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In this edition of the Blown Mortgage Podcast series we talk with Rhonda Porter of the Mortgage Porter.
Rhonda was nice enough to join us and share her thoughts about the current changes in the market, ethics in lending, and what it means to be a Certified Mortgage Planning Specialist.
Thank you Rhonda for joining us and be sure to visit her on her Mortgage Porter blog and the Rain City Guide blog!
Music licensed under the Creative Commons license, The Streets of Miami performed by Dokapi.
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David Lereah, the Chief Economist and SVP of the National Association of Realtors is stepping down. Lereah a complete liar housing bull has been the brunt of criticism for his very optimistic outlooks on housing.
Many people, myself included have chided the NAR for being overly optimistic in its predictions, advertising and public relations. Lereah, whose predictions have been far above what has been reported in the housing market, should thank his lucky stars he is getting out before being sued for misleading the public.
Housing Panic and others have more to say. I say good bye and don’t let the door…
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California Housing Forecast estimates that there are 2,180,000 empty houses currently for sale, 4,000,000 homes empty for rent. Who is making the mortgage payments on these homes? How much equity is actually in these homes? How many mortgage payments will an investor make before slashing the price to dump the home like last-year’s car model?
This supply will not go anywhere until prices come down and people feel that they are worth owning. These empty houses are not going to help anyone.
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Why I hate my industry sometimes - part 4.
Foreclosure rescue scams are becoming a huge problem in this country. People preying on folks about to lose their home has apparently become the latest thing for mortgage brokers out of a job. Our local news here has done a Dateline-esque hidden camera sting (click, hit play) of foreclosure rescue con artists experts to catch them in the act.
It’s well worth the time to watch this short clip. Hats of to the Home Equity Theft Reporter, who always has incredibly detailed and comprehensive coverage of this type of scam.
I would personally like to say F*&^ thank you to Lupita for making the mortgage industry look so good with your brilliant idea to falsify rental income.
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Secured Funding, (I would link but their web site is mysteriously gone) an Irvine, CA-based originator of primarily second mortgages closed it’s retail operations on Friday, according to a source close to the situation. Secured Funding had ceased its wholesale operations back in January, but had maintained a small retail side as of late.
Secured Funding had a reputation of being a super-shady company and so I am rather happy to report its demise. In my opinion it is better for consumers that they are out of business. A few things that the company allegedly was notorious for:
- Refusing to pick up inbound phone calls from borrowers who had questions at signing
- Using random social security numbers to run other people’s credit
- Charging a minimum of 10 points on each loan
There are plenty more that I have heard of, but those are my favorite. Again, that information is all just what I’ve been told by former employees of the firm.
So another mortgage lender is gone - good riddance to this one.
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In a recent interview with John Lanser of the OC Register, Cal State Fullerton economist Mira Farka talks about how the national housing drop will not be as severe in Orange County, California as in other parts of the country. From the interview:
On the other hand, I expect the house-price correction in Orange County to be more orderly, given that the region is relatively insulated from the housing market shocks, given the economic structure and job growth creation generated in the region.
This is absurd to me. I have long been a proponent of the idea that Orange County is just like every other asset bubble out there. That in fact, Orange County is MORE like any other bubble town than not, due to the following:
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The massive run-up in home prices in the county.
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The very large presence of real estate and mortgage related employers.
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The large amount of wealth and spending amassed and fueled by real estate related activities.
Common sense dictates that The OC is going to get hit extra hard by this downturn. You have a lot of people who made a lot of money ripping people off selling homes and doing mortgage loans who no longer have homes to sell and loans to do. You have over-valued housing that is now unaffordable and people trying to get out before they go bankrupt. In short, you have a large part of the local economy falling on its face.
Pick a town where there isn’t a huge majority of mortgage companies, realty folks, etc. and they don’t have the same problems Orange County does. So in summary - Orange County has the same problems as everywhere else, if not more so due to the unique nature of the local economy being so pegged to the mortgage and housing markets. Anyone who thinks OC is special is delusional.
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As we’ve talked about several times here consumer spending (which accounts for about 70% of the economy according to Bloomberg) has been fueled by mortgage equity withdrawal or MEW. Calculated Risk has done extensive studies of this effect as well.
To give you an idea of how much this MEW fueled consumer spending consider this:
Borrowing against home equity financed 2.1 percent of consumer spending in 2005, up from a 0.6 percent average between 1991 and 2000, former Federal Reserve Chairman Alan Greenspan said in research published this week.
In the same article Paul Kasriel of Northern Trust Securities in Chicago mirrors our thoughts about the link between a falling housing market, reduced refinance products and consumer spending:
“We’re in a housing recession; it’s not over and it’s going to spread to other parts of the economy, mainly consumer spending,” said Paul Kasriel, director of economic research at Northern Trust Securities in Chicago. “House prices are going to continue to fall, and that’s going to play havoc with consumers because it means the home ATM is now draining, it’s no longer filling.”
What does this mean? It seems to point to a significant slowdown in overall economic growth for the country. Consumer spending has been the economic engine over the last few years, keeping the economy humming along. With the plug pulled on the excess cash that has been put in to the market by appreciating home prices and the subsequent cashing out by home owners the economy will need to find a new driver for the foreseeable future.
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One of the things that people take for granted when they are going through the process of getting a home loan is that they believe that what the loan officer is telling them is actually true. When you think about it, it makes perfect sense, we’re predisposed to believe what people in a position of authority tell us. This works against you when dealing with a loan officer because many of them will lie to you about your own personal financial information that you may not know yourself. One way they do this is by lying to you about your credit score in order to sell you a higher interest rate.
When they sell you a higher interest rate the bank pays them more money. Yield Spread Premium (YSP) is what banks pay brokers for selling an interest rate higher than the floor (or par) interest rate.
Here is an example: You talk to Joe Loan Officer and he says “After reviewing your credit it looks like you have a 620 FICO score. With that score you qualify for a rate of 6.75%” You go along with it and “take” the 6.75%. In fact, your credit score is really a 680. With a 680 you’d qualify for the same loan program at a rate of 6.25%. By selling the 6.75% the loan officer will get paid an extra point (1% of the loan amount) from the bank in the form of YSP.
This is a shady way that loan officers trick you in to higher interest rates in order to pad their paychecks.
To protect you against this loan officers are supposed to send out a disclosure called the Credit Score Information Disclosure; however this disclosure is easily manipulated and often-times not sent out to begin with. The best way to protect yourself is to acquire a copy of your credit report ahead of time through a company like www.myfico.com. This way you’ll know your credit score before you begin the process.
It is an easy way to protect yourself from getting a higher rate from some loan officer who tries to use your ignorance about your personal financial situation against you.
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Last Night was the first OC Real Estate Blogger Meet Up that I had the privlidge of attending. It was great to meet many of the people that I read on a daily basis live and in person. They are all just as interesting, fun and intelligent as their blogs would suggest. Joe and Rudy from Sellsius and Brian Brady have already done great write ups, so read those. Here are my photos.
I look forward to the next one!
CLICK PHOTO FOR BIGGER VERSION
Brian (America’s most opinionated mortgage broker) greases the door man to get us up on the outside patio
Joe (Sellsius), Kaye (Manhattan Beach blogger), Laurie (Long Beach), Sara (Laguna Beach), Brian
Rudy, Joe, Kaye, Laurie
Rudy, Dustin (Rain City Guide), Joe, Kaye, Laurie
Joe, Kaye, Laurie
Mr. & Mrs. Loren Nason from the Future of Real Estate Technology
Rudy, Loren, Brian
Sellsius on the Patio
Rudy w/Space Magazine
Rudy & Tisza (Route 66 Living)
Sara, Dustin
Sellsius upclose
Sunset in Laguna
Dustin and the way to the Bar
The rooftop patio
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My blog gets a lot of hits for the term ’scratch and dent lenders’ presumably from mortgage bankers looking to off-load New Century loans that they can’t sell off their warehouse line. I think Blown Mortgage comes up near the top on Google because of my correspondent loan saga posts.
If you’ve arrived here because you’re looking for scratch and dent lenders email me and I can send you a list of about 20 different buyers and brokers of scratch and dent loans. It’s tough to learn who buys these loans and I’ve been lucky enough to have been passed a list of about 20 companies who specialize in buying these types of loans.
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