Talkin Waukesha Real Estate Weblog

I met with a mortgage banker yesterday. It’s always an interesting scene when a couple of veteran real estate professionals get together. There is a mix of sympathy, empathy, trepidation (which includes head shaking), conjecture and resolve. If I could summarize these type of discussions, I would use two words….. “who knows”!!

In the mortgage industry, there are a few “Thank You, Lord” prayers going up because of a recent boom in refinances. I have heard the chorus from appraisers as well. What I found surprising, though, were the amount of FHA loans being done. In some cases 7 or 8 out of every 10 loans are being funded by FHA. Many people have heard of FHA before. Most would say, it’s some kind of government backed loan. In fact, the history is rather interesting.

Believe it or not, there have been other periods in the history of this country when the government decided to step into what were historically “private sector industries” to push things along. The year is 1934 and I shouldn’t have to tell you about the economic state of the country at that time. The Federal Housing Authority was formed. They ramped up their services again in the 1940’s to help returning war veterans finance home purchases.

In the 1950s, 1960s and 1970s, the FHA financed privately-owned apartments for lower income, elderly and handicapped segments of the population. In 1965 the Federal Housing Administration was placed under the purview of the Department of Housing and Urban Development (HUD). Many will remember what happened in the late 1970s…. interest rates soared and property values started to fall. FHA was instrumental in helping to steady the market by making emergency funding available.

So in the grand scheme of cycling economics, here we are again with a mortgage market that has been rebuked and restricted because of it’s wild ways. We have a real estate market that enjoyed the ride, but is now lost and confused. And, once again, in steps the government. THEY have the best financial deal in town. Their debt to income ratios are the most favorable, they require the lowest downpayment and their interest rates are good. If you don’t mind waiting six to eight weeks to close (on a purchase OR a refinance), FHA is a great way to go. Conventional lenders are still in the corner licking their wounds and are being very discriminating about who they will finance.

With all the talk about $Billion$, you may wonder how you can benefit, even if it’s only a few $thousand $. Spend some time on their website – http://www.hud.gov/ . It’s worth the visit

I’ve seen enough foreclosures to last a lifetime. What a sad thing. Some of the homes I’ve seen were dearly loved. Not just a house, it was a home. There is a thoughtful décor in each room, neatly planted landscaping and maybe a child’s writing on the bedroom door “Spencer’s Room”. I imagine this family just fell on hard times and couldn’t hold onto their dream of owning a home any longer. These homes are in all neighborhoods, in all price ranges. The vacant houses with orange stickers on the doors and plumbing fixtures serve as reminders that they once belonged to people who started a journey they couldn’t finish.

I know a handful of people who are facing foreclosure. It’s a wretched thing. The pressure is crushing. For most people, the only way to deal with it is to simply become numb to what is happening to their lives. They can’t deal with the shame and the devastation, so they don’t. They just stop caring after a while because it’s too hard to try and claw their way out. It’s too frustrating and exhausting to call the lender and try to work something out. These financial machines can be ridiculous. A person who stops making their house payment because they hit a financial bump calls the lender and asks for a forbearance (tack the delinquent amount on the END of the mortgage) and the lender has this brilliant formula. Sure, send us two months house payments AND an extra $2,500 to boot and we’ll consider that. Huh? Apparently they don’t GET what it means to come to a mutually beneficial agreement. Hello – if someone stops making their house payment, it usually means they don’t have thousands of extra dollars sitting around. Maybe the banks WANT the houses back!

I don’t know for sure, but I suspect that of the $830 BILLION dollars being doled out of Washington, very little of it will help Spencer’s mom and dad, or your neighbor, or your friend, or your child, or anyone else who stands on the precipice of home ownership gone a-muck. Some of the proposals to give low interest rates and thousands of dollars to home buyers are just plain stupid. What got us into this mess to begin with? Maybe it was too easy to buy more than we should have. The problem is deep and wide and complex. There is no easy answer. This much I do know: just like any other dream that explodes, being foreclosed on is tough. People going through it need support and compassion.

Last month, for about five minutes, rates for 30 year fixed mortgages dipped into the 4.xx % range. I wasn’t one of the lucky ones who got to my lender in time to refinance, but perhaps you were. The last time we refinanced, I remember a very unsettling flurry of activity that followed. We got dozens of letter from other finance companies telling us to refinance with them! I had to ask: how do they know I’m in the midst of refinancing….. Who told them??

Well, just when they’re passing all kinds of restrictive “privacy” acts on one hand – they’re giving away your firstborn with the other. As it turns out, the process is something like this: I go to a lender and start the refinance process. My lender, as part of that process, pulls a credit report. Now, there are actually THREE main credit bureaus and a prudent lender will pull your score from all three because there is some degree of variance. Here’s the scary part. Those credit bureaus RELEASE to anyone who pays them, the fact that a lender just pulled your credit report. If another lender is buying the list of people whose credit reports just got pulled – YOU get their junk mail! It was very unsettling to me to realize that my private transactions are being sold by the very people who hold my deepest financial secrets. And, there’s not much one can do to stop it!

Just so you don’t panic (like I did) and freeze your credit, report potential fraud and call an attorney, rest assured, ALL they can sell is the “who”. They don’t give your social security numbers or any personal information on your report. The balance of the mortgage you’re refinancing is already public record (who knew?!), so the letters are really more of an annoyance than anything else. If you want to see what your credit report looks like at all three agencies, you are legally entitled to a free copy of your report. The credit reporting agencies are: Experian, Equifax and TransUnion. The ONLY free website that has NO OTHER STRINGS attached to get your free credit report (limited to one per year, per agency) is www.AnnualCreditReport.Com . The others you see advertised give you free credit reports, but want something else in return.

It baffles me, how much information is “out there” if someone knows where to look and how to get it. Here’s another one: If you’re shopping around for home owners insurance, you won’t be able conveniently forget past claims with your new insurance agent. That industry has a “Comprehensive Loss Underwriting Exchange” information database that lists five years worth of claims reported, how many resulted in loss payments and how much each loss cost. You can order your CLUE Report for yourself: www.Choicetrust.Com . You may feel like you’re paranoid checking all this public information about yourself, but hey – it’s free….and then you’ll have a C.L.U.E. !