Dennis' Mortgage Blog

Thanks to everyone who participated in our Flag Retirement event last week, a great response from our community:  www.DennisCSmith.com/FlagRetirement for details.

Question of the week:  I have a client who has gold, physical gold not gold certificates, and wants to use it for down payment and closing costs to purchase a home.  Can he do this?

Answer:  This is a great question posed by Marilyn Shasha from Main Street Realtors during a presentation we were giving to the office (agents if you would like a very informative speaker for your office meetings please contact me!).  The answer seems like it should be “yes use your gold!” But what seems to be is not always what is.

In days gone by we would routinely would use collections or personal non-cash assets for funds to close, every now and then as an exchange with the seller for credit towards down payment, but more frequently converting to cash for down payment and closing costs.  Baseball cards, jazz records, boats are just some of the assets clients have sold that we then used the funds to purchase their new home.

Today the conversion of non-cash assets to cash for closing is a bit trickier as underwriters want to make sure that the client owns the asset in many cases.  At a minimum to convert his gold to funds in his bank account Ms. Shasha’s client will have to provide: Bill of sale from an authorized gold dealer (can be located on the internet through a google search or with a website) that shows the amount of gold purchased, seller’s name is same as our client’s, the amount paid for the gold.  Client will then need to provide a copy of the check from the authorized dealer and evidence check was deposited into his account, i.e. a deposit slip.

That is the minimum which some lenders will allow.  In doing my investigations other lenders want the client to somehow establish proof that he is the rightful owner of the gold and has been for at least the 60 days/2 months minimum requirement that is also used to establish seasoning of funds for all applicants.  This would entail providing bills of sale for when the gold was purchased and for how much and then matching the amount sold to convert to cash for the purchase using the same procedures as above.

Or given that Fannie Mae/Freddie Mac and FHA have basic two month seasoning requirements for funds in bank accounts have the client convert the gold, or other asset, and deposit the proceeds into his primary bank account at least two statement cycles before he begins his purchase transaction.  This will season the funds by not having them show on the two months statements or on the 60 day average verification of deposit.

If you, or your client, are counting on converting non-liquid assets to cash for a transaction please contact me before any conversion so I can walk through the process step-by-step to ensure the funds are eligible for the transaction and we are able to close smoothly and on time.

Great question Marilyn, thanks!

Have a question for me?  Ask me!

This week’s blog postings:

No new postings this week, short week with a special day thrown in.

Please give me your feedback as to what you want to see or read to increase your knowledge and awareness!

Mortgage 1.0 Update: Real estate agents I have scheduled a seminar/workshop to cover fundamental aspects of the mortgage industry from products to qualifying to process to underwriting.  The session will be on Thursday July 14^th from 9:30 to 11:00 in our office.  Please contact me to reserve your spot for this informational and valuable session that will enhance your communication with buyers and sellers.  Limited spaces available and I need your RSVP to ensure I have enough materials.  Contact me today!

The chart says it all.  After getting pummeled for about two weeks Mortgage Backed Securities (MBS) had a major improvement this morning erasing seven trading days of losses. (Remember down prices—red, mean up rates; up prices—green, mean down rates) Why?  For regular readers I will let you guess and see if you are right, what is the one word I have been writing again and again that has impacted rates and the economy?

Did you say……jobs?  Pat yourself on the back and grab a candy bar as a prize.  Jobs.  Or rather the lack of jobs, sent stocks plummeting and pulled rates down with them.  June’s job data came out today and the numbers were bad enough to bring President Obama out to the Rose Garden to make a brief statement on the data to try to…try to….I’m not sure what the purpose of his remarks were as I didn’t hear much except a litany of measures Congress can pass that would help jobs.  Many of the measures by the way seem to contradict his other statements and preferred policy, such as extending the current tax rates to create jobs.

9.2% 18,000. Those are the significant numbers.  The unemployment rate in June rose to 9.2%, the highest since December 2010, with 14.1 million Americans who want a job but can’t get one.  The economy added 18,000 non-farm workers last month, and to exacerbate the news the job gains in May and April were revised downward a total of 44,000 jobs.  The private sector, which is where job growth is most necessary for any sustained recovery, added only 57,000 jobs in June, local and state governments shed 39,000 employees.

Something isn’t working.  Since the passing of the American Recovery and Reinvestment Act (aka The Stimulus) of approximately $800 billion in February 2009 the Federal Government has racked up approximately $3 trillion in deficit spending, that is beyond spending covered by revenues, the Federal Reserve has pumped approximately $3 trillion more into the economy through purchasing MBS, QE1 and QE2 and private companies and corporations are sitting on over $3 trillion in cash on their balance sheets.  It seems all the extra money being poured out of Washington to help create jobs and move the economy has only increase stock prices and allowed companies to stockpile cash.  Cash that will remain stockpiled until the CEOs and CFOs, and more importantly Mom and Pop who own most of the businesses that employ most of the people, have some certainty as to the what their business costs, including taxes, will be in the coming few years.

All this as a backdrop for the much publicized and commented upon negotiations between the White House and Congress on budget cuts and raising the nation’s debt limit.  Interesting talks and leaks to the media, especially since today marks 800 days since the Senate has passed a budget.  And we pay them to do…?

Rates for Friday July 8, 2011: Today’s market rebound has seen big improvement in conforming rates from last Friday and slight improvement for FHA.  Market is reacting to domestic economic fundamentals and not foreign debt crises, if future reactions continue to follow domestic issues we should see rates continue to drop unless Washington can pull several hundred thousand jobs out of the hat in the near future.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS*

30 year conforming                               4.375%             Down 0.125%

30 year high-balance conforming           4.50%               Down 0.25%

30 year FHA                                         4.157%             Down 0.044%

30 year FHA jumbo                              4.213%             Down 0.076%

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.

As America celebrated its birthday and Declaration of Independence from the colonial rule of Great Britain this week, so too did I celebrate a birthday and independence from the womb.  On Tuesday as I took the first of 365 steps into my 50^th year to wind up a half century, Leslie and the girls Dadnapped me to Universal Studios for the day and evening.  For those, who like me prior to Tuesday, have never been it is a fun day and quite the bargain for SoCal residents as a one day pass is the same price as an annual pass with minimal blackout dates and your pass is good for discounts in the park and at restaurants on City Walk (we were able to take 20% at the Hard Rock Café!).

 Birthdays aren’t so bad, studies show that those who live a long time have a lot of them!

Have a great weekend, call me if I can be of assistance.

Dennis