American Pacific Mortgage

American Pacific Mortgage

Thursday, November 30, 2017


Conventional loan limits for 2018 have just been announced. They will be $453,100 for lower cost areas, but in high cost counties such as Los Angeles and Orange County, the new limit will be $679,650. This represents a big jump from the current high cost county limit of $636,150. The loan limits for VA loans and FHA loans have not yet been announced, but in 2017 they matched the conventional loan limits.

This is great news for current homeowners who may want to refinance and take advantage of the increased equity in their homes. It is also beneficial for home buyers. Conventional loan programs offer more flexibility vs. jumbo loan programs--in terms of higher debt-to-income ratios and less income documentation. The new loan limits represent increased buying/borrowing power.

Please call me if I can be of assistance! I welcome your questions.

Wednesday, November 15, 2017

Tax Overhaul is Opposed by CAR

The California Association of Realtors has come out vehemently against the proposed changes to our tax code, which would eliminate the tax deduction for state and local taxes, as well as the deduction for mortgage interest for all loans over $500,000. Loans currently held with higher balances (up to $1 million) would be grandfathered in. Further it would eliminate the interest deduction for 2nd home mortgages. Deductible property taxes would be limited to $10,000. According to CAR the average homebuyer in the state would pay an additional $3000 in taxes annually.

Living here in the sunny state where it seldom rains, this would definitely put a dark cloud over the real estate market. Our median home price here in Orange County is $790,000 and in LA County it is $595,000. Already, home affordability rates in Southern California have fallen to the lowest level since 2008 and statewide housing affordability fell to a 10-year low as the tight housing market has driven prices higher and higher. The percentage of California home buyers who can afford a median-priced home in 3rd Q 2017 fell to 28%. These statistics do not apply to condos but to single family homes. Condos are more affordable, and 38% of Californians can afford the $440,000 median-priced condo.

To be clear, all these statistics assume a 20% down payment. With less down (including many first-timers) the affordability is lower...and with more down payment, affordability rises.

But, here in California and other high-price states such as New York, affordability will drop even more if the tax bill goes through as proposed. Real estate values will surely drop as fewer and fewer buyers can afford homes. A recent article in the WSJ notes that in NYC sales are slowing as buyers ponder the effect the tax changes could have to their disposable income.

We always advise clients as to the after-tax consequence of owning a home with a mortgage, and how the interest and RE taxes will provide them with a deduction on their tax return. We'll see!

Sunday, November 5, 2017

Abusive Lending Practices -- e.g. Bad Underwriting

I read today's Mortgage column in the Orange County Register. The columnist referenced a number of underwriting issues that came up during the home loan process; and the results. You can read about it here:

I've read this column for years and know the author. He is a good guy who is also a good loan originator. But, the issues he cites are pretty hard for me to imagine at Catalyst Lending. With our own in-house underwriters for almost all loan programs, we rarely have to deal with outrageous conditions or situations similar to those he cites.

To wit:

1. Unmarried couple required to marry prior to closing their FHA loan? No. Never happened on my watch and never have had this become an issue.

2. Self-employed borrower required to provide more income back-up after loan documents have been signed, but prior to funding. Never happens to my clients. I will add that very occasionally we are asked to provide an item post-closing that wasn't properly signed with loan documents. But never more back-up income items.

3. Married borrower buying as sole and separate property is asked to pay her new husband's tax lien. Not with my title guy. It isn't her lien, and he's not on title or on the loan.

4. Underwriter requests a physician's note that borrower won't become ill again and miss work. Huhhh?

5. Foreign born naturalized citizens are asked to provide certificate of citizenship although they have USA passports and Social Security cards. NOT!

All these items are virtually unthinkable in the environment my team works in. Our underwriters are extremely competent; always check guidelines for investors and programs; and virtually never request outrageous conditions for loan closing.

Catalyst Lending has our own team of underwriters and processors, and they are experts. We work together to make the loan process a positive experience. And, I have much more control over the process. 'nuff said.