Meet Allan Ayres - Photographer for MN's Gallery Show 10/16

With the first day of Autumn past us, MN is gearing up for our Fall Gallery Opening featuring the work of local photographer Allan Ayres. The reception and opening is October 16th from 6-8pm at our Rockridge office. You can RSVP for the event HERE and read more about the artist at allanayres.com

Market Turmoil...Settle Into Your Seats

Recently, I received a great email description explaining the frailty of our current economy. Written by branch owner Chet Gohd, I wanted to pass it along to our blog readers.

First of all, the mortgage market did not close down today nor is it likely to in the future. The ups and downs of the US stock markets do not directly dictate what happens in the Mortgage Loan market. They do, however, relate more closely to a) the pricing (rate) the loan is offered and b) what happens after the loan has been funded, our clients have moved in and are making their initial payments. The fact that a huge investment bank (Lehman) went into bankruptcy and one of the largest financial services organizations (AIG) needed rescue by the US Treasury, DO have an impact and please see below for an explanation. Please keep in mind that I will start out simply and proceed with more complexity.

Mortgage loans allow people like you and I to borrow a portion of the purchase price in buying Real Estate. In exchange for that loan, the borrower agrees to pay back the loan with interest. That interest is the return on the money that the lender used to give the loan. Hopefully, all of you are still with me. Now, the lender who made the loan, will package that loan up with other loans like it and sell them as an investment to companies like Fannie mae and Freddie Mac. I’ll use Fannie in our examples to keep it simple. Fannie pays the lender for the loan they gave the borrower thus giving the lender that amount to re-loan to another borrower who wants to buy a house. Fannie mae continues to do this in a very big way on a daily basis. They keep close track of the performance of these loans in making sure that the borrower makes their payments on time(servicing). The servicer also makes money in this process for keeping track of the payments.

Okay, assuming that you’re still with me, this is where it gets more complex. The banks in our world are the ones who make the loan initially. They make the loan figuring that fannie mae will buy it very quickly. They make the loan because that’s what they do with the money you keep there in your checking and savings account. Well, when they need to do something else with that money, such as keep it in reserve so that they meet the government’s guidelines which require them to do so to stay in business, they then have less money to use for loans like our example. This causes a problem which has an impact on that lender’s ability to make mortgage loans. So, this leads to a place where realistically, the only loans being done are from the lenders with available money to loan and that do the loans EXACTLY the way they need to be so that they will be purchased by Fannie Mae. This is the primary reason that many of you are delayed in your escrows do to appraisal reviews or a need for additional documentation. I’ve taken over loans recently where the borrower thought they had a loan and it turned out that the bank misinformed them along the way. Unfortunately, the lending world is tightening as result of a strain and anxiety in our financial system and the increasing challenge for banks to maintain adequate levels of assets. In addition, there is the present fear by the investors that the loans will not be paid back on time.

As for today, we have a tale of 3 markets. The market for loans up to $417k is a normal market. Loans from $417,001 to $729,750, the loans must meet specific guidelines but in exchange, the rates are looking very favorable. For loans above $729,750, it’s a different ballgame with rates at least 1-2% higher than the lower amounts. As time goes forward, you need to remember a few things:

1) The current loans from $417,001 up to $729,750 will be going away after 12/31 and we’ll have a new limit of $625k in our market.

2) You will see the rates for investment loans go higher and require more down payments due their poor performance.

3) You will see lenders closer scrutinize the property and its value.

4) You will see a decrease in the number of mortgage brokers who are able to survive in that format.

5) You will see rates moderate at these low levels over the short term and then go higher.

From me, you can count on the following;

6) I will continue to provide you with the same credible and honest information which you’ve come to expect from me.

7) I will continue to do the best I can for you and your clients and deliver on my commitments.

8) I will tell you and your clients if obtaining financing is not possible and point out actions that can be taken to make it more possible.

9) I will be approved to do FHA and government loans within a month to widen the product offerings of my practice thus increasing my ability to help you.

As always, I hope that this is helpful and I invite you to pass the information along to your colleagues, clients and friends should you think it helpful.

Out & About in Rockridge Event

The first day of Autumn has arrived and with it so has the 2nd Annual Out & About in Rockridge festival! Live music, food and local artisans will line College Avenue from 11AM-6PM. You can find more info at www.rockridgeoutandabout.com see you there!

How To Buy From Sinking Homeowners

In the current Bay Area real estate market there are opportunities to be had as well as pitfalls to avoid. Bankrate.com created an interesting article regarding how to purchase from these current homeowners who might be feeling the market softening more than others. This article is by no means tailored for the Bay Area, but provides some overview to the terms being thrown around by the media and water coolers. Click HERE for the article and for an even better description of local market conditions contact the Maison Nouveau office.

How the Fannie Mae & Freddie Mac Takeover Affects You

The feds want mortgages to remain available at good rates to credit-worthy borrowers. That's good news. But don't expect easier jumbo mortgages or home equity loans. The government takeover of Fannie Mae and Freddie Mac is designed to put downward pressure on mortgage rates and to ensure that home loans remain available. For the full article click HERE.