While I am certainly proud of my little part in this, what I want to share with you is the greater message of the piece. The role of points in mortgages is going down nationally and NYC is no exception.  This article will help you decide for yourself if paying for points makes sense for you and your home purchase of refinance.  Of coarse this is only the starting point of that decision and I welcome any questions you may have, either through commenting on this blog, following Universal Mortgage on Facebook, or by giving me a call at 718-534-5600.

The link to the entire New York Times article can be found HERE.  Thank you, Norman

I recently came across an article from Reuters that covers all of the important points to consider when thinking about refinancing. I recommend you take a look at this article –I could not have written it better myself, so here is the link. Enjoy, and as always please feel free to share your thoughts in the comment section.  Norman

http://www.reuters.com/article/2011/11/30/idUS98971266520111130

Since the beginning of the mortgage crisis I have heard one very common statement from many of my clients who are looking to buy:

“We are currently sitting on the sidelines, maybe we’ll be back in the market in 6 months time”.

Six months later I would call and hear the same line again. Now is the time to get off those sidelines and here is why!

The US is still coming out of one of the worst housing markets since the Great Depression. Many people here in NY are waiting for “the deal of the century.”  Believe it or not, New York City (primary Manhattan and Downtown Brooklyn), has been a national anomaly and prices have only dropped between 10-15% from the 2005 – 2006 highs. Despite this clear and obvious sign of the strength of our local marketplace, many still believe that they should continue to hold out until prices “eventually” come down. Many analysts are now saying this is not the case, that prices are about to start going up, as can be seen here.

In my opinion, 2012 will be one of the best buying opportunities in over 6 to 7 years, and that doesn’t come around too often. The reasons why I believe this is true boil down to these few points:

1. Interest rates at historic lows
2. The rental market becoming very hot causing rents across NYC to skyrocket.
3. Your mortgage payment may be LESS than or equal to rent, making ownership a FAR more attractive option.
4. Sellers who were holding back from putting their properties on the market are now willing to test the waters and are being somewhat more flexible.
5. The economy is showing signs of rebound

With interest rates at historic lows, an individual’s purchasing power is much, much greater and of course payments will be correspondingly lower.  I speak to borrowers day after day and they are incredibly amazed (sometimes shocked) at how low their mortgage payments are with today’s rates.  But, there’s much more to mortgages than just the interest rates. There’s also the tax deductibility of mortgage interest paid. When you factor in the tax benefits, a $4,000 gross monthly mortgage payment is oftentimes approx. just $3,300 (or less) with the after tax benefits. There is also the building of equity with every monthly payment.

It’s no secret that obtaining a mortgage loan approval over the past 4 years has been a difficult and exasperating process, but there are now signs of lenders finally lightening up on their guidelines. We are also seeing the return of Private Mortgage Insurance allowing borrowers to go as high as 95% financing even on conventional financing. On one end of the spectrum, we have the FHA program only requiring just 3.5% down even on very high loan amounts. On the other end of the spectrum, there are new Jumbo lenders entering the marketplace every week and we are seeing a resurgence of lending on the very high end.

Nearly all news reports are now indicating that the US economy is poised for a turnaround. With some new financial/debt crisis happening in Europe every day, the ongoing turmoil many North African and Middle Eastern Countries, and with the U.S. Presidential elections just around the corner, no one can be certain that our rebound is indeed here to stay. What is VERY likely, though, is that our general marketplace will continue to see an incredible resurgence in purchase activity. The Dow Jones has already hit intraday multi-year highs a few times over the past couple of weeks.

There’s been quite a bit of pent up demand over the last several years and with all of the above factors in place (low rates, high rental prices, motivated sellers), it seems to me that this year is the BEST year in a long, long time to buy.  Those who continue to sit on the sidelines waiting to buy will be sorry, indeed, because 2012, in my opinion, will be the watershed year when there is a confluence of the very best opportunities to buy.

Happy house hunting!

Will real estate recover? We added almost 30 million people in the United States during the past ten years. Right now we are not building enough housing to accommodate this growth. Even those who have been unemployed for a while still need housing.  Some of them will be buying in the next year or so and I am already seeing a few of these purchasers in my practice.

During the past five years, we have survived by “doubling up” with two or sometimes three generations living under one roof.   But as the economy recovers, our children (and sometimes our parents!!) will be moving out and household formulation will accelerate. This all amounts to pent up demand. The statistics in real estate are starting to turn around with the inventory of existing homes for sale falling from 3.8 million in October of 2010  to 3.3 million in October of just this year. Yes, there is still a large “shadow” inventory of homes hanging over the market, but these are national statistics that don’t really apply much to our market area (at least not Brownstone Brooklyn).  New York City was one of the few places around the country already reporting increases in home prices, and it is well known that we are incredibly fortunate to have one of the best local economies in the country.

The bottom line is that early 2012 might well be a phenomenally great opportunity to purchase a new home with somewhat reduced prices and with financing at such incredibly low rates.

Thank you for taking the time to read my blog this past year and I look forward to providing you with informative and entertaining posts in the year to come.  Happy Holidays and Happy New Year,

Norman

I want to keep you abreast of a new requirement by some banks on underwriting a file (i.e sending the file to the bank) without a fully signed contract of sale. It turns out that because of the onus and penalties now required by the Federal Government on making mistakes on the Good Faith Estimates, some banks are now requiring a copy of the fully signed contract of sale to show that the State and City Transfer Tax will be paid by the seller. The assumption that the seller will be responsible for said tax is no longer valid, unfortunately. While we and the banks fully realize that in virtually ALL cases it is only the seller who pays this (with the exception of new construction/new renovation), the banks nonetheless are holding up the files until they receive full and unequivocal proof of who will be paying it.

The documentation needed is either the purchase contract specifically naming the seller as responsible for this fee or a letter from the seller’s attorney to confirm the seller is paying said tax. Without either one of these items, some of our banks simply will not let the file go to the underwriting stage and the file may even be suspended or denied if said items are not received in a timely basis. Most banks, of course, wont allow the file to be sent to them without the contract anyways. 
Given the above, if you want to move the file along without a fully signed contract of sale, then in most cases the said letter will be needed.

I realize that these new bank policies can be confusing to any buyer or Realtor. If you do have more questions about this, please feel free to:

• Ask it in the comments section below
• Post it on our Facebook Wall (www.facebook.com/universalmortgageinc)
• Give me or any of Universal Mortgage’s brokers a call at 718-534-5600.

  We are here to help out any way we can.

Special Note to all Realtors: Since either the contract or the aforementioned letter are now being required by so many lenders, appraisals cannot be ordered until the borrower has received the GFE directly from the bank (and as mentioned, even if you try to send the file to the bank, they won’t proceed without the contract or letter). So, the time frame for appraisal ordering now is generally at least 4 to 5 days AFTER either we have gotten the contract or the letter indicating that the seller is paying the transfer tax. It will definitely seem like there are delays in just ordering the appraisal, but in reality, it all has to do with these new regulations.

One might think, a rate is a rate is a rate, the lower the better no matter where it comes from, end of story.  This unfortunately is simply not the case, especially when dealing with all the subtle nuances of buying in New York City. The problem with dealing with a lender on the basis of rate alone is that all the other factors (experience, reputation, knowledge of the area you are buying in, etc.) are unknown, and that can lead to disaster.

One shocking number you should be aware of off the bat is that virtually 70% of all online applications never make it to the closing table!

Why does that happen? I have included a list below on some bait and switch rate tactics and other issues that someone only using rates as a factor for choosing a lender could face:

• Just because a low rate is posted does NOT mean you will actually qualify for it. Many of those low rates you see banks post are reserved only for those with a credit score above 740 and sometimes 780!  This alone, rules out over 80% of the population from getting this rate.

• With self employed or highly commissioned borrowers, getting those low rates are even more problematic with the online rate sources and oftentimes with bank clerks as well.  The on line firms, IF YOU CAN GET SOMEONE ON THE PHONE (see my nightmare story here), cannot screen tax returns at all.  Nor are they trained to do so. So, they merely accept the income levels as provided by borrowers with no screening or evaluation of the returns whatsoever.  As anyone who is self-employed can attest, more often than not, these borrowers write off sometimes 50 to 75% of their gross earnings.  A borrower might say that he or she earns $200,000 per year (and with THAT income would qualify), but in reality, it is more like $75,000 (and with this income they don’t!).

• Many borrowers are reluctant to discuss “taboo” lending subjects such as self-employed less than 2 years, money under the table, undisclosed gifts, getting money from overseas, etc.  By not including this information in the application however it can directly lead to it being declined.

Issues Specific to Property Types in New York

No matter where you plan to buy, the points I just listed are important to keep in mind.  Those who are planning to buy in New York City, though, have a few other complicating factors to keep in mind.  In many cases, going online or with clerks at a bank branch, you may be doomed before you even start when going through them for a loan. Here are some of the NYC issues:

• 3,4,5 unit co-op buildings (AKA Brownstones). You may recall a blog posting I had on this a few months ago, which can be read here.  Basically what the issue here is that Fannie Mae will not buy loans on co-ops with less then 5 units and an individual bank will not finance more then 20% of a given building. For 5 unit buildings that means there will be 5 different lenders for the building.  For a building with 3 or 4 units, a single unit already is more then 20% of the building AND Fannie Mae will not get involved. Going directly to a lender for this type of property is a waste of time, you need an independent mortgage broker who is familiar with the area on your side to even stand a chance of approval.  (I should also note that Universal has successfully closed every single small unit co-op that we have been challenged with.)

• Even if you are not buying a small co-op, have perfect credit, all of your income is reported, AND you have plenty of money in the bank, you are still at risk of being declined when working with an online company or bank.  Most of these businesses rely on “standard” recorded sales prices comparables to determine appraised value, not Real Value. This means if you are buying a house for $2,000,000 when a block away a house just sold for $900,000, on paper it looks like you are spending over $1,000,000 too much for the property value of the area.  It does not matter that the $900,000 house is in disrepair and is significantly smaller.  The result of such blind comparisons is that the loan is either declined or requires a significantly greater amount down.

Still not convinced to avoid shopping for a loan online or going directly through a bank?  Ok how about this scenario:

You have great credit, you have great verified-income, you are buying a standard $1,000,000 home, and you are going to put 50% down.  Clearly in this scenario even if you go with one of those low rate online companies or through a bank you will get approved without an issue…WRONG!

The problem here lies with a general lack in customer service.  Now you may say “I can deal with poor customer service if it means a lower rate.”  The problem is you really can’t.  These online companies and banks make their profit though taking on as many clients as possible, and any delay on working with your application could result in miss deadlines and ultimately a declined loan. When you take into consideration that it is not even in the banks best interest to lock you in at those low, low rates, is it really any wonder that those deadlines are frequently missed?

Ultimately, whether you are planning to purchase in NYC or elsewhere (but especially in NYC) you need a proven and reliable mortgage broker on your side, not only to help you avoid the tricks and trappings of banks, but also to help make sure you are providing all of the information you need to provide.  Unlike with banks directly (who pay their branch managers based on loan applications brought in, NOT closed), it is in an independent mortgage brokers best interest to get you the best rate you qualify for and they make sure that your file gets closed and funded within the time-frame needed.

Here are some of, but not all of, Universal Mortgage’s National rankings:

Overall Volume of Loans Closed

• Norman Calvo ranked 13^th
• Mark Maimon ranked 55^th
• Edward Ades ranked 86^th

Top purchase volume

• Norman Calvo ranked 5^th
• Mark Maimon ranked 15^th
• Edward Ades ranked 21^st

What makes the actual numbers so significant is that despite all of the pronouncements in the media on how impossible it is to get mortgages these days, the loan officers at Universal Mortgage are simply amongst the very best in the nation.  These rankings show how skilled they are at making sure that their applicant’s files get approved AND closed.  Indeed, banks are throwing curve balls at us day after day after day, but because of our experience, diligence and perseverance in details, we are able to overcome nearly all the obstacles that they put in front of us.

These national rankings  puts the three of us WAY ahead of the loan originators from Wells Fargo, Bank of America, Chase, Met Life Home Loans, and other much larger companies.

These annual rankings are certainly a feather in our cap, but the true meaning behind them is simply that we, as a group, have much more clout with our lenders than the vast majority of other loan originators out there.

Simply put, if you are looking for the best loan officer out there to handle your loan, who would you choose?  Someone who hasn’t even made the list, someone who is a novice in the industry, or someone like Edward, Mark, or myself, who has had years and years of experience dealing with all of the myriad issues that are inherent with mortgages these days?   Anyone in the industry can quote interest rates and fees , but who are the ones that can be relied on to get the job done and actually close the loan?  The numbers certainly speak for themselves!

To see the full 2010 Scotsman Guide’s Top 200 Originator List please click here.

Here are the problems and issues in a nutshell:

1.     Many of the standard “simple” fees are lumped together into one total sum. The old good faith estimate that had been used for over 30 years was much clearer on nearly every single line (fee) item.

2.     Oftentimes, since banks are running scared of having to pay these costs themselves, some are now including the SELLER paid transfer tax as a BUYER paid fee, thereby nearly doubling the section for “transfer fees” on the form.  This can and will scare the heck out of nearly every borrower.

3.     Banks are now, once again because of the fear of having to pay the amounts themselves, WAY overestimating certain fees, sometimes by more than 20% so that they can be “safe” on the estimates. If the actual costs come in just a bit higher then their estimates, they would have had to pay for the costs themselves, which clearly they do not want to do.

4.     Because most files are now underwritten by computer modules and technology, the “systems” that are used to approve a loan simply do not and can not understand the inflated and over exaggerated fees. So, if a borrower now needs $20,000 more in funds to close because of these over exaggerated fees, and let’s say he doesn’t have the “additional” funds” readily available, the computer will DENY/decline the file because of lack of funds!!  This has happened over and over again!

The article is from the March 24, 2011 issue of the New York Times, entitled Problems With New Good Faith Estimate Forms, by Lynnley Browning. It is such a well written one that I wanted to make sure that everyone reads it. Please go here to do so.

The article mentions a little known fact that many lenders and brokers are now offering simplified and easier to understand closing cost worksheets.  At Universal Mortgage, we’ve been doing this for years already to make the process simpler and easier to understand.  Whenever someone calls me for a generic pre-qualification or, if they have a specific property in mind, or if they want to compare closing costs and loan programs, we send out our simplified version and, in addition we also send out the new mandated form required within 3 days of the date of the mortgage application. I have found this to be invaluable for everyone because of the clarity and precision that our form provides.  I only wish the Federal Government could do the same.

Then at the beginning of December I received an email requesting the same information and documents that I had already given them three times!!  They asked for things that I had thought we resolved months earlier.  I was beginning to feel that I was stuck in a cycle that would never end.  What was supposed to be a simple refinance application had somehow ballooned into half a year of paperwork and hellish incompetence.

Fortunately, I did not give up, and continued to demand results; my file, after all, was one of the most perfect files around.  Finally, when things seemed to be in the middle of yet another standstill, the loan was approved and the nightmare was over at the very last hour of the very last day of 2010.  It was a perfect way to end the year and I felt that with my refinance behind me and the refinancing craze of 2010 behind all of us, that 2011 should turn out to be a great year.

Here are some reasons why we, in Brownstone Brooklyn will see a pretty darn good year for real estate:

1. Homes and apartments are more affordable than they have been in quite some time.  The combination of lower rates and slightly lower prices makes for a strong, affordable market for both first time buyers and step up purchases

2. The economy is improving and jobs are being created, unlike the previous three years. As the economy improves, household formulation and the need to purchase a home, will rise as well.

3. While credit standards are tight, the worst is over and underwriting guidelines will start to become a bit easier. Along the same lines, as rates have crept up, refinances are down and mortgage banks will once again concentrate their focus on purchases.  They will be competing for fewer loans because they will no longer have the “easy pickings” with refinances.  This will make for a stronger mortgage market and easier underwriting.

4. The population is growing and our area is in incredible demand!  With our neighborhoods at the very top of “Best Places to Live in New York” (and probably in the nation!) we will have a very strong and steady supply of buyers in all price ranges.

I look forward to being a part of this upcoming strong and wonderful year with all of you.

I still feel strongly that we are continuing our rise out of the housing crises that seems to have plagued us these past few years. On a personal note, I am ever hopeful that my own refinancing nightmare will one day see its happy conclusion. Regardless of what the future holds for any of these topics, rest assured, I will be here thinking, sharing, and working along with you to find new insights and opportunities in the ever-changing world of mortgages.

The first order of business for 2011 will be an update on My Nightmare with Part 4. Yes, regrettably, there is a Part 4! Until then, I would like to wish you all Happy Holidays and a wonderful New Year and once again remind you to be sure to “like” Universal Mortgage on Facebook so that you do not miss a single entry in 2011.

Thanks!

Norman