Here is a letter I wrote recently to someone who kept sending me stuff about how alwful everything was and how great the Republicans are -
My response was a little heavy but here it is -
In response to your continued claims about Al Gore's house, I thought you might want to see where the numbers came from and what the actual numbers are. Explore some of the links - especially Keith Oberman. The figures were put out by a small obscure conservative group right after Al Gore's movie was released. The local utility says they were never contacted and the figures are totally bogus.
http://thelede.blogs.nytimes.com/2007/02/28/an-inconveniently-easy-headline-gores-electric-bills-spark-debate/?emc=eta1
And why is our budget in such a mess? Think about what he inherited.
In just eight years Bush took us from a surplus to a massive deficit. First he argued for a tax cut to return the surplus and then he argued for more tax cuts to stimulate the economy as the economy worsened. Then he stretched the truth to start a war that everyone in the world argued forcibly against. 10 billion dollars has been flowing out the window every month. Next he tortured prisoners with bogus legal claims that he was above the law while setting up a phony court system because he knew many of the prisoners were innocent and didn't want them to be allowed to defend themselves. I pity our poor soldiers who are now imprisoned in a foreign country - the Geneva Conventions are meaningless.
And if we had not been denying the existence of global warming for 8 years, we might not be behind the rest of the world and we might have profitable industries building good environmental products.
And how about health care? We spend the most of any country in the world but many of our statistics like infant mortality are behind those of some third world countries. We have a bomb about to explode with our aging population and we need to address that now. Bush set the policy of forbidding Medicare to negotiate lower drug prices. How absurd is that. Options need to be explored that will work best with our private systems to produce affordable health care.
Hopefully you will never get Parkinson's disease or have paralysis because stem cell research has been put back ten years. What do you say to those who are suffering today?
Oh another thing - the SEC, Federal Regulators and the Credit Agencies were asleep at the wheel to allow Wall Street to pursue sub prime mortgages and slice and dice them with credit derivatives. The whole financial industry was on a binge with no regulation.
And our schools are a joke. The rest of the world is overtaking us while we are arguing for creationism.
Bob, stop sending me your emails.
You might be interested to know that I have been a moderate Republican for most of my life. I like the Republican values but I see a party that has lost its moral compass.
David Field
Monday, March 30, 2009
Friday, February 27, 2009
March 2009 Field Notes on the Mortgage Market
March 2009
Ring, ring, ring. Hello, this is David Field with Carolina Home Mortgage.
Hi, I want to refinance my home and I have been hearing about all these low rates but no one has the 4.5% rate which I thought was being put in place.
These are uncharted waters and nothing follows common logic. We have all been hearing how the government was going to do this and that and how the markets were going to improve, but unfortunately we seem to be going in the opposite direction. The government does want to see lower rates but the lenders control the pricing and they are not in any mood to really push rates lower.
The stock market and the bond market have had a classic inverse relationship over the years. As the stock market has weakened with poor economic numbers, typically people sell stocks and put the money into bonds. This drives the price of bonds up and interest rates down. The mortgage industry was one of the few industries to cheer poor economic numbers because mortgage rates would go down. Since the mortgage meltdown, though, this relationship has been turned on its head. Now, often the bond market and stock market go down together.
Buyers of mortgage bonds have assigned them a huge risk factor which means higher rates. They use to sell at about the same rate as US treasury bonds and today US treasuries are selling at practically 0%. Investors are skittish about mortgage bonds and rightfully so and are demanding a higher rate of interest.
On the other hand the government is in the marketplace trying to stabilize it and bring mortgge rates down by buying mortgage bonds themselves. When they first started, rates plunged as everyone cheered this strategy and it looked really good on paper. The problem is that the devil is in the details. They bought the wrong bonds. They bought the higher rate ones rather than the lower rate ones so the pricing on the lower rates has not improved as much as everyone had hoped.
Compounding the problem has been the massive stimulus package. While we hope that it will spur the economy, there have been unitended consequences in the mortgage industry. As these huge amounts of debt are being dumped onto the market, buyers have to be found and these are the same buyers that the mortgage industry is courting. With so much supply of bonds hitting the market at the same time, mortgages take a back seat and rates are pushed upwards.
Now the lenders have not helped the situation much themselves either. When rates plummeted during December, the flood gates of refinances were opened. The problem is that the industry has been decimated and the few remaining lenders had drastically cut back their staffs. They were quickly overwhelmed. Their knee jerk reaction was to raise rates to slow the flow down and increase their profit on each loan.
Adding to the lenders' uncertainty are various cramdown proposals being circulated in Washington. These would help borrowers by lowering their mortgage balances. The problem is who is going to pay for this? This is another added risk factor which will do nothing but increase rates.
So what you should you do if you want to refinance your home?
My advice is if it makes financial sense and fits with your payment and equity objectives, then do it. You can wait and rates may go lower, but there is absolutely no guarantee and getting almost the lowest rate and payment in history is certainly better than being stuck in your current loan for its remaining term.
There is a silver lining in these dark clouds and it is your mortgage. If you are interested in a free analysis, inquire today and let's take a look at all the options. david@loansnc.com or 919-869-8204.
Ring, ring, ring. Hello, this is David Field with Carolina Home Mortgage.
Hi, I want to refinance my home and I have been hearing about all these low rates but no one has the 4.5% rate which I thought was being put in place.
These are uncharted waters and nothing follows common logic. We have all been hearing how the government was going to do this and that and how the markets were going to improve, but unfortunately we seem to be going in the opposite direction. The government does want to see lower rates but the lenders control the pricing and they are not in any mood to really push rates lower.
The stock market and the bond market have had a classic inverse relationship over the years. As the stock market has weakened with poor economic numbers, typically people sell stocks and put the money into bonds. This drives the price of bonds up and interest rates down. The mortgage industry was one of the few industries to cheer poor economic numbers because mortgage rates would go down. Since the mortgage meltdown, though, this relationship has been turned on its head. Now, often the bond market and stock market go down together.
Buyers of mortgage bonds have assigned them a huge risk factor which means higher rates. They use to sell at about the same rate as US treasury bonds and today US treasuries are selling at practically 0%. Investors are skittish about mortgage bonds and rightfully so and are demanding a higher rate of interest.
On the other hand the government is in the marketplace trying to stabilize it and bring mortgge rates down by buying mortgage bonds themselves. When they first started, rates plunged as everyone cheered this strategy and it looked really good on paper. The problem is that the devil is in the details. They bought the wrong bonds. They bought the higher rate ones rather than the lower rate ones so the pricing on the lower rates has not improved as much as everyone had hoped.
Compounding the problem has been the massive stimulus package. While we hope that it will spur the economy, there have been unitended consequences in the mortgage industry. As these huge amounts of debt are being dumped onto the market, buyers have to be found and these are the same buyers that the mortgage industry is courting. With so much supply of bonds hitting the market at the same time, mortgages take a back seat and rates are pushed upwards.
Now the lenders have not helped the situation much themselves either. When rates plummeted during December, the flood gates of refinances were opened. The problem is that the industry has been decimated and the few remaining lenders had drastically cut back their staffs. They were quickly overwhelmed. Their knee jerk reaction was to raise rates to slow the flow down and increase their profit on each loan.
Adding to the lenders' uncertainty are various cramdown proposals being circulated in Washington. These would help borrowers by lowering their mortgage balances. The problem is who is going to pay for this? This is another added risk factor which will do nothing but increase rates.
So what you should you do if you want to refinance your home?
My advice is if it makes financial sense and fits with your payment and equity objectives, then do it. You can wait and rates may go lower, but there is absolutely no guarantee and getting almost the lowest rate and payment in history is certainly better than being stuck in your current loan for its remaining term.
There is a silver lining in these dark clouds and it is your mortgage. If you are interested in a free analysis, inquire today and let's take a look at all the options. david@loansnc.com or 919-869-8204.
Monday, June 16, 2008
Comparing Closing Costs
I have often seen other closing costs estimates which vary considerably for the same loan program. The irony is that the more expensive estimates may be cheaper because they may be more encompassing and present realistic costs. How do you compare? Here is an article which I wrote for the Chapel Hill News recently.
Comparing Closing Costs
Ring, ring, ring. Hi, I am having difficulty comparing closing costs from different lenders. The numbers vary considerably and I am not sure what to believe. How do I make a valid comparison?
You are not alone in having difficulty comparing closing costs as Good Faith Estimates can be difficult to understand. In fact recent studies have found that consumer confusion leads to higher closing costs. On the other hand, some estimates which are higher may be more accurate as they encompass all costs and provide realistic estimates. Adding to the confusion are different disclosure rules between banks and brokers.
At this point many people start to roll their eyes and they say just tell me how much to write the check for. The good news is that there is a way to compare costs between programs so you can make an informed choice.
Rather than focusing on individual fees in the beginning, let’s look at where the fees are going. The best way to compare costs is to group them into three separate categories of where they go. There are bank / broker fees, 3rd party fees, and prepaids and escrows for interest, taxes and insurance.
Let’s work backwards and start with the prepaids and escrows. These monies are going to pay the initial interest on the loan during the first month and put enough in a reserve account so taxes and home owner insurance can be paid when due. At the outset no one knows exactly what these numbers will be because they are dependent upon the property’s taxes, insurance costs, and the day of the month of closing. None of these expenses has anything to do with the loan. These charges will be what they are so this section must not be used for any comparison. If the figures are very different, it would be a good idea to ask how they were calculated.
Third party fees should be reviewed next. These are fairly straight forward and should be within the same range irregardless of the lender. As an example, attorney, title, appraisal, survey, inspection etc. fees represent the costs of the services and do not vary by lender. The only exception would be if the lender or seller paid them in-full or in-part. These fees are for outside services and their costs will be what they are. In many cases, the borrower will even be picking the service provider.
The last grouping of broker / banker fees is where there could likely be some big differences. Origination, points, broker, lender, application, credit, commitment are some of the more common fees which are encountered. The best approach is to add all these fees up and discuss them with your loan representative so you can understand and compare them. Since you have already taken out the 3rd party fees and prepaids and escrows, comparing the real costs of the loan has become much easier.
Many borrowers are confused when they get to the line which contains the yield spread premium (YSP). This is paid to the broker by the lender typically to compensate the broker for originating and processing the loan. This is not an added expense for the borrower as the lender pays it. Banks do not have to disclose this fee since they are originating, processing and funding the loan themselves. They are, of course, still earning it.
Is this fee a concern? It should only be an issue if your interest rate is high. As interest rates rise, this fee also rises. The bottom line is to get the best competitive rate with low closing costs then the fee paid to the broker will be reasonable and in-line with what the banks are earning and not disclosing.
Breaking closing costs up into these three separate categories makes them more understandable and manageable for comparison purposes. Any discrepancies or omissions can easily be spotted so true loan costs can easily be compared.
Good luck with your financing choices as traditional good solid loan programs remain at still very competitive rates.
Comparing Closing Costs
Ring, ring, ring. Hi, I am having difficulty comparing closing costs from different lenders. The numbers vary considerably and I am not sure what to believe. How do I make a valid comparison?
You are not alone in having difficulty comparing closing costs as Good Faith Estimates can be difficult to understand. In fact recent studies have found that consumer confusion leads to higher closing costs. On the other hand, some estimates which are higher may be more accurate as they encompass all costs and provide realistic estimates. Adding to the confusion are different disclosure rules between banks and brokers.
At this point many people start to roll their eyes and they say just tell me how much to write the check for. The good news is that there is a way to compare costs between programs so you can make an informed choice.
Rather than focusing on individual fees in the beginning, let’s look at where the fees are going. The best way to compare costs is to group them into three separate categories of where they go. There are bank / broker fees, 3rd party fees, and prepaids and escrows for interest, taxes and insurance.
Let’s work backwards and start with the prepaids and escrows. These monies are going to pay the initial interest on the loan during the first month and put enough in a reserve account so taxes and home owner insurance can be paid when due. At the outset no one knows exactly what these numbers will be because they are dependent upon the property’s taxes, insurance costs, and the day of the month of closing. None of these expenses has anything to do with the loan. These charges will be what they are so this section must not be used for any comparison. If the figures are very different, it would be a good idea to ask how they were calculated.
Third party fees should be reviewed next. These are fairly straight forward and should be within the same range irregardless of the lender. As an example, attorney, title, appraisal, survey, inspection etc. fees represent the costs of the services and do not vary by lender. The only exception would be if the lender or seller paid them in-full or in-part. These fees are for outside services and their costs will be what they are. In many cases, the borrower will even be picking the service provider.
The last grouping of broker / banker fees is where there could likely be some big differences. Origination, points, broker, lender, application, credit, commitment are some of the more common fees which are encountered. The best approach is to add all these fees up and discuss them with your loan representative so you can understand and compare them. Since you have already taken out the 3rd party fees and prepaids and escrows, comparing the real costs of the loan has become much easier.
Many borrowers are confused when they get to the line which contains the yield spread premium (YSP). This is paid to the broker by the lender typically to compensate the broker for originating and processing the loan. This is not an added expense for the borrower as the lender pays it. Banks do not have to disclose this fee since they are originating, processing and funding the loan themselves. They are, of course, still earning it.
Is this fee a concern? It should only be an issue if your interest rate is high. As interest rates rise, this fee also rises. The bottom line is to get the best competitive rate with low closing costs then the fee paid to the broker will be reasonable and in-line with what the banks are earning and not disclosing.
Breaking closing costs up into these three separate categories makes them more understandable and manageable for comparison purposes. Any discrepancies or omissions can easily be spotted so true loan costs can easily be compared.
Good luck with your financing choices as traditional good solid loan programs remain at still very competitive rates.
Monday, December 3, 2007
New NC Contracts will affect time deadlines
Ring, ring, ring. Hi, I have heard that many changes have taken place with the North Carolina Offer to Purhcase & Contract Form. I am being told that there are more steps and time deadlines to be met.
You are right. A lot of work has been put into the new form to address issues that have routinely been coming up. As of November 1st, all offers must be written on the new form. The North Carolina Real Estate Commission states, “Many of the changes in the new contract relate to setting deadlines within which the seller and buyer must respond to each other and specifying the consequences of failure to act within the stated time frame.” These changes are clearly evident with respect to buyers obtaining their financing. Paragraph 5 in the contract has been greatly expanded with new obligations and rights.
Over the years contracts have favored either the seller or the buyer. For the past couple of years the buyer has been favored at the expense of the seller. Financing requirements as outlined in the contract were loose and the buyer could claim unavailability of financing almost to the last minute and still get their earnest deposit back. This would put the seller at a particular disadvantage since they would have had their property off the market and might have missed a favorable marketing window. The pendulum has now started to swing back towards the seller. Paragraph 5 as rewritten seeks to strike a balance by setting more time deadlines when certain parts of the financing must be completed.
The new contract emphasizes TIME BEING OF THE ESSENCE by putting it in bold, capitalized, and italicized letters. The EFFECTIVE DATE can be viewed as the starting line for the run to the closing table. This is the date of the last signature and acknowledgment by everyone.
There are now two dates which must be completed in the financing section of the contract. The first is that loan application must be made and the second is loan approval must be received so many days from the effective date. The new contract stresses the importance of the buyer making loan application and getting approval within a timely period.
These dates must be realistic and reasonable and made in consultation with your lender. Fortunately the new contract states “WARNING: Buyer is advised to consult with Buyer’s lender to assure that the number of days allowed for the Buyer to obtain the Loan is sufficient to allow Buyer’s lender time to take all reasonable steps necessary to provide reliable loan approval.” This is excellent advice. If too short a time is allowed, the seller can keep the buyer’s earnest deposit.
Underwriting has taken a step backwards as a result of the mortgage meltdown and now, more than ever, is requiring strict adherence to all the program guidelines. The problem is that no one knows for certain what the guidelines are since they are changing day by day. In fact lender representatives often say to ignore the posted guidelines as they may not be current. I tell my customers that during this period common sense and logic don’t apply. It’s not worth the time, effort and energy in being aggravated. The focus has to be on what will be approved today and not what would have been approved yesterday.
A buyer today must be more prepared than ever before. Not only must they go to their lender well in advance, but they must have every piece of documentation ready to go. This includes documentation that has not even been requested but might be requested. You have to ask yourself is the documentation which you have thorough and complete and will it trigger any follow-up questions. The good news is that if you get everything out on the table in the beginning, your lender will be able to select a program that best fits your qualifications and financial goals. In fact there are still many programs where income and assets can be stated or not documented at all to simplify and ease the documentation burdens. The loan has to make sense, though. Going down the right path in the beginning is a much better choice than having to change direction in mid-stream, especially when the contract has a loan approval date looming.
The mortgage market is improving with jumbo loans returning to the market place with better pricing and many other types of loans being more available. Congress is working on revamping FHA but what form it will take is still unclear. Even though many lenders have shut their doors and others have cut staff and offices, good mortgages are being written which are fairer and have more reasonable terms. Just remember to see your lender well-in-advance, put realistic time frames in the contract and move quickly on any requests and you should be on your way to a smooth and easy closing. Happy Financing!
David Field creates Sound Mortgage Solutions with Carolina Home Mortgage. He can be reached at 919-869-8204 or david@carolinahomemortgage.com
Sunday, October 28, 2007
Aggregate Adjustment at Closing - Is it real Money?
“Ring, ring. Hi, I just looked at my settlement statement, and I am $900 richer. The only thing it says is ‘Aggregate Adjustment $900.’ While I am thrilled to have $900 more in my pocket, what happened and where did it come from?”
The first response is to say “Wow,” that’s fantastic and feel as though you have won the lottery. But is this really extra money appearing in your pocket? There has been so much press recently about closing costs and extra charges appearing out of nowhere. As a result, buyers are skeptical and distrustful of any changes, no matter how valid they may be.
The aggregate adjustment is a perfect case in point. Remember that a settlement statement is composed of closing costs, pre-paids and escrows. The aggregate adjustment relates to escrows and is more of a timing issue than a sudden windfall. A buyer will have to pay now or later.
The aggregate adjustment grew out of a ruling to limit the amount of escrow monies that lenders were allowed to hold. Lenders had been criticized for withholding excessive amounts. The rules now state that no more than a two months reserve can be held at any one time. These are the rules used to prepare the good-faith estimate at the time of application.
A loan application is processed using these estimates and the closing documents are sent to the attorney’s office, where all the final numbers are put together in the settlement statement. The attorney must fax this statement to the lender for approval.
At this point several interesting things happen. The lender does an escrow analysis projection of receipts and disbursements for the next 12 months. If in any month the projected balance is greater than the two-month reserve permitted, these monies must be credited back to the borrower at closing. The lender instructs the attorney to issue an aggregate adjustment.
Fortunately, this adjustment is always a credit to the bottom line so there is never a nasty surprise. Sometimes the buyer hits a home run and it is more than a thousand dollars or sometimes it is a strike out and nothing. How much the adjustment is just depends upon the timing of closing, the escrow receipts and payments.
The question that always is asked is why this is done at the last minute. And why can’t a more accurate estimate be done upfront? It’s a good question. The answer that the lenders give is that the formula is too complex for a straightforward calculation and will vary considerably based upon many factors. If any one item changes during loan processing, the adjustment will change accordingly. Lenders want to calculate this number only once at the last minute when they can be assured that there will be no further changes to any of the variables. Furthermore they would rather lower the bottom line at closing than come back and say, "Oops, that will be a thousand more."
The good news is that these are not costs per se. The lender is maintaining a reserve account to pay for taxes and insurance. The aggregate adjustment is just an adjustment to how much is collected upfront to be deposited into this reserve account. It can be a welcome surprise.
Speaking of good news, the sub prime mortgage mess is resulting in lower rates. As the economy appears to be cooling with the job losses in August, we are seeing better rates across the board, especially for fixed rate loans under $417,000. Some guidelines are a little tighter but there are still many great programs for sound mortgage solutions! Wishing you good luck with your buying or refinancing decisions!
David Field is a home mortgage loan consultant with Carolina Home Mortgage. He can be reached at 919-869-8204 or david@carolinahomemortgage.com.
Saturday, March 10, 2007
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