That's No Moon...

It's a Space Station!

Back in 1977 I was sitting in the front row of the local theater watching Obi-Wan as the Millennium Falcon came out of hyperspace and discovered a debris field where a planet should have been.

Oh and then there was this strange looking Moon...

This morning I can't help but think that we in the mortgage industry are like some of the characters in StarWars.

Today I was told that Diablo Funding, one of Northern California's largest brokerages will shut it's doors Tuesday. I had heard the rumors a week ago, but today it became official!

They are closing due in part to "buybacks". Meaning that they are having to buy back loans they brokered to wholesale lenders.

Here's the cliff notes version as I heard it through my sources. A Large Wall Street Firm that owns multiple wholesale lenders, one of them being a bankrupt subprime lender, requested that some (not all) of the loans they had funded through them be re-purchased by Diablo. This would be a very large capital expense for any business to take on. Not surprisingly, Diablo refused. So the Large Wall Street Firm then instructed all the other branches of it's lending network (the A and Alt A paper lenders) to not fund any loans originated by Diablo - period!

Like the famous line from the movie...

Obi-Wan: "I felt a great disturbance in the Force, as if millions of voices suddenly cried out in terror and were suddenly silenced. I fear something terrible has happened."

Pulled from the DRE website, here's 437 loan officers who were suddenly silenced. Click on the image and you'll be at the DRE website. This is only the DRE licensed loan officers. Diablo also operated under the department of corporations and had unlicensed loan officers working under supervision that are off the radar.

Loan Officers

If you are a Displaced Diablo Loan Officer and would like to continue on - give me a call. We may have room for you.

One word of caution - we do things a little differently here. (This isn't Tatooine.)

Mike Mueller - (925) 288-9977

Borrowers

Did you have a loan that was in process through Diablo Funding? No guarantees, but I will probably match it, fund it and we'll all look back at this someday and laugh. I have many of the same wholesale lenders if not more. (and they aren't asking me to buyback any loans)

Mike Mueller (925) 288-9977

Real Estate Agents

Your wonderful loan officer may be gone. They, like Obi-Wan might come back in a different form. Or like Luke's Uncle, they might be gone forever. I'm here to pick up the pieces. Give me a call.

Mike Mueller (925) 288-9977

Technorati Tags: Diablo Funding, Loan Officer, out of business

NOTE: According to a phone call I received today from an employee at Diablo Funding, she says that the company has been bought by IndyMac. I'll keep you posted...
MM

First Time Buyers? - YES!

I wanted to share a short story with you.

 This is Reza.

Reza is 29 years old, he works as a bartender.

Tomorrow morning Reza will become the owner of his first home.  That's right,  Reza is a First Time Home Buyer.  This picture was taken yesterday just after Reza signed his loan documents.

I'm sharing this story because like you, I've been reading the same stories in the media.  I've heard the same doom and gloom you have.

• The Credit Crunch
• The Liquidity Crunch
• The Tightening of Guidelines
• 100% Financing Canceled
• Zero Down Payment Programs Canceled

I'm here to tell you...  The loans are out there.  The buyers are out there.  The deals are out there.  Really!

Reza used his Agent's knowledge of the current market and neighborhood to his advantage.

Reza looked at the housing market as an opportunity - not as a .

Reza got a great deal on a home from a motivated seller.

Reza got a great 30 year fixed loan from a great lender at a great rate.

I have some wonderful programs for the First Time Buyer.  I have programs that will cover the closing costs.  I have programs with silent seconds.  There are a lot of options out there.  All you have to do is ask. 

Mike Mueller - (925) 288-9977

  

Technorati Tags: first time buyer, 100% financing, zero down payment

The Best Down Payment Assistance Program in California?

I recently wrote about perhaps
"The Best First Time Buyer Program in California". It's just one of the 100% financing options I have in the toolbox.

Amazingly this was the first that many agents had heard of it. I received calls from Agents and Buyers, and even other Loan Officers inquiring about the program.

In that article I briefly touched on a particular Down Payment Assistance Program. Surprisingly, this too garnered a bit of attention, so I thought I'd devote a similar post on what might be "The Best Down Payment Assistance Program in California".

With 100% programs disappearing off the Lender's shelves like bottled water and batteries during hurricane season this topic could be crucial to the future homeowner.

Are you buying your first home and need a little help?

Would 3% of the sales price be enough?
(on a $500,000 purchase that would $15,000)

Do you need that money for the Down Payment or to help pay Closing Costs?

Would you like to borrow that money at below market rates and at simple interest? (current rate is far below 4%).

Here's the best part...

Would you like to not have to make a payment on that loan for the life of your mortgage?

Really!

This isn't a fancy financing scheme. This is a very simple Down Payment Assistance Program available to every first time buyer in the state of California. It's not a grant. You do have to pay it back. It does accrue interest, albeit very low interest. It doesn't require a particular loan program. It's clean, it's clear and it's simple.

Combine it with seller assistance if you like. Or how about the BAMM Program? You could use this 3% towards the down and then have the seller participate in the Marpa Funds program and have up to $1,000 each month paid towards your mortgage. Or use this for closing costs, use a 100% loan, and add the BAMM Grant. That's not good, that's really good!

Even your financial planner would like this program as you are borrowing long term and below market rates. Since your even borrowing below inflation rates most would argue that this is like free money! There are just a few catches but all in all I think this is...

The Best Down Payment Assistance Program in California

Want more details? I thought you might. Just give me a call.

Mike Mueller, (925) 288-9977 Ext 104

Technorati Tags: Down Payment Assistance, First Time Buyer, 100% Financing, Zero Down

Lease Option to Buy Snag

From a Sellers perspective the Lease Option could be viewed as a viable method of moving the property from the negative side of the equation to the positive  side.  If a home is on the market it obviously has no rental income, it's also not benefiting the present owners by providing a roof over their heads.  As it sits on the market it's costing the seller each and every day.  They probably have to wait to make an offer on their new home until they have an offer on their present home.  One of the latest tactics when a home doesn't sell is to Lease Option it.  I wrote about one such instance here:

Your Listing Hasn't Sold? Lease Option It!

This tactic could be a win for the Seller depending on the structure of the deal.  Many deals are structured to favor the Seller, not the Buyer.  Not that there couldn't be a Win - Win for both, I just happen to see more tilted towards the Seller.  That makes some sense as they are the ones writing the contract. 

For the potential Buyer, there are certainly risks involved. 

Lease Options are nothing new.  Rent to Own business models are known to all.  I could go down to my local Rent - A - Center and pick up a new leather couch.  Exorbitant rental fees aside, I now am watching my Rent to Own Plasma, while sitting on my Rent to Own couch.  If I miss my weekly payment, they come pick up my TV and couch and I'm back to where I started.  If I continue my payments to the end, I now own the couch and TV.  It's all good.

Lease Option the house and I will probably put something down as a deposit, I'll have to make my monthly rent on time each and every month, and then 2 years later a portion, or maybe all of my rent is applied towards the purchase price.   It's all good.

Almost.

• What happens if the market zooms in those 2 years?
• What if it declines?
• What will rates be like in June 2008?
• Will his credit be any better then?
• What will underwriting guidelines be like in June 2008?
• Will he be able to qualify for anything at all?

These are just the reasonable questions we can ask.  The foreseeable ones.

But remember, there's a reason the house wasn't sold to begin with.  Was it overpriced?  Was it below standards?   Did the owners need money?  There was a reason.

This presents another risk to the Lease Option Buyer.  What if the Owner / Seller goes under?  What happens if the home goes into foreclosure?  When you signed the agreement, did you ask for financial statements from the Seller?  Did you check to see if there were any liens on the property?  Of course not.

Lease Options can be good vehicles to move property.  But increasingly there are more and more reports coming out as good Lease Options go bad.

Here's a couple I've been following:

 Crisp & Cole lease to buy program

http://www.buzzle.com/editorials/12-2-2005-82927.asp

http://sfvblog.com/tag/investor-info/lease-option/

"If you lease option the house, you can charge up to 25% more than the current market rental price, because you are offering to let the tenants buy the house. You might also be able to use the option consideration to pay for the payments to the bank of which you are behind."

How scary is that?

FHA is not Fannie Mae

"Borrowers with subprime loans are now ending up in foreclosure twice as often as borrowers with FHA-insured loans, said Brian D. Montgomery,  assistant secretary for housing and the federal housing commissioner for HUD.

Of the 10 states with the highest percentage of FHA-insured loans, only three (Texas, Indiana and Utah) also rank among the top 10 for foreclosures, new federal data show. The FHA's current strong position follows a sharp dip in its market share. Between 1996 and 2006, the FHA's share dropped 25 percentage points, from 32% to 7%, among minority borrowers, the same class of borrower that (according to the Center for Responsible Lending) provided the single-largest rush into the subprime mortgage market.

The GAO report linked the drop in FHA's share of the overall mortgage market to the popularity of adjustable-rate mortgages and other unconventional loan products generally disallowed in the FHA program, and the hassle of filing the paperwork to do an FHA loan.

Many originators found the fees on interest-only and zero-down payment loans, which the FHA won't insure, higher than with government loans. In an interesting footnote, the National Association of Mortgage Brokers told GAO that many of its members couldn't afford to meet the FHA's financial requirements for brokers writing FHA-insured loans: a brokerage business must have a minimum net worth of $63,000 and provide annual audited financial statements. "

While this is the National story, the local or Bay Area spin is that FHA (and it's loan limits) will not work with so many of our local loan amounts. 

Fees aside, financial requirements aside.  FHA will work for the 1 Bdrm Condo in Bay Point or Oakland, but it won't work for the 4 bdrm Rancher in Walnut Creek.  The loan amounts are simply too high.  The same can be said for VA.   FHA has some great programs and really can do some great things.

The buzz in the media these days seems to be "FHA, It's your answer to the subprime collapse" .

The truth is, while that's correct it just doesn't apply to the bay area for so many situations. 

Remember, a Conventional, Conforming Fannnie Mae (or Freddie Mac) loan is capped at $417,000.  Anything above that falls into a Jumbo Loan. There's plenty of loan programs that will do that.

FHA is not Fannie or Freddie.  The two are completely different, not connected.  There is no Jumbo FHA.

What's Weight Got To Do With It?

Living with a teenager is a learning experience.
If you are a parent you know what I'm talking about.

The latest happenings in the Mueller household is that my 13 yr. old daughter has discovered the sense of smell.
Ok, maybe it's more that she has discovered the stores in the mall that sell smelly lotions, bath beads, soaps, shampoos and conditioners.
We now have a bathroom fully stocked with smelly stuff.

In the mood for

• Passion Fruit / Banana?
• Guava / Cranberry?
• Green Apple / Hibiscus?

I'm sure we have it stocked in both Shampoo and Conditioner.

Which brings up a question - does the shampoo have to match the conditioner?
What if they clash? Dill Pickle Shampoo and Milk Conditioner?

I digress, back to the point.
While my precious daughter is consumed with one aspect, in this case how a product smells, she is also neglecting all other aspects.
I say this because I've noticed her hair looking less shiny, less clean, less bouncy lately.

How does this relate to mortgages?
Many times I talk to clients who are keyed into one aspect, (or two) of a loan.
Most times it's, "What's the Rate?"
Other times, "How much is this going to cost me?"
Or the extremely deadly, "What is my payment going to be?"

Like my teenager - they are blindly focusing on one part of the loan and not the big picture.

Let me say this.
If you were to focus on only one particular aspect of your loan...
There is one feature that I would rather you spent all your waking moments on rather than any other.
Want to know what that is?

The Weighted Average Cost of Capital.
Chances are this is something you've never heard of - right?
You see, Weight has everything to do with making the right choices!

WACC generally is talked about in conjunction to corporations and investing but when applied to home ownership it is an invaluable tool.
Only by determining the weighted average can see how much real interest the borrower has to pay for every dollar they finance.

In any purchase or refinance transaction -
Ask your mortgage professional about the WACC.
If they don't know (and you'll be surprised how many do not), maybe you should be working with someone who does?