defense against shady lending practices.

It comes back to education. If I've called five respectable lenders - I know about what rates and costs are. It's going to be pretty easy for me to know whether one lender is pulling the wool over my eyes.

How do you know if they are are respectable lender? Read "How to Shop for a Lender" for some good clues.

One final word of advice. Don't assume your current lender can give you a great deal because "they already know you." It almost always is a worse deal because they know you DON'T SHOP!

Need financing in MN, WI, or FL... We can help. Apply Here

Blue Collar Common Sense Starts This Month

Dan Conry is back on the air with his trademark "Blue Collar Common Sense." Beginning Monday, January 19th. Dan is bringing some familiar characters to the new program. Super Dave will produce the show and Bill Snyder will be sitting in from time to time.

The flagship station for this new syndicated program is Radio for Wright County, AM 1360 KRWC, in the Minneapolis / Saint Paul, Minnesota area. Visit his new web site at www.DanConry.com.

Blue Collar Common Sense hits the air mornings from 7:00 to 9:20 and will be live-streamed and podcast.

Raised in Flatbush Brooklyn in what he calls his crazy Irish family, Dan developed his street smarts & well known self deprecating sense of humor that we have all come to enjoy over the years here in Minnesota. Dan realized his goal of becoming a Police Officer & joined the NYPD in the 1980s. After several years as a street cop in Brooklyn, he became an undercover narcotics Detective in Manhattan. Dan retired from the NYPD after a line of duty injury.

Shortly after a personal relationship brought Dan to Minnesota, A dinner at the St Paul Hotel, along with timing, luck and serendipity, brought Dan to the attention of the powers that be at KSTP AM 1500. A few weeks later, he was sitting in for evening & weekend hosts and soon joined Twin Cities Attorney Ron Rosenbaum. The duo became one of the most popular shows on radio. The pair joined Mark O'Connell after the terrorist attacks in 2001 and hosted the show immediately following the 9-11 tragedy. After this, Dan hosted a morning show at WMEL Melbourne Florida until 2005 when he returned to Minnesota radio on KTLK. From Ground Zero to the 35W bridge tragedy, Dan has cemented his reputation as a reporter and his ability to personally connect with listeners like no other radio host.

Dan who was most recently heard on KTLK, not only hosted his very popular morning show, but was also the steady sub-host for Minnesota radio icon Jason Lewis, as Jason became a steady sub for Rush Limbaugh.

Now engaged to a Minnesota gal & attending St Mary's University, Dan is in Minnesota to stay! So we invite you to join Dan Conry boadcasting live from the new Minnesota Majority studio on Radio for Wright County AM 1360 KRWC. The show can also be heard by live internet stream and podcasts.

What does this post have to do with a mortgage blog you ask? The Joe Metzler Group at Mortgages Unlimited is proud to be one of the inital sponsors and we WISH DAN CONRY great success.

Fannie Mae and Freddie Mac Change the Appraisal Process

Freddie Mac and Fannie Mae will implement a revised Home Valuation Code of Conduct beginning May 1, 2009. In an attempt to increase the reliability of appraisals, the revised code builds on existing seller-servicer guidelines and will apply to lenders that sell single-family mortgage loans to Fannie Mae and Freddie Mac.

One major difference in the code is that lenders will be required to order appraisals from one central clearing house, which will in turn select an appraiser. Your loan officer or lender will no longer be able to have any communication with the appraiser before they go out to appraise a home.

The upside of the new appraisal code is intended to help assure that borrowers, home buyers and secondary mortgage market investors receive fair and independent property valuations. In the past few years, many unscrupelous lenders and appraisers put customers and the end lender in bad positions with phoney appraisals.

A typical scenerio is one where a customer had a real loan-to-value of 95% (a high risk loan). The customer may have wanted to pay off $20,000 worth of credit cards, but with a 95% appraisal, this would be impossible. Therefore a bad lender would get the appraiser to sharpen his pencil and get an appraisal of 80%. This is a much lower risk loan and would not require PMI - saving the customer money and giving them the cash they wanted.

The problem is the customer was now really at 115% loan-to-value. A bad position for everyone. Especially in todays market.

The downside is that lenders will no longer be able to ask appraisers for ball park estimates before commiting to a full appraisal. Your Loan Officer won't have an opportunity to have a discussion or touch base with appraisers before they go out to appraise the house.

This also means customers will HAVE TO PAY IN ADVANCE for a full appraisal, typically by credit card before a lender can do anything. If the appraisal comes in short, the deal is dead, and the cost of the wasted appraisal will surely annoy homeowners everywhere.

In some areas, lenders have already implemented these changes, and in the next few weeks and months, more will have to begin the process.

Additional Resources:
Federal Housing Finance Agency's News Release
Federal Housing Finance Agency's Home Valuation Code of Conduct