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Real Estate Agents: How the government shut down will affect your business

With: John Meussner, Loan Officer & Mortgage Coach @ Mason-McDuffie Mortgage

So it’s been a day and the government is still shut down.  What exactly does that mean?  I’ll spare the humor and all the things I’d like to say – basically it means that some services are available, and others aren’t.

     While many vital services are still in action and exempt from shutdown, many others have been frozen, and could inadvertently have a pretty poor effect on the housing market, especially if this shutdown lasts for more than a couple days.

Please note: Not all lenders will have the same processes during a shutdown, just like in 2013. Your experience may vary. For example we are good to proceed on USDA Loans as-is during the shutdown.

USDA loans – the USDA loan program is frozen.  Since files are approved by USDA offices directly, there will be no more guarantees or housing loans issued by the USDA offices until the shutdown is over.  This could have a pretty terrible effect for those who live in rural areas or need 100% financing.

VA loans – VA loans should be in full swing, as the program is run based mostly on fees.  Where there might be an issue is when someone needs a VA certificate.  When the government shut down in the 90’s, there was a delay in obtaining certificates, and this will likely be the case again.  New applications will be taken, and files will be underwritten and funded, though.

FHA loans – FHA loans aren’t expected to feel a real impact from the government shutdown so long as the shutdown doesn’t last for a long period of time.  HUD is running at a significantly reduced staff, though, so getting information and paperwork to & from HUD could take a lot longer than usual.  The good news is, loans will still be insured & they will still have staff delegated to underwriting.

Conventional loans – while many are stating the shutdown is ‘no big deal’ for conventional financing, this is simply not the case.  Yes, conventional loans will be applied for, underwritten, approved, and funded.  BUT, over the past few years, as we all know, lenders have taken extra steps to fight fraud, and 2 of these steps are social security verifications and IRS 4506-t transcripts.  These services will be unavailable, and therefore loan files may be put on hold until the shutdown is over.

     Some borrowers will be in more trouble than others – for self-employed borrowers, they may be at the mercy of the shutdown as a work around for 4506 transcripts isn’t currently available.  Also, for any government employees that are in the midst of the loan process it will be extremely difficult to get any verifications of employment done.

   I’d strongly recommend being proactive in making sure none of your clients are surprised by any potential delays – sellers should understand that the shutdown can cause delays at no fault of buyers.  Anyone buying or refinancing should be aware of what type of loan they are getting, and if the potential is there for delays, they should plan accordingly.

     Hopefully in a day or 2 this blog post won’t matter & things will be running smoothly once again between our elected officials, but as a preemptive stragegy, it would be a good idea to know this information.  And for an added benefit you’ll already know what to be ready for if this happens in the future.

–  John Meussner

Phone
(949) 247-7530
Email
jmeussner@masonmac.com

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Delaware Budgeting: Your Home is Our Piggybank

Prior to this past Sunday, Delaware was the state that charged the highest property transfer tax in the country.  Customarily 3%, split between buyer and seller, with half the money going to the state and half to the local county in which a property was sold.  After Sunday, Delaware is the state with the highest property transfer tax in the country, by a much larger margin.

Mason Mac specializes in Delaware home loans
Newark, DE, home to the University of DE and one of the best small towns in New Castle County

Thanks to a failure to pass a state budget by the deadline of June 30, a midnight deal on the Sunday of a holiday weekend was struck, increasing the state property transfer tax on real estate transactions up a full 1%.  Also included in the measure were increased SIN taxes (those on alcohol and tobacco products).

So a few cents more for your smokes, a few cents more for your booze, and thousands of dollars more in fees if you plan to buy or sell a home in the 1st state.

On a $300,000 home sale, the result is an extra $1,500 out of pocket for buyers and an extra $1,500 out of pocket for sellers.  It doesn’t take a partisan point of view to consider this a terrible move by the state and it’s “leadership”.  At a time when home ownership rates in the United States are their lowest since the 60’s, and would-be buyers struggle to enter the market largely due to the associated costs, this move by Delaware is a pathetic way to address budget issues.

More and more states and federal governments are looking to the housing market to compensate for decades worth of fiscally irresponsible practices, so it’s important for people to take this into consideration come election time.  Home ownership has historically been one of the biggest and best steps for individuals to achieve financial wealth, but through actions like this one taken by Delaware and not long ago the federal money grab through conventional mortgage “g fees” one of the best financial moves an individual can make is under attack from politicians on both sides of the aisle.

Buying and owning a home is a huge piece of the American Dream, and at Mason Mac we’re helping people achieve that dream every day – while we always educate our clients and partners on the mortgage world, it’s important to know when things like this happen, too.  We have clients, business partners, and tons of friends in Delaware, and we hate to see their homes and home ownership dreams treated like a piggybank by the people in charge.  We hope our Delaware friends don’t see any further increased costs going forward, and that you’ll all remember this 4th of July surprise when election time rolls around.

 

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How Does the Fed Rate Affect Mortgage Rates?

Yesterday the Fed increased the target funds rate .25%.  This was the 4th time the Fed has raised rates since December 2015 when it was decided the economy was stable enough to begin increasing rates after a period of recession and a long-running Fed funds rate of .25 (effectively 0% as this is the lowest rate possible).  With ‘rate increases’ in the news so frequently many people panic, thinking the home or auto loan they’re about to get is about to get more expensive.  Real estate agents often tell buyers to “move quickly before the Fed increases rates!”, and some mortgage lenders even use the Fed movements as a marketing opportunity.  In reality, though, the Fed rates don’t have much effect on your home loan rates at all, at least initially.

 

The Fed and Mortgage Rates
The Fed doesn’t impact mortgage rates the way many people think

 

What is the Fed Rate?

 

The Fed Funds rate is the rate at which banks borrow money to either lend or meet reserve requirements, not what consumers pay for loans.  So if you could get a 4% yesterday on your mortgage, the rate isn’t going to change to 4.25% today because of the Fed move.  Likewise your auto loan rates won’t be any different today, either.  The Fed funds rate is more impactful to financial institutions than it is to consumers, at least short term.

 

What does change with the Fed Funds rate?

 

Variable rate debt often changes along with the Fed funds rate.  Credit card rates?  They’re influenced since the Prime rate is linked to the Fed funds rate, so your credit debt or home equity line of credit is likely about to get more expensive than it was yesterday morning. Variable rates on things like student or business loans can also adjust along with the fed funds rate, so these are areas that could see an increased interest rate as a direct result of Fed action.

 

Immediate VS Long term impacts

 

The immediate impact of Fed rate adjustments can act opposite of what most think makes sense.  For example, the day the Fed raises their fund rate, mortgage rates often see improvements – this was the case yesterday, as the Fed raised rates and mortgage rates saw one of their largest drops of the year (and reached their best level of the year).  Consumers (with the exception of those carrying the types of debt mentioned above with large balances) generally feel very little immediate impact from Fed rate changes.  Businesses and banks can feel some immediate impact though, and often times this benefits mortgage bonds at the expense of stock losses.  Typically, Fed movements are baked into the markets over a period of time, so unless there’s a surprise on Fed announcement days, stocks and bonds generally don’t see a ton of movement.

Long term, Fed rate increases are done in economically improving environments to combat inflation (or the potential for it).  Since inflation is the arch enemy of long term investments like mortgage bonds, when it does rear it’s head, inflation can cause mortgage rates to rise, however the direct cause is inflation, not a Fed move.  In economically improving times, stocks generally benefit as well, sucking money from safer but lower yielding investments like long term mortgage bonds and treasuries.  For this reason, mortgage rates can also increase in times when the Fed is raising their rates, but the movements are in correlation, not a result of causation.  But Fed movements can also decrease mortgage rates – along with the announcement of increasing, decreasing, or leaving alone the Fed funds rate, the Fed issues a statement.  If that statement is a negative economic outlook, we often see mortgage rates improve.  In fact, when the Fed began raising their Funds rate in 2015, the economic outlooks that went along with those increases were so conservative, mortgage rates bottomed out for a long period of time.

Things to remember

  • The Fed doesn’t directly affect mortgage rates
  • Both the direction of the funds rate AND the Fed statement is an indicator on where rates may be heading
  • Variable rates, especially those linked to the Prime rate, will rise and fall with Fed movements
  • Avoid scare tactics and dismiss anyone saying that Fed movements will have a negative impact on their home loan rates
  • Economic movements and day to day world events have more impact on short term mortgage rates than Fed changes
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Student Loan Mortgage Rules Loosen Up

Fannie Mae lightens up on Student Loan Mortgage Rules

 

This Spring, Fannie Mae released big changes to the way they’ll allow mortgage companies to underwrite loan files involving student loans.  The student loan mortgage rules will now be more borrower-friendly, and will allow lenders to implement some common sense into underwriting loans for borrowers with substantial student loan debt.  Included in the changes

Student Loan Mortgage Rules have relaxed to make it easier for those with student debt to buy homes

are other common sense approaches to how underwriters can analyze a borrower’s debt burden, commonly referred to as DTI (debt-to-income ratio).  The recent release is best described as several small changes with potentially large impacts, opening the doors for more Americans to achieve the dream of home ownership.

Changes to Student Loan Mortgage Rules

Until now, lenders were limited in the ways they could calculate student debt into DTI – either using a payment shown on credit, or a percentage of the outstanding loan balance.  While this way of doing things makes some sense in that a payment showing on credit is generally accurate, and using even 1% of a loan balance is a conservative measurement of what people will actually pay, it left a lot of borrowers with unnecessarily large debt burdens on their mortgage applications.  For example, someone on income based repayment plans may pay much less than 1% of their loan balance or what is shown on credit.  For those with loans in deferment or forbearance their actual payment may be much lower than 1%, but may not be shown on credit during the deferment/forbearance period.

With the new rules, lenders can use a borrower’s actual payment when qualifying them.  If they have an income-based repayment schedule, the reduced payment can be used to qualify when properly documented.  This will help many recent college grads qualify for a home loans sooner than under the previous rules.

Note: When in deferment or forbearance, a lender must still verify what the payment will be when repayments begin.  This can be verified through the credit report or through the student loan lender.  If no payment can be verified, the 1% of the balance rule will apply.

 

Student Loan Mortgage Rules for Cash-Out Refinances

With the recent rise in home prices across the country, cash-out refinance programs have become more popular, and with new student loan mortgage rules, homeowners can refinance and include student loan debt into their new loan without the higher interest rates typically associated with cash-out loans.  Under previous guidelines, Fannie Mae required pricing adjustments if borrowers used the equity in their home to withdraw cash or pay off debts, resulting in higher interest rates.  Now, if the debt being paid off is a student loan, there is no such adjustment, so borrowers have the ability to wipe out their student loans with no “penalty” to their interest rate.

Note: Under this guideline, at least 1 student loan must be paid off in full with the new cash out refinance.  Student loans cannot be partially paid off, and including other types of debt will still result in a pricing adjustment.

 

Excluding Debts Paid by Others

The recent Fannie Mae changes also addressed a very common problem encountered by mortgage applicants – debt in a borrowers name, but being paid by someone else.  In the past, debts paid by another party had to be counted against a loan applicant if the debt was in their name..  Now, if a borrower has a debt and can evidence someone else has paid that debt for 12+ months (on time, of course), the debt can be excluded from a borrower’s DTI.  This will be a huge help to parents who are helping their children establish and obtain credit (think: cosigning student loans, or purchasing a vehicle that the child will pay for), and circumstances where one borrower has opened credit to help someone with a less than stellar credit history.

Note: This exclusion only applies to non-mortgage related debts

 

No Seasoning Required on Previously Listed Property Cash-Out Refinance

Fannie Mae has also changed their rules on withdrawing cash from recently listed properties.  In the past, if a property was listed for sale, the owner had to wait 6 months after withdrawing the listing to pull cash out.  Now, there is no waiting period.  Immediately after removing a property from the market, a cash-out refinance can be done.

 

While the changes to student loan mortgage rules and debts paid by others are a big deal in getting more mortgage applicants qualified, there is another plus to take away from these changes.  Fannie Mae is loosening requirements and restrictions on mortgage applicants, allowing more people to qualify, and allowing lenders to use common sense to evaluate the repayment ability of applicants.  This is a tremendous shift from years of tighter restrictions following the housing crash, and is evidence of a largely improved market place, the return of equity and appreciation to homeowners, and a commitment to helping Americans achieve a big part of their dream – homeownership.

 

Note:  All of the above requirements are guidance from Fannie Mae, not a particular lender.  Many lenders have overlays that could prevent using the above guidelines – be sure to work with a lender that underwrites their loans according to Fannie Mae guidance.  If you’re curious, yes, Mason Mac is one of those lenders.

 

Have questions on the changes to student loan mortgage rules or anything else loan related?  Reach out to an expert for an instant response!

 

 To read more about changes to student loan mortgage rules, please check out the Washington Post announcement in which we were referenced

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HOLY TRID! New Regulations for the Mortgage Industry Start Today!

Today marks the 1st day of new federally mandated regulations known as “TRID” (TILA-RESPA Integrated Disclosures). The Consumer Financial Protection Bureau (CFPB) has introduced these new regulations as part of their “Know Before You Owe” initiative.

New forms are part of TRID whose purpose is to help make it easier for borrowers to understand complex mortgage documentation. Home mortgages are important for consumers so that they can achieve the dream of homeownership. As much as we try to make the mortgage process less complex for our clients it is still not as simple as we all would like. These new TRID forms look to help with the complexity by merging four forms into two forms.

The New Forms

During the mortgage process, we as the mortgage lender are required to give you these two new forms. One form, the Loan Estimate, you will receive early in the process. The second form, the Closing Disclosure, you will receive later on so you can review the final loan terms before you close.

The Loan Estimate

The Loan Estimate replaces both the initial Truth-in-Lending (TIL) statement and the Good Faith Estimate (GFE).

Within 3 business days after receiving certain information on your loan application (income, property value, etc.) you will be sent a Loan Estimate.

Your Loan Estimate (LE) consists of three pages. The first page lists general information about your loan:

Applicant info and property details
Loan type, purpose and terms
Projected payments during the loan term
Estimated closing costs and how much cash you’ll need at closing

The second page of the Loan Estimate breaks down the closing costs:

Origination Charges (this covers our expenses to do the loan)
Other Costs (third-party charges like homeowners insurance)
Calculation used to determine estimated cash required at closing
Adjustable interest rate table, payment table (for ARM loans only)

The last page shows information about your lender and further details to help you choose which loan is right for you:

Contact info for us “the lender” and your loan originator
Comparisons (consistent table format to make comparing different loans easy)
Other Considerations (details specific to this loan from this lender)
When you’ve decided on your loan option, you MUST sign the Intent to Proceed document. Without this consent, we as your lender cannot move forward with processing your loan.

Closing Disclosure

The new Closing Disclosure replaces both the final Truth-in-Lending disclosure and the HUD-1 statement.

When your loan has been processed and is ready to close, you will have a final discussion with us to go over the loan and its terms. We want to make sure you understand and agree to everything. We will then provide you a Closing Disclosure detailing your loan terms.

The Closing Disclosure is designed to be easy to read and contains the same information as the Loan Estimate essentially. It will reflect your final fees, charges and includes additional information relating to your escrow account (which holds funds to pay your taxes & insurance(, if applicable. You need to review and confirm everything matches what you have agreed to.

The New 3-Day Waiting Period

We as your lender are required to give you a minimum of three business days to review the Closing Disclosure before your closing can take place. If changes to the Closing Disclosure are made, another three-day review period may be required.

To prevent a delay in the closing of your loan, it is important to acknowledge receipt of the Closing Disclosure as soon as you receive it.

Here at Mason-McDuffie Mortgage we have been working hard to make sure our clients have a seamless transaction with these new regulations. If you have any questions about the new regulations or forms, please contact your Loan Originator, or you can email us at info@mmcdcorp.com.

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Mason-McDuffie Mortgage ranks No. 24 in Best Workplaces of 2014.

 

Best Workplaces full topper

 

 

 

 

For the third year in a row, Mason-McDuffie Mortgage was among the Top 100 Workplaces in the Bay Area.  MMCD ranked No. 24 in the category for small companies with fewer than 149 employees. The Bay Area News Group sponsored the afternoon event and a small group of MMCD employees attended the lunch and presentation.

MMCD received this award based on positive feedback from employees like the examples below:

Best Workplaces quotes

 

 

 

 

 

 

 

For more information on the Top 100 Workplaces companies:

http://www.mercurynews.com/topworkplaces

http://www.contracostatimes.com/california/ci_25981619/business-digest-june-18-2014-best-workplaces-recognized

 

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80th Anniversary of East Bay Regional Park District

2014 marks the 80th anniversary of the East Bay Regional Park District (EBRPD), which includes 65 parks, 15 regional trails and more than 113,000 acres.  Did you know that the residential developer and realtor Duncan McDuffie was a conservationist, pioneer, and original proponent and founder of the California park system?  He was a major player in the development of the environmental movement of the SF Bay Area.

McDuffie loved the Sierra Nevadas and spent a month in 1908 hiking and mapping a 230-mile route across the High Sierra from Yosemite to Kings Canyon with Little Joe LeConte, the UC professor who had cofounded the Sierra Club. McDuffie made the first ascents of Mount Abbot (13,736 ft) and Black Kaweah (13,754ft).

McDuffie served as president of the Save the Redwoods League and president of the Sierra Club from 1928-1931 and 1943-1946 and was chair of the California State Parks Committee, which began lobbying to create a California park system in 1927 when 10,000 acres of the East Bay Municipal Utility District (EBMUD) became available for sale.  McDuffie chaired the $6 million bond campaign for that cause.

When McDuffie’s former employee Clement Calhoun Young became governor of California in 1927, McDuffie urged the Governor to use Frederick Law Olmsted Jr (who had previously designed some of his residential developments) to draw up the state park.

Olmsted traveled from Los Angeles to Berkeley to meet with McDuffie (a UC Berkeley alumus), Robert Sibley, and UC political science professor Samuel May, who, as director of the UC Bureau of Public Administration, had obtained a $5,200 grant to pay for the report and Ansel Hall of the National Park Service.

Olmsted’s plan was followed by the East Bay Regional Park plan.  The park study was approved in 1930 and the new park system was launched.  As Earth Day approaches on April 22, we recognize the visionary work and passion of founder Duncan McDuffie, who had the foresight to envision the goal to preserve the California Regional Park District lands.

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Duncan McDuffie
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New Maui and Hilo Branches Open

“We are excited to expand our mortgage operations in Hawaii with the addition of new branches in Maui and Hilo.  But more importantly, we are fortunate to have four professional mortgage bankers open these new locations.  Sharon Robinson, branch manager, along with loan originators Patricia Ward and Tera Paleka will be our production team in Maui and Dennis Santiago will manage the Hilo branch.  MMCD has a long history of doing business in HI and we are thrilled to have these highly competent and experienced HI loan originators on our team.”

-Marilyn J. Richardson, President and CEO of Mason-McDuffie Mortgage.

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Patricia Ward, Christie Craig (Regional Manager), Sharon Robinson, and Dennis Santiago.
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Kim Bristow (Transition Coordinator/Corporate Loan Officer San Ramon Office) and Tera Paleka
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Tera Paleka, Patricia Ward, Sharon Robinson, and Christie Craig
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Sharon Robinson joins MMCD as Maui Branch Manager

Sharon Robinson has joined the Mason-McDuffie team as Branch Manager to lead the Maui team.  Sharon works hard to help borrowers move through the loan process as quickly as possible. “I make myself available in the evenings and even on the weekends- I understand the need in getting a contract in as soon as possible.  My goals are to help realtors obtain financing for their clients in the quickest way possible.” Sharon works hard to help her customers understand the process of their loan and to help them obtain the best loan for their situation. “I have helped hundreds of borrowers work on their credit so they become eligible to buy a home sooner than later.  I pride myself in knowing what I am doing and will research all day and evening if it is necessary to help my realtors or my borrowers,” she said.  Her specialities include Purchase & Refinance – VA, FHA, USDA, Fannie Mae, Freddie Mac, HomePath, Super Conforming, Jumbo, construction, and Condo-tels (and more). Sharon has been in the mortgage business in Hawaii since 1980.  Sharon can be contacted at srobinson@mmcdcorp.com or (808) 633-6696.

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Patricia Ward joins MMCD as Maui Branch Loan Originator

Patricia Ward, a seasoned professional Loan Originator (her first loan in the business 16 years ago was for a Las Vegas mogul for 4 million dollars), has joined the Mason-McDuffie Maui Branch office.  “I am ecstatic about working with Mason-McDuffie,” she said.  “In my 16 years as a loan officer, the people with this company are the friendliest, most helpful people I have ever worked with.  I have worked in the broker arena and with companies like Mason-McDuffie that are Lenders.  I love working with people, so this career is the most conducive to the best of both worlds- numbers and people.  My heart is to put people in homes that never thought they would be able to buy a home.  It is the most rewarding thing I do and the reason I got into the business originally.   I am proficient in all types of loans but I prefer USDA.  I work with Na Hale O Maui which is a Land Trust Company and builders such as DR Horton and Spencer Homes.” Prior to joining Mason-McDuffie, Patricia worked in Hotel Management and Accounting. Patricia can be contacted at pward@mmcdcorp.com or (808) 264-8014.

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