Inside Houston Real Estate

HR 5981 has passed the house and senate and it is on its way to the presidents desk to be signed into law. What this does is allow FHA to increase its annual premiums, raising the statutory cap from 0.55 percent to 1.55 percent.  It is FHA's intention that effective on September 7, 2010, FHA’s upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortization terms greater than 15 years and possibly goes as high as 1.55 basis points. So what does all this mean; lets break it down in easy numbers

$200,000 Loan @ 5.000% - 30 year fixed

If we look at the first coloumn with todays upfront MI and the monthly MI that the consumer has to pay and compare it to what is going to happen when this bill goes into effect on September 7,2010 you can see an increase of $43 to the monthly principle and interest payment. But! it does not stop there congress has given FHA the room to push the monthly MI up as high as 1.55% as you can see in coloumn 3. So what this means is if your loan officer does not get the FHA case number before September 7,2010 your customer will be paying the new MI cost. So, those customers that you have setting on the fence you may want to let them know in less than a month there payment will increase $50 a month and could go up to $150 extra a month because of this bill.

This weekend news and the lighted signs along our Houston highways remind us not only to "click it or ticket" and "Seat belts all the time, all riders, every ride" is not only a new campaign to remind Houston area drivers to wear their seat belts but could also be kicking off the new year of seat belt laws for our children too. 

Last September a series of new laws regarding drivers and riders in Texas including laws regarding cell phone  and texting while driving as well as new laws regarding booster seat use. The law regarding booster seats gave parents a "grace period" where from Sept. 1, 2009 to June 1, 2010 parents could obtain the booster seat they needed for their children. Warnings were issued. But starting today parents will no longer receive warnings but tickets, fines and possibly even greater prosecution  for not having their children in a booster  car seat. 

What is the new child safety/booster/car seat  law in Texas? 

The Texas Department of Safety (DPS) says "safety or booster seats and safety vests must be installed according to instructions of manufacturers, including age, height, weight requirements and proper placement in the vehicle." 

Children under the age of 8 and 4 feet 9 inches should be in a properly installed booster car seat. There has been some confusion over this new law and the DPS issues this helpful guide regarding booster seat laws. 

• Once a child reaches eight (8) years old, they are not legally required to be in a child safety seat system.
• If the child is younger than eight years old, BUT they are already 4’9” tall, they are not legally required to be in a child safety seat system.
• If a child is eight years old or older, and not yet 4’9” tall, they are not legally required to be in a child safety seat system.

Fines may range from $25.00 to $250.00 for violating the booster seat law. 

Why do booster seats need to be used? 

According to DPS regular lap belts allow children to slump and during an accident they are susceptible to injuries and death that being in a booster seat may be able to avoid.  In a statement to the Houston Chronicle  State Rep. Ellen Cohen, a Houston legislator whose district includes the Texas Medical Center and who co- authored the companion bill in the Texas House, says, "In car crashes where children are restrained by only an adult seat, they are more likely to suffer severe head, spinal cord and internal injuries,” she said. “It's just that one moment that can change a person's entire life."

To find out if your child is ready to be without the booster seat use this simple test by the DPS. 

Have your child sit on the vehicle seat, sitting all the way back, with their back straight against the back of the seat, and buckle the lap/shoulder belt over them.
1. Do their legs bend naturally at the knees over the edge of the seat?
2. Does the lap portion of the belt fit low over the hips and top of their thighs?
3. Does the shoulder portion of the belt fit across the center of their chest?

(Source: DPS New Booster Seat Law Clarified) 

For children that will be "going back" to car seats with these booster seat laws consider buying backless booster seat which will raise them up to the height needed for lap belt safety. 

7 Timeless Skills for Any Real Estate Market:

The real estate profession changes every day, but the qualities you find in top-performing practitioners do not. The details may shift as technology rolls forward, yet the underlying skills are always the same. If you can master these, you'll be successful in any market.

Skill 1: Meeting New People

The simple fact is that if you never meet anyone new, you will never have anyone new to sell to. Whether you encounter them for the first time in person, online, or over the phone doesn't matter. Get one-on-one with them in a conversation about their needs, and you've at least started down the path to success. 

Skill 2: Making Personal Connections

You don't have to be the best at everything to succeed in this business. You just have to be competent and likeable.People buy from people they like. Develop the ability to connect with your clients and make them trust you, and 90 percent of your sales process is done. Want a quick way to engender trust? Tell the client something that it's not in your best interest to tell them. Show them that honestly is more important than anything to you.

Now, this doesn't mean to tell them that you got sued last week — that will make people nervous. But it could mean mentioning that the houses in another neighborhood have the same amount of space and are less expensive. They know that you get paid more if you sell them a higher-priced house. Showing them something in their best interests instead of yours makes you trustworthy.

Skill 3: Following Up on Every Lead

Follow-up is a big area where agents fail. If you aren't going to take every lead you get and work it to death, then you'll never be a top performer. Working every lead until it either closes or is clearly not a lead anymore is critical to building the solid pipeline that's required to keep your business continually producing. This means that you need a system to make sure that nothing gets dropped or forgotten. Throw away your Post-it notes; they should never be used as a place to write down a lead. All leads need to be kept in one place, and all of them need a minimum amount of information. That includes:

• The person's name
• Contact information
• What property they contacted you about (or where they came from if it wasn't from a property)
• What their timeframe is for moving
• If they're buying, selling, or both
• If they're buying, what they're looking for and in what area
• What their emotional hot buttons are (what they get excited or angry about)

If you don't have all of the information you need, don't be afraid to contact them again for more information. And once you have the information you need, continue to contact them on a regular basis to make sure they stay on track. Don't worry that you'll be bothering them—instead, worry that they would otherwise forget who you are or feel ignored by you.

Skill 4: Asking for What You Want

This is typically a big problem with real estate rookies, but you'd be surprised how many veterans forget this piece of the puzzle, too. It's not always easy, but you have to ask for things to get them. Ask for the sale. Ask for the appointment. Ask for the phone number of the person your client wants to refer.

Don't wait for people to call you, for the clients to say they're ready, or for the buyers to tell you that this is the house they want. Be direct. Ask them, "Is this the house you want to buy?" "I'll get your house on the market tomorrow if you'll sign right here." "Which is better for you: Monday at 6 p.m. or Wednesday at 3 p.m.?" "Why don't you give me your friend's number and then you don't have to think about it anymore?" All of these are great closing questions used by some of the top practitioners in the industry.

Skill 5: Setting Appropriate Expectations

Once you have the contracts signed and your clients are committed to the process, then it's all about meeting expectations. And make no mistake, there will be expectations—whether you set them or your clients do. This is why it's important to set those expectations yourself; you don't want to get blindsided by something the clients decided to expect without consulting you.

The best real estate professionals are masters at setting expectations. They know what reasonable timeframes are, and they don't make promises they can't keep. They let clients know immediately if things need to change and they set the new expectations quickly and decisively, leaving no room for the clients to wonder (and worry) what happens next. 

Skill 6: Taking Care of Details

You must treat you business like a business. This means that having a system in place to make sure that deadlines get met, appraisals are ordered, home inspection responses come in on time, appointments aren't forgotten, and problems are solved. You should even have systems to make sure that your clients—and, if you're really smart, the other side's clients—have handled all of the details that they need to attend to. Hold on to every deal and work it until it closes, letting nothing go. In saving multiple deals from certain death each year, top performers improve their closing ratios and increase their per-hour earnings. 

Skill 7: Paying Close Attention to Money

Lots of agents tell me that it's not about the money for them; it's about the people. And that's great. I love helping people, too. But if you don't focus on making money, you're not going to make any. Real estate is your business, your livelihood, and you deserve to be compensated for the skills and services you provide. If you stop paying attention to the money, you'll do things like:

• Negotiate away your commission.
• Not take a referral fee "to be nice."
• Work on listings that will never pay you anything close to reasonable compensation for the amount of work they are because you "feel bad for the person."
• Take overpriced listings so that the sellers will like you.
• Not make buyers sign contracts.
• Stay with a broker who pays you a below-market split.

All of these things result in you working too hard and not making what you deserve. It's not your job to right the wrongs of the world. It's your job to make a living for yourself, preferably a really good one. It's not about the number of deals you do; it's about how much money you get to keep when the deals are done. 

You have to focus on the money if you hope to be successful. If you're not making a profit, you're running a charity, not a business, and you don't get grants like charities do to make ends meet.

You have to keep up with changes in technology, industry regulations, buyer and seller priorities, and economic conditions. But the skills that I've listed above will take you further than any new flashy marketing plan or social media technique. No matter what's going on in real estate, these skills will be the difference between a good agent and a great one.

The Federal Housing Administration, the government agency that insures a bigger and bigger portion of home loans, plans to rely more heavily on lenders to police mortgage brokers.

The changes will put more of the onus on lenders to make sure there is no fraud or faulty underwriting in the loans they fund, and less on the FHA. The lenders could be held liable for losses if a loan insured by the FHA goes bad and there are signs of fraud or mistakes in the underwriting.

The new approach comes as the FHA is straining to monitor mortgage brokers seeking to arrange FHA-backed loans, a number that has mushroomed in the last few years.

Instead, the agency wants to beef up oversight of lenders and revamp itself along the lines of other mortgage investors that guarantee or buy loans in the secondary market, such as Fannie Mae and Freddie Mac.

Under changes set to take effect May 20, the FHA will stop certifying mortgage brokers or tracking the individual performance of loans that they originate. Instead, it will require lenders to sponsor brokers and to assume responsibility for those loans, including losses from fraud or poorly underwritten loans, such as those in which the income stated on a loan application doesn't match accompanying financial documents.

The National Association of Mortgage Brokers generally supports the FHA's changes. Grant Stern, president of Miami brokerage Morningside Mortgage Corp., said they represented a "huge cut in red tape" that should produce better rates for consumers.

The FHA says the new policies will result in better risk-management. The FHA has already stepped up efforts to eject lenders that it says aren't playing by the rules.

In addition to revamping broker oversight, the FHA will increase minimum net-worth requirements for mortgage lenders to $1 million, from $250,000. The rules, which take effect in one year for existing lenders, could force some smaller lenders to instead become brokers that rely on large lenders to fund loans.

The FHA is also asking Congress for greater authority to recoup losses from lenders on defaulted loans that were improperly underwritten. Currently, the FHA has that indemnification authority for loans from some 600 lenders that account for 71% of all FHA-backed loans. The new rules would apply to the remaining 1,400 lenders that account for the remaining 29% of FHA originations.

Kenneth R. Harney

Saturday, May 1, 2010; E01

For anyone who assumed that the toughened real-estate appraisal rules imposed on the mortgage market last year would mean less monkey business in home valuations, here's a shocker: Fraudulent appraisals soared in 2009, according to a lending-industry study released this week, and they now represent the fastest-growing form of home loan fraud.

The Mortgage Asset Research Institute found that, while overall incidences of loan fraud rose last year by 7 percent, the share of frauds involving property valuations increased 50 percent. MARI, a service of data company LexisNexis, collects information from more than 600 wholesale mortgage lenders who account for the vast bulk of loans originated in the country. Once a year, MARI reports its findings on fraud trends to the Mortgage Bankers Association.

Although the biggest source of mortgage fraud last year was intentional misinformation submitted by borrowers on their applications -- bogus Social Security numbers or data on income, employment and assets -- distorted valuations came in second. In previous annual reports, appraisal problems were far less prominent. As recently as 2006, just 16 percent of all mortgage fraud cases involved skewed property valuations. By 2008, 22 percent of reported fraud involved bad appraisals, whereas last year, that number rose to 33 percent, according to MARI.

The surge in appraisal shenanigans came despite the nationwide imposition of restrictions last year that were designed to limit interference in real estate valuations and to improve their accuracy. As of May 1, 2009, mortgage giants Fannie Mae and Freddie Mac prohibited loan officers and brokers from selecting appraisers, and effectively encouraged lenders to use "appraisal management companies" that assign appraisers from their own networks nationwide.

The new rules, known as the Home Valuation Code of Conduct, stoked immediate controversy among mortgage brokers, appraisers, home builders and real-estate brokers. Critics charged that because management companies pay rock-bottom compensation to appraisers -- often as little as $175 for an assignment that previously made them $350 to $450 -- the new rules encouraged the use of inexperienced people, who frequently were not familiar with local market conditions.

Critics also charged that management companies forced appraisers to turn in their work within unrealistically short deadlines, even if they had to cut corners on quality and thoroughness.

Citing widespread evidence submitted by members about lowball and incompetent appraisals, the National Association of Realtors waged a lobbying campaign to persuade Congress to put the rules imposed by Fannie and Freddie on ice for 18 months. Congress has not acted on the matter.

Bill Garber, government affairs director for the Appraisal Institute, the largest trade group representing the industry, said the surge in bad appraisals last year "demonstrates what happens when lenders hire appraisers solely based on low prices and quick turnaround times."

"This should send a loud signal to lenders to hire ethical and competent appraisers" if they want to avoid fraud in their loans, Garber said.

Freddie Mac spokesman Brad German offered a different view. Because the MARI study made no specific reference to the rule changes by Freddie and Fannie or to the use of appraisal-management companies, "we see no connection between [the code] and appraisal fraud." Fannie Mae officials declined to comment.

Jeff Schurman, executive director of the Title/Appraisal Vendor Management Association, which represents the appraisal management industry, had no immediate comment on the findings, pending a review of the data.

The fraud report covered every major type of valuation method lenders use to underwrite mortgages, including traditional appraisals, electronic valuations and broker price opinions supplied by real estate agents, among others.

The biggest game fraudsters play: messing with or fabricating the information on "comparables" that form the basis of most appraisal reports. Rather than selecting nearby properties with broadly similar physical characteristics and recently recorded selling prices, bad appraisers typically come up with houses and characteristics that better fit their purposes.

Sometimes, they just left out the negatives. A hypothetical example: The property they were valuing was located near a busy and noisy highway or railroad tracks that would normally depress its value significantly. No problem. Poof -- the appraisal report could omit those issues.

What did fabrications like these achieve? Primarily custom-tailored property valuations that were often off-base by 15 to 30 percent or more and allowed the sales contract and loan application to be approved. This, in turn, left lenders holding the bag when the mortgage went sour, raising losses and making the national foreclosure crisis even worse

According to Forbes.com latest report Houston,Tx is ranked the 2nd best locale for a borrower to get a great interest rate on there mortgage.

Read the whole article at http://articles.moneycentral.msn.com/Banking/HomeFinancing/5-best-metro-areas-for-mortgages.aspx?GT1=33006

WASHINGTON - The Obama Administration today released questions for public comment on the future of the housing finance system, including Fannie Mae and Freddie Mac, and the overall role of the federal government in housing policy. The questions have been designed to generate input from a wide variety of constituents, including market participants, industry groups, academic experts, and consumer and community organizations. The questions will also be published in a Federal Register notice requesting public comments, and information on the process for submitting comments will be included in that notice.


The Obama Administration will seek input in two ways. First, the public will have the opportunity to submit written responses to the questions published in the Federal Register online at www.regulations.gov. Second, the Administration intends to hold a series of public forums across the country on housing finance reform. Together these opportunities for input will give the public the chance to deepen the federal government’s understanding of the issues and to shape the policy response going forward.

This effort is both in keeping with this Administration’s commitment to openness and transparency and the President’s Open Government Initiative. This initiative represents a major change in the way federal agencies interact with the public by making agency operations and data more transparent and creating new ways for citizens to have an active voice in their government.

Questions for Public Solicitation of Input:

1. How should federal housing finance objectives be prioritized in the context of the broader objectives of housing policy?
   
   
   • Commentary could address: policy for sustainable homeownership; rental policy; balancing rental and ownership; how to account for regional differences; and affordability goals.
   
   
   
2. What role should the federal government play in supporting a stable, well-functioning housing finance system and what risks, if any, should the federal government bear in meeting its housing finance objectives?
   
   
   • Commentary could address: level of government involvement and type of support provided; role of government agencies; role of private vs. public capital; role of any explicit government guarantees; role of direct subsidies and other fiscal support and mechanisms to convey such support; monitoring and management of risks including how to balance the retention and distribution of risk; incentives to encourage appropriate alignment of risk bearing in the private sector; mechanisms for dealing with episodes of market stress; and how to promote market discipline.
   
   
   
3. Should the government approach differ across different segments of the market, and if so, how?
   
   
   • Commentary could address: differentiation of approach based on mortgage size or other characteristics; rationale for integration or separation of functions related to the single-family and multi-family market; whether there should be an emphasis on supporting the production of subsidized multifamily housing; differentiation in mechanism to convey subsidies, if any.
   
   
   
4. How should the current organization of the housing finance system be improved?
   
   
   • Commentary could address: what aspects should be preserved, changed, eliminated or added; regulatory considerations; optimal general organizational design and market structure; capital market functions; sources of funding; mortgage origination, distribution and servicing; the role of the existing government-sponsored enterprises; and the challenges of transitioning from the current system to a desired future system.
   
   
   
5. How should the housing finance system support sound market practices?
   
   
   • Commentary could address underwriting standards; how best to balance risk and access; and extent to which housing finance systems that reference certain standards and mortgage products contribute to this objective.
   
   
   
6. What is the best way for the housing finance system to help ensure consumers are protected from unfair, abusive or deceptive practices?
   
   
   • Commentary could address: level of consumer protections and limitation; supervising agencies; specific restrictions; and role of consumer education
   
   
   
7. Do housing finance systems in other countries offer insights that can help inform US reform choices?

In the past three months, the Department of Housing and Urban Development (HUD) has made itself visible to the industry in efforts to aid in the implementation of the RESPA final rule. Consistent with its promise to get questions answered and provide guidance, HUD representatives have been out at trade association events and featured on training Webinars and Webcasts. In addition, HUD continues to update its guidance materials, which are presented as frequently asked questions on HUD’s RESPA homepage. While these efforts have paid off for some members of the lending and title communities, HUD said it is still seeing inconsistencies and problems with the way the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement forms are being implemented.

To address these issues, HUD conducted a video Webcast on March 18, titled, “RESPA 2010 Implementation Consistency.” During the presentation, Vicki Bott, deputy assistant secretary of Single Family Housing at HUD, said, among other things, that for the past few months the industry has been unclear on whether it is permissible for loan originators to use worksheets prior to issuing a GFE. Bott said HUD is allowing this practice, but cautions against certain restrictions.

In an hour-and-a-half long program designed as a follow up to HUD’s December Webinar that educated the industry on how to implement the new GFE and HUD-1 forms, Bott said while the industry is two-and-a-half months into implementation and doing a “great job,” there are some inconsistencies that must be addressed and some sections of the forms with which the industry continues to struggle.

“We really want to highlight the known implementation inconsistencies and provide guidance to the industry to correct those and move toward a consistent implementation of the GFE and HUD-1,” she said.

The contents of the Webcast mirrored discussions that took place on Feb. 18 in a meeting at HUD between HUD’s RESPA team and the nation’s major lenders.

They include:

• Inconsistencies in the implementation of blocks 1, 4 and 5 on Page 2 of the GFE;
• Inconsistencies with different investor or lender requirements of third-party originators; and
• Inconsistencies in moving the fees from the GFE to the HUD-1 at closing.

HUD also addressed the use of worksheets, prequalifications and preapprovals, loan officer compensation, administration and processing fees, originator compensation in the HUD-1, itemization of fees and credits, transfer taxes and how HUD has defined its 120-day restrained enforcement period.

Worksheet parameters

According to Bott, HUD is allowing loan originators to use worksheets in certain situations in which a consumer wants information, but isn’t ready to shop for a loan. However, she warned that if a consumer asks for a GFE and discloses the information the originator needs to complete a GFE, then a GFE must be issued.

“The customer has the decision, of ‘do I want to provide the information and get a GFE or would I rather have the generic worksheet because I’m not quite sure if I should purchase a refinance in today’s rate environment,’” Bott said.

HUD has identified two different types of worksheets some loan originators are issuing to consumers. One is a quote rate worksheet, which consumers who might not be ready to shop for a loan would use to determine if the rate was right for them. Loan originators have used this worksheet in the past few months to include general fees associated with the rate to help the consumer understand some of its costs. Bott said this particular type of worksheet is acceptable.

However, she warned that if this type of worksheet is used, it should not look like a GFE, it will most likely contain less information than a GFE, and the loan originator should make it very clear to the consumer that it’s not a GFE.

“We have seen worksheets that are called ‘Good Faith Estimates of Closing Costs.’ This could confuse the customer and definitely leave the customer to believe it’s a GFE and potentially have all the accountability around the fees that the GFE would provide. A worksheet should never be used in lieu of a GFE,” she said.

Also, if a consumer has provided elements to the loan originator that are required by the lender’s policy to generate a GFE, then the GFE, not a worksheet, must be issued.

“You can’t provide a worksheet, let the customer believe their fees are bound and then deliver the GFE at a different time during the loan process,” she said.

In addition to the worksheet not resembling the GFE, Bott advised against using the consumers “intent to move forward” as a basis for whether a worksheet or GFE is given.

“A consumer should not have to show intent to move forward to receive a GFE,” she said. “At the point the loan originator is collecting information, the determination of whether to give the generic worksheet or the GFE should not be based on the consumer’s intent to move forward with that particular originator. What it should be based on is, ‘has the originator received the information that they’ve defined to be a RESPA application that requires them then to provide the GFE to the consumer?’” she noted.

The second type of worksheet HUD is seeing being used in the industry is a comprehensive worksheet given to the consumer in conjunction with the GFE that further explains fees associated with the consumer’s transaction, such as cash-to-close and seller credits. Bott said this is acceptable by HUD as well, but warns that what the loan originator discloses in the worksheet should match the terms disclosed in the GFE.

“In other words, if you’ve quoted title in your GFE as $1,000, you shouldn’t bring it over to your worksheet that you’re using in conjunction to show cash-to-close as $500. You’re padding the GFE and you’re really telling the customer, ‘I don’t think it’s going to cost that much.’ You’ve got to keep those aligned to not confuse the customer,” Bott said.

According to Bott, a worksheet is not acceptable to use during a prequalification or preapproval process for a consumer wishing to refinance.

“Why? Because by virtue of the fact that it’s a refinance, if you have all the other elements [except the property address], the property address still exists,” Bott said. “You know [the property] is there. The customer has provided the needed information. You need to provide the GFE. As long as they’ve met all other elements that that lender requires and property address is the only one that isn’t there, you would not be able to provide a worksheet on a refinance.”

Specifics on restrained enforcement

On Nov. 13, 2009, HUD announced that for the first four months of 2010, the staff of the Mortgagee Review Board (MRB) will exercise restraint in enforcing new regulatory requirements under RESPA. The MRB instructed its staff to exercise restraint in considering actions against FHA-approved lenders who have demonstrated that they are making a good faith effort to comply with the RESPA final rule.

HUD has reiterated in speaking engagements and to the press on what this means, but no formal guidance has been issued on this.

“We wanted lenders to implement and implement with ease, without worrying about potential enforcement that could be worrisome to them as they’re trying to get RESPA right,” she said.

Bott reminded the industry that HUD’s restrained enforcement regarding the new RESPA rule covers only a lender or broker and only if they’ve implemented the new RESPA forms in good faith.

“The new forms must be used. They must be used as long as it’s a Jan. 1, 2010, forward RESPA transaction. Lenders should also be abiding by the intent of RESPA. Fee categories should be used. Tolerances should be managed too. The restrained enforcement was for those inconsistencies where we knew lenders may not know where a particular fee went and some errors may have been made,” she noted.

Bott added that during the restrained enforcement period, HUD still expects that the consumer will reap the benefits of the new GFE and HUD-1 forms. She also indicated that HUD provided for this reprieve not only for loan originators and lenders, but also for HUD, in order to give its RESPA team time to understand the inconsistencies in the industry and help it through the challenges.

According to Bott, in HUD’s next round of FAQs, which she says will be released “very shortly,” HUD will address worksheets as well as provide more guidance on its 120-day restrained enforcement period.

In part two of this series, RESPA News will cover HUD’s most recent guidance on clearing up inconsistencies in preapprovals, filling out block 1 on Page 2 of the GFE (loan originator compensation and disclosing the yield spread premium), administration and processing fees, and float to lock. Stay tuned!