Homebuyers: The "Perfect Storm" is upon you!!

Whether you're an aspiring homeowner, or a current homeowner thinking of purchasing a different home, December 2009 is giving a whole new meaning to the term "perfect storm".

A "perfect storm" is an expression that describes an event where a rare combination of circumstances will aggravate a situation drastically. But in this case, rather than aggravating the situation, the circumstances are creating a whirlwind of opportunity for people who are thinking of purchasing a home. If you've been planning on postponing your home search till 2010, you might want to reconsider and turn your holiday window shopping into a holiday house-hunt!

Low Rates. You're probably aware that interest rates have been at historical lows for the last few months. While we've been enjoying these low rates for awhile now, we all know that they can't last forever.


Home Prices Still Low. Between all the available foreclosures and short sales, and the decline in market values over the past few years, home prices are lower than we've seen in the past 8+ years.


Tax Credit. As you've likely already heard, the $8,000 tax credit for first-time buyers has been extended, and a $6,500 tax credit is now also available to current homeowners who buy another home. This credit is only available for a limited time, so take advantage of this opportunity now and you'll be grinning your way through tax season!!


Holidays...? Yes, the holiday season is the component you may not have considered! Finding the right house for the right price and getting approved for a loan is all well and good. But if there are other buyers who are willing and able to offer more for that house, your "right house" just became their house.


So, why not do all you can to get an edge on the competition? Many house-hunters are easily sidetracked by holiday preparation and gatherings, which makes this the optimal time for you to put in an offer and less likely to be out-bid. You may have to give up some of your usual holiday activities, but it will be well worth it if it results in getting a new home for Christmas!


Another MUST to be a step ahead of the competition is to get pre-qualified for a loan BEFORE you make an offer. Sellers are serious so you have to be ready to play ball. If you make the same offer as someone who can show the seller they've been pre-qualified to buy the home, your offer might as well be written in crayon. Lenders are constantly tightening their standards, making it harder to qualify for a loan. The best place to start your home search is by meeting with a Loan Officer and knowing exactly where you stand and how much you can afford. Having a pre-qual letter from your Loan Officer to accompany your offer can make the difference between you and your competition.

Happy Holidays and Happy House-Hunting! 

Tom Smith

Owner/Consultant

Falcon Financial

The fires keep burning, yet nobody's learning...

For those of us that live in California, we're a magnet for wildfires the way mid-West trailer parks are tornado-targets. We're used to it and accept it as a likely risk for where we live.

But has this acceptance turned to complacency? You'd be surprised that in this day & age, people are still under-insured! Year after fire-stricken year, our state spends its summer engulfed in flame and smoke. You can't seem to turn on the news without some mention of a wildfire, or a control-burn that became, well, not-so-controlled.


You'd think with all the fire danger warnings and fire restrictions and news coverage and...and...and... that we'd all be very well-versed in how to protect our home against the almost imminent threat of fire. There are countless articles dating back over the last DECADE about people being under-insured, yet every year, a new set of fire victims get the double-whammy of a burned down house and not enough insurance to replace everything.


Why is this?! Have we become that much of an it-won't-happen-to-me society? Does 'review homeowner's insurance policy' get lost amidst the more pressing to-dos on our list? Or do that many people simply not realize they have inadequate insurance?

In some cases, it looks like many consumers may be putting too much trust in the "pro's". When you consult an insurance agent, you likely assume that they know the business, it’s what they do, they'll make sure you're covered... right...?? Wrong.

As with any profession, not all insurance agents are created equal. Some agents take the time to discuss all your options with you, based upon a detailed analysis of your situation. They ask a myriad of questions and from there, provide you with sound, reliable advice. But there are those that - due to laziness, dishonesty, inexperience or for whatever reason - take shortcuts, aren't thorough, and just want to quote you the cheapest rate so they can write your policy. And really, how is a first-time homeowner's policy shopper supposed to know whether or not the agent has asked all the right questions?


In today's comparison-shopping world, many people focus on "getting the best deal", and companies know this. Businesses everywhere utilize software that enables them to provide rate-shoppers with a "quick quote" to pacify the consumer's need for an answer NOW. But in their rush to find the best deal, consumers aren’t always pausing to find out what that "deal" includes or excludes.


In this eye-opening article by Elliot Spagat, he talks about the Marshall & Swift/Boeckh LLC "Quick Quote" software used by many insurance companies. If the "Quick Quote" isn’t taking into account your jaccuzzi tub, the custom kitchen cabinetry, the fireplaces in each bedroom suite or the hardwood floors throughout the home, chances are the coverages provided in that "Quick Quote" are WELL below what you really need. Any good insurance agent knows that this "Quick Quote" survey is just a guesstimate, and that a more detailed analysis of the home's features is needed to generate a more accurate policy. However, several homeowners have obtained policies based solely on the generic information required to generate a "Quick Quote", only to find out the hard way that this has left them grossly under-insured - often by hundreds of thousands of dollars. Hmmm... so much for landing that "best deal".

What can you do to protect the home and belongings you've worked so hard for? Start by determining if your home is underinsured. Whip out that dusty, coffee-stained policy you have tucked away and look at your coverages. Do you know what each item really means? That's ok, don’t be shy, a LOT of people don't - but this is no time to adopt the ignorance-is-bliss attitude! So if you don't know, you might wanna learn before you burn!!


Here are three great articles/blogs to help you get started: "Is your home underinsured? 8 key points", "5-minute guide to home insurance" and "Home insurance - are you covered?". There are home inventory checklists to help you make sure you've accounted for EVERTHING you would have to replace if you lost everything in a fire, as well as software programs you can utilize to guide you and take inventory.


Now that you've attained a better understanding of what all those coverages mean and what's included, and taken an inventory of EVERYTHING that would have to be rebuilt or replaced if your house goes down in flames, do you feel comfortable that your policy will cover it all? Or do you think perhaps an appointment with your insurance agent is long overdue?

Don't be a victim due to negligence!!  Fires are inevitable, and kudos to those of you that strive to make your home and property "fire safe". But it's all for naught if you've neglected to properly insure your home.

Is your Loan Officer keeping you in the loop?

As you may have read in my recent blog, "Mortgage Disclosures Improvement Act (MDIA) and how it affects YOU, the Realtor", the MDIA time frames that now affect us in the mortgage industry also directly affect you and your escrows. But knowing this may not be enough to ensure your transactions close when you had anticipated. You have enough to worry about on your end - you certainly don’t need to be blindsided by setbacks on the lending side of the deal. Unfortunately, the time frames set forth by the MDIA may throw the occasional wrench in the works. So what can you do to help your escrows stay on track? First and foremost, make sure the Loan Officer you work with is proactive and keeps you in the loop every step of the way. In an effort to keep you in the loop from the get-go, I thought I would give you some scenarios that your Loan Officer is likely to encounter. To recap my previous blog, "Mortgage Disclosures Improvement Act (MDIA) and how it affects YOU, the Realtor":

• No closing can be scheduled for at least 7 business days from the initial disclosure of the loan upon submission to the lender.
• If any re-disclosure is required due to an APR change of .125% or more, a minimum of 3 additional days is required prior to closing.

As I am sure you have experienced before, the final numbers for a typical real estate transaction are not usually available until the day of, or the day prior to closing. Not only does the lender have to prepare figures, the title company and the settlement companies have to do so as well which is what creates the delays in getting exact closing figures prior to closing.

MDIA now requires that these figures are prepared in advance and in the event that the final tally of these numbers impacts APR by .125% or more, re-disclosure is required which automatically kicks in the 3 day additional disclosure time frame. As you will see from the partial list below, the odds on re-disclosure are very high given the multitude of items that can create the need for re-disclosure:

• The borrower decides to pay additional points to buy down their loan rate since initial application and disclosure.
• The borrower reduces their points to save money which results in a higher interest rate.
• The borrower changes their down payment which changes the loan amount.
• The per diem interest will change based upon the actual closing date versus the initial estimated closing date.
• The borrower opts to "float" their rate at time of application and when the loan is locked in during the process, or directly prior to closing, the interest rate has changed.
• A new borrower is added to the loan after the initial application.
• The loan program changes which can cause settlement fees as well as lender fees to change. (Example: application fees, processing or underwriting fees, etc…)
• The initial estimated charges which impact the APR increase by more than $100.00. Some of the main items that can impact APR are Lender Settlement Fees, Points, Per Diem Interest and Lender Fees

The above are the most common, but certainly not the only scenarios that can impact the loan APR resulting in new disclosure being required based upon MDIA.

Due to the ever increasing penalties that lenders are subject to due to the new regulations, it is highly likely that all lenders will create strict time frames for loan closings that will lean toward being extra safe versus working on the bare minimum time frames designated in the MDIA rules.

In summary, it’s now more important than ever for you to work closely with your Loan Officer in order to navigate the inevitable hurdles to come. At Falcon Financial, we strive to form close working relationships with our Realtor partners, so that together we can create the most seamless and rewarding experience possible for our mutual clients.

Tom Smith

Mortgage Disclosures Improvement Act (MDIA) and how it affects YOU, the Realtor

As you’re probably aware, the Mortgage Industry is in a constant state of change. You have the ever-tightening qualification parameters which differ with every Lender, making it tough to qualify even the most “golden” borrowers. Then you have the recently implemented HVCC ruling, which has increased the appraisal fees for the consumer, decreased the quality of the appraisals and as you may have already witnessed first-hand, killed many sales. As if all this weren’t enough, we’re now blessed with yet another obstacle in closing loans quickly and easily for our clients: the Mortgage Disclosures Improvement Act (MDIA), effective July 30, 2009. Now, don’t get us wrong, we’re all for protection of the consumer, which is the primary goal of MDIA. However, with so many people and facets already affecting the timely completion of every real estate transaction, the timelines set forth by the MDIA add yet another element to the juggling act of closing the deal. Now some of you may be wondering “this is about MORTGAGE disclosures, what does this have to do with me?” The timelines we Mortgage folk must now adhere to will affect how quickly we are able (or more accurately, ALLOWED) to close a loan. That means no matter how well the client qualifies for the loan, and how timely all parties are in completing the required documentation, we will all now be forced to twiddle our thumbs during the waiting periods set forth by the MDIA. Let me explain: Certain stages of the loan process have been given a specified waiting period after the Delivery Date. The Delivery Date is the date the item is received by the client. The Delivery Date is determined by the Delivery Method used. Acceptable Delivery Methods are:

• Face-To-Face: We meet with the client Monday, who signs and dates the loan package right there, including the key disclosures Truth-in-Lending and Good Faith Estimate (TIL/GFE). Delivery Date = Monday
• Email Delivery: We email the TIL/GFE to the client on Monday. Tuesday, we receive a read receipt from the client. Delivery Date = Tuesday
• Overnight Mail: We overnight TIL/GFE to the client Monday, and confirm it was signed for Tuesday. Delivery Date = Tuesday
• Regular Mail: We send TIL/GFE via postal service to the client Monday. Delivery Date = Thursday

The following waiting periods now apply:

• Initial TIL/GFE: Close of escrow cannot occur prior to 7 business days after Delivery Date of TIL/GFE
• Collection of Fees: No fees (other than for the Credit Report) may be collected before the Delivery Date. Therefore, we cannot order an Appraisal with the client’s credit card until the Delivery Date.
• Appraisal Receipt: The client must have a copy of the appraisal for 3 business days after Delivery Date of the Appraisal before escrow can close.
• Changes to APR: Any change in APR of >.125% (from rate or program changes, changes in initially disclosed fees, change in closing date, etc.) must result in the generation of a new TIL/GFE to the client. Close of escrow cannot occur prior to 3 business days after Delivery Date of the redisclosed TIL/GFE.

To sum it all up, a client must have the following in their hands before escrow can close:

*** Initial TIL/GFE for 7 business days *** Appraisal for 3 business days *** Redisclosed TIL/GFE (due to any changes in APR of >.125%) for 3 business days.

So my Realtor friends, please keep these new timeframes in mind when collaborating with your clients on the projected close of escrow date. We of course will do everything possible on our end to prevent any delays in the loan process, but please remember that with the constant changes in available rates and programs, along with clients who don’t always produce needed documentation in a timely manner, changes in APR are a good possibility. It’s very important to our team here at Falcon Financial to work closely with you & your clients and remain in constant contact to do what it takes to create a smooth and timely transaction.

Tom Smith

Owner/Consultant