Extension Please! Offering Perspective on Why.

Can we get a 1 week extension please? I continue to hear that escrows are not closing on time.(not my deals of couurse:) I have come here today to offer my opinion on this subject matter. As we all know the times have changed. Many of the sellers in today's market go by the names Countrywide, Washington Mutual, and Aurora Loan Services not Bob aand Suzie Smith. The sellers are motivated to sell but at their pace and on their terms. Not only do they ask the buyer to get pre-approved through their bank to retain more money but they also take their time in opening the escrow.
Why does all of that matter? Changes in the underwriting standards and programs re-emerging are causing the files to get thicker. In the day of low doc, no doc, stated income, and stated life the meat of the file was the appraisal, preliminary title report, purchase contract and the credit/job history. The market was appreciating so rapidly that there was little problem with the appraisal, the credit is a 10 minute skim and the prelim is obvious. The only item of contention was the purchase contract. Fast Forward to now and the file contains all of the same items as well as income documentation, tax returns, bank statements, appraisals in a declining market, DD-214 for VA, Caivrs clearance for FHA, pest inspection reports, non occupant co-borrowers, Title issues because the bank took over etc. The file was an inch thick and is now 5 inches thick. Would you rather read a magazine with photos or a novel in fine print? That is the difference for the underwriters.
All of those pieces are very important for the file. So back to the bank taking their merry time to open escrow. When the bank delays the opening of the escrow a loan officer cannot obtain the prelim. Until the loan officer has the prelim they cannot send the file to underwriting. This can take a week to two weeks on a 30 day close with a five inch file, how could we close? The average business month is twenty business days. If ten are gone we leave ten to have the file underwritten, provide additional documentation, clear pest, get docs out, sign, fund and record each being 48-72 hour process. The math does not work. Standard FHA takes 45 days, add the prelim issue and again how would it ever be done.
I hate extensions as much as the next person but everyone looking to get financing is facing the same dilemna. We have to work as a cooperative unit to get the deal done. The finger pointing just gives the buyer a sour taste in their mouth. Buyers and sellers are indecisive, worried and nervous. It is our job as a team to state that these are the times and offer the information above to put it into perspective.
Does anyone know of a good doctor that does not have a great nursing staff? The Escrow Officer, Loan Officer, Realtor and Appraiser have to be the Doctor/ Nurse team to get things done. Working together to make the patient as comfortable as possible. I will be the nurse if that make others feel better. Effective communication and no finger pointing will lead to faster closings and more decisive decisions in this market. Edify the person that you are working with even if you cannot stand them. We as a country and professionals need the inventory to move. It is our job to ease the fears of the buyer and make it a smooth transaction. So the next time that an extension is needed smile to your seller, buyer, Realtor and Loan Officer, and remember the words above. Assure them that all is well and even workman's compensation gets the paperwork done at some point.
As Always thank you for reading...........Until Next time.
Matt Freeman

Real Estate and Parenting

For all of you that are parents and in the Real Estate business(mortgage or sales) you should understand what I am about to say. I will also ask for feedback on techniques that you use to keep the two very separate. A Real Estate career can be very demanding and it should be. However, without the appropriate barriers it can easily seep into another part of life called parenting. The facts are that we are commissioned sales professionals and we have to be accomodating to our clients. Most of the time our clients jobs are in the normal hours of a business day (8-5) and that requires us as Real Estate professionals to meet our clients off work hours. These times Monday through Friday 6-9pm and Saturdays and Sundays can be very hard on our own families. The solution is to have very strict barriers.
First, I will admit that early in my career I was terrible at this and I do not think that I am the only one. I worked as a Mortgage Professional from 7:30 am on the phone until 9-930pm. Yes, the money was good but I did not get to know my Two children at the time intimately. They knew that I was there Daddy and that Daddy had to make the money. I can honestly say that I did not see their first step and all the other firsts. Weekends were for my family right? Wrong again. I constantly was on the phone pre-qualifying my clients to buy or sending out the new Pre-approval letter, holding an Open House or striking up conversation at the park to gain a new prospect. The off switch was stuck.
As the market changed and business slowed a little I began to have more time on the off hours. The money was still good and we began to get to know each other. Partially because we moved and all we had was each other and my wife needed help. The other reason is that I was not slammed like a newly opened In and Out Burger. This is when I realized that to have barriers was not only good for my family but my business. I never said no before and my clients began to call out absurd hours. Establishing barriers also said in a nice way that I value your business greatly and will provide you all my expertise but I also have a family and they mean the world to me. With that I went from smooth talking salesman to a business professional. Respect my time away and I will give you the best when I am on the job. No distractions because I have separated the two.
Business then made another change and for a moment I worked all day and night again because I thought I had too. Boy was I wrong. I always have known that relationships are the key to this business. What I did not know was that before I can establish lasting relationships in the industry I had to be able to establish lasting loving relationships in my home. Now I have three kids and the third child Daddy was her first word. I saw the first step and stayed awake with her all night while the first tooth broke through.
Real Estate allows us the flexibility to be at the play middle of the day or participate when your daughters school goes to the Pumpkin patch. In my opinion, with strong barriers between work and family known to all strong realtionships are built throughout. Lasting Relationships that will help us all last through this cycle.
In conclusion, remember that being a parent is just a season. It goes by so fast and we do not get that time back. This downturn is just a season also and we dont get this time back either. Embrace both with strong barriers and both will flourish. Thank you for listening.

Job Market Catastrophe

http://money.cnn.com/2008/03/07/news/economy/jobs_february/index.htm?postversion=2008030713

This article by CNN provides a great overview of the job market. I think that this validates Paul Zane Pilzer's view of where the next Millionaires are going to make their money.

New FHA Limit Increases in California

Here are the New loan limits for California:) The source of this information was:

See http://www.ofheo.gov/media/pdf/ConformingLoanLimitLtrstoEnterprises112607.pdf.

Numbers are 1-Unit, 2-Unit, 3-Unit, 4-Unit
CA Bishop (Micropolitan Area)
Component County: Inyo
$ 437,500 $ 560,050 $ 677,000 $ 841,350
CA Los Angeles-Long Beach-Santa Ana (Metropolitan Area)
Component Counties: Los Angeles, Orange
$ 729,750 $ 934,200 $ 1,129,250 $ 1,403,400
CA Madera (Metropolitan Area)
Component County: Madera
$ 425,000 $ 544,050 $ 657,650 $ 817,300
CA Merced (Metropolitan Area)
Component County: Merced
$ 472,500 $ 604,900 $ 731,150 $ 908,650
CA Modesto (Metropolitan Area)
Component County: Stanislaus
$ 423,750 $ 542,450 $ 655,700 $ 814,900
CA Napa (Metropolitan Area)
Component County: Napa
$ 729,750 $ 934,200 $ 1,129,250 $ 1,403,400
CA Oxnard-Thousand Oaks-Ventura (Metropolitan Area)
Component County: Ventura
$ 729,750 $ 934,200 $ 1,129,250 $ 1,403,400
CA Phoenix Lake-Cedar Ridge (Micropolitan Area)
Component County: Tuolumne
$ 437,500 $ 560,050 $ 677,000 $ 841,350
CA Redding (Metropolitan Area)
Component County: Shasta
$ 423,750 $ 542,450 $ 655,700 $ 814,900
CA Riverside-San Bernardino-Ontario (Metropolitan Area)
Component Counties: Riverside, San Bernardino
$ 500,000 $ 640,100 $ 773,700 $ 961,550
CA Sacramento--Arden-Arcade--Roseville (Metropolitan Area)
Component Counties: El Dorado, Placer, Sacramento, Yolo
$ 580,000 $ 742,500 $ 897,500 $ 1,115,400

CA Salinas (Metropolitan Area)
Component County: Monterey
$ 729,750 $ 934,200 $ 1,129,250 $ 1,403,400
CA San Diego-Carlsbad-San Marcos (Metropolitan Area)
Component County: San Diego
$ 697,500 $ 892,950 $ 1,079,350 $ 1,341,350
CA San Francisco-Oakland-Fremont (Metropolitan Area)
Component Counties: Alameda, Contra Costa, Marin, San Francisco, San Mateo
$ 729,750 $ 934,200 $ 1,129,250 $ 1,403,400
CA San Jose-Sunnyvale-Santa Clara (Metropolitan Area)
Component Counties: San Benito, Santa Clara
$ 729,750 $ 934,200 $ 1,129,250 $ 1,403,400
CA San Luis Obispo-Paso Robles (Metropolitan Area)
Component County: San Luis Obispo
$ 687,500 $ 880,100 $ 1,063,850 $ 1,322,150
CA Santa Barbara-Santa Maria-Goleta (Metropolitan Area)
Component Couny: Santa Barbara
$ 729,750 $ 934,200 $ 1,129,250 $ 1,403,400
CA Santa Cruz-Watsonville (Metropolitan Area)
Component County: Santa Cruz
$ 729,750 $ 934,200 $ 1,129,250 $ 1,403,400
CA Santa Rosa-Petaluma (Metropolitan Area)
Component County: Sonoma
$ 662,500 $ 848,100 $ 1,025,200 $ 1,274,050
CA Stockton (Metropolitan Area)
Component County: San Joaquin
$ 488,750 $ 625,700 $ 756,300 $ 939,900
CA Truckee-Grass Valley (Micropolitan Area)
Component County: Nevada
$ 562,500 $ 720,100 $ 870,450 $ 1,081,750
CA Ukiah (Micropolitan Area)
Component County: Mendocino
$ 512,500 $ 656,100 $ 793,050 $ 985,600
CA Vallejo-Fairfield (Metropolitan Area)
Component County: Solano
$ 557,500 $ 713,700 $ 862,700 $ 1,072,150
CA Yuba City (Metropolitan Area)
Component Counties: Sutter, Yuba
$ 425,000 $ 544,050 $ 657,650 $ 817,300
CA Alpine County $ 547,500 $ 700,900 $ 847,200 $ 1,052,900
CA Amador County $ 443,750 $ 568,050 $ 686,650 $ 853,350
CA Calaveras County $ 462,500 $ 592,050 $ 715,700 $ 889,450
CA Mono County $ 462,500 $ 592,050 $ 715,700 $ 889,450

What is going on?

This week has been one of the most extreme weeks in a while. I do not know about you but everybody I know has siad to me " the strangest things have happened to me this week." The week seems to be all out of order. The dollar is dropping fast, oil is sky-rocketing, bonds rally, stocks tank, mortgage rates go up and the sky seems to be falling. What is the cause of all this craziness? PANIC! None of the normal indicators are giving the message that they normally deliver. Generally, when the 10yr treasury bond yield drops like it did today mortgage rates come down with it. Why then was there two price changes for the worse? Unemployment cannot be that good and we will find out soon the REPORTED numbers on that front. What does all of this mean to the consumer? My thoughts would be to do what you do best, enjoy life as it is and do not spend excessively. Buy the necessities only and make smart decisions. In this time, I would think that a smart decision is a decision with an exit strategy or one that you can afford to invest long term. The other option is to do nothing and sometimes that is the best plan.

A Dose of Optimism

In the recent bouts of change in the industry we alll begin to look at what is the positive side of things. The one that jumps out at me the most is what a great time to buy. Homes that were 785K around me in June of 2006 are going for 515K and less. What you can get for the devalued dollar these days is amazing. The next best thing is that the lenders are requiring that you have money into the investment so even if the investment goes down a little bit more you are still in the green. Also, you are less likely to walk away from an investment that you put something into. It would require what all great investor's have which is patience. Real Estate over the last 100 years nearly doubles the home value every 10 years. That statistic came right from the National Association of Realtors. Think about this for a moment. If you buy a 515K dollar house and you put 100K down in ten years you will have a a million dollar home. The equity position at that time will be in the 600K plus range depending on the loan choice. Thank you again for tuning in.

Lending Update

Here is the scoop on lending in California:100% can be obtained through VA or CalHfa primarily at this point. Anything else that states there is 100% financing is simply not aware of the upcoming changes. There are pockets like lake county that have stayed out of the declining market that is effecting 100% financing. The day of the 80/20 combo is over so each of these options require mortgage insurance. Mortgage Insurance has another set of guidelines. They do not want to issue MI if the borrower does not have a minimum 620 Fico score with three scores and they use the lower of two with only two scores for LTV's above 90%. Under 90% The parameters for fico are still the same. MGIC requires a 45% DTI and most other MI companies are the same. So even if a borrower qualifies for a loan up to 95% in some cases or 97% in the case of FHA they will not qualify for MI. If they do get approved for MI the rates are so high they no longer qualify for the loan. It is a serious catch 22. Second home nearly the same lower LTV's and second home requirements. On Investment the guidelines for lending are very strict currently. You are unlikely to get cash out on an investment property over 60 LTV and if it is stated may even be hard to get that. You have to have 680 Fico unless you go Hard Money. There are some subprime lenders coming back to play. They require some form of income documentation but they are flexible on the types. They use bank statements, 75% of 1099's, mixtures of income etc. For MI on purchase and rate and term refinance you have to go Full documentation. FHA always require MI even if you are more than 20% down, CalHfa and Va require a DU approval which is the Fannie Mae underwriting engine. Fannie Mae is extremely credit driven. Essentially you have to have very clean credit.