Richard Nacht's The Daily Mortgage

House works on tax deduction

A bipartisan majority of the U.S. House of Representatives has agreed to co-sponsor an act, already passed by the Senate, that would make private and government mortgage insurance tax deductible.  The Mortgage Insurance Fairness Act could save consumers hundreds of dollars annually by allowing a write off of monthly mortgage insurance premiums.  The deduction would be limited to those earning less than $100,000 per year.

Private mortgage insurance is a critical feature for low and moderate income families allowing them to obtain a mortgage with less than 20% down.  Recent figures show that mortgage insurance exists in more than half of all purchase loans to African American and Hispanic borrowers in the U.S.

”This measure would provide tax relief to millions of Americans,” noted John Berthoud, President of the National Taxpayers Union.  “The bill enjoys broad support from groups on both the right and left because, while it would provide much need tax relief, it also helps further a worthy aim, the expansion of homeownership opportunities.”

Chase provides Hispanic discounts

Chase Home Finance and the National Association of Hispanic Real Estate Professionals announced a partnership to provide discounted and flexible products, dedicated bilingual mortgage specialists and educational seminars and counseling for NAHREP members and their customers.

The benefits will include a closing cost rebate from Chase to home buyers (no details yet provided) who purchase through NAHREP real estate professionals.  Chase will provide ongoing training and education to NAHREP chapters regarding Chase home finance products and will provide financial counseling services to NAHREP customers who need to improve their credit history.

How much is that website in the window

Following the last post, it should be noted that there are tens of thousands of lenders in the U.S. who can’t afford the most sophisticated high-tech websites.  For the average mortgage broker a website presence is a necessary evil.  It’s a necessity in this day and age but they can’t compete with the big players on features.  They are left, therefore, with having to find a site that looks professional enough to make the average mortgage shopper think the company is for real.  Any well prepared website can make a statement about the lender; the web confers a minimum level of assurance just by being on it. 

So how much does it cost to create this impression of professionalism - well for now it’s on sale for $699.  That’s it, less than $1,000 and you’re an e-commerce mortgage broker.

New home sales up again

In another surprising report U.S. new homes sales increased 9.4% in August.  This is the fastest growth in almost four years.  Continued low rates contributed to the increase.  This after decreases in July and June.

New home sales increased 12.6% in the South, 19.5% in the West and 6.1% in the Northeast, but slid 8.3% in the Midwest.

What this means for you…at least in the regions where there were increases you can expect that housing prices will continue to hold if not increase.  As long as builders are selling at a strong pace there is no reason for any price decrease and certainly no bursting bubble.

Wholesaler provides targeted market leads

PRNewswire — Fidelity National Financial announced today that Fidelity’s LSI Credit Services division is now providing ABN AMRO’s InterFirstLink financial institution partners a web-based lead generation and marketing tool.  This tool will allow ABN’s partner community bankers to obtain custom-qualified mortgage leads for targeted marketing initiatives.

Targeted results may be sorted by FICO score, income, loan types, property types, loan-to-value ratios, loan amount and geographic location.  Community banks will be able to customize marketing materials for use in lead generation campaigns, including branded letters and postcards.

”Lead Locator Plus...offers time and money savings tools that provide the valuable sales leads and marketing materials financial institutions need, but don’t often have the resources to develop in-house,” said Michael Griffith, ABN AMRO Mortgage Group senior vice president.

ABN AMRO’s InterFirst unit has been a leader in offering its lending partners tools to assit them in growing their businesses.  InterFirst’s pricing is sometimes very competitive but most often is off just a bit so they have to generate alot of goodwill by providing excellent service.

What this means for you…if you are a community banker and want a new source to sell your loans to InterFirst is a good firm to work with.  Since your clients are less sensitive to pricing you can probably offer rates that are competitive enough to capture new business and by outsourcing the lead generation and marketing your new business from the relationship will be business you simply aren’t getting now.

Mortgage industry millionaires

Forbes magazine recently released its 22nd annual listing of the 400 Richest Americans.  Several mortgage industry related individuals made the list.

Carl Pohlad, the former owner of Marquette Financial (sold to Wells Fargo for $1 billion in 2001) is the 92nd wealthiest man in the U.S.  Roland Arnall, founder of Ameriquest, is number 106 with a net worth of $2.0 billion.  Three founders of Golden West Financial placed in the top 400 also.

Bernard Francis Saul II at 340th place, worth $900 million, founded real estate investment trust B.F. Saul and Chevy Chase Bank in 1969.  A newcomer to the list this year is mortgage banker Victor Galan, chief of R&G Financial.

First Horizon on a tear

First Horizon which has already increased its mortgage offices from 166 in 1999 to 329 today is now scheduled to open 52 more mortgage branch offices, as well as dozens of construction lending, small business and full-service banking offices over the next three years.

First Horizon CEO Ken Glass outlined the ambitious new expansion plans at the Lehman Brothers 2004 Financial Services Conference (connect to webcast by clicking on link) in New York.  The expansion appears to be the result of a decrease in the contribution of the mortgage banking division to First Horizon’s earnings.  During the refinance boom of 2003 the mortgage banking division represented more than 75% of the company’s earnings.  Today that is down to 41%.

Glass said that FHN will be on the prowl for acquisitions.  Noting the FHN can’t start new offices or conversions in every market, it will be looking for $200 million - $3 billion in asset acquisitions.

Glass noted that FHN’s expansion should be not compared to the way other banks in the industry have recently expanded, but that FHN “will be adding bank branches where we already have customers.”

What this means to you….First Horizon is likely to be a company that industry people will like to work for, as well as one consumers should keep their eyes on for good rates.  In an effort to increase the share that the mortgage division contributes to earnings FHN will likely be aggresive in its growth and in its loan pricing.  That bodes well for potential employees as well as clients.

Multiple credit inquiries

A question I get all the time is whether or not multiple credit inquiries that take place within a short period of time count as one inquiry or multiple inquiries.  This occurs most often when a potential borrower makes application or inquiry with multiple mortgage lenders within a few days.  The issue here is that multiple inquiries can have a negative impact on your credit score since it may be an indication that multiple new credit accounts are being opened.  There are many different opinions on the topic but there are two facts that are known.

First, Fair Isaac, the developer of the FICO score, the numbers that mortgage lenders use to rate credit risk, states the following on their website MyFico:

”Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time.  Typically, these are treated as a single inquiry and will have little impact on the credit score.”

This certainly makes sense from a credit risk view.  A consumer who makes multiple inquiries within a short period of time is likely shopping for one new mortgage and will only be opening one new credit account and therefore adding no more risk than one additional account.  The prevailing wisdom is that “within a short period of time” means either 14 or 30 days.

However, having said this, I must also note that my observations during my years of mortgage lending indicate that this rule may not be the case.  I have had clients who have come to me early in their shopping process, then shopped with other lenders having their credit run multiple times and then come back to me for their final application.  Upon running their credit reports a second time we have seen decreased FICO scores and the clients have advised us that they have had no negative changes in their credit in the past few months (no new accounts, no increases in credit balances).   This leaves the multiple inquiries as the only likely culprit for the decrease.

What it means for you….in most cases a decision about whether a lender will approve your loan is likely to be the same from lender to lender.  If one lender says yes, most others will also (this is due to most lenders using the same automated underwriting systems from Fannie Mae or Freddie Mac).  Thus it really isn’t necessary to have multiple lenders run your credit.  Do your shopping for the best rate and fees then have that one lender take your mortgage application.

Intra-family mortgages

Getting a home loan from a parent, sibling or other relative is sometimes the only way a home buyer can make a deal work.  It can mean a lower than market interest rate for the borrower and higher returns, as compared to CDs, treasury notes, etc., for the family member who is lending the money.  However, such interpersonal arrangements can be fraught with emotional hazards, administrative hassles and financial risks.

CircleLending is an online service intended to “help individuals gain access to affordable credit and to promote successful debt repayment.”  Circle lending provides borrowers and lenders with tools and resources to improve the ability of borrowers and lenders to structure low risk debt arrangements with reduced administrative tasks.  The company offers three levels of service, a basic kit, a loan creator and a full service loan manager priced at $549.00.

What it means for you…it is always a good idea to properly document any private loan to ensure that there is no miscommunication regarding the terms of the loan.  CircleLending enables you to accomplish this in a way that avoids interpersonal conflict and which stays focused on the issue of loan setup and repayment.

Habitat for Humanity

Habitat for Humanity has built more than 125,000 simple, decent houses since 1976.  In an effort to teach people about its mission it has created a six acre educational center at Habitat’s headquarters in Americus, Georgia.  There you can “see life-size Habitat houses from countries around the world and learn about the devastating effects of poverty and the inspiring work of Habitat volunteers and partner families everywhere.”

One of those volunteers is John Courson, the outgoing chairman of the Mortgage Bankers Association of America.  In recognition of his service to the organization, his mortgage company, Central Pacific Mortgage, and the Mortgage Bankers Association of America have provided funding to Habitat for the Habitat for Humanity International’s Mexico home at the Global Village and Discovery Center.

If you are interested in donating to or obtaining additional information on Habitat for Humanity International Global Village and Discovery Center call 1-800-HABITAT or go to Habitat’s website.