Real Estate & Relocation ^ Colorado

Homebuyers find alternatives with Colorado Housing Finance Authority

Homebuyers are finding their pot of gold at CHFA

Industry news in the finance sector has been scary to say the least.  Home buyers are finding themselves with less and less options each passing day.  One steady financing resource for purchase funds in  Colorado is CHFA.

I received an excellent email from Mark Afman a Senior Loan  Consultant with Universal Lending explaining CHFA's offerings.  Mark has given me permission to post his email:

CHFA is a non-profit investor that sells tax free municipal bonds to fund their loans and is there specifically to help low to middle income buyers into homes. They allow FHA and conforming loan programs to be funded through CHFA. The CHFA program is the antidote for the predatory lending practices that are now under so much scrutiny. CHFA sets the Interest rate so a lender could not charge a higher interest rate even if they wanted to and CHFA caps the closing fees that a lender can charge so CHFA is considered a loan program that protects home buyers.

There are 4 programs that CHFA offers. All programs require the buyer to attend a CHFA approved, free first time buyers education course.

1) MRB First Step: This is the program for first time buyers (someone that has not had an ownership interest in a home for at least three years). This is a 30 year fixed loan. There are income limits, for example a 2 person family can not make more then $71,400 a year. There are also purchase limits, for example in the Denver Metro area, the limit is $365,100. CHFA also offers a 3% "Silent 2nd" for down payment assistance. This 2nd mortgage has no interest or payments due for the life of the loan but is is a lien against the property so when the buyer is done with it they have to give it back. So if the buyer sells the property, refinances the mortgage, or lives there for 30 years, the original 3% must be paid back to CHFA. This effectively offers the buyer 100% financing. However, if a buyer uses the CHFA 2nd mortgage for down payment assistance, the interest rate on the 1st mortgage will be 1/4% higher then if they bring their own 3% down payment. The buyer is required to put in a minimum of $1,000 in to the transaction. The interest rates are set by CHFA at an affordable level usually below the normal prevailing market rates. They also cap the amount of closing costs a lender can charge at $600 plus a 1% origination fee. For current rates and information on the training, etc. go to www.CHFAinfo.com

2) Taxable Home Opener: This program is very similar to the MRB First Step program but it allows for non-first time buyers to use the CHFA advantages. The income limits are higher, for example, a 2 person household needs to be under $82,100 and there are no purchase limitations. The rates are about 3/8% higher on the Taxable Home Opener program then the MRB First Step rates but it offers a safe 100% financing option to those that do not have a down payment saved up.

3) HomeStretch: This is a new CHFA program for buyers that may need help keeping their payments lower. It is a 40 year fixed loan and has lender paid mortgage insurance, unlike the other 2 programs. The rates are higher by about 7/8% but with the combination of a longer term and no MI, the payments are generally lower. This program also allows for non-first time buyers to use it. It can also be used for refinancing. This program also allows for Involuntary Unemployment Insurance which pays up to $1500 a month against the mortgage payment for up to 6 months.

4) Home Access: This program is specifically for buyers that have a disability or the parents of a child with a disability. This is for low income, first time buyers. You can find more information at CHFA.

Looking to Denver real estate?  Call me! (303-589-2022)  Need to finance a home?  Call Mark Afman 303-759-7392.

Thanks Mark!  We all appreciate your sharing this excellent advice.

Primal Scream Catch 22

Denver Relocation Tips

Moving to a new area brings horrors of it's own. The biggest horror of all is having a Catch 22 problem you cannot solve.

The most common problem I see is when the transferee packs up all his belongings. As the moving van pulls away from the curb the Denver lender calls, asking for documentation for the new loan.

No problem the transferee says, I'll fax it to you, then he remembers...

OH NO! It's packed away in the truck!

What happens now? The moving van does not arrive until next week sometime, just after closing.

But closing can't occur until there is a loan. The loan won't occur until there the documents are delivered.

What a predicament.

The solution? Get your loan in place before you pack.  Separate all your important back up data from the items to be moved. Keep them with you, this might even mean HIDING them from the moving guys, who have been known to be extra efficient in packing!

This Denver Relocation Tip works in every part of the country whether you are buying Denver Real Estate or not!

(Photo of Norway's most famous painter, Edvard Munch's emotional Primal Scream. Painted in th 17th Century were obviously the artist experienced a distraught moment in relocation!)

Mortgage broker screws up...

Some clients of mine have  moved away.  They closed on their home last week after a traumatic few weeks of house hunting.  The story I am about to tell is real.  The names will not be mentioned, but the facts are the facts.  Take them for what they are worth.

They bought a very expensive home, the day before closing they learned the out of state mortgage broker neglected to tell them (probably because he didn't know) there was a "LUXURY TRANSFER TAX" of 1% and several thousand dollars of fees he forgot to list in the good faith estimate.

1% doesn't sound like much, but in this instance it all added up to $26,000!  OUCH!

At the last minute they were calling family for a quick loan.  Yes, they had the funds, but just couldn't access them by the next day.

Everyone makes mistakes, but why is it that mortgage brokers seems to make them more often?

Once again I must repeat, real estate is local.  When you are moving from one area to the next, never assume things are just like they are back home.  Chances are you will be wrong.

Why blame it on the out of state/area mortgage broker?  Well had they used a LOCAL mortgage banker, that person would have been more likely to be familiar with the local custom (the 1% tax was a STATE law!).  It would have come up much sooner than the day before closing.

Using an out of area lender is always risky.  Mortgage brokers often are licensed to do business in many states.  More states than they could ever possibly know all the rules and regs.  To  most, it's a crap shoot, they win some they lose some.  Mortgage brokers have NO VESTED interest in the consumer or getting the job done right. They  take applications and send them off to  investors and mortgage BANKERS to  process. This means they do not control the process, even though they tell you they do. (that's another blog)

Why do I say that?  Well time and time again mortgage brokers have ignored important dates in the Colorado approved contract.  Dates that if missed could possibly mean the buyer would lose every penny of their hard earned earnest money.

The person held responsible is the real estate agent.  The agent is required by law to represent the best interest of the buyer so he does.  But when it comes to the mortgage broker who is responsible for meeting the dates and delivering the money, they have no fiduciary to the buyer.  In fact many mortgage brokers refuse to even speak to the buyer's agent.

So the agent is left in the dark, writing extension after extension to be sure the buyer is covered. 

The best strategy for a consumer is to use a tried and true mortgage banker who lives and works in the area.  Don't rely on some friendly voice in a faraway state to handle the transaction.  Go with a professional who knows what they are doing and can advise you from the beginning.

As my daughter quipped, "You don't want to be a casualty at their first rodeo!"

A few words on money management

A few rotten apples...

Remember the famous saying, "A few rotten apples, spoils the bunch?"  Well the saying holds true for more than just apples.  In Colorado like much of the US, we have had our share of "predatory lenders." 

Predatory lenders are the bad actors who come out and tell people less than the whole truth and nothing but the truth.  They give loans to people who have no business getting a loan.

Yuck. They make me ill.

Now the Department of Regulatory Agencies, Division of Real Estate has issued a position statement on Tuesday, July 3rd with respect to House Bill Section 12-61-904.5 (1)(b) C.R.S., requires mortgage brokers to make a "reasonable inquiry" concerning the borrower's current and prospective income, existing debts and other obligations. The Division of Real Estate does not prohibit specific mortgage products or documentation types.  Rather, the Division views this provision as a responsibility of the mortgage broker to recommend appropriate products.  Mortgage brokers may only recommend appropriate products "after reasonable inquiry has been made in order to understand borrower's current and prospective financial status."

As a result most major investors, including GMAC, Wells Fargo and others, have translated that a "reasonable inquiry" cannot be determined on documentation types in which the borrower's income is omitted from the application. As of immediately there will no more "no stated income loans."  Additionally lenders are suspending funding of certain documentation types with buyers who are currently under contract.

How many contracts will fail?

No income loans are nothing new nor are they all bad.  There are good people who use no income loans who actually should be allowed to do so.  Thanks to the bad apples in the bunch the good will get thrown out with the bad.  Sellers who thought their homes were sold, will be finding out otherwise very soon.  Hopefully the buyers will be able to rewrite the loans and close as planned.

The legislature is acting in a response to years of abuse by bad mortgage brokers and  some irresponsible  borrowers.  Some were genuinely  wronged, but many knew exactly what they were doing. They cheated the system, now the  rest of us have to pay.

Bandaids are only good for scraped knees.

Colorado mortgage brokers will now have to register with the state in order to do business.  This registration is not a proficiency test, it's a background check.  Well that's good, we can eliminate the really bad apples with criminal records etc. but who's to say they actually know how to prepare a loan?  Do they subscribe to a code of ethics? Do they use reasonable skill and care protecting the borrower's personal information?

The next question is, "Will Mortgage Brokers be Responsible for Predicting the Future?"

Making a reasonable inquiry into a borrowers debts, obligations and income should be part of the process of preparing a loan to a borrow.  But I must ask the question, if this is now law, what if the mortgage officer makes a loan to a borrower that defaults?  Is this mortgage broker at fault too?  Can the borrowers come back and sue the mortgage broker for giving him the loan he asked for?  Somehow this just doesn't seem right.

The Bad Apples Change the System, we all lose.

So at the present moment there are honest buyers and sellers scrambling to keep a deal together.  There are honest, career-minded mortgage brokers considering changing a career because of the undue risk.  Then there are the bad apples out there rotting and smelling and going about their business as usual.

What is the solution?

Out of area lenders

Jim Duncan Realtor in Central Virginia has a good blog, reflecting my feelings of Out of State Lenders....

Rate Shopping?

Here's the inside scoop on how to do it right...

Buyers looking to finance homes are easy prey for non-discriminating lenders who look to confuse buyers in order to make a profit.  In Colorado Lenders are not licensed, nor do they have educational standards. Good advice to follow when looking for someone to finance your home is to learn as much as you can about the process and what you are doing.  A professional lender who has a long-term track record of providing solid advice and who explains the process in a manner you can understand is your best choice.

Finding a home loan is easy, finding the BEST home loan may take some footwork on your part.  How do you decide?  The following questions are typical questions  you should ask your prospective lender.  The answers should help you decide if your choice is a good one.

Financing is more than just getting a good rate.   

1. What are mortgage interest rates based on? ~ The correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note.  While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, they can move in completely opposite directions.  DO NOT work with a lender who has their eyes on the wrong indicators.
2. What is the next Economic Report or event that could cause interest rate movement? ~ A professional lender will have this at their fingertips.  For an up-to-date calender of weekly economic reports and events that may cause rates to fluctuate, visit this site.
3. When Bernanke and the Fed "change rates," what does this mean and what impact does this have on mortgage interest rates? The answer may surprise you.  When the Fed  makes a move, they can change a rate called the "Fed Funds Rate" or "Discount Rate." These are both very short-term rates that impact credit cards, Home Equity credit lines, auto loans, ARMS and the like.  On the day of the Fed move, long-term Mortgage rates most often will actually move in the opposite direction as the Fed change.  This is due to the dynamics within the financial markets in response to inflation.
4. Do you have access to live, real time, mortgage bond quotes? If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone w ho is still reading yesterday's newspaper, and probably not a professional with whom to entrust your home mortgage financing.  Would you work with a stockbroker who is only able to grab yesterday's paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market condition could cause changes in the near future?

Interest rates

Has anybody noticed the interest rate dropped down a bit.  A 30-year fixed is at 6.125% with a jumbo at 6.375%.

If you are sitting on the fence...now may be the time. 

We've got the inventory!

Special Programs for Financing a Home

If you are or know of someone who is a Teacher or Police Officer, you need to be aware of some very special programs that may save thousands of dollars!

The Teacher Next Door/Officer Next Door are HUD-sponsored programs allowing qualified buyers the ability to purchase designated HUD properties at 50% off the purchase price.  Buyers are allowed to finance up to 15% more to include closing costs, commissions and capital repairs.

If the borrower fits all the requirements, these programs can benefit them greatly.  For additional information you can get all the facts here.

Denver real estate and relocation

Financing Follies

One of my pet peaves is listening to the advertisements on the radio or tv.  The ads for home loans are not always straightforward, actually they are down right misleading.  The consumer is beakoned to call a specific lender because they "don't charge closing fees". 

Sure.

Actually the probably don't charge closing fees.  They charge, but they just call the fee by another name.

Consumers only hear the interest rate and think it's a good deal.  The reality is, the consumer needs to know the whole story.  Ask for a "good faith estimate". 

If the consumer decides to go with a lender, they should insist that the lender provide them with a GUARANTEE that the lender will deliver that interest rate in time for the consumer's loan committment date.  It the lender cannot deliver it, the lender will reimburse the consumer's earnest money.  This lender guarantee should be in writing.   If the lender doesn't want to provide a guarantee, then the consumer should find a lender that will.

Unfortunately lenders have absolutely no fiduciary to the consumer.  They can tell them ....whatever and walk away.  It's the consumer that loses.

OF course I must qualify the previous statement, the consumer does have a responsibilty not to change their finacial position after the loan application.  By that I mean, the consumer should not be out charging new furniture or buying boats and cars, etc. 

:)

Braking an ARM's Grip

Breaking an ARM's Grip - Those who took out adjustable-rate mortgages (ARMs) when rates were at record lows are now looking for ways out.