Let’s talk about Loans           

First thing this month, I wanted to make sure you were aware of some changes coming to reverse mortgages. As a part of all these bail out programs, many of you may not know that Congress passed a temporary loan limit increase to $625,500 for reverse mortgages. That limit is good till the end of this year, and then it will revert back to the current agency limit of $417,000. The advantage here is that you may qualify for more cash back, or a larger income stream, for the next four months. If you already have a reverse mortgage, you may also want to refinance it for the additional cash, or to just take advantage of the historically low fixed rates. But either way you slice it, now is the time to take a closer look at reverse mortgages. You don’t want to end up kicking yourself early next year for missing out. Enough said.

I have also had some readers inquire about the overall state of lending. Many have asked me, “How hard is it to get a loan now?” Well if you read my column regularly, then you already know how concerned I am about the health of the banking sector. I think we have given plenty of cough medicine to our cancer patient. And I know the media is quick to point out, “Look, no more coughing!” However in my opinion we seem to have a serious aversion to administering the chemo therapy necessary to cure the patient. So as you might expect, this untreated cancerous banking system has made getting a loan the most difficult proposition I have ever seen, in the 24 years I have been at it.

To start with we have lost over 350 major mortgage companies since late 2006. So the choices of where I can place a loan have become very limited. Of the few mortgage sources left, 90% are the very same large banks that caused this mess.  So you can imagine how dysfunctional they are when it comes to underwriting and purchasing loans. As an example, Bank of America now runs the equivalent of Zillow.com (an on-line automated appraisal “guess-timator” service) to decide if they want to buy a conventional loan after it has already closed. These sorts of odd policies employed by all the big banking conduits have created near record levels of “buy backs”. A “buy back” is a situation where the intended investor refuses to purchase a loan (in some case a loan they underwrote themselves), after it has already been closed. This in turn has made underwriters everywhere as nervous as tics on a meth addict . The trickle down to you the consumer is that you can expect a process that feels grossly over documented, to say the least.

Then we have the politicians. Need I say more? They have already passed a series of meaningless rules which I guess were well intended, but do nothing but cause delays and create additional expense. You are no doubt shocked, I am sure. Here the Home Valuation Code of Conduct (HVCC) comes to mind. This little gem prevents lenders from ordering appraisals directly from, or having any contact with the appraiser. Long story short, many lenders who order through their specified “Appraisal Management Company” are seeing appraisers from as far away as Colorado Springs show up to do work in places like Frisco. As you might imagine, thousand of purchases nationwide have been scuttled as a direct result of this new practice alone. Finally there have also been tweaks made to the Truth-in-Lending laws (and more coming) that require a complete re-disclosure for as little as .125% in rate change, AND mandate a 3 day waiting period after re-disclosure. So if you change programs or get a better rate just prior to closing on Monday, don’t plan on closing until that Friday.

The take away here is that if you are well qualified for a loan, you will still get it. You just need to be prepared for a process that has become incredibly tedious and prone to delays. Gee, I can hardly wait to see what they do with health care…

For honest advice from someone who cares, call Dan Smith. He can be reached at 303-674-0201 or visit him on the web at www.coloradohomeloans.com