Mortgage Blog

HVCC, HERA, and New TIL Regulation -- ZT

August 7th, 2009 12:28 PM by Eric Fang

This is the post from another mortgage professional. I agree with most his opinion.


Here's my dirty, little secret: HVCC is working out well for me!

I have NO control over the appraisal process so REALTORs can't badger me like they have in the past. No more double-apps and borrowers pay closer attention to  mortgage rates. I'm no longer the "market-maker",  I'm a consumer advocate.

New TILA disclosures?  I embrace them.  I don't tell consumers that their closing is going to be delayed, I inform them that it MIGHT be delayed if  they don't sign and return the loan disclosures in a timely matter.  I get to cite transparency and consumer protection as my compass.

How about the fact that Bank of America makes mortgage brokers use that a prior negotiated mortgage brokerage fee agreement?  I swiped that sucker and use it on every loan, regardless of the lender. 

I use transparency as a weapon against the banks.  I walk into a bank branch and snap a picture of their mortgage rates, on the lobby sign.  I e-mail that picture with a copy of the wholesale rate sheets (from the same bank), and SHOW THE CUSTOMER HOW MUCH "SECRET PROFIT" THE BANK IS MAKING ON ITS MORTGAGES. I explain how yield spread premium can lower the portion of the mortgage brokerage fee they pay me.  Sometimes, I lock the loan with the same bank and laugh along with the customer. 

Customers think of me as the guerrilla mortgage guy, sneaking behind enemy lines, to win the war for them.

Customers love you when they know you're working on their behalf.  HVCC helps them get a fair appraisal without undue influence.  Early TILA disclosures, disclosed with a written lock-in agreement, and upfront mortgage brokerage fee agreements tells them you have nothing to hide.  Why would you hide ? You're a hero, helping your customer navigate the murky maze the big banks legislated.

Get out of your own way and get on the customer's side. Stop fighting the Goverment and the big banks; use their strength against them... like a Guerrilla Warrior.


The Rate Lock is not Free.

August 31st, 2009 8:22 PM by Eric Fang

Some clients asked whther the rate locks from the lender are free or not. Here is the explanation.

It's not free for the lenders. For each rate lock, the lender will pay certain fees to get the loan locks. There are a lot of parties involved to prepare the loan closing, financial department to secure the funds from the investor with costs, the underwriting team does not do it free either(whether they have their own UW team or out-sourcing to subcontractors).

It's not free for the brokers either. We will be penalized if we deliver less than 80% of the loans we locked. We will either get kicked out or the lender will get us the worse rate(compared those who have a better pull-through ratio).

And worse yet, sometimes when we can lock the "mandatory delivery"(We promise the lender that we will close the loan no matter what), we do get better rate for the clients, but the lender do penalize the broker if we don't close(We have to pay the lender money from our pocket).

So try your best to close your loan if you get the rate you planned to have.

I got the following from my favoriate National Mortgage News Column Writer Paul Muolo:

I have horrible news for all of you: the housing industry
is about to fall off the cliff again. How do I know?
Because CNBC's stock picker James Cramer wrote a column
this past week entitled "Housing Is Back, Despite Media's

As you well know whatever Mr. Cramer thinks/suggests
the opposite happens. Who knows, maybe he's right this
time. But what really drives housing? Answer: Employment.

This past week a University of Michigan report said U.S.
consumer confidence fell to its lowest in four months
in August on worries of - you guessed it - high unemployment
and dismal personal finances.

Why we change the rates a few times everyday?

August 27th, 2009 11:53 AM by Eric Fang

The market fluctuates because of the bond auction and the stock market tradings. The most important thing is that the bond market is also trying to find its support and the direction, though there are huge resistance at the current level.

The demand for 7 yr Note auction is still strong. That's a good sign for the lower rate in the future after the base is built.

There is a Berlin wall between 4.875% and 5%(30 Yr fixed)

August 26th, 2009 10:34 AM by Eric Fang

There are so many inquiries about when we will see the 4.875%(no cost 30 yr fixed) rates again. Though we have the rate 5% with impound or CLTV <=60%, we are still far away from the rate 4.875%.

The above rate of 5% was tested a few times recently. And we need to break this "Berlin Wall" to get lower rate first and if gets confirmed, we will be in a lower rate range.

Hopefully these days are not futher away. I still belive we will have it in October. The earlier the better.

Portability of Appraisals

August 23rd, 2009 10:59 PM by Eric Fang

After the implementation of HVCC, the lenders are now accepting the appraisals ordered by other lenders which complies the HVCC. Though the new lenders will accept the appraisal report, the old lender will ask the appraiser why the borrowers want to switch the lenders. So it's still kinda hard to switch the lenders at this moment.

Economy Events for the week of August 24th

August 23rd, 2009 10:48 PM by Eric Fang

The release of August's Consumer Confidence Index (CCI).
This index measures consumer sentiment about their own
financial situations, giving us a measurement of
willingness to spend. That is important because
consumer spending makes up two thirds of the U.S.
economy. It is expected to show a reading of 48.0 ,
which would be an increase from July's 46.6.
Any weakness will drive the rates lower.

July's Durable Goods Orders & July's New Home Sales data.
The Durable Goods Orders data tracks orders at U.S.
factories for big-ticket items, or products that are
expected to last three or more years.

Also, there is a 5-year Note Auction on Wednesday.

Release of 2nd Quarter GDP & Auction of 7-year Note.

Overall, we will likely see the most activity in rates
Tuesday morning, but Wednesday and Thursday are also
important. If we manage to get weaker than expected
results in the key reports and the auctions go well,
we should see mortgage rates close the week lower
than Monday's opening levels. But stronger than expected
results in the economic reports and disappointing results
in the Treasury sales will most likely lead to rates
moving higher this week.

Open Interest in Bonds push the rates lower

August 20th, 2009 9:33 PM by Eric Fang

We are at the lowest level since May 27th, the "black wednesday" move the rate 0.5% higher. We indeed have some good rates, like 5% for 30 yr fixed, 4.5% for 15 yr fixed, etc(all for no closing cost) and some good rates for ARM.

I know some agents also advertise for 4.25% for 5/1ARM (Loan<=729k). The is the rate for 7 day lock, or 15 daylock. I won't over-commitment. From my opinion, the rate may go slightly lower from here, but most likely it will bounce up before it's going lower futher.

The reason is very simple. The lender has pipeline management issue. For the past week, when the rate at the two months low, there are huge interest for the loan locks. Once the pipeline is full(or close to full), the lenders will hike the rate to protect the locks and profits.

Bond trades like any other secutities. There are some resistance at the current level. Once the break confirmed, the rate will go lower. But we are not at that level yet. So the rates will be traded at ranges for now.

The rate may go lower Friday, but it's hard to tell the next week. One exception: the weak stock market will push the rate lower.

Have a good weekend.

One easy way is to get the HELOC from the bank, and refinance the property 6 month later. It's doable for primary house. For rental property, there is a limit for the HELOC line. Check with the banks or credit unions when you do need the cash-out.

My Monthly August News Letter Was Out

August 18th, 2009 10:07 PM by Eric Fang

Cash-out Refi for the property just purchased

August 13th, 2009 10:36 PM by Eric Fang

According to Fannie Mae guideline, you will have to wait for 6 months for refinance(to get conventional loans; HELOC is different story). I have a few clients asked this question because of the difficulty to get the loans for various reasons. But we still have to follow this guideline for all wholesale loans. Some retail lenders or portofolio lenders may have exceptions, but the rate may be a little bit higher.

You can rate my service now

August 13th, 2009 12:14 PM by Eric Fang

Even though the rate may be the same, the service is very important in the industry. I just setup the link on my website for the opinion from my clients about my service. To submit the survey, click here. To view the survey, click here. I will request a survey to my clients after each loan closed.

Post FOMC Meeting Statement

August 12th, 2009 3:15 PM by Eric Fang

This week's FOMC meeting has adjourned with no change to key short-term interest rates. This was widely expected by market participants. The post-meeting statement really didn't give us any new insight to the Fed's next move. It did renew the same thoughts previously mentioned- that the economy is leveling off but to expect weak economic conditions for the immediate future. They also indicated that inflation is not an immediate concern to the economy.

The lack of a change to rates had no impact on trading as it was expected. The portion of the statement that indicated the spiraling economy is stabilizing can be considered somewhat negative for the bond market. However, the lack of concern about inflationary pressures offset any concerns that may have arisen from the reminder than the economic downturn is slowing.

Today's 10-year Treasury Note auction has caused some stress in bonds during after noon trading though. The sale was met with an average demand at best. The results were far from the worst we have seen but also nowhere near the recent levels of interest. This led to bond prices falling immediately after the 1:00 PM ET announcement and the FOMC meeting has done nothing to push them higher.

Overall, I am expecting to see a small upward revision to mortgage rates this afternoon. If your lender does not revise higher today, it will be built into tomorrow's pricing. Some lenders may opt to wait for tomorrow morning's key economic data to be posted before reflecting this change. If that is the case, keep in mind you already have a slight increase waiting from this afternoon's events.

This morning's only relevant economic data was June's Trade Balance report that revealed a $27.0 billion deficit. This was smaller than expected, but this data is not considered to be highly important to the markets so its impact on this morning's trading a nd mortgage rates was minimal.

Tomorrow morning's sole monthly report is July's Retail Sales data. This data is very important to the financial markets and mortgage rates because it helps us measure consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any data related to it can cause a fair amount of movement in the markets. A smaller than expected increase would indicate that consumers are spending less than previously thought, potentially slowing the economic recovery. This is good news for the bond market and mortgage rates as it eases inflation concerns and makes long-term securities such as mortgage-related bonds more attractive to investors. Current forecasts are calling for an increase of 0.7%.

A good and saver investment?

August 12th, 2009 8:47 AM by Eric Fang

I have a client calling me to ask the following question,
she has around 50k, and and she can use it either to
purchase a rental or pay down her current mortgage and refi
to get a lower rate from 6.125% to around 5.125%(he has to
pay down to be able to refinance).He needs my opinion
about the strategy.

The first question I asked: Do you like to be a landlord?
How much do you know how to be a landlord? Do you plan to
manage the property yourself or hire a property manager?
Are you a handy person?

The reason I asked this question is that even though I am
a landlord for a long time, hired some property managers before
and manage the property myself sometimes. Though I learnt
a lot about how to be a good landlord, and I still hate it.
This investment is not for everybody, especially if
you are busy.

But the refi maybe a good idea. To bring the 470k loan to 417k
with the rate reduction of 1%. It's an average of $4000(more or less)
saving a year. With the investment of 50k, the return is
around 7% to 8%, without the hassle of tenants. Is not it
a good investment?

Economic Events for the week of August 10th.

August 9th, 2009 10:58 PM by Eric Fang

This week brings us the release of six relevant economic reports
in addition to another FOMC meeting.

1)Tuesday. Employee Productivity and Costs data for the second quarter.
It will give us an indication of employee output. High levels of
productivity are believed to allow the economy to grow without
fears of inflation. It will not affect mortgage pricing too much.

2)Wednesday. June's Trade Balance report will be released;
Auction of 10-Year Notes.

3)Tuesday-Wednesday. The FOMC meeting.
It is expected to yield no change to key interest rates. Usually,
the post-meeting comments seem to have more of an influence on
the markets than the rate adjustments themselves, or a lack of
one in many cases.

4)Thursday. July's Retail Sales data& 30-Year Bnds Auction.
This data is very important to the financial markets and mortgage
rates because it helps us measure consumer spending. Since consumer
spending makes up two-thirds of the U.S. economy, any data related
to it can cause a fair amount of movement in the markets. A smaller
than expected inc rease would indicate that consumers are spending
less than previously thought, potentially slowing the economic recovery.
This is good news for the bond market and mortgage rates as it eases
inflation concerns and makes long-term securities such as mortgage-related
bonds more attractive to investors. Current forecasts are calling for
an increase of 0.7%.

5)Friday. Three Reports: July's Consumer Price Index (CPI);
Industrial Production data for July; Index of Consumer Sentiment
for August.

The review of HVCC -- 3 months after the implementation!

August 9th, 2009 9:21 AM by Eric Fang

HVCC started May 1st,2009, almost nobody(except the banks
and AMC) likes it, but we still have to embrace it.

Here is the some of the problems with this HVCC.
1)Poor Portablity.
Usually we can share the appraisal with multiple lenders.
Now, we have to decide which lender we will send the loan
before the appraisal.If we double submit, we will have to
order multiple appraisals.

The interpretation of the value is so different from the

3)Longer Turn Around Time.
We got one report three weeks after the initial order.
This make it so hard to decide when to lock the rates. It
improves a little bit now.

4)Higher Fees.
The appraisal fees are about $100 higher than we used to
pay because we have a middle man -- AMC(Appraisal Management
Company) Now.

5)Geographic Competency.
We have some bay area reports completed by Sacramento or
Merced Appraisers; San Diego appraisals completed by LA
appraisers. Those appraisers just want to make the money,
but they don't know the area; so the value is totally
different; it created a lot of disputes and angry borrowers.

6)Poor Quality.
When the appraisers are only responsible to the AMC, not
the borrowers; when the schedule is busy, and they have to
rush for a report; when they don't the area well, the
quality of the report is poor. Recently, I got a report
with the square footage 10% less than the county records
(at least they will check and measure it correctly).

Though thus many problems, we did see the improvements in
the last 3 months,and we did see bad appraisers kicked out,
and the service getting better.

But we have some other advantages.
1)No pressure of the value.
The realtor usually think the value should be higher. We
don't have the pressure of the value any more since it's

2)Cut Down the Frauds.
When the loan originators are not allowed to choose and
contact with the appraisers,the possibility of fraud is

U.S. Citizen Working Abroad are Eligible for loans Now

August 8th, 2009 11:15 AM by Eric Fang

As long as last two years tax returns provided. The lender
may need Verification of Employment and/or paystub.
Translation is needed if income documents are in foreign

We need to adjust our target

August 7th, 2009 8:37 AM by Eric Fang

I tried to convince some of the clients who could not
get the 4.875% rate(30 yr fixed for no cost) last time
to adjust the target to higher rate(like 5.0% to 5.125%).

So far only a few took my advice. With the recent news
of the economy recovery, The rate will not go to low lows
any more. So we may need to adjust our expectation
and get a low rate without missing the boat.

Is the lowest rate locked the best Rate?

August 6th, 2009 6:01 PM by Eric Fang

I sent two sets of emails out to my clients today. One email
to my current client with TBW loans, just told them that
they will receive a letter from a new bank about where to
send out the next payment. And another email to my clients
whose loan was about to close(should be closed last week),
but we did not get the funds because of the failure of the
lender Talor, Bean & Whitaker.

All those clients got the best rates, with 5/1ARM around
3.75% to 3.875% and 7/1ARM aroun 4.125%, all no closing cost.
Are those rates are good rates? Sure, they are. Those rates
are almost the lowest rates since 2000. Unfortunately, I
did not have enough time to get all of them closed(I am so

I watched the lenders closely since last year. And we
already stopped submitting loans to this lender since
beginning of July. And I hoped to close those loans asap
to avoid the blow-out. Given two more days, those loans
should be funded.

GFE for purchase

August 6th, 2009 11:40 AM by Eric Fang

I got lots of phone calls recently about the GFE. Here is
more explanation.

On 2nd page of the contract, under 4 D)Escrow and Title,
it specify who is going to pay those owner's title insurance
and escrow fees. We could not get an accurate GFE without
the contract(or we assume it's a standard contract)

My job is to let my borrower to understand not only the
rates but also the closing fees. There were cases before
that some agent under-estimate the closing cost so they
can quote lower rate (no cost loans) at the beginning and
then they told the borrower that they have to increase
the rate because the higher fees.

Please click here for the estimated closing cost(purchase) for each

One major lender TBW failed today.

August 5th, 2009 12:46 PM by Eric Fang

The lender TBW(Taylor, Bean & Whitaker Mortgage Corporation) ceased all operations today. All the loans in the pipeline(not closed) with this lender will not be closed. I am very sorry for those borrowers who trust me and submit the loans to this lender.

Taylor, Bean & Whitaker Mortgage Corporation is 12th biggest wholesale lender in USA. And this is one of the biggest bank failed this year.

Things to Know Before Buying a House

August 3rd, 2009 11:59 PM by Eric Fang

Things to Know Before Buying a House

Owning your own home is the all-American dream. For many, however, that dream never comes to fruition for one reason or another. If you’re looking into the possibility of becoming a homeowner, home here are some things to know before buying a house.

Know about your credit

The biggest problem most new homebuyers face is problems with their credit history and credit score. If there is a history of late payments or not meeting financial obligations, it’s not likely a mortgage company will loan the money needed.

To combat this potential problem, it’s best to get at least one if not all three of the major credit reports and go over them thoroughly before speaking with a mortgage broker or real estate agent. Having your report will allow you to see if there are problems, if anything has been misreported, and will give you an opportunity to explain any negative marks on your credit report.
However – there are still some programs that will allow you to obtain a mortgage with attractive rates and very little downpayment even if you have experienced some minor credit challenges. One of the best programs is the FHA program from HUD.

Check the house out

Some people may be moving from state to state. If this is the case, they may be tempted to have someone else look for a house in their new area. Trusting someone else to find a house, or trusting what is available on the internet, is risky business. It is best to always physically go to inspect any house you may be interested in.

Take care in choosing a mortgage broker

Considering how important the mortgage broker is in securing financing and how much your monthly payments will be, you’ll want a mortgage broker who is a professional. Inexperienced brokers may not give you the same quality of service as one who’s been working in the industry for years. Don’t be afraid to ask for references and then check them out.

Learn as much as you can about the neighborhood

You may find the perfect and decide it’s the one for your family. Make several trips to the neighborhood during all times of the day or night. Since agents generally only show houses when the weather is nice and during the daytime when most people aren’t home, you may not get an accurate impression of what the neighborhood is like when there are people around. Talk to potential neighbors. Pay attention to the atmosphere and notice if there are children, especially if you have them.

Do your own homework

Even though your real estate agent may have knowledge you don’t, it’s best to be familiar with housing trends in the area you’re interested in. You can find out from the county what similar houses have sold for in recent months. Having this knowledge can help you avoid paying too much for a house in the long run.

Consider buying in the winter

The housing market is usually slower during the winter months, so you may want to wait until then before looking. You may also have a better selection of homes to look at during this time of the year.

These are some things to know before buying a house. Most of all, remember to take your time when looking for a new home. You want to realize the American dream of owning a house, but you don’t want to spend more than necessary to do it.

The bottle is half empty

August 3rd, 2009 12:06 PM by Eric Fang

Encouraging economic indicators, as well as better than expected corporate earnings, proved to be major factors influencing investors to believe that the economy has already reached its lowest level. Even The Fed's Beige book, a report card on regional economic health, stated that economic decline is slowing. Still, continuously rising unemployment and rising oil prices gave some investors second thoughts on how fast the economy is recovering.

I have some clients got jobs recntly while some other lost jobs. I hope those who just recent lost jobs will focus on job hunting and will get a job soon.


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