Every time we sell a property, whether we are the listing agent or the buyer's agent, at the end of the transaction, we sent out a survey with a return envelope and ask our clients to be brutally honest!
As these surveys come in during the year, we read and discuss each one in an effort to continually improve our service to our clients. If you are an agent and you do not do this - YOU SHOULD. If you are a buyer or seller, you might find the questions interesting - they should provide the basis of the type of questions you would ask an agent you are considering using or the type of questions you can ask the references they provide! So here we go.....
The first group of questions ask the respondent to answer with a checkmark under "Excellent", "Very Good", "Good", or "Fair" -
*Ease of getting an appointment
*Timeliness of return phone calls
*Helpfulness to your needs
*Courtesy and friendliness
*Knowledge of real estate
*Overall performance
The second group of questions are merely yes or no answers:
*Do you feel we adequately explained the real estate process and what you could expect during each phase of the process?
*Do you feel we really cared about you and your real estate needs?
*Do you feel we earned our commission?
*Would you use our group to buy or sell a home again?
*Would you feel comfortable recommending our services to your friends and family?
*Can we use you as a reference?
*Are you interested in investment property now or in the future?
We have one rating question that asks "in comparison to other realtors you have worked with, the quality of our group's real estate service is:
Substantially Lower
Moderately Lower
About the same
Moderately higher
Substantially higher
Excellent
We then ask questions with several blank lines following for clients to write comments:
*Why did you choose to work with our group?
*When you think about yoru real estate experience, what stands out most in your mind?
*What could we do to improve our service and provide a more positive real estate experience?
*We like to acknowledge our tem members for a job well done. Please let us know if any member of our team was especially helpful, and how they were helpful.
*Who do you know who could benefit from our service?
So.... how did WE fare this year?
100% of our respondents felt we earned our commission!!!!!
That's really what we strive for - no matter how anyone may answer any of the other questions, if your clients feel you have earned your commission you're doing a great job!
100% of our respondents felt we adequately explained the process during each phase!
100% of our respondents said they would feel comfortable recommending our services to their friends and family!
99% of our respondents said they would use us to buy or sell a home again
99% of our respondents said they felt we really cared about them and their needs
87% of our respondents rated our overall performance at the very highest level and not one survey came back marked less than very good! (just one notch lower).
So, we're doing a great job in a difficult market - survey your clients to keep yourself and your team at the top of their game and for you buyers and sellers, don't feel shy about asking these questions of current clients of any agent you are interviewing!
Thats it for today, as always:
BE INFORMED and CHECK BACK HERE OFTEN
Thursday, January 31, 2008
Wednesday, January 30, 2008
Rate Drops - Mortgages Rise
On speaking today to several mortgage lenders, the 30 year fixed rate mortgage actually went up today after the Fed announced another 50 point rate cut. As I had previously explained, although the average listener hears an interest rate drop and automatically assumes that mortgage rates will fall as well. As an educated consumer, it is important that you understand how these changes might affect you or a client of yours. The following is a great explanation of how this works by Amy Swaney, past president of the Arizona Mortgage Lenders Association.
Many consumers have misconceptions about the FED, and its affect on the long term interest rates. I thought I would give you a crash-course on the truth behind the Fed’s meeting and the affect it has on long-term rates. This may be a refresher course for many, but always good information to review.
The Federal Open Market Committee (FOMC) is a twelve-member committee made up of the seven members of the Board of Governors and five Federal Reserve Bank presidents. It meets eight times per year to determine the near-term direction of monetary policy, such as setting guidelines for the purchase and sale of government securities and setting policy relating to System operations in the foreign exchange markets. The Fed determines interest rate policy at FOMC meetings. The interest rate set by the Fed, the federal funds rate, is the lending rate banks charge each other for the use of overnight funds and it serves as a benchmark for all other rates. A change in the fed funds rate also changes the dynamics of competition for investor dollars: when bonds yield 10 percent, they will attract more money away from stocks then when they only yield 5 percent. Again, the level of interest rates affects the economy for a higher rate tend to slow activity; and lower rates stimulate activity, a ripple effect that expands into all sectors of the economy.
These changes in monetary policy are now announced immediately after FOMC meetings so many assume that a drop in the discount rate or the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility–the discount window or the Fed Funds Rate, will automatically translate into a corollary drop in the long term rate. This is inaccurate.
Is a Fed rate cut really good news for long term mortgage rates? The facts may be surprising. The Fed can only control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years, a rate that is set by the Fed can change from one day to another.
How does a change in the monetary policy directly affect consumers? Consumers will see fairly immediate changes in short-term or consumer type loans such as credit cards and Home Equity Line of Credits (HELOCs) as the rate has ties to the Prime Rate. But then how are long-term mortgage rates based?
As it turns out the answer is mortgage-backed bonds known as Mortgage Backed Securities (MBS). Bonds issued by Fannie Mae and Freddie Mac (MBS) and the trading performance of those bonds will determine the direction of mortgage rates. Finding the catalyst that causes mortgage bonds to move will give you the keys to finding out what makes mortgage rates rise or fall.
That catalyst could be any type of economic, political or global data. Something to consider is that as bond prices rise, interest rates fall. As bond prices fall, interest rates rise including large movements in the Stock Market. This concept is simple if you think in terms of where money comes from. Investors have basically 2 places to put their money; in the stock market or the bond market. Since money is a finite resource, if people are buying stocks, they typically have to pull that money out of the bond market and vice versa, thus they typically move opposite of each other.
As the Nasdaq (Bond Based) moves higher, bond prices move lower causing interest rates to rise. As the Nasdaq declines, mortgage bonds benefit, causing mortgage rates to fall. Additionally, and unlike common opinion, Fed rate cuts have had virtually no direct effect on mortgage rates. In actuality, it appears that since Fed rate cuts act to stimulate the Nasdaq, they have a negative effect on mortgage rates.
The reality is that market participants weeks before the meeting announcement speculate about the possibility of an interest rate change at these meetings, and if the outcome is different from expectations, that is truly the only time the rate hike or cut will have a direct impact on the markets, but it usually tends to be short-term and volatility based.
Hope this was informative and helpful.
As Always BE INFORMED and CHECK BACK HERE OFTEN
Many consumers have misconceptions about the FED, and its affect on the long term interest rates. I thought I would give you a crash-course on the truth behind the Fed’s meeting and the affect it has on long-term rates. This may be a refresher course for many, but always good information to review.
The Federal Open Market Committee (FOMC) is a twelve-member committee made up of the seven members of the Board of Governors and five Federal Reserve Bank presidents. It meets eight times per year to determine the near-term direction of monetary policy, such as setting guidelines for the purchase and sale of government securities and setting policy relating to System operations in the foreign exchange markets. The Fed determines interest rate policy at FOMC meetings. The interest rate set by the Fed, the federal funds rate, is the lending rate banks charge each other for the use of overnight funds and it serves as a benchmark for all other rates. A change in the fed funds rate also changes the dynamics of competition for investor dollars: when bonds yield 10 percent, they will attract more money away from stocks then when they only yield 5 percent. Again, the level of interest rates affects the economy for a higher rate tend to slow activity; and lower rates stimulate activity, a ripple effect that expands into all sectors of the economy.
These changes in monetary policy are now announced immediately after FOMC meetings so many assume that a drop in the discount rate or the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility–the discount window or the Fed Funds Rate, will automatically translate into a corollary drop in the long term rate. This is inaccurate.
Is a Fed rate cut really good news for long term mortgage rates? The facts may be surprising. The Fed can only control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years, a rate that is set by the Fed can change from one day to another.
How does a change in the monetary policy directly affect consumers? Consumers will see fairly immediate changes in short-term or consumer type loans such as credit cards and Home Equity Line of Credits (HELOCs) as the rate has ties to the Prime Rate. But then how are long-term mortgage rates based?
As it turns out the answer is mortgage-backed bonds known as Mortgage Backed Securities (MBS). Bonds issued by Fannie Mae and Freddie Mac (MBS) and the trading performance of those bonds will determine the direction of mortgage rates. Finding the catalyst that causes mortgage bonds to move will give you the keys to finding out what makes mortgage rates rise or fall.
That catalyst could be any type of economic, political or global data. Something to consider is that as bond prices rise, interest rates fall. As bond prices fall, interest rates rise including large movements in the Stock Market. This concept is simple if you think in terms of where money comes from. Investors have basically 2 places to put their money; in the stock market or the bond market. Since money is a finite resource, if people are buying stocks, they typically have to pull that money out of the bond market and vice versa, thus they typically move opposite of each other.
As the Nasdaq (Bond Based) moves higher, bond prices move lower causing interest rates to rise. As the Nasdaq declines, mortgage bonds benefit, causing mortgage rates to fall. Additionally, and unlike common opinion, Fed rate cuts have had virtually no direct effect on mortgage rates. In actuality, it appears that since Fed rate cuts act to stimulate the Nasdaq, they have a negative effect on mortgage rates.
The reality is that market participants weeks before the meeting announcement speculate about the possibility of an interest rate change at these meetings, and if the outcome is different from expectations, that is truly the only time the rate hike or cut will have a direct impact on the markets, but it usually tends to be short-term and volatility based.
Hope this was informative and helpful.
As Always BE INFORMED and CHECK BACK HERE OFTEN
Tuesday, January 29, 2008
You can't win them all - buyers be ready to move!
Unfortunately, we did not get the house our buyers were bidding on even though we were willing to pay $77,500 over the asking price - an almost 10% premium! There wound up being a total of NINE contracts offered on the property that had been on the market only three days! Although our buyer is disappointed, he understands that we did everything within reason to win the contract and to pay and offer more might not have been in his best interest. So be it. We'll keep looking for another gem in the rough.
After doing yet another evaluation of the property, it appears that the house actually sold for slightly more than it's true value. Having said that, it's true value is really what someone is willing to pay for it so in some regards that IS it's true value. It was very difficult to justify that price when doing comparables, but again, pricing is always somewhat suggestive. On speaking to the listing agent who we happen to know quite well, I asked how they came up with the selling number and her answer was that quite frankly she was somewhat affraid of all the negative news she had been hearing and it was important for the seller to realize a quick sale. It wasn't a brilliant marketing move, it was an effort to realize a quick sale on a good property. Yes, the property was priced slightly under market for the size, condition and neighborhhood, but not THAT much under market - lucky seller!
Again, pricing is everything - but you can't predict the response either - if you price a property on the low end of the scale hoping for a quick sale (and maybe even a bidding war as we had here), you also need to be prepared to accept the low price if only one offer comes in! A tough call on a seller's part.
So in just two days we have had multiple contracts on several properties and we have seen quite an increase in showings on our listings - and it's only January - hopefully the brisk spring market will prove the "nay-sayers" wrong.
As always BE INFORMED and CHECK BACK HERE OFTEN
After doing yet another evaluation of the property, it appears that the house actually sold for slightly more than it's true value. Having said that, it's true value is really what someone is willing to pay for it so in some regards that IS it's true value. It was very difficult to justify that price when doing comparables, but again, pricing is always somewhat suggestive. On speaking to the listing agent who we happen to know quite well, I asked how they came up with the selling number and her answer was that quite frankly she was somewhat affraid of all the negative news she had been hearing and it was important for the seller to realize a quick sale. It wasn't a brilliant marketing move, it was an effort to realize a quick sale on a good property. Yes, the property was priced slightly under market for the size, condition and neighborhhood, but not THAT much under market - lucky seller!
Again, pricing is everything - but you can't predict the response either - if you price a property on the low end of the scale hoping for a quick sale (and maybe even a bidding war as we had here), you also need to be prepared to accept the low price if only one offer comes in! A tough call on a seller's part.
So in just two days we have had multiple contracts on several properties and we have seen quite an increase in showings on our listings - and it's only January - hopefully the brisk spring market will prove the "nay-sayers" wrong.
As always BE INFORMED and CHECK BACK HERE OFTEN
Monday, January 28, 2008
What a Day - Weekend Madness Continues
Well, as promised, the results are in..... we received a second contract on the home before signing off on the contract we had been negotiating since Thursday! The second contract was far from ideal but afforded us the opportunity to let both offering agents know they had competition and that they needed to come up with their "best and final" offer. The result was that the net to the seller increased by almost $18,000 and closing will happen quickly. The first contract was the eventual winner, the buyers really were committed to buying the house - but it was a close call! Again, even in a down market, when you find the house you really want make that offer and get it done quickly!
A second interesting happening today which truly shows how crazy the market can be. We made an offer on a home for a client. The home had been on the market only three days and there were four registered offers as of this afternoon when we made our offer. We offered full price with an escallation of $50,000 more if any other offer was higher. The $50,000 wasn't enough to be the high contract and so we raised our offer another $27,500 - we don't know if that will be enough but that is really the highest we are willing to go on this property. Oh, and the asking price of the house was $825,000 - this property will sell at over $900,000. The agent took a gamble and it has obviously paid off.
This goes to pricing your home - while there are homes on the market for months and months, there are homes still selling in a few days with multiple offers and going over the asking price. This house is probably worth the $900,000, but the gamble came in on generating the interest by offering the home at $825K - about $50,000 under where other agents may have priced the property. They will never know, but in reality had the house been priced at the $900,000 to start I don't believe they would have gotten a full price offer right out of the gate - certainly wouldn't have gotten four offers with escallation clauses!
In making our offer, we compared selling prices of similar homes and felt that $875,000 was a good price for the property. We'll know what happens tomorrow as the seller is out of the country and we won't know the outcome before then. I intend to go back and do a more in-depth analysis of the property and the comparables as well as speaking to several appraisers we know that do extensive work in the neighborhood early in the morning. It will be another interesting experience seeing where this ends up! Again, you'll have to tune in tomorrow to find out the outcome!
As always BE INFORMED and CHECK BACK HERE OFTEN!
A second interesting happening today which truly shows how crazy the market can be. We made an offer on a home for a client. The home had been on the market only three days and there were four registered offers as of this afternoon when we made our offer. We offered full price with an escallation of $50,000 more if any other offer was higher. The $50,000 wasn't enough to be the high contract and so we raised our offer another $27,500 - we don't know if that will be enough but that is really the highest we are willing to go on this property. Oh, and the asking price of the house was $825,000 - this property will sell at over $900,000. The agent took a gamble and it has obviously paid off.
This goes to pricing your home - while there are homes on the market for months and months, there are homes still selling in a few days with multiple offers and going over the asking price. This house is probably worth the $900,000, but the gamble came in on generating the interest by offering the home at $825K - about $50,000 under where other agents may have priced the property. They will never know, but in reality had the house been priced at the $900,000 to start I don't believe they would have gotten a full price offer right out of the gate - certainly wouldn't have gotten four offers with escallation clauses!
In making our offer, we compared selling prices of similar homes and felt that $875,000 was a good price for the property. We'll know what happens tomorrow as the seller is out of the country and we won't know the outcome before then. I intend to go back and do a more in-depth analysis of the property and the comparables as well as speaking to several appraisers we know that do extensive work in the neighborhood early in the morning. It will be another interesting experience seeing where this ends up! Again, you'll have to tune in tomorrow to find out the outcome!
As always BE INFORMED and CHECK BACK HERE OFTEN!
Sunday, January 27, 2008
Weekend Madness - It's Not Over Until It's In Writing!
Since Thursday we have been trying to reach an agreement on a proposed contract. The property has been on the market less than three weeks and although several agents were "hovering" with clients, this was the first written contract we received. What started out as a large difference in asking price and contract price has narrowed to an acceptable level and what was an unacceptable long period of time between contract and settlement has also narrowed to an acceptable level - we have reached a verbal agreement and the seller is meeting in our office tomorrow morning to sign the contract - but it's not over yet.
There have been numerous showings of the property over the weekend and several agents have requested disclosures (the property condition, lead paint and other disclosure forms) necessary to prepare a contract!
Do we have another offer at this time? No. Are we locked in to the contract we have verbally agreed to? No. If there were another offer sitting on our fax or in our email tomorrow morning when the seller arrives is it ethical to then reject the contract the seller verbally accepted?
The ethical question really relates only to our group, the listing agent. We work for the seller and if another, better offer comes in before physically signing the "bird in the hand" we are ethically bound to present the offer to the seller for their consideration.
The ultimate decision rests with the seller, but we are bound by our obligation as the seller's agent to review all the information and advise in their best interest. Obviously if a better offer were received, it would be in the seller's best interest to sign the new contract.
So, we'll see if another offer comes in before signing - and we'll see if they are any better than the offer we have negotiated in good faith. It's a tough situation for a buyer's agent who has worked so hard to put the deal together and it's a tough situation for the first buyer if they lose a house they really wanted at the 11th hour - but it has happened to all of us.
The lesson here is if you find a home you truly want to buy, make a fair and reasonable offer, require a timely response, negotiate in good faith, but don't procrastinate and when a deal is struck get it in writing! It isn't over till it's over - agents may seem pushy by asking for a quick decision, but they are acting in your best interest - we all know what can happen.
We'll all know tomorrow how this shakes out - and I will post it here. This also goes to several of my previous postings, even in a "down" market, when a house is priced properly and shows well, it sells - sometimes even with multiple offers and quite quickly.
As always BE INFORMED and CHECK BACK HERE OFTEN
There have been numerous showings of the property over the weekend and several agents have requested disclosures (the property condition, lead paint and other disclosure forms) necessary to prepare a contract!
Do we have another offer at this time? No. Are we locked in to the contract we have verbally agreed to? No. If there were another offer sitting on our fax or in our email tomorrow morning when the seller arrives is it ethical to then reject the contract the seller verbally accepted?
The ethical question really relates only to our group, the listing agent. We work for the seller and if another, better offer comes in before physically signing the "bird in the hand" we are ethically bound to present the offer to the seller for their consideration.
The ultimate decision rests with the seller, but we are bound by our obligation as the seller's agent to review all the information and advise in their best interest. Obviously if a better offer were received, it would be in the seller's best interest to sign the new contract.
So, we'll see if another offer comes in before signing - and we'll see if they are any better than the offer we have negotiated in good faith. It's a tough situation for a buyer's agent who has worked so hard to put the deal together and it's a tough situation for the first buyer if they lose a house they really wanted at the 11th hour - but it has happened to all of us.
The lesson here is if you find a home you truly want to buy, make a fair and reasonable offer, require a timely response, negotiate in good faith, but don't procrastinate and when a deal is struck get it in writing! It isn't over till it's over - agents may seem pushy by asking for a quick decision, but they are acting in your best interest - we all know what can happen.
We'll all know tomorrow how this shakes out - and I will post it here. This also goes to several of my previous postings, even in a "down" market, when a house is priced properly and shows well, it sells - sometimes even with multiple offers and quite quickly.
As always BE INFORMED and CHECK BACK HERE OFTEN
Saturday, January 26, 2008
So, Andy, You want to be a Real Estate Agent!
I had a conversation with a young man yesterday who has been contemplating getting a real estate salesperson license and jumping into the business. He asked for my advice and so I gave it to him - both barrels. It's not an easy job and it doesn't pay well - at least for a while. It really is starting your own business and as such should be approached the same way you would start any other business - you need information and you need a plan. You also need enough money - there the "start up" expenses of taking required classes, obtaining a license, joining the associations, errors & omissions insurance to name a few. You need money to live on until you start seeing returns on your efforts.
I suggested that he market himself to a successful group as a buyer's agent. By doing this he can be fed leads that he might otherwise not get, and if nothing else, he will gain valuable experience from successful agents.
I know several agents who work part time. One of these agents is an airline pilot with lots of free time to work his second job in real estate. After six months, he had spent approximately $5,000 on expenses that I mentioned above and marketing materials and marketing campains. His first sale came shortly thereafter (the end of his first six months) and he netted $9,000 after his split with the broker. So, six months of effort for $4,000 in income. Now, on the other hand, he also purchased a property at an extremely good price that was headed to foreclosure in partnership with a friend. There was expense in fixing up and marketing, but the sale of the property within the year netted them $40,000 in profit - $20,000 each. He is a dedicated, intelligent individual, he works hard and looks for opportunities!
We have a new buyer's agent with our group. After seven months he has completed one sale, assisted on a second and just wrote his second contract - that translates to about $20,000 in income, give or take a bit. As we head into the spring and sales historically increase (even in a down market), he has the opportunity to do well in his first full year as an agent!
As you can see just from the two examples above (and believe me, they truly are representative samples) it isn't easy to get into real estate sales, and it truly is the lucky agent that can be associated with a top producing team.
Of course, I continued to explain that we all need to pay our dues in this industry - we need to take floor duty (answering incoming calls into the main office hoping for leads) - we need to take as many "fast start" classes we can find - we need to ask more experienced agents for help when necessary - we need to market ourselves to anyone who will listen - we need to be sponges and read, read, read, we need to see every house that comes on the market in the area we want to work, we need to hold open houses for other agents (not a good place to make a sale, but a great place to meet prospective buyers) and we need to get our name out there and recognized. In other words, we need to make a super human effort if we want to become a top producing agent - and we need the personality and stick-to-it mentality it takes to be a successful business owner.
I don't mean to be discouraging - real estate has been good to me. The rewards at the goal line are great - both monetarily and emotionally. I have made great friends, I have had the satisfying experience of helping families into the home of their dreams, I truly enjoy what I do. A good agent will prevail in any type of market - I sometimes think that down markets are nature's way of weeding out the weaker agents!
So, that's my rambling for today - I'm looking for suggestions on topics you would like me to address - so please feel free to comment - I will respond.
As always BE INFORMED and CHECK BACK HERE OFTEN
I suggested that he market himself to a successful group as a buyer's agent. By doing this he can be fed leads that he might otherwise not get, and if nothing else, he will gain valuable experience from successful agents.
I know several agents who work part time. One of these agents is an airline pilot with lots of free time to work his second job in real estate. After six months, he had spent approximately $5,000 on expenses that I mentioned above and marketing materials and marketing campains. His first sale came shortly thereafter (the end of his first six months) and he netted $9,000 after his split with the broker. So, six months of effort for $4,000 in income. Now, on the other hand, he also purchased a property at an extremely good price that was headed to foreclosure in partnership with a friend. There was expense in fixing up and marketing, but the sale of the property within the year netted them $40,000 in profit - $20,000 each. He is a dedicated, intelligent individual, he works hard and looks for opportunities!
We have a new buyer's agent with our group. After seven months he has completed one sale, assisted on a second and just wrote his second contract - that translates to about $20,000 in income, give or take a bit. As we head into the spring and sales historically increase (even in a down market), he has the opportunity to do well in his first full year as an agent!
As you can see just from the two examples above (and believe me, they truly are representative samples) it isn't easy to get into real estate sales, and it truly is the lucky agent that can be associated with a top producing team.
Of course, I continued to explain that we all need to pay our dues in this industry - we need to take floor duty (answering incoming calls into the main office hoping for leads) - we need to take as many "fast start" classes we can find - we need to ask more experienced agents for help when necessary - we need to market ourselves to anyone who will listen - we need to be sponges and read, read, read, we need to see every house that comes on the market in the area we want to work, we need to hold open houses for other agents (not a good place to make a sale, but a great place to meet prospective buyers) and we need to get our name out there and recognized. In other words, we need to make a super human effort if we want to become a top producing agent - and we need the personality and stick-to-it mentality it takes to be a successful business owner.
I don't mean to be discouraging - real estate has been good to me. The rewards at the goal line are great - both monetarily and emotionally. I have made great friends, I have had the satisfying experience of helping families into the home of their dreams, I truly enjoy what I do. A good agent will prevail in any type of market - I sometimes think that down markets are nature's way of weeding out the weaker agents!
So, that's my rambling for today - I'm looking for suggestions on topics you would like me to address - so please feel free to comment - I will respond.
As always BE INFORMED and CHECK BACK HERE OFTEN
Friday, January 25, 2008
Help May Be On The Way - Increase for Conforming Loans
If you are one of many people (especially in our area) that are thinking of buying or if you are one of the owners with a jumbo mortgage that would like to refinance, but jumbo rates are still too high, help may just be on the way.
The following information was just received from a lender we work with quite often (I'll explain in more simple terms following his statement:
"As part of the economic stimulus package, an increase in the conforming limit could now be a reality, at least for a brief period. Congress and President Bush agreed, but have not voted yet, on a 1-yr increase in the conforming loan limit to $730K. There is not a lot of detail yet (there is confusion as to whether the $730K, or $725, is for high cost housing areas, or everywhere, and just what high cost areas are?). Just when mortgage originators everywhere were breaking out the Cold Duck, OFHEO’s director James Lockhart (Office of Federal Housing Enterprise Oversight, who oversees FNMA & FHLMC) issued a statement saying “We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform. To restore confidence in the markets we must ensure that the GSEs’ regulator has all the necessary safety and soundness tools. Yesterday Chairman Dodd talked about moving a GSE reform bill early this year. We are ready to work with him and the Senate Banking Committee. We will also be working with Fannie Mae and Freddie Mac to ensure that any increase in the conforming loan limit moves through their rigorous new product approval process quickly and has appropriate risk management policies and capital in place.”
Now what? Frankly, analysts feel that enactment is possible by mid-February but looks more likely by early March. No large investors will make any policy changes or announcements until the issues are less confusing, or even voted into law. Apparently, the bill would temporarily increase the limit on mortgages Fannie Mae and Freddie Mac may securitize from $417k to up to $730k. In addition, the bill would increase the limit on loans the Federal Housing Administration (FHA) may insure from $362k to $625k. This should help to reduce spreads in the jumbo mortgage market! One estimate mentioned that as many as $400-500 billion in loans could qualify for refinancing. As these loans refinance, it could ease pressure on capital-constrained bank balance sheets. And “temporary” items like this are difficult to rescind after a year, which would also be good news for originators."
So what does this really mean? If this change is made, particularly in high priced areas, loans would be conforming up to $730 - today's rate quoted from Wells Fargo Bank was 5.75% on a conforming loan (loan amount up to $417,000) and 6.876% on a non-conforming loan (jumbo loan) - 1.126% more! That's a big difference! That will enable home buyers to afford a slightly higher priced home, that will enable anyone who currently has a jumbo mortgage at a higher interest rate to refinance!
This is just another encouraging sign that the powers that be are taking steps to ease the home buying and mortgage crunch! If this becomes available as expected, the market just might take that turn we've been waiting for!
Remember BE INFORMED and CHECK BACK HERE OFTEN
The following information was just received from a lender we work with quite often (I'll explain in more simple terms following his statement:
"As part of the economic stimulus package, an increase in the conforming limit could now be a reality, at least for a brief period. Congress and President Bush agreed, but have not voted yet, on a 1-yr increase in the conforming loan limit to $730K. There is not a lot of detail yet (there is confusion as to whether the $730K, or $725, is for high cost housing areas, or everywhere, and just what high cost areas are?). Just when mortgage originators everywhere were breaking out the Cold Duck, OFHEO’s director James Lockhart (Office of Federal Housing Enterprise Oversight, who oversees FNMA & FHLMC) issued a statement saying “We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform. To restore confidence in the markets we must ensure that the GSEs’ regulator has all the necessary safety and soundness tools. Yesterday Chairman Dodd talked about moving a GSE reform bill early this year. We are ready to work with him and the Senate Banking Committee. We will also be working with Fannie Mae and Freddie Mac to ensure that any increase in the conforming loan limit moves through their rigorous new product approval process quickly and has appropriate risk management policies and capital in place.”
Now what? Frankly, analysts feel that enactment is possible by mid-February but looks more likely by early March. No large investors will make any policy changes or announcements until the issues are less confusing, or even voted into law. Apparently, the bill would temporarily increase the limit on mortgages Fannie Mae and Freddie Mac may securitize from $417k to up to $730k. In addition, the bill would increase the limit on loans the Federal Housing Administration (FHA) may insure from $362k to $625k. This should help to reduce spreads in the jumbo mortgage market! One estimate mentioned that as many as $400-500 billion in loans could qualify for refinancing. As these loans refinance, it could ease pressure on capital-constrained bank balance sheets. And “temporary” items like this are difficult to rescind after a year, which would also be good news for originators."
So what does this really mean? If this change is made, particularly in high priced areas, loans would be conforming up to $730 - today's rate quoted from Wells Fargo Bank was 5.75% on a conforming loan (loan amount up to $417,000) and 6.876% on a non-conforming loan (jumbo loan) - 1.126% more! That's a big difference! That will enable home buyers to afford a slightly higher priced home, that will enable anyone who currently has a jumbo mortgage at a higher interest rate to refinance!
This is just another encouraging sign that the powers that be are taking steps to ease the home buying and mortgage crunch! If this becomes available as expected, the market just might take that turn we've been waiting for!
Remember BE INFORMED and CHECK BACK HERE OFTEN
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