Sales Trends, Mortgage Insurance & California Wines

Sales are trending up in the OC both in terms of prices and volume. Some realtors are jumping on the bandwagon telling us that we’re past the bottom, and prices are going up….but personally I agree with those naysayers who attribute the increase in volume and prices to competition to qualify for the Homebuyer Tax Credit which expires April 30th. In order to qualify, your property must be under contract to purchase by this Friday.

The County median price was $432,000 in March, with a 9% volume increase as well. We are still seeing a substantial percentage of “distressed sales”… 1/3 were foreclosures and I didn’t find any stats on short sales but I know there are plenty.

Over 20% of last month’s sales were ALL CASH BUYERS. This is most common in sales below $450,000…which is pushing out a lot of first-timers. The investors are winning the battle unfortunately.

Mortgage Insurance

The big news of last week is that the private mortgage insurance (PMI) has just become more easily accessible to conventional borrowers (non-FHA). For the last few years there have been substantial limitations on areas of “declining values” i.e. California, Arizona, Michigan, Nevada and Florida.

The new guidelines provide Mortgage Insurance up to 90% and 95% LTV in some cases, depending on the individual company guidelines. The minimum FICO scores required in order to qualify for mortgage insurance have also been reduced. Companies “back in the market’ include MGIC, Radian and Genworth.

Up until now, the only path available was an FHA loan for those buyers without 20% down and a FICO score below 720-- here in California. I have a client with a score just below 700, and before this change he wasn’t able to qualify for PMI, although his debt-to-income ratios met the stringent guidelines.

For those of you who don’t know, PMI is typically paid monthly by the borrower, and guarantees the lender (insures) for the portion of the loan over 80% loan-to-value. These companies have been under great financial strain due to the last few years’ tremendous losses.
This announcement comes on the heels of more restrictive guidelines handed down by HUD for FHA loans. HUD is tightening up on FICO scores, by restricting loan-to-value for those borrowers with lower scores. So, they will have to come up with a larger down payment.

California Wine Festival


The first annual California Wine Festival in Dana Point was held last Thursday through Saturday. Thursday evening they held an event at the Ritz Carlton, Friday evening at the Dana Point Yacht Club, and Saturday afternoon at Doheny State Beach Park. I attended the Saturday event which was sold out at 3000 attendees. There were over 60 wineries, both well-known and boutiques that poured a wide variety of wines. Five breweries had beers and ales to sample, and a number of restaurants provided tasty appetizers. All the food and wine was unlimited, although a few booths ran out of some wines near the end of the day.

Lines were minimal, fun was in abundance, and the music was reggae/calypso style so of course I practiced my Zumba technique. The weather cooperated with sun and a light breeze, to provide an afternoon that couldn’t have been more perfect. We made new friends, and ran into old ones.

Next stop for the afternoon was Turk’s in the Harbor, on the water… for some sightseeing… and we finished the day at Sunsets’ on PCH across from Capistrano Beach…. where a band of guys my age (or older!) played surf music while we dined on pork from a whole pig they’d roasted across the street in a pit on the state beach. What a hoot! This lively bar has big screens for the sports’ fans, and live music on weekends.

Back to the Wine Festival – although this was their first time in Dana Point, they will host the same event in mid-July in Santa Barbara for the 7th year. For more info, here is their website: http://www.californiawinefestival.com/index.html

Rates, Foreclosures and BeachFire

Interest Rate Update

The end of the government’s purchase program –on March 31st—of mortgage-backed securities, was widely heralded as the precursor of a steep rise in mortgage interest rates. However, after an initial steep decline in MBS prices (pushing rates up) rates have improved and stabilized for the time being. Scott Simon, managing director of PIMCO says “We are unlikely to see a significant market disruption in the agency market stemming from the Fed’s retreat.” Translation: he doesn’t think rates are going to rise. Much.

30 year fixed rates are currently ranging from the high 4’s to the low 5’s depending on loan size, fico score, property type, loan purpose and loan-to-value. FHA rates are in the same range and go up to 96.5% loan-to-value (3.5% down.)

There is a new purchase program called HomePath requiring only 5% down on properties currently owned by Fannie Mae. The rates are a bit higher, but there is no requirement for mortgage insurance which is a big plus.

The BIG news is that true “jumbo” financing is returning to the market place. We are suddenly seeing very competitive rates from Chase, US Bank, Wells Fargo and GMAC. Great news for those with loan balances over the current high-balance Agency limit of $729,000. However, be warned, these programs are very conservative in terms of credit, personal liquidity, and loan-to value.

Foreclosure Activity Report

8.33% of all mortgages in Orange County are more than 90 days late. The national average is 8.78% and the California average is at 11.68%. Government programs to prevent foreclosures are slowing foreclosure rates…but most of these homes will likely convert to “short sales.”

My clientele’s purchases this year have primarily been short sales requiring bank approval…which is hard to come by, and can takes months to achieve. Then, when they finally agree to a price, they typically want to close the purchase within 15 to 21 days making for a mad dash at the end! Banks are not easy to deal with!

The highest percentage of distressed sales in the U.S. is in the Riverside SMSA, then Las Vegas and Sacramento.

Happy Hour at BeachFire

Friday evening I went to the BeachFire Bar & Grill in San Clemente. BeachFire opened in 2002 and is credited with the revitalization of downtown San Clemente.

They host a regular Friday evening Happy Hour all night, if you show up in “island” attire…whatever that means. I wore my yellow shell necklace from Maui and it did the trick. I had an aloha shirt in my purse as a back-up though. Drinks are $4 to $5 each, and appetizers range from $4 to $6. What a deal! Any time it rains, they also offer Happy Hour prices….otherwise known as “When it rains we pour.”

In addition to great drinks and appetizers at discounted prices, they have live Reggae music every Friday. We were rockin’… or whining, rather! (Jamaican-style dancing) The band manager treated my friends and I to Jaeger shots which was a hoot. See, you can still have fun over 50. http://beachfire.com/home.asp

My favorite Reggae band had performed the prior week…Smoothie Jones and the RedX. Now they play authentic Jamaican Reggae! I was sorry we missed them. http://www.myspace.com/smoothiejones
They used to play regularly in Dana Point, on the summer cocktail harbor cruises.

State of the Union for the Mortgage Loan Process, Part 2

I am pleased to announce I have moved to Western Reliance Funding. Western has been operating for over twelve years in Orange County, and offers some new bells and whistles in terms of service, to include in-house underwriting, and both correspondent and brokering capabilities.

Western works with a number of investors as a correspondent including CitiMortgage, Chase, BofA, GMAC, US Bank, Flagstar, Wells Fargo and more! Most exciting for me is the ability to get back into the business of Reverse loan financing, which I couldn’t offer any longer through Clarion.

My new contact information is:

kcard@westernreliancefunding.com
24422 Avenida de la Carlota, Ste. 180 Laguna Hills, CA 92653
949-470-1333 x111


As a postscript regarding Clarion: I loved working there, and they had a great run. Unfortunately, times have changed and the mortgage industry has undergone dramatic metamorphosis, necessitating my move….in order to be more effective and responsive to my clientele.

State of the Union for the Mortgage Loan Process, Part 2

HVCC is the Home Valuation Code of Conduct. It went into effect May 1, 2009, and effectively cut off all communication between loan officer, or any “party of interest,” and the appraiser. New Appraisal Management Companies (AMCs) sprung up overnight, but there are a number of companies that provide appraisals on a national basis that have been in operation for many years with fairly good results.

Mortgage companies have created their own appraisal management companies, some more equal than others. Unfortunately some of these organizations pay appraisers so little, their quality is very poor. There are others who charge more and tend to have higher quality and success.

The biggest issue, other than appraisal quality, is non-portability. The problems arise when different lenders require appraisals to be performed by specific AMC’s. This means a mortgage banker must determine where a loan will be placed BEFORE ordering appraisal. Otherwise, the appraisal may not be accepted by the lender/bank of choice.

Correspondent lenders typically have two or three choices of AMC’s to use, and as a correspondent, the target lender will accept the appraisal. However, if a loan needs to be brokered to a specific bank due to loan program and parameters, the appraisal must be ordered through that bank’s AMC. This is very limiting to borrowers since it removes much of the flexibility of choice…without ordering a second appraisal. If for some reason a file is declined or does not meet the target investor’s guidelines, a new appraisal will be required in most cases! I have had to order second appraisals on a number of loans this last year, much to my dismay (and my clients’!)

Gone are the days of calling one of my regular appraisers, asking them to “comp” a property for me to give me an idea of value, before embarking on a refinance. We are all operating “blind” these days. HVCC has also caused many appraisers to go out of business (since they AMC’s take a percentage off the top the appraiser earns much less per report than in the past) which is very unfortunate.

Why did this happen? An official of New York State put pressure congress to act to prevent “value inflation,” and this is what they came up with. Initially HVCC only affected Fannie and Freddie loans (those under $729,000) but now it has also been adopted by HUD for FHA loans.

In my opinion this bad law has made it harder for clients to obtain competitive pricing for their loan. It is very limiting, in many ways.