First Ohio Home Finance

I promised to update you on the recent Save Our Homes statewide summit held last week, and it was definitely an eye-opening event. The takeaway was the need to tell all Ohioans:

IF YOU ARE BEHIND ON YOUR HOUSE PAYMENTS, THE WORST CHOICE YOU CAN MAKE IS TO DO NOTHING

The experts say, If you do nothing, there is nearly a 100% chance you will lose your home. Meanwhile homeowners who take basic steps like opening your mail and reaching out for help gives almost an 80% chance of staying in their home.

“We are going to have to keep at it,” said Cordray to the crowd of county officials, industry insiders, and non-profit workers. “People ask me all the time – and I don’t have the answer for them – how long is this going to keep on?”

Maybe you think foreclosure could never happen to you but are finding yourself more and more delinquent on property taxes, utility payments, or other debt service. Especially if you have an adjustable or balloon mortgage - now is the time to learn what options and assistance there is.

A number of cutting-edge programs have been rolled out in Ohio – far ahead of the rest of the nation. Ohio Treasurer Richard Cordray is showing a great deal of leadership in this effort, along with Chief Justice Thomas A. Moyer. Other states and the federal government are actively inquiring into Ohio’s efforts after recognizing them as among the most proactive and responsible.

One front of this endeavor to stop foreclosures is a Foreclosure Mediation Program. This option requires the lender and the borrower to sit down and discuss measures to avoid foreclosure. Some reach agreements like cutting the house payment for X months if the homeowner keeps the property in good condition. This allows the borrower time to find other housing, while reducing the cost of maintenance and repair for the lender.

There are other groups simply advocating on behalf of distressed homeowners. The ESOP group in Cleveland shared about successful protests of bank branches to gain the attention of the lender and stop a sheriff sale. While the manpower for such an event is enormous, the success rate is also high.

Loan servicers are softening as more and more homes burden banks not equipped to own so many foreclosed homes.Other resources include grants and loans to catch up on your mortgage, personal finance counseling, 7 Steps to Smart Homeownership seminars, public television call nights, and financial literacy education.

Remember, only you can prevent foreclosures!

(HT to Alex Stenback)
We all know that most online mortgage aggregators are champions of selling and re-selling and re-selling any information you put online. They also have been linked in urban legend to unscrupulous lenders with varying degrees of bait-n-switch tactics.

A recent incident with LendingTree - which takes a short loan application and farms it out to national lenders - highlights the real problem with throwing your personally identifiable information online. Yes, even with recent innovations in “secure” protocols like SSL.

Apparently, LendingTree had employees who were re-selling borrower information to non-affiliated mortgage brokers (and maybe others).

“several former employees” may have shared confidential passwords with “a handful” of lenders that were not approved by the company. The lenders then used those passwords to access customer information files that contained mortgage request data such as name, address, e-mail address, phone number, Social Security number, income and employment information. The files did not contain credit card information, LendingTree said…. The company said it does not believe the disclosure led to identity theft or fraudulent financial activity, but recommended customers check their credit reports for suspicious activity.”

Needless to say, this underscores the benefit of dealing with a local or regional direct lender like First Ohio Home Finance. Nothing beats being able to look in the loan officer’s eye and personally seeing where they conduct business.

Don’t trust your information or your mortgage to just anyone - the result could be more than you bargained for!

I have to say April is one of my favorite months of the year. It contains one of my favorite family birthdays. And you gotta enjoy sunshiny blue skies, breezy days and crisp nights, flowering bulbs and trees, watching the kids hunt for Easter eggs - even the occasional shower.

It’s also tax day. But April means more than this for Ohioans.

This collection of fabulous spring days has been designated as Financial Literacy Month in Ohio, which makes it a great time to re-focus on getting your finances in order. I don’t mean to encourage the kind of stress that comes from worrying about bills, fighting with your spouse, or trying to figure out how you are going to pay for college years in the future.

There are some great ways to get a clear picture of your financial health. And then take simple and clear steps toward improving the future for yourself and your family, if you have one.

A good place to start this process is at Your Money Now web site established by the Ohio Treasurer’s office. While many people are cynical about government officials actually helping the average citizen, I don’t write about this because Cordray is a ‘Public Official’. After following his career for almost a decade, I see a very smart individual who uses all available resources with a genuine interest in helping others.

With knowledge comes control – and it can be even be fun. This site does have some helpful information about avoiding fraud, tracking your cash flow, teaching your kids the basics, and managing debt. They even have a section in Espanol.

Other fun resources include personal finance blogs like here, here and here. There are even some focused on singles, marrieds, women, news, the heavily-indebted, and goals. Pick the one that meshes with you or put them all into a feed reader.

We recommend getting an annual mortgage review to make sure your loan is still the best for your ever-changing situation. And now is a great time of year to do that. If you’ve had changes recommended by your tax preparer, inherited money, changed jobs, or are even having trouble making your house payment – now is a great time to talk with a loan officer. The worst thing you can do is ignore the problem.

Here’s the Your Money Now website link. YourMoneyNowOnline.org Oh, and enjoy the fantastic spring!

I have been involved recently in a surprisingly cooperative effort to find solutions to the residential real estate slowdown. I won’t call it a bust, because it hasn’t been catastrophic in the central Ohio market. It really is becoming – and will continue to be - more difficult to find loans for buyers with a poor history of paying their bills and for marginal investors. But by and large, the market is moving on. There are a solid number of buyers in the market, and more than enough sellers.

Every week, one of the top news stories is the steady rise in home foreclosures here in Ohio. The issue is affecting our local economy and, more importantly, the lives of real people in our own neighborhoods.

State executives - including the governor, attorney general, treasurer, chief justice and others – seem to be really worried about housing in Ohio. Executives have been touring the state with news conferences and collaborative meetings. Foreclosures are quite common in some neighborhoods of Cleveland and Toledo, which unfortunately leads to theft, vandalism and general deterioration of communities.

Among the solutions being rolled out:

• Lenient property tax payment plans by county treasurers around Ohio
• A new foreclosure mediation program headed by the state Supreme Court
• Increased legislation to subsidize borrowers and regulate mortgage brokers
• Increased education from and interest in public and private educational programs
• Pressure on lenders to help homeowners – including subordinating 100+% LTV second loans, easy negotiating for short sales, even partial mortgage forgiveness when a helpful refinance is held up due to appraisal problems.

The local group I am involved is the Save Our Homes Taskforce (site currently down). A task force is really a simple name for a loose group of people working toward a specific goal. This particular group, meeting on East Broad Street, is attended by non-profit educational groups, county leaders, and some lender representatives. Many of our company’s loan officers will be attending a statewide summit on April 23rd to refresh our best practices and learn about some of the above efforts.

Some of the initiatives our task force include identifying community resources, conducting homeowner and professional seminars, exploring ways to deliver foreclosure counseling, and lender remediation. The idea is catching on across the state, thanks to Ohio Treasurer Richard Cordray.

Now some people may be cynical of these efforts by politicians to intervene in the market. While I share some of those sentiments, I appreciate the interest and leadership as long as the solutions are mindful of the free market and participation is voluntary.

Here at First Ohio Home Finance, we are spending tremendous resources to reach out to those with adjustable and subprime loans. We believe Ohioans who are not under the direct and regular advice of a financial planner should move as fast as possible into fixed and affordable mortgage payments. That means you need the advice of a professional loan officer who can advise you on the best mortgage product for your needs.

I’ll let you know how the Save Our Homes Summit at the end of this month goes.

The state’s Department of Financial Institutions (DFI) audited our company’s mortgage practice last month with little notice.

I’d be lying if I didn’t admit the audit – before, during, and after – made me feel unsettled, mistrustful, and maybe even confused. We’ve all heard stories about new Ohio Attorney General Marc Dann, and I’m sure some of them get blown out of proportion – you know, the mythical $50,000 fine for having a file’s paperwork in the wrong order.

Even as we knew most of our files were in order, one concern was the additional mortgage disclosures which became required starting in January 2007. The paperwork and attending regulations tend to be confusing to borrowers and loan officers. The changes ushered in by S.B. 185 required a new Mortgage Loan Origination Disclosure Statement (MLODS), as well as re-disclosure of certain documents if the terms, payment, closing costs payable to us, or escrow changes.

The burdensome part of the new law is this re-disclosure is required 24 hours before closing. While it sounds like a common sense requirement, in the reality of our broader real estate industry it can be an aggravation to the very people it is supposed to protect.

In one humorous situation last year, we had a purchase closing scheduled during the summer. One of our borrowers happened to be a DFI employee. When the settlement statement was completed and approved by all the parties the morning of closing, it was discovered that the closing costs had changed - by less than $100. The borrower understood and agreed to the change. However, we were required to delay the closing until the following week in order to have a re-disclosure signed by the borrower. The borrower had to re-schedule his moving company, and the Realtor had a delay in their paycheck.

Needless to say, the borrower was not happy with us or the law. But they understoood – and we’d rather stay in business and help more Ohioans find the right mortgage product for their needs.

Another cause for concern was stated income mortgages – or in the current environment, called ‘liar’s loans.’ In making a loan, it is very important for loan officers not to lead borrowers to state a specific income. It is also unethical to leave that issue out of the loan application and later ‘back in’ the level of income that an underwriter would approve. Without internal auditing of every closing (which a small business like ours only does in a cursory way), we did not know what the state auditors would find.

The two state employees were unexpectedly thorough, spending 4 days occupying our conference room instead of the 2 they had asked for when first announcing their assignment. But they were courteous enough.
The result in our office was immediate. After getting an in-person clarification about new regulations, company owners called a meeting and made the requirements very clear.

All in all, I think the audit was positive in that it reinforced the need for more assertive management and record keeping if we are to stay out of ‘QC jail.’ But I know the company will be in the game - for another few decades at least!

Many people like you and me are hearing news of rate cuts but are uncertain about refinancing. If you are like most Ohioans, you bought a home with little down payment in the last few years and home prices don’t seem to have risen much. But mortgage rates are returning to 50-year lows…fixed rates this month touched 5.0%!

1. Now that the Fed has cut rates, you can lower my mortgage payment, right?
Actually, it’s not that easy. We often see mortgage rates rise when the Federal Reserve Bank cuts rates. The Fed adjusts the rate that banks borrow from each other, not consumer rates. Mortgage rates are directly tied to the bond market. But after 5 of the last 8 Fed rate cuts, mortgage rates have risen in the next three months.

2. So how can I take advantage of lower rates?
Most homeowners are angling to get into a fixed rate loan. That’s often a good idea when mortgage rates are low. Now the hot mortgage product is FHA loan. In the past, these programs were little used because of more favorable terms from subprime lenders. Now, the government has loosened its credit and appraisal guidelines to include more normal Americans and average homes. Also conventional loan rates are near 50-year lows!

3. What refinance options are available?
Many homeowners can save hundreds each month if they refinance. Usually it is getting out of an adjustable or second mortgage. With rates falling, this is a great time to do that. We have introduced programs to help no matter your equity position.

4. Can you help if I’m behind on my payments?
Most often we can. FHA has a special program now to help borrowers who have fallen behind on an adjustable rate mortgage (ARM). If you started missing payments after your ARM went up, we want to talk with you!

5. What if I bought from a builder and I owe more than my home is worth?

Many home buyers were sold on payment - without regard to historical price - and few saw the decline in home prices coming – hitting new subdivisions especially hard. We’ve helped a number of people who owe more than their home is worth. Call today!

6. I’d like to move but have heard stories of long times on market. What should I do?
People are still able to sell in this tough market. If you don’t have an exceptional home, it is taking longer and you may get less than you expect. The first step is to get preapproved. Next, you should find a builder or Realtor you trust. We have relationships with GREAT professionals in almost every market. We also know about innovative lease options and land contracts. We’ll steer you right - give us a shout.

7. What is a preapproval and why is it helpful?
Deciding how much you can and want to afford is a critical step to getting and keeping a home. Take a few minutes to discuss your situation with an officer at First Ohio Home Finance. We will explain the process and look over your income, asset and credit documents. You will get a Realtor referral and a preapproval certificate. You’ll also have confidence that offers you make will be able to close in a timely way.

8. Why would I work with First Ohio Home Finance instead of my local bank?
Unlike bank employees, mortgage companies in Ohio now have strict background checks, state testing and licensing, and thorough continuing education requirements. With 12 years in business and more than 6 years HUD-approved, First Ohio Home Finance has thousands of satisfied customers. We are the oldest mortgage company in each of our locations.

In between the stock market volatility and emergency rate cuts and recession talk, last week was full of headlines like talking about home prices at decade lows, linking investment losses to housing gloom, and drawing parallels between current markets and the Great Depression.”

So what is all the noise about?

I find Joe Peffer’s blog particularly helpful as a window into the local markets. There aren’t many Realtors having these kinds of open conversation online, and his is certainly one of the best. Here’s a brief excerpt from Friday’s “nutshell” post.

“Remember that most media stories are greatly effected by larger east and west coast markets and that all Real Estate is Local. Here are some facts and figures on our market, here in Central Ohio.

• Last year was the third highest number of sales ever in Central Ohio. Yes, it was down 4.5% from 2005 and the average sale price is down a `whopping’ 1%, but it was still a good year. Today, compared to 2004, only 3 years ago, we have sold close to the same number of houses and the average sales price is up nearly 3%.
• Inventory levels are at record highs providing prospective homebuyers with the best selection of homes in the history of central Ohio!
• Our home prices are very competitive. Right now, there are more homes for sale than buyers to buy them. The result is that sellers are pricing their homes to compete. As the market corrects itself, home prices will start to increase again. So, buyers should act now while homes are priced to sell!!!
• There are still many great loan programs for deserving buyers.
• The recent Fed cut is good news! Even though a Fed rate cut doesn’t necessarily spell lower mortgage rates, it does mean good news for housing.”

Here’s another great point from Joe:

“Why was the average sales price in Central Ohio down 1%?

• First, because for much of the year we had roughly ten homes on the market for every buyer, many homeowners were forced to drop the selling price of their home in order to compete.
• Second, we had 22 percent fewer homes sell in the $1 million dollar range. Homeowners resistance to drop the price as well as lenders’ temporary aversion toward jumbo loans likely had impact here
• And third, we saw 124 percent more homes sell for less than $30,000. Many of these lower priced homes were purchased by investors who recognized just how favorable the 2007 housing market was and took full advantage of these conditions.”

One last note you will find interesting is this controversy in Massachusetts (and probably a great deal of other places now) where a bankers’ trade group is reporting single-family home sales were down twice as far as the Realtor’s association reported. And average home prices were down 5 times what the Realtor’s reported. The discrepancy apparently stems from the Realtor’s group NOT including homes sold by owner - without a real estate agent.

In my mind, what this issue highlights is that the RESULTS of one’s home sale are much worse when you try to save money by cutting out reputable local professionals. There are dozens of good Realtors in our market. Chances are you will sell your home faster and for more money if you use one.

Ask me if you are interested in buying a home. We will make sure you get a thorough pre-approval and one of the best Realtors in our market. Nothing makes your home purchase smoother!

The Federal Reserve Bank cut the federal funds rate to 3.5% this morning before markets opened. This was obviously and openly in response to stock markets around the world ‘in panic’ or ‘crashing’ over the last four days.

Here’s how the Fed couched it’s latest action (emphasis mine):

The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

Fed Policy Statement on Surprise 75BP Rate Cut

What those who have an interest in real estate should remember is the Fed controls short-term interbank rates - not mortgage rates. While there is a trickle-down effect to consumers with variable rate consumer debt (think credit cards and home equity lines), Fed rate cuts generally send mortgage rates higher.

Surprisingly, mortgage bond trading has been positive, though. Retail fixed rates for prime borrowers have been reported as low as 5.5%. So the combined effect right now is positive as borrowers have lower debt service and lower mortgage rates. Time will tell, but I firmly believe pricing will worsen as the market digest this unusual move. The news is extremely inflationary and will eventually send rates higher.

The other piece of the puzzle that I think will send rates higher is that the domestic bond market relies heavily on foreign central banks and investors. If those banks are rushing to save their own markets/economies, how much will they have to invest in US markets that are conservatively described as defective? So if demand falls, prices fall and yields/mortgage rates are forced upward.