St Paul Foreclosed home sales hit 5-yr low

pdSt Paul, MN:  Sales of bank owned foreclosed homes dropped to a 5-year low according to figures compiled by RealtyTrac, Inc.

This is clear evidence, that while not over, the nation’s foreclosure woes are easing and the housing market recovery is gaining momentum.

Sales of bank owned homes in the January – March 2013 quarter fell 16% from the previous quarter, and were down 23% from the same quarter in 2012.  The last time bank owned sales were lower was the first quarter of 2008, at the beginning of the whole housing mess.


Rates Tick Up – Buyers Want to Lock Low Rates

Minneapolis, MN: Mortgage interest rates have been near historic lows for a long time. Home buyers have fallen into a feeling that low mortgage rates are normal.  That attitude changed a bit recently as mortgage rates jumped up to the highest level in over a year.
lmrInterest rates on baseline  30-year fixed mortgage  surged 12 basis points to average 3.9% in the week ended May 24, the highest level since May 2012. The upward trend went even slightly higher this week, with most lenders reporting best execution rates at 4.00%
The slight up-tick in rates has caused many potential buyers to jump off the fence, and act now before interest rates go any higher.

So why are rates moving higher?  It is complicated, as there are many factors, but the simplest explanation is that the economy is slowly getting better.

Another big reason is that the FED has been propping up mortgages by being the primary buyer of mortgage backed securities. Without them buying these securities, the entire mortgage system would collapse. While they have, and continue to say they will buy the securities for the immediate future, there are signs that this policy may be changing, with a pull back of the buying because of the improving economy

Simply put, rates may be slowly starting to return to where the market should be if supporting itself, and not being propped up by the Fed.

Your cost for new mortgage compliance

Minneapolis, MN: We all know about, and most of us have been effected by the real estate and mortgage industry meltdown. The government agencies, many of which have been created since the meltdown, including the Consumer Financial Protect Bureau (CFPB), come at a significant cost to you for their new “protection” and compliance rules.

cfpb_logoDid you know the average cost of originating a mortgage climbed from $2,291 in 2009 to $3,353 in 2013? That’s because today, mortgage lenders must comply with about 350 different federal, state and local rules. Of course those charges are past on to you.

The sad thing, is very little within the new rules have actually made a large difference on the street. Rather, most of the rules have done little to correct anything  except reduce consumers ability to get loans. The increasingly stringent laws and regulations are affecting the mortgage industry and leading to higher costs and risk for lenders.

A great example of the new laws and costs, yet didn’t hit its mark has to do with the difference between licensing requirements for Loan Officers. If your Loan Officers works at a bank, credit union, or mortgage company owned by a bank or credit union, the Loan Officer has no mandated educational requirements, no state or federal requirements, no continuing education requirements, and simply has to get registers into the National Mortgage Licensing and Registry System (NMLS).

On the other hand, if your Loan Officers works for a non-bank lender, or for a broker, they must complete educational requirements, plus pass both state and federal testing requirements. They are also required to have yearly continuing education.

This means that today, roughly 80% of all Loan Officers are unlicensed, with no mandated testing or education, yet the vast majority of consumers believe all of them have a license.

nmls_checkTo check if your Loan Officer is licensed, go to www.NMLSconsumeraccess.org.  Type in the Loan Officers name or NMLS number. At the bottom of the page, it will say Licenses/Registrations.  If there are one or more states listed, that Loan Officer is Licensed.  If it says “Federal National Loan Originator”, that person is NOT licensed.

When getting a mortgage loan, likely the largest financial transaction of your life.  If is probably prudent to work with a licensed professional.

FHA changes drive homebuyers to conventional loans

St Paul, MN: FHA mortgage loans are due on June 3rd, 2013 to make a significant change that is driving more clients to conventional loans.  New FHA loans after that date that have less than a 10% down payment or equity for a refinance, will now have mortgage insurance for the life of the loan.  Currently FHA mortgage insurance goes away once the loan is paid down to 78% of the original value.
Eric Metzler, a Senior Mortgage Loan Officer with Cambria Mortgage in St Paul, MN.,  said clients currently in the process who can afford a slightly higher down payment of 5%, versus FHA’s 3.5% minimum down payment are all going with a conventional loan.
He further indicated that it is a pretty simple choice. The difference between 3.5% down, and 5% down for many isn’t much money. But the dramatically higher monthly mortgage insurance, high initial up-front mortgage insurance premium, and now mortgage insurance for life has killed FHA for all better qualified home buyers, leaving only those with weaker credit to need an FHA Loan.
updateThe major reason FHA has increased the costs is an effort to replenish their default pool of money because of recent losses due to the market crash. But now less and less people are taking FHA loans. The pool of FHA clients will no longer have a blend of strong and weak buyers, they will only have weak buyers – resulting in a more risky pool. Something that got them into trouble to begin with.

Those with excellent credit can sometimes even obtain a 3% down conventional loan.

The new rule also effects the popular FHA Streamline Refinance.  Those refinancing their FHA loan will now have PMI for at least 11-years if they are 90% loan-to-value or better, or life of loan if over 90% loan-to-value.

The trend toward conventional had already started over the past few years as FHA made several increases to the cost of their loans with higher mortgage insurance rates.  The “life-of-loan” requirement starting June 3, 2013 is the proverbial straw in the camels back for many home buyers.

CFPB cracks down on builder kickbacks

Minneapolis, MN: Have you bought a new construction home and been “forced” or offered an incentive to use the builders lender and title company? It is a big problem that has been round for a long time, that the Consumer Financial Protection Bureau is finally getting around to look at.

Many builders offer “incentives” if you use their affiliated companies for mortgage and title senewconrvices. While this is technically legal – the promises they make, or how the incentives they offer are structured to consumers in order to close a deal and make a profit are generally not legal.

Builders can give you a discount or an incentive to a home buyer provided you don’t make it up anywhere else in the transaction.  But that is the issue. They are always making it up somewhere else. The incentives are rarely “real”.

One example of how this plays out is that when a new home buyer is looking around at other mortgage company or title company options, the builder says he will give you a $4,000 appliance allowance, or $4,000 off closing costs, and their rate today is 3.50% if you use their affiliated company. If you use someone else, they won’t give you the allowance or pay some of your closing costs. Pretty compelling reason to use them.

If you still want to use someone else, it can sometimes get pretty ugly. I’ve heard many customers talk about threats, and even the builder refusing to build the home at all if you use someone other providers.

Once you sign the contract, you are bound to use their affiliated companies.

When the time comes to actually lock the loan 3 to 4 months later, their rate is no longer competitive. I’ve seen the initial offer, which was equal to mind, now be as much as 1/2% higher. By providing the higher rate, they have easily paid for the incentive, and a whole lot more.

The Consumer Financial Protection Bureau (CFPB) last week required that a Texas homebuilder, Paul Taylor, deposit over $100,000 he received in kickbacks from his jointly owned mortgage company into the Treasury. The homebuilder is now banned from future real estate settlement services, including mortgage origination.

The settlement resolves violations of the Real Estate Settlement Procedures Act (RESPA), enforced by the CFPB, which prohibits giving and receiving kickbacks for services, and specifies detailed guidelines for affiliated companies.

Dishonest affiliated business arrangements and kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage. The CFPB said they will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices.

Builders beware… The CFPB has you on their radar.

20% down NOT needed to buy a home in Minnesota

Minnesota Down Payment mortgage loansSt Paul, MN:   Question.  How much money do you think you need to put down to buy a home?

If you answered anything higher than ZERO, your answer is wrong!

Would it surprise you to learn that most people can get a mortgage with a great rate with just 3.5% down, and in some cases, zero down?  For most people, it is about the same amount of money you would spend on the first month, last month, and damage deposit on a rental property… but now, it is your home.

For some strange reason, the myth you need a huge down payment persists.  It simply isn’t true, yet I hear it all the time. I think it is because we hear it on TV.  I know I have. This is mostly from the talking heads on either coast. Many of those areas are what is known as “high cost” locations.  Anytime you go over $417,000 – you are now a jumbo loan, and jumbo loans are typically 20% down.  But for the rest of us…  Heck no, just 3.5% down!

  • FHA Loans are very popular, and only require 3.5% down
  • Good credit conventional loans only require 5% down
  • VA loans are zero down
  • USDA rural housing loans, for rural parts of the country, are zero down
  • Community programs can many times be used for your down payment to effectively get you zero down

Don’t let misinformation derail your dream of home ownership. Contact a local licensed mortgage professional to get pre-approved today.  Once approved, contact a great Real Estate Agent to find your dream home!


Minneapolis Weak and bad credit loans down since 2007

Minneapolis, MN:  Not much of a shocker here, but weak, and bad credit loans are down dramatically since the lending correction of 2007.   Part of the reason for the housing collapse was an immense community desire to allow everyone to have a home. Clearly, that experiment failed miserably. Simply put,  not everyone who wants a home loan deserves a loan, regardless of what liberal community activists say.

Mortgage loans written today, have some of the highest “quality” seen in underwriting history. New mortgage regulations pretend to provide important protections to borrowers, but have also lead to a permanent increase in the cost of originating loans to all borrowers, and a dramatic decrease in loans to those with poor credit.

deniedBetween 2007 and 2012

  • Home buyers with credit scores higher than 780 declined by 30 percent
  • Home buyers with credit scores between 620 and 680 declined by 90 percent
  • Home buyer with credit scores below 620 were virtually non-existent

Loans harder to get with no incentive


All loans are much more difficult to originate, process, and underwrite.  But small loan amounts, and especially small loan amounts combined with credit challenges require a huge amount of time and effort that loan officers can no longer be compensated correctly to work on.

In the past the loan officer and their company were rewarded and compensated for their extra efforts with problem clients. Today, loan officer walk away from them because there simply is no reward or incentive to help challenging clients.

Simply put, if you worked on a project for 10-hours, and got paid the exact same amount as you do on a 1-hour project, would anyone ever work on the 10-hour projects anymore?  Of course not… The government and community activists may disagree, but Loan Officers and lenders are in this business to make a living, not work for free.

Twin Cities home prices rise again

St Paul, MN: The most recent reports and data for the Minneapolis St Paul real estate market shows continuing signs of rebound with both increased home prices and increased building permits for new construction.

newconThe University of St Thomas’ monthly residential real estate price report index shows that the mediam sales price was up 6% over March of 2012, with the current average now 209,900.

Improvements to the housing market are attributed to an

New construction builders are also complaining about a lack of quality lots within the metro area that have current access to utilities. This forces builders to pay premium prices for prime lots, which of course increases the price of the new home.


Fannie Mae earns $59B record profit

fannieMinneapolis, MN:  Fannie Mae earned a record $58.7 billion, yes billion, in profits for the first quarter of 2013!

To many, this is an unthinkable achievement, and their best performance since 2006, right before the mortgage and housing collapse. The fortunes of the company, which is 80% owned by taxpayers after being seized in 2008, have been lifted by the recovery in the housing market. As the housing market recovers, the mortgages it owns or backs have increased and Fannie Mae’s bottom line has improved. Last month the company reported a record $17.2-billion annual profit for 2012

Fannie Mae also said it is close to repaying taxpayers for the cost of their bailout, which was the most expensive of any single company. The Congressional Budget Office (CBO) says the real cost of the federal government guaranteeing the business of failed mortgage giants Fannie Mae and Freddie Mac is $317 billion — not the $130 billion normally claimed by the Obama administration.

Fannie Mae was able to achieve this by two factors, first it applied tax credits that it had saved from its losses on delinquesnt loans, and the other is a hidden tax (called G-Fees), that it applies to every single new loan. So essensially, all the new loans are paying the G-Fee Tax to make up for all those people who defaulted on their old loans.

Mortgage loan delinquency rate drops dramatically

pdSt. Paul, MN: Many signs point to an improving housing market. Steady job games, and rising home values appears to be helping to keep more people current on their mortgage loans.

The number of home owners at least two months behind on their mortgage payments fell by 21% for the first three months of 2013 versus the first three months of 2012, according to a report from Trans Union, one of the major three credit bureaus.

This large drop in delinquent mortgage payments is the biggest quarterly drop since Trans Unions records started tracking this in 1992.

FHA loans potentially most costly after June 3, 2013

FHA Mortgage Insurance & Streamline Refinance in MN and WI

FHA Loans More costly after June 3, 2013
Minneapolis, MN: FHA loans are having another change starting June 3rd, 2013.  The change comes in two areas:

1) Monthly mortgage insurance is being added to some loans that previously didn’t have it. For the vast majority of FHA loans, this is a change that will effect next to nobody, as most FHA loans have mortgage insurance. For example, if you had a 15-yr FHA loan, and you put at least 22% down, you currently wouldn’t have PMI.  Under the new rules, you will.

2) FHA mortgage insurance, which currently goes away once your loan reaches 78% loan-to-value, will now be on most FHA loans for the entire term of the loan.  Here is a quick breakdown of the new mortgage insurance guidelines:

FHA Mortgage Insurance (PMI CANCELLATION – ALL FHA loans after June 3, 2013

  • UNDER 90% loan-to-value at START of loan: 11-years
  • 90% loan-to-value of higher at START of loan: Life of loan – never goes away

While this sounds terrible, two items jump to my mind:

  • Whenever possible, try moving to a 5% down conventional loan.  Just a little more out-of-pocket will currently save you a LOT of money in PMI monthly,AND it can still go away as early as 80% loan-to-value.
  • Standard FHA loans with just 3.5%, on average, will have PMI for about the first 10-years anyway. So for most people, the new life-of-loan mortgage insurance on FHA loans is meaningless unless you are still in the house after 10-years.

As always, contact a local LICENSED mortgage professional to assist and answer questions. Don’t assume.


FHA streamline refinance loans are great for refinancing to today’s low fixed mortgage rates! We are an approved FHA Lender that allows more people to qualify under the flexible credit guidelines. Our clients love the low fixed rates and security of a government-insured loan.FHA Streamline Refinance Rates / Quote

Fast Closings / MN based lender
NO Appraisal Option

NO Closing Cost Option
Refinance into the Minnesota’s Lowest rates
Fixed Rate Payments for 15 or 30 Years
Reduce Your Mortgage Payment or get Cash Out too
Special refinance program if you currently have an FHA home loan

Historical perspective on assumable loans.

How about some historical perspective and history lesson on assumable loans? keys

I recently received this note: “FHA and VA had assumable loans back in the day. All you did was sign the assumption form and pay $300 or transfer everything.  The original borrower was not released from liability, and the vet did not regain VA eligibility until that loan paid off.

In the past…



Rates jump up after jobs report

lmrMinneapolis, MN:  Mortgage rates jumped up  at their fastest pace in two months after this weeks employment report, which showed that more jobs than anticipated were created in April.  Anytime we see good economic news, it tends to cause long-term mortgage interest rates to move higher.

Not only were April’s numbers good, the report also revised March’s numbers higher – which combined, added to the increase in mortgage interest rates.

While this all sounds like doom and gloom for anyone looking to buy a new home, or refinance their existing mortgage to save money – it just means that for a perfect customer, a 30-year fixed rate is back up to about 3.50%…  Hardly terrible news!

While we never know what mortgage interest rates will do, today’s rates are awesome.  There is very little room for downward improvement, and lots of room to move up.  I suggest locking in these great low rates, and never look back.