Dennis' Mortgage Blog

RETIRE YOUR FLAG! 

Before I get to the question of the week and the Rate & Market Update I want to let you know of an opportunity to properly retire your current flag and replace it with a new flag in time for Independence Day.  On Friday July 1^st as part of the Bixby Knolls First Fridays events I will be at The Expo building (4321 Atlantic Avenue, Long Beach) from 6:30 to 8:30 collecting American flags that are in need of retirement.  For those who turn in a flag to us I will be providing a 10% discount for any new flag purchased at the Orchard Supply and Hardware (O.S.H.) in Bixby Knolls.

Collected flags will be given to the Boy Scouts who will dispose of them properly in a retirement ceremony.

At 8:30 I will have two drawings to give a new flag to a child under twelve and a flag to an adult.  Must be present to enter but not to win!

Come to Bixby Knolls on the evening of July 1^st, stroll Atlantic Avenue enjoying the local establishments and shops and see us at The Expo where you can turn in your flag that has perhaps become a bit worn out waving in the breeze representing liberty and freedom. 

Question of the week:  Can the buyer pay any closing costs for the seller in a transaction?

Answer:  Yes, no, maybe.  Whereby all mortgage products have allowances for sellers to pay closing costs for buyers, this is not the case with buyers paying any costs for sellers.

This situation, buyers paying fees or costs for sellers, has become an issue mainly for transactions in which the sale is a short-sale and the seller does have the funds, or does not want to pay the funds, necessary to cure back taxes, HOA dues, pay down a second mortgage, pay for a short-sale coordinator.  In many transactions the servicer of the existing mortgage that is being short-sold will approve a transaction but cut fees to be paid, or deny the fees to be paid from the seller’s account as it impacts the amount of money the lender will ultimately collect through the short-sale.  This short-sale process can be shortsighted by the lender as it puts in jeopardy closing the short-sale and the lender losing perhaps $35,000 and instead losing perhaps $100,000 if it has to go through the foreclosure process all over $3-5,000 in back taxes or other fees.  Nevertheless I am not going to be the first to accuse lenders’ distress/workout departments of being visionary geniuses.

No.  If the transaction is being financed with a FHA mortgage the buyer can pay no fees for the seller.  Any fees traditionally charged to sellers must be paid by the sellers or third parties or other parties to the transaction who are not the buyer.

Yes, with a maybe.  Fannie Mae does allow for the buyer to pay for costs/fees traditionally paid for by the seller, or the seller’s back fees owed for taxes, etc.  If a short sale the servicer of the existing loan on the property must acknowledge the fees being paid by the borrower and have the option of renegotiating the amount it will accept for final payoff.  If the borrower is paying fees for the seller the funds must be verified as part of the full asset verification to ensure there are enough funds to close the transaction.

Freddie Mac allows the buyer to pay seller fees, however it is considered a concession and the amount being paid by the borrower is reduced from the sales price—a net no gain for the servicer subject to the short-sale.

Maybe?  Many lenders have overlays on this issue that require the borrower, seller and servicer subject of the short-sale to sign agreements acknowledging the fees paid by the buyer for the seller.  Because this form is from another lender most servicers will not sign the required form from the new lender.  This creates a major problem when it comes time to close as the borrower’s lender will not close without their form being signed and the seller’s lender will not sign the form.

If you are negotiating a transaction, especially a short-sale, and there is a gap between sales price, total fees owed and what the seller’s servicer will agree to accept as part of the short-sale make sure you include the new lender on all negotiations to ensure final accounting of who is paying what fees will be acceptable and enable your transaction to close.

Oh, and this is all predicated on the appraisal coming in at the agreed upon sales price and there not being a need to renegotiate the sales price lower….

Have a question for me?  Ask me!

A reminder, you can check My Blog daily, or follow me on Twitter (dcslb) or my new Stratis Financial Facebook page which you can “like.”

This week’s blog postings:

Mortgage One Point Oh  This posting was an announcement for real estate professionals on a seminar I will be giving in the next couple of weeks.  Mortgage 1.0 will cover most of the basics of the mortgage process and types of mortgages and other information that will greatly benefit newer agents and refresh the knowledge more experienced agents already have.  With all the changes in the industry the last few years Mortgage 1.0 will help anyone in the real estate industry better communicate with clients and prospects.  If you are interested email me

May Sees Drop In Existing Home Sales  Sound familiar?  Look at NAR’s release and quite a prediction from NAR’s chief economist.

Quadruple Whammy Helps Rates  Yesterday was pretty amazing in the quantity of news that had significant impact on rates, both short and long term.

After last week’s little blip up and continued up-blipping earlier in the week rates saw dramatic improvement yesterday (see blog post for reasons) and the improvement continued today.  Besides our own economic struggles, Europe is coming back to hit our stock markets and benefit our bond markets (and improve rates).  Greece may have its bailout, depending on Tuesday’s vote in the Hellenic Parliament.  The vote is to dramatically slash spending and make major reforms to Greece’s public spending and pensions.  A “Neh” vote gets them the money, a “Ohkee” votes results in no bailout and major, major problems not only for Greece but the Euro and European banks.  (If you ever travel to Greece it is important to note that in Greek “yes” sounds like “no” or “nay” and “no” sounds like “okay.”)

But Greece is not alone.  Capturing the attention of investors today is Italy which has been moving towards its own Greek Tragedy of fiscal crisis.  Friday morning several Italian banks’ shares plummeted on concerns they would not meet financial stress tests next month.  This sudden drop in share values resulted in the suspension of the banks.  This caused a huge drop in the Euro, and uptick in the strength of the dollar, and money pouring once again from stocks and into bonds. 

Bad economic news is good mortgage rate news.  Only two events will cause a significant increase in interest rates in the near future: 1) several good pieces of economic news one on top of the other 2) U.S. Treasury defaulting on any bond payments—the soonest this could happen is August.

Rates for Friday June 24, 2011: With yesterday’s big rally in the Mortgage Backed Securities markets and continued positive movement today rates are lower today than last Friday.  Conforming rates are at their lowest level since Thanksgiving.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS*

30 year conforming                               4.25%               Down 0.071%

30 year high-balance conforming           4.375%             Down 0.095%

30 year FHA                                         4.033%             Down 0.103%

30 year FHA jumbo                              4.173%             Down 0.047%

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. 

* Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment with an impound account for taxes and insurance and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected.  Numbers provided are for comparative purposes only.

If you are in the Long Beach or Southern California area please make plans to head to Bixby Knolls next Friday for the wonderful First Fridays festivities.  Have dinner at one of the many great restaurants, enjoy a beer or glass of wine, and stop by to see me at The Expo. 

Have a great week,

Dennis