WE NEED YOUR SUPPORT and, your market update for April~

Hi Friends!

I have so much to share so let’s jump in.

From the Lending side….. the Crash of 2008 – What changes have occurred and what still needs work….

Predatory Lending – This was one of the Biggest issues that caused most foreclosures and consumers to lose their homes. Non-licensed professionals (because they did not have to be) would put consumers into adjustable-rate mortgages, interest only loans, or stated income loans that they knew going forward the consumer was at risk when the introductory rate timeframe expired. What has changed? Now, when someone gets an adjustable-rate mortgage, they must qualify at 2% above the note in most cases. This has eliminated a lot of these types of loans. Interest only first mortgage loans, also may be known as negative amortization loans, do not exist anymore. The only time you will see an interest - only loan now is when you get a HELOC (Home Equity line of credit) on your home as a second lien. Stated Income loans DO NOT exist anymore, that I know of. Prior to 2009, these types of loans were referred to the “if you are breathing” we will give you money. There was no due diligence to verifying the income. If a consumer had good credit and their own down payment, they could say they worked at a gas station making $15,000 a month and close the loan. 

Subprime loans – These loans are now called Non-QM loans. They are very rare and harder to qualify and may require a larger down payment. Prior to 2009, subprime loans were offered with sometime no money down and there was an option at one time to finance 125% of your appraised value- for example: if you bought a $500,000 home, the loan would be offered at $625,00 and in most cases, you could do an adjustable-rate or interest only payment on top of it. These subprime loans would often include loans with low credit scores a, higher fees, variable rates and often no down payment as well.  It was just a recipe for disaster.

What was put in place to help prevent it from happening again:

TRID – Formed in 2015 – Created to provide consistency in the industry both on the Real estate side and lending when it comes to disclosing fees and disclosure timeframes. Before this was put into place, there were some cases where the final settlement statement that the title company prepared, did not match lenders final good faith estimate. Often some of these transactions would close so quickly that the consumer did not have enough time to review/react and would just close. In today’s world, the consumer, upfront, is given 7 business days to review the fees and then is given at least 3 business days to see the upfront closing disclosure prior to closing. In my opinion, all professionals that interact with a consumer through lending or Real Estate, should have to follow the same consumer disclosure laws regardless of where someone works either bank, broker, retail or even by state, not everyone follows the same rules.

CFPB – Formed in 2011 – Created to enforce laws and protect the consumers in mortgage lending. This was put into place mostly to protect the consumers from predatory lending. Every consumer must be treated fairly no matter what their credit circumstances, race, religion, or financial status was. There are a lot of branches with the CFPB that protect and collect data from licensed professionals to ensure this is happening.

S.A.F.E Act – In 2009, all mortgage loan officers that receive compensation from a loan transaction must be licensed. Depending on the state, if a loan officer works for a bank or credit union, they do not have to have a state mortgage license but do have to have a national license, which is challenging sometimes within the states that we are licensed in. They also are required to take and pass classes to keep their licenses active.

Qualified Mortgages/Fee Tolerance – Not every loan or lending institution has to make sure that the mortgage that they are providing the consumer is fair and does not become a high-priced loan. I do believe that this area, industry wide, is lagging. This was implemented to protect the consumer from paying an excessive amount of fees that impact the APR and holds the lender accountable for absorbing the difference and not passing it onto the consumer right before closing.

Mavent Reports - Most lenders must pull this on every loan once the file is ready for the closing disclosure. This report is very detailed and breaks down the initial fees, vs the final fees and creates a tolerance report and if the fees are under disclosed, in most cases, the lender must cure the difference and the fee cannot be passed onto the consumer. This report also validates and verifies the variance between the initial disclosure and final fees ensuring there is not additional fees added that impact the APR. It verifies the payment initially disclosed against the final calculated payment and if it increases by a certain percentage, it must be explained and cured. It verifies the licenses of everyone involved in the transaction including the title closer, real estate agent and loan officer. All this data is gathered and reported back to some of the entities above to tract the data. Again, not all lenders pull this report so that creates a loophole in the industry.

LQI Reports – Started in 2010 - On most loans, these reports are pulled within 10 days of closing. They are also referred to as a “soft pull” on the consumer’s credit to make sure that there was no new debt incurred or existing debts did not increase or become derogatory accounts. Prior to 2009 there was no “double” check on the consumers credit prior to closing. Some people would apply for a home loan, go under contract on a home and then buy a new car for the garage (sometimes two), new furniture for the whole house and a lawn mower for a home they did not own yet. The debt would increase significantly. If they had an adjustable-rate mortgage, 125% financing or were one paycheck away from making any of these payments, this would cause a huge financial burden. 

The good news is with the current state of affairs, lending practices have improved drastically. Many Buyers obtained low rates during this new period and gained equity. Unemployment rates are stable. 

Inventory nationwide is still low (980,000 of which approximately 500 of these are under contract). To put this into perspective, in 2007 we had 4 million active homes nationwide

I predict the market will stay strong and it’s a great time to invest in real estate. And buyers are out shopping!

GIVING BACK: On May 4, 2023 we will host our 2nd annual Law Enforcement Appreciation Party!  Last year, we raised almost $3,000 for tourniquets and safety equipment for our men and women in blue.

  This year's donation will go toward purchasing Dynamic Entry Kits for every patrol car…. We need 200. What is a Dynamic Entry Kit? Its 3 tools that are used to get into buildings, more specifically we are providing them for our School Resource Officers to get into schools in case of active shooters.  It’s a tough conversation, but the need is great.

To help us support this amazing cause email me at: [email protected]

And as always, thank you for sending your friends and family to New Dawn Realty for exclusive and personalized service for all their real estate investment needs. Because of YOU, I work entirely by referral.

Serving the Colorado AND Florida real estate market.

I also have nationwide Realtors who will take great care of you. Just let me know where you are headed, and I will connect you.

Happy Easter,

Dawna