Currently, FHA represents the majority of purchase loans in the US. According to the HUD/FHA guidelines the eligibility for the seasoning (the “waiting time”) of a foreclosure before an individual can purchase again is 3 years. 2 years for a chapter 7 bankruptcy and 1 year for a chapter 13 bankruptcy with proof of on time payments to the trustee. Over the last few months I have received significant amounts of emails and calls asking “when can I buy gain?”.

At first the idea of a defaulted home owner buying another property seemed outlandish but when we go back and realize that the main reason that the cycle started was due to a sub prime mortgages that after a 2 year teaser rate became impossible to pay back at rates close to or, in some cases, above 10%. Fast forward 3 years and here we are in a completely different environment with rates at historical lows of 5% for a 30 year fixed. Home values have decreased across the country and some markets are down 25%. Granted that the aggressive underwriting guidelines are gone for forgettable future  and now the pendulum has moved almost to much in the other direction there will be a true opportunity for the hard working American that has not lost sight of the dream of owning a home.

Although the unemployment rate represents a HUGE issue for the overall economy it may not be the case for the housing market. If we do the math and subtract the current 11% in California versus the +/-4.5% that we had, before the economy took a nose dive, that only eliminates an additional 5% of the general population but with home ownership at historical lows of 64.5% that number truly eliminates less than 2% of the former homeowners.

We all know that price is the point at which the supply curve meets the demand. The fact is that under normal circumstances the largest portion of the population that becomes “new homeowners” are couples that have recently gotten married or had a baby. That population has not gone away. There are just as many people getting married and having kids in 2010 as there were in 2007. One last potential increase in demand is the possibility of our troops coming home and obtaining financing via the VA system. If we add all these factors together the outlook may not be as bleak some economist have already predicted further declines for the remainder of the year.

Could we have seen the worst of the housing market in our lifetimes and face greener pastures? I sure hope so.

Today I get a frantic email from my borrower that closed escrow and recorded January 22nd stating that she gave the key and instructions to the contractor to get into the home to do some work. When the contractor got there they found that the lock was changed and there was a sheet of paper on the window labeled “Notice of Trustee’s Sale”, dated 2/1/2010.

I immediately called the listing agent to find out what was going on. Unfortunately, the agents response was to point the finger at me for not being able to close the loan within the necessary time, 2 weeks, on an FHA loan. They were not able to get an answer from the lender for 9 months and it is my fault that I could not pull a miracle? He still assured me that it was a “typical example of the right hand not knowing what the left hand was doing”. The auction date for this property is 2/26. I sure hope that the recording takes priority over the banks intentions.

Doing my best to console the buyer but this is definitely a first for me. If this has happened to you before please share.

What makes this experience even more remarkable is that I emailed Seth my experience as soon as I had access to email. Much to my surprise he replied, “great story, Michael! enjoy the ice cream.”

If we look at the latest Case Schiller report, the first thing we notice is that there was an improvement of 0.5% in home values nationwide, YTD Nov 2009. If we drill down the data it becomes quite obvious that the west led the nation with a 2.9% improvement in values.  California is one of the most badly-hammered states of the Great Recession.  My local paper, San Diego North County Times announced a 7% improvement in home values for our area. If you are familiar with North County San Diego, then you know that La Costa, La Jolla, Del Mar, and Carlsbad are generally all in the $1 million plus range.

More often than not we get multiple reports contradicting each other within minutes from the major agencies like Reuters and CNBC.  And the fact that national trends are primarily broadcast on the major news programs highlights the importance of focusing on the local numbers (see earlier post “San Diego Real Estate Outlook 2010”).  One of the best tools we have to gauge our local markets is social media. Although brilliant in its global reach, it’s also indispensable in keeping one’s pulse on the local micro-economy.  Several years ago it was paramount for the mortgage professional to be licensed in every possible state, but today I believe we need to have extraordinary knowledge of our immediate neighborhoods to succeed.  (Not to mention the nugget that 60-70% of mortgage professionals have jumped ship, which presents a huge opportunity).

Social media, having gained the momentum that it has, definitely means we are not in Kansas anymore.  One cannot prevent progress, or ignore its impact on the global, as well as the micro-economy.

Michael Mekler is an active loan officer. Reach Michael via email at mmekler@fhaexpert.net or call toll-free to 1-888-218-0094

The truth is that I can honestly say that the 70 degree weather year round, the awesome beaches (dolphins all the time), the outdoor life, the world famous San Diego Zoo, great schools and the family life in general fills the aforementioned voids. Living in Carlsbad, a suburb of the City of San Diego is a real treat. We don’t have to deal with much traffic and the general entrepreneurial spirit makes it a great community. My oldest son adapted rather quickly from Snow Skiing to surfing and from ice skating to roller blading.

The great news from anybody considering the move is that real estate has come down in value significantly, at least for the time being. Mortgage rates are also at historical lows, so in essence there is no time like the present to take the plunge. Depending on the area that you are considering, a large number of homes are being sold in the $400’s. The reassurance of my decision to move here is magnified 10 fold every Thanksgiving when there is a massive nor’easter in the North East.

Since I am in the Real Estate field I must make the statement that there are a number of outstanding Realtors and mortgage lenders, like yours truly, to make the dream a reality.

Michael Mekler is an active loan officer. Reach Michael via email at mmekler@fhaexpert.net or call toll-free to 1-888-218-0094

1. Get a full underwriters pre-approval for your loan. Any mortgage broker can issue a pre-qualification letter. They are truly worthless. Bank Owned Properties are managed by asset managers and they take only the offers that they feel have the best chances of closing and closing fast. When you deal with a reputable mid-sized direct lender submitting a credit package to the underwriter is a very simple process. Once you have this approval your loan can close inside of 2 weeks.
2. Go through this process so you know exactly how much home you can afford comfortably. My stomach turns when I hear borrowers asking “how much house can I afford?” The question that you need to prepared to ask is how much money can I pay every month for housing without affecting my current lifestyle.
3. Once you are pre-approved you have a greater chance to eliminate any last minute surprises. You will know exactly how much money you need to bring to the table or ask for a concession from the seller(not recommended) so the closing can go smoothly and the transaction does not fall apart in the last minute.
4. Once you start the process of the pre-approval you start to develop the relationships that will be on YOUR side through the process. The lender can recommend a Realtor or the Realtor can recommend the lender. Regardless of which one happens first, the Realtor should have the insight to have you pre-approved first.
5. Most bank owned properties will require you that you get pre-qualified by the lender that foreclosed on the property.  Don’t let anybody bully you into using their lender. Once you have an underwriter’s pre-approval you can prove your income and credit worthiness. Shop, shop and shop for the individuals that give you the highest degree of confidence in achieving your goals. Buying a home is a big investment driven by emotions. Once you see the house that looks like the dream home, you will do everything in your power to try to get it. This is not the best way to shop for your home. Talk with several Lenders and choose the one that YOU feel most comfortable with.

The great news is that the latest announcements by FHA and HUD regarding flipping properties will only accelerate the process of the cash investors running out of funds. THE GAME HAS CHANGED. DO NOT LOSE YOUR PATIENCE NOW. The credits for first time home buyers is still in effect and the rates are still at historical lows. Find a lender you trust and get an “full underwriter’s pre-approval”. If they refuse, call around or me and I will be happy to guide you in the right direction.

Michael Mekler is an active loan officer. Reach Michael via email at mmekler@fhaexpert.net or call toll-free to 1-888-218-0094

1. Changes are effective for case numbers assigned on or after April 15th, 2010.
2. New upfront mortgage insurance premium (UFMIP) will be 2.25% for all purchase and refinance loans. The premium for H4H and HECM is 2.0%.
3. This change applies to all standard FHA Single Family Programs except the following: Title I, Section 247-Hawaiian Homelands, Section 248-Indian Reservations, Section 223e-Declining Neighborhoods or Section 238c-Military Impact areas in Georgia and New York
4. Annual premiums will not change at this time
5. There will be no discount on the UFMIP for first-time homebuyers with pre-purchase counseling.

The most challenging questions that all parties will be the following:

1. Why is my Loan Officer sending me a form asking me to shop for services that I don’t even understand, ie Title Insurance, Escrow, Appraisers etc.?
2. The last page of the Good Faith Estimate gives me a grid to compare the best rate and terms. It appears that when if I go through a Bank I don’t get any credits but when I go to a Mortgage Broker  I get thousands back. Why?
3. My loan officer has explained that this document is just an estimate, and he calculated all the fees on the high side so that he does not have to submit a whole new set of disclosures if there are changes. How can I trust this is true?

The bottom line is that the creation of new disclosures will create enough confusion to make one heads spin. In a world where the excellent Loan Officers just survives, you need to be extraordinary to do well. This of course means that as you are making your business plans for 2010 you must account for most of your time being in front of the Real Estate agents and consumers with extremely simple and easy to understand language for EVERY line item in the new Good Faith Estimate. At least for the first quarter of 2010 or until the dust settles a bit. Of course by then there will be a whole new set of rules.

Over the last 12 months we have heard the saying numerous times “You don’t really know who is swimming naked until the tide goes out”. As a trusted professional in the business my approach has been, and will continue to be, to try to figure out the science behind how the tides work.

I would love to share my experience and presentations that have already helped many Realtors and consumers in the last several years to simplify and take the stress away from the home buying transactions.

mmekler@fhaexpert.net