As reported here a few weeks back, most of the nation’s large mortgage lenders routinely add 40 to 60 points to the minimum FICO credit score required by the FHA. Last week, Quicken Loans and Wells Fargo quietly suspended the questionable practice saying they will now honor the FHA’s 580 minimum score on the popular 3.5 percent down payment program. This is good news for first time homebuyers, and others who may be rebuilding their credit histories as we slowly climb out of the Great (nothing great about it) Recession.
Consumer groups estimate that one-third of Americans have credit scores below 620. Making lenders adhere to government guidelines means more minority homebuyers will find mortgages. It also helps alleviate charges of discrimination levied by the Obama administration’s Department of Housing and Urban Development. More than 20 large mortgage lenders remain under investigation. Kudos to Wells Fargo and Quicken for doing the right thing.
Tales from the street
Last Saturday, my son Cameron enlisted my help with a buyer when his schedule got jammed up a bit. The client, a longtime family friend, is just re-entering the housing market after sitting on the sidelines for three years, which as it turns out was a wise strategy. We poked around Bankers Hill and downtown and we could not believe the values available. Nice units selling for 40 percent or more off their previous sale prices.
We often tease lookers at our downtown storefront that we’re having a “buy one, get one free” sale. It seems now that we’re very close to that level of home values. As I often say, “For every loser, there’s a winner.” At these prices, watch for big wins in five to ten years by the people who wisely buy while prices are so low.
Our client decided to submit an offer on a newer place downtown. Original price: $440,000. Last comparable sale from just 30 days ago: $310,000. Asking price on the unit he wants: $279,000!
Big Bad Banking continues to exacerbate the values dilemma with its slow and inefficient short sale processes and shoddy foreclosure mechanisms. The longer it takes to move properties through these two avenues of sale, the further prices sink. You’d think it would be in everyone’s interest (bank, buyer, seller, investor, HOA) to streamline short sales. Ah, we can only dream.
More on mortgage of the future
If you’ve been following closely, here is the next in a series from Wharton School Professor Jack Guttentag and the way mortgages could/would/ should be procured in the future. Guttentag envisions the mostly-anti consumer single lender sites with a virtual better business bureau of lenders and affiliated services that agree to strict rules and compete for borrowers.
His most recent columns in Inman News covered the dreaded “rate quote/rate lock” process, where lenders lock a rate on behalf of a borrower. The rate may or may not be the same or lower than the rate you were initially quoted.
The process works great if your lender is honest and makes his/her fee schedule transparent. It’s fraught with opportunities for cheating you if they are not. Guttentag makes the case for strict policing and banishment as a result of deceptive lending.
On the subject of affiliated services (escrow, title, mortgage insurance, etc.), Professor Guttentag is spot-on with his analysis. Lenders, real estate agents and developers often end up selecting these services even though it’s the buyer and seller in the transaction who pay for them. In his plan, the clients would make these choices based on their own examination of fees and service recommendations from other site users. While most Realtors are trained to defer these choices to clients, it’s often the client who asks for the recommendation having little time to focus on anything more than the home purchase and the interest rate of the loan. Abuses in the private mortgage insurance area can be very costly to an uninformed borrower, and in virtually all cases the borrower is not offered a choice or comparison of insurers.
Watch for my comments on the final two installments on the “mortgage of the future” or catch them at Inman News, inman.com.
A perfect fit
I have been around long enough to recognize success in the real estate business. Truly successful people who manage to stay at the top of their game are a rare find and so is Ginny Ollis, Broker Associate at the Mission Hills Branch of Coldwell Banker.
Ginny is immediately likable. She has that rare gift of being genuinely interested in the person she’s talking to whether it be client, family, friend or colleague. She is unimpressed by her own success with a modesty that leaves her time and energy to spend meeting the goals of clients, and after 34 years in real estate sales there are lots and lots of clients.
A Massachusetts native who came to San Diego via NYC, Ginny is worldly in a way that complements her approving small-town outlook of San Diego. “San Diego is still a community. That’s what I love about it!” She went on to cheerlead about her Mission Hills neighborhood – a place where she’s become synonymous with real estate.
Asked about the current high-end market she said, “Sluggish would be too optimistic. But I am happy to see some recent sales above the $1.25 million mark. Buyers are demanding properties that they are willing to pay for every single month, meaning they are being very, very choosy. “
Keeping buyers and sellers engaged in their transactions until completed is a new skill-set Ginny’s perfected given current market conditions. She calls it “Keeping the lights on,” a perfect analogy given the dark clouds of uncertainty clients endure these days.
“It’s probably the most important thing we do as Realtors.”
Ginny is currently listing an incredible three bedroom, three bath home at 2345 Juan St., the former home of Price Club founder Sol Price. A gorgeous mid-century contemporary with ultra-private resort-quality pool, spa and stunning upgrades. Contact Ginny for more information, ginnyollis@aol.com.
Jim Abbott is the President/Managing Broker of ARG Abbott Realty Group DRE LIC 1843472. He serves on the Board of Directors of the Nat’l. Assn. of Gay and Lesbian Real Estate Professionals. He is a former board member at EQCA, SDAR, CAR and a past Library Commissioner for the City of San Diego. He can be reached at info@argsd.com or at his downtown office where his adult children pretend to let him run the company.
