"Timing" your closing

As investment advisors say, you can't time the market. But in real estate, there is one sure thing--the end of the month will be a busy time for closings. Why? Well, when you buy a home, the interest clock starts ticking from the date of closing. When you pay your mortgage, the interest is paid for the full month in arrears. That means that any interest 'charged' in the current month is due at closing. Let's put that into perspective. Today is the 11th. IF you closed today, your new loan's first payment would be due in APRIL. When you pay April's payment, guess what? You just covered all the interest for MARCH. That leaves February hanging so that would leave 19 days of interest left due and payable at closing. For a $200,000 loan at 4.25%, that would be around $23 per day SO you'd have to come up with $437 at closing to cover the interest. If you closed on the 29th, you'd have to pay ONE day of interest or $23; if you closed on Friday the 26th you'd pay $92. IF you are a cash-strapped buyer that extra money can mean a LOT (like paying for movers or pizza for all your buddies who are helping you move). I can see why people want to close at month-end but let me tell you why NOT.

Think of it this way--this is not a revelation to realtors and loan officers. They know their clients' personal situations and will try to schedule these cash-strapped buyers on the last day or as close to it as possible. Again, I get it BUT just realize that there are many issues that could come up. As EVERYONE is super busy, what happens if something goes wrong? Primarily, if the loan is delayed then the closing can be delayed. Again, everyone is busy; things happen. BUT why would you want to set yourself up for something to happen to YOU? Also, people tend to want to close on Friday. Why? Well, the theory is so that they can move the next day. IF something goes wrong though, guess what? If your Seller (especially if they are a builder) "doesn't care" that you have a $100/hour mover idling in the cul de sac. They "don't care" that you have everything lined up. If they don't get their money, it didn't fund. If it didn't fund, you don't own a home. If you don't own the home, do you expect them to just let you move in? NO. Again, they aren't truly uncaring people (hence the quotes around don't care). With that being said, ask any closing attorney or agent about horror stories about people moving in and causing damage, etc. prior to owning the home, with the extreme example of that happening PLUS something totally going south with the loan process and then they can't actually buy the home. Who would be stuck? THE SELLER. (SO if you are a Seller, think twice about allowing someone to move in w/o closing; call and ask me why sometime; that's another post!).

Tips? Close the equivalent of the week of the 20th or 25th on a WEDNESDAY. Why? Well, you're close to month-end (less out of pocket, CHECK) and guess what? If 'something' happens at closing, there are several days to sort it out. What could happen? Missing documents, underwriting issues, missing funds, delayed funding wires, delayed documents, etc. etc. etc. In all honesty, I haven't had many closings take more than a day (extra) to fund when issues have come up; but if it was on a Friday, you'd be looking for a hotel!

There's my tip for the day! Get out there and find your next home! (and remember to call us to close it for you!) Bo

Interest rates on the rise... move fast!

Are you considering a home purchase? A refinance? The time is NOW. Why? Read THIS ARTICLE noting that rates are rising but also take into account that it is widely accepted that the FED will raise short-term rates this summer. Sure, those rates actually have nothing to do with Long-term (e.g. mortgage) rates BUT it will still affect the marketplace. If they do raise the "Federal Funds Rate" expect to see car loan interest rates to go up as well as 2nd Mortgage (HELOC) rates, which are based on the Prime rate AND don't forget credit card rates will likewise rise. SO as noted, while the Prime rate may have 'no affect' on mortgage rates, the factors allowing people to AFFORD a mortgage will definitely be affected (okay, if they don't have ANY car loans or ANY credit card debt or ANY other interest rate affected items, then you are correct, I am wrong ; )

In sum-if you want to buy a house or refinance, do it NOW and definitely before August 1st when the world ends, thanks to dear old blubbering Barney Frank. Cheers!

Witness-only closings are a threat to you and your home...!

I answer general questions from an attorney referral website from time to time. The scenario at the bottom (look for the link) REALLY struck a chord with me as this is a huge problem for citizens in Georgia. I must be honest that yes, my answers are self-serving as I would like only attorneys to close loans in Georgia. However, it's not just protecting myself and my business--it truly protects the consumer as well. These attorneys who show up at your house to be a witness for these out of state companies are not helping you out. Yes, it's convenient (and I do mobile closings from time to time--I happened to close a refi at a coffee shop with a good friend/loan officer this morning) but is it truly helping you? Let's look at the differences.

So we closed at a coffee shop. As a GA attorney, we ran title here in GA (using an attorney-certified title abstractor). We processed the file in our office; a licensed attorney (ME : ) with E&O coverage closed this file along with a witness (and I am a GA notary). I processed this file and we will fund it using a GA IOLTA account (Interest On Lawyers Trust Account--required by the State Bar, and it funds indigent defense among other things). I wrote title on a GA licensed Title Agency, which will in turn cut a check to the proper oversight agency here in GA. If the customer has an issue with their closing, who will they call? ME. Who will pick up their phone (or call back within 24 hours)? ME. Who is liable for any mistakes on that file? ME. Period.

Let's contrast that with a witness-only attorney who closed with their 'customer'-they received a file from an out of state company, showed up at the mutually agreed upon time and location and pulled out their notary stamp and pointed to where the customer needed to sign. When they were finished, they sealed up the FEDEX and sent it back to the out of state company/lender. NO taxes were collected in GA, no fees were generated in GA, no liability (so they think!) for the GA "attorney". So who does the customer call? GOOD LUCK PAL! And do you think that customer saved any money? From most HUD-1 Settlement Statements I have seen, the fees are more costly than a GA attorney's fees! Even if not, they are only slightly cheaper.

Is losing your house worth saving $50? Read this article and see if you think it is....

Why HVCC killed the mortgage business

As a closing attorney, I am on the 'front lines' as it relates to real estate. People ask me about the current trends or "what's really going on" as it relates to real estate. When I talk about our current conditions and why we remain 'stuck' in this real estate recession, my typical response has nothing to do with Wall Street or sub-prime loans--it's all about a little-known regulation called "HVCC" (I bet the mortgage people out there just had a collective shiver up their spine).

The concept behind HVCC (Home Valuation Code of Conduct) was noble enough--a loan officer should not be able to 'push' an appraiser into giving a higher value for a property. HVCC insulated the appraiser from loan officers entirely by using Appraisal Management Companies (AMC's) who now handle the entire appraisal process (LO's submit the property; the AMC will line up the appraisal and provide the finished product to the LO/Lender). Again, sounds reasonable, right? Well, the law of unintended consequences kicked in and the AMCs have either used low-cost providers that aren't very experienced or they've used appraisers that aren't up to speed on the area. Think of your own part of town--could you guess values on properties 20 miles away? I know appraisers aren't guessing (and this is not to throw rocks at qualified appraisers) but some of the people the AMCs use seem to be 'going through the motions' and (as they aren't getting paid market rates for their work) they aren't producing the best quality work. Low-cost providers aren't typically the best products (e.g. you get what you pay for).

My typical analogy for this is take someone who lives in the burbs and typically appraises mega-mansions worth $1M or more out in North Fulton--what happens when they have to do an in-town 'bungalow' that essentially would (should?) be valued at the same pricing? Typically, it doesn't compute and they have issues setting the true value for that in-town property. I hear that LOs can now 'appeal' values with the AMCs and changes are coming (perhaps the 'death' of HVCC?). Sure, HVCC isn't the only culprit, but it's one 'behind the scenes' issue that continues to haunt us. Likewise, there are even more dark clouds on the horizon as new legislation may create more levels of government interference in the industry, again with good intentions (such as lowering costs for borrowers).

Take FHA for an example. With FHA loans, there is an up-front mortgage insurance cost (that is rolled into the loan) and a monthly MI premium. So here's some info about the newly revised FHA program--the up-front MI is now lower (only 1% of the loan amount vs. prior amount of 2.25%). Great, it will cost your borrower less to get that loan, so hooray, right? Wrong! While the up-front charge is now lower, the monthly premium is now higher (from .55% to .90%)! I read an example in the AJC noting a $200K purchase price and a loan of $193K. Old monthly MI was reportedly $88 a month and the new MI will be $148/month! OUCH. The up-front MI is a one-time thing--but that extra $60 is due every month. So again, what sounds good ("lower costs") may not turn out to be a good deal for consumers!

The bottom line is this--many of the relaxed lending standards began years ago with the stated goal of getting more people in houses. Unfortunately, standards were 'too' loose and some people got in over their heads. We are now mopping up from that mess and now we face even more issues with tight credit, no credit and even the foreclosure moratorium is going to affect our industry. Regardless of all that, we shall persevere! Get out there and get some business! If you're over 5% and need to refi, get moving while rates are crazy low! Remember us when you need a closing attorney, no matter where you or your clients are located! Have a great week, Bo

By the numbers: JOBS and Housing

What's important for our nation's economic recovery? Two things dominate--unemployment and the housing market (yes, government spending is a huge issue but many expenditures relate heavily to the two issues above). The tax credit originally did its job as people rushed to purchase homes last fall. There was a pretty solid push this Spring (prior to the April 30 cut-off date) but it was not as 'robust' as the fall of 2009. In fact, new home sales in May 2010 dropped to the lowest pace in the 47 years records have been kept! Right now, housing starts are down but home completions are actually up as it appears builders are focused more on finishing homes already started versus breaking ground, which is in-line with the tax credit and the June 30 close date deadline (which has been extended to September). If housing starts remain this slow, new home inventories will continue to decline which will in turn help clear the way for more recovery.
As a side note, the NAHB (National Association of Home Builders) says each new home built in the US creates the equivalent of 3 new jobs for a year and generates around $90,000 in taxes paid (local and federal) and impacts many industries (such as raw materials, goods like appliances and faucets, etc.). When I say that the housing recovery is key to our nation's recovery, you can see what I mean now! In ATL, we were overbuilt prior to the crash; that's why we were really hurt by the downturn. Even now there are over 89K homes for sale in ATL, which is a 14 month supply. 150K vacant lots = enough to supply builders for the next 4 years per a report by Wells Fargo Securities. More foreclosures = even more inventory!
Bright notes? Our unemployment rate has declined 3 months in a row (still around 10%) and our fundamental growth models remain intact. Factor in all the Fortune 500 companies here, the world's busiest airport, and our strong ports in Savannah, we are still a very attractive area for job creation. With that being said, we may not be back to 'normal' for another few years. The Fed agrees; they noted that the recovery is weakening in many parts of the country.
Final thoughts? Stocks are up this week due to upbeat earnings reports from many different companies/industries and there was a small drop in unemployment claims last week. Likewise, uncertainty in Europe is calming due to bank ratings remaining acceptable across the board after regulators crunched numbers on 91 banks (only 7 failed their tests per an AP report) and determined that most would survive further economic slowdown. The Euro rose and most European markets rose slightly on these reports as well. See? It's not all bad! Keep plugging away, and have I mentioned that rates are at their lowest levels EVER? Buy or refi NOW ; )

Clark Howard says it's time to refinance!

No surprise, as rates are so low! Contact me for any tips/ideas about lenders, etc. Read Clark Howard's article HERE!