Category: Real Estate Related

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If you are a homeowner or about to be a homeowner THIS IS A MUST READ

~ Fred Thomas, III ~ Leave a comment

The signs of “White Only” or “Negroes get your food by the back door” have long been removed.  But, the vestiges of racism remain, even in 2022. It is a systemic construct that will not disappear, at least not in my lifetime. Many of us have learned to navigate the treacherous waters that are prevalent in our day to day lives. This article is a prime example and a great lesson for those who might think racism went away when President Lincoln signed the emancipation proclamation or when Dr. King gave his “I have a dream speech.”

The phrase “getting the American Dream” is tossed around as an achievable aspiration. However, history and current reality remind us that preamble wasn’t necessarily meant for us; those who are African American.

In the mid-80’s several well known fortune 100 companies were gobbling up mortgage lenders to create a subsidiary business for their well-heeled clientele who might one day become mortgage customers.  American Express was a key sponsor with the 1984 Los Angeles Olympic Organizing Committee. Once the games ended key staff were directed to apply for post-Olympic employment opportunities with sponsors such as American Express. At the time, I had no clue what a mortgage banker was. My background was marketing. American Express had a subsidiary called Shearson-Lehman and their mortgage banking division was taking off. I jumped at the opportunity. I quickly learned how subjective staff charged with processing and underwriting a loan were; simply based on their upbringing or their societal perspectives. Of course since then a lot has changed but people are people and it is hard to strip away their biases.

Fast-forward to the article, many still swear racism is over and everybody is treated equal. The article points to a very clear, if not painful lesson that many have to endure.  Just when you think you may have “made it” it is examples like this which remind you the work must continue to go forward to break the veil of prejudice and racism.

PLEASE TAKE THE TIME TO READ THE ARTICLE

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Blockbusting is not a video game

~ Fred Thomas, III ~ Leave a comment

During the past several years the Black Lives Matter movement has been taken more seriously.  Some, genuinely have made an effort to understand its preamble.  It has evolved into social consciousness not seen in decades.  One issue which has been highlighted from the movement is housing discrimination and how it was strategically used to keep non-whites from reaching their potential to secure home ownership.

Ever since African-Americans were emancipated from slavery strategies, initiatives and even public policy has been used to thwart their progress.  Jim Crow was the moniker used to define that period.  Even though it has been outlawed, to this day its remnants are still part of our environment.  Racial Covenants was the legal process used to keep property from being sold to non-whites.  Legislation from the civil rights era outlawed the practice, however even though non-whites or specifically African-Americans were eventually able to purchase property, a slew of other schemes were developed with the goal to create a negative impact.

One of those schemes was called “Blockbusting.”  In simple terms it literally means to tear up the block or neighborhood.  It was accomplished by telling white homeowners in urban areas to sell their properties to the blacks who were seeking improved housing.  The whites were motivated to sell not from some benevolent position of integrating the neighborhood.  The opposite; they were motivated to act so they could secure whatever favorable price they could achieve which allowed them to move out.

NPR just released an outstanding and more comprehensive article on this topic and others dealing with discrimination in home ownership.

READ MORE

Newkirk: Mississippi Delta, Reparations and the Wealth Gap

~ Fred Thomas, III ~ Leave a comment 

Above photo:  WASHINGTON, DC - JUNE 19: Writer Coleman Hughes testifies during a hearing on slavery reparations held by the House Judiciary Subcommittee on the Constitution, Civil Rights and Civil Liberties on June 19, 2019 in Washington, DC. The subcommittee debated the H.R. 40 bill, which proposes a commission be formed to study and develop reparation proposals for African-Americans. (Photo by Zach Gibson/Getty Images)

PASADENA, CA. Vann Newkirk (Photo by Zach Gibson/Getty Images)(Photo by Joshua Blanchard/Getty Images for Politicon)

The Atlantic’s Vann Newkirk has produced a riveting expose about “The Great Land Robbery.”  It is worthy of reading and understanding so that you can weave historic realities into today’s current events.

If you’ve ever been through the Mississippi Delta (Delta) you are right in the passenger seat of Newkirk’s article.  The “Delta” stretches from Memphis Tennessee through the western part of Mississippi down to Jackson.  The land is legendary for its agriculture yield.  Following slavery key parts became transformed into the ownership of African-American farmers.  The boon was tremendous but survival did not come without peril.  Led by the backlash of emancipation, through the suffocation of Jim Crow and even the Civil Rights era,  there was much oppression.  The goal of the white power structure was always the same; make it as difficult as possible for African-American farmers to succeed with the bottom-line intent to strip ownership and stunt growth .

 

The article is compelling and brings you up to date regarding land and ownership in the “Delta” and even provides a perspective on the reparations debate.  While the article focuses on farmers in the “Delta” the same principals and examples could be used throughout the United States.  Most critically, it will help you understand the notion and primary driver of the wealth gap between Whites and African-Americans.

READ THE FULL ARTICLE HERE

To view a special clip of the interview Vann Newkirk did for PBS Newshour see below

HR2161 saves First-Time homebuyers approx. $5,000.  Will McConnell highjack?

~ Fred Thomas, III ~ Leave a comment 

Above image courtesy of Photographer: Matthew Staver/Bloomberg

[Washington, D.C.]  Today First-Time homebuyers received more welcomed news at Nancy Pelosi’s (Speaker of the House/D-CA/12th) House of Representatives passed HR2161.  Labeled as the “obstruction party” by leaders of the Trump administration the bill was passed and headed to the Senate where members are hoping majority leader Mitch McConnell doesn’t try and high jack the bill.  Lately he has proudly accepted the moniker to be known as ‘the grim-reaper.”

WASHINGTON, DC – JUNE 04: Senate Majority Leader Mitch McConnell (R-KY) speaks to the media after attending the Republican weekly policy luncheon on Capitol Hill June 4, 2019 in Washington, DC. McConnell took questions on various subjects including President Trumps proposed tariffs with Mexico. (Photo by Mark Wilson/Getty Images)

The bill essentially can result in borrowers using FHA mortgages saving $5,375 and is based on an average loan of $211,000.  Current FHA borrower must pay three percent which is known as the standard rate for mortgage insurance or the program which allows the agency operate.   Unlike conventional mortgages where insurance is normally mandated if the mortgage exceeds 80% of the value of the home, FHA mortgage through their mortgage insurance premium (MIP) is mandated regardless of loan to value.

HR2161 would allow borrowers who successfully complete authorized counseling to have their premiums reduced to 2.75%.  If passed and Donald Trump signs it into law you could see millions of buyers enter the marketplace.

 

Many borrowers use FHA insured mortgages as their entry into home ownership.  Contrary to popular belief, especially political leaders who have attempted to vilify the program, historically it helped the United States of America define a middle-class standard.

Mortgage News: Discount Rate, Weekly Survey & D & I

~ Fred Thomas, III ~ Leave a comment

The Feds led by Jerome Powell announced yesterday, discount rates would remain unchanged.  Although Donald Trump has been up to his usual antics of butting in to agencies which demand independence, Powell has been clear and intimated to Trump to stop harassing him or threatening to fire him.

Here is his remarks about why there was no need to change rates.

This week’s mortgage rate survey

June 20, 2019

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 3.84 % 3.25 % 3.48 %
Fees & Points 0.5 0.4 0.4
Margin N/A N/A 2.76

Diversity & Inclusion

While some will swear congress, specifically the House of Representative is doing nothing for the people was they are mired down in whether to impeach Donald Trump or not, in fact there is lots going on.

One such group, the Financial Services Committee has been busy (in addition to coordinating impeachment discussion) hold critical hearings about financial issues affecting the American people.  Today, they held a very important hearing on Corporate Diversity & Inclusion.

Here is the full hearing

Mortgage news: GSIBs as a group have paid at least $163.7 billion in fines!!!

~ Fred Thomas, III ~ Leave a comment 

above photo - House Financial Services Committee Holds Hearing On Keeping Megabanks Accountable
WASHINGTON, DC - APRIL 10: (L-R) Michael Corbat, chief executive officer of Citigroup Inc., Jamie Dimon, chief executive officer of JPMorgan Chase & Co., James Gorman, chief executive officer of Morgan Stanley, and Brian Moynihan, chief executive officer of Bank of America Corp., listen during a House Financial Services Committee hearing on April 10, 2019 in Washington, DC. Seven CEOs of the country’s largest banks were called to testify a decade after the global financial crisis. (Photo by Alex Wroblewski/Getty Images)

The news was initial reported in April but it is worth repeating today because at first the amount seemed like a prank but it truly is real!  Ever since the Democratic party assumed control of the House of Representatives they have moved quickly to implement more accountability as part of their oversight.  Global Systemically Important Banks known as GSIB’s make us some of the largest U.S. commercial banks.

The TARP Bailouts

During the financial crisis or mortgage meltdown of 2008, in 2009 the GSIB’s as mentioned appeared before the Financial Services Committee to discuss the bailouts they received.  On April 10th they reappeared before the committee chaired by Rep. Maxine Waters.  The purpose was to discuss “lessons learned” as well as steps they have engaged to balance the lending spectrum across the nation.

WASHINGTON, DC – APRIL 10: Chairwoman of the House Financial Services Committee Rep. Maxine Waters (D-CA) speaks during a House Financial Services Committee hearing on April 10, 2019 in Washington, DC. Seven CEOs of the country’s largest banks were called to testify a decade after the global financial crisis. (Photo by Alex Wroblewski/Getty Images)

$163.7 in FINES

As a group to date they have paid $163.7 BILLION in fines for various consumer abuses and other violations of the law.  Questions remain but one thing is clear; many banks chalked up the fines as the cost of doing business as evidenced by their current behavior and fact collectively they have made over $780 billion in profits.  Has anything changed?

The hearing shed light on why accountability is critical.  The committee has more hearings planned to address specific steps the banks plan on incorporating to benefit all consumers, particularly those that have been historically marginalized.

Here is a list of the fines some of the largest banks have paid in the last ten years:

  • Bank of America has paid $76.1 billion in fines.
  • JPMorgan Chase has paid $43.7 billion in fines.
  • Citigroup has paid $19 billion in fines.
  • Wells Fargo has paid $11.8 billion in fines.
  • Goldman Sachs has paid $7.7 billion in fines.
  • Morgan Stanley has paid $5.4 billion in fines.

Here is the full hearing on video

HUD’s Inconsistency a blow to DACA

~ Fred Thomas, III ~ Leave a comment 

above photo - Photo by Lev Radin/Pacific Press/LightRocket via Getty Images)

Imagine!  “you are a person living in the place you know as home; the United States of America.  You are not a citizen, instead you are known as Deferred Action for Childhood Arrivals (DACA).   You have broken no laws (of significant consequence) other than your parent(s) did not bring you here through the normal immigration process.”  Some will profess saint-hood and claim the law is the law, without trying to understand the majority in the DACA population entered as infants.

AFP PHOTO / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)

When Donald Trump was declared the victor in the 2016 presidential election some signaled a warning bell (and not all were Trump haters) that he was hellbent on appointing cabinet members who would do the bidding for himself, his cronies and supporters regarding the agency’s they would administer.  In other words unlike normal cabinet leaders it was not that important for you to have subject matter expertise.  It was more important for you to do as you were told while high-jacking agencies that millions of American’s would need to engage in their day to day activity.

During the nearly three years of the Trump administration many have left  after their malfeasance became too much for the administration to keep deflecting.  Take the case of Dr. Ben Carson who was appointed to lead Housing Urban Administration (HUD).  He rightfully earned the respect and admiration as a gifted surgeon.  With respect to housing or public policy which impacts how HUD operates he knew ZERO.  Some of Trump supporter’s snickered that he would be a good fit because as a child he grew up in HUD housing or the projects in Baltimore.

(Photo By Bill Clark/CQ Roll Call)

“I’m sure we have plenty of DACA recipients who have FHA mortgages,” Carson said. “I would simply say that I have instructed everyone to follow the laws of the United States with regard to DACA, with regard to anyone who is an immigrant or a potential immigrant to this country, and as long as you continue to follow the laws you will have my approval.”

 

Today, Carson sided with his boss engaging an updated policy to insure DACA recipients have difficulty in accessing public programs.  The latest is to make it impossible for them to secure an FHA or U.S. backed mortgage.  Again, while the move may appease some, you have to probe and ask the question what is the ulterior motive of withholding a popular program to gain homeownership?

 

In a response to HUD’s updated guideline or a legislative rebuttal, this afternoon the Financial Services Committee led by Representative Maxine Waters introduced H.R. 3154,

Representative Maxine Waters, a Democrat from California and chairwoman of the House Financial Services Committee, listens during a hearing in Washington, D.C., U.S., on Thursday, May 16, 2019. A top Democratic lawmaker yesterday questioned whether the Federal Reserve Vice Chairman can be trusted when he says leveraged lending isn’t a current threat to the financial system, pointing to his failure to foresee similar dangers before the credit crisis a decade earlier. Photographer: Anna Moneymaker/Bloomberg via Getty Images

The Homeownership for DREAMers Act, legislation to clarify that Deferred Action for Childhood Arrivals (DACA) recipients cannot be denied mortgage loans backed by FHA, Fannie Mae, Freddie Mac or the U.S. Department of Agriculture (USDA) solely on the basis of their DACA status.

Stay tuned.

Mortgage Payoff Tip:  What does SB2 have to do with you?

~ Fred Thomas, III ~ Leave a comment

Paying off your mortgage loan is a big achievement.  Make sure you, your escrow officer, your attorney or whoever is handling the final payoff pays attention to the fees you are charged.  Most lenders or servicing company’s which handle your payments are straightforward.  Unfortunately, some stray from full transparency and collect fees which are in excess of what is actually owed.  Keep in mind final fees vary from state to state.

 

SB2

In California, Senate Bill 2 took effect January 1, 2018.  Called the Building Homes and Jobs Act anyone paying off their mortgage were assessed a $75 fee.  While the fee may appear excessive, it was approved so that amount “Is what it is!!”

 

Paying off a mortgage normally consist of your lender receiving the final payment, preparing a “Reconveyance Deed” and filing it with the County Recorder where your property is located.  Using Los Angeles county as an example the lender will charge a statement fee ranging from $25-$40, which includes preparing the Reconveyance document.  They send the document to the Recorder who charges anywhere from $15-$25.  The key is any fees charged must be for work actually completed.  By the time you add SB2 your total fees to payoff your loan should NOT exceed $100.

 

It’s the SB2 fee that is raising concerns as some lenders have been known to manipulate communicating to borrowers the exact amount due.  Some will add on a blanket amount over and above the State mandated $75.  For some homeowners the amount could range from $150-$250 and more.  Most homeowners do not know about SB2 and are forced to take “their lenders word” in getting an explanation of the charge.  Lenders on the other hand have been known to use a very dubious answer such as, “Oh! it’s a State mandated fee.”  The facts are simple, you can only be charged for actual work and for SB2 the fee is clear at $75.

“Most homeowner’s never question the fees their lender charges because as long as they are within reason, they just pay them.  They don’t realize many of those fees are posted and you can only be charged on what the actual fee is.”  anonymous Los Angeles County Registrar staff

Pay attention to your payoff statement and make sure you receive a FULL explanation on any fee you are not sure about.

 

Mortgage rates continue to drop……..but

~ Fred Thomas, III ~ Leave a comment

Consumer mortgage rates have continued their decline and normally this would be great news for those financing the purchase of their home or refinancing their existing mortgage.

 

Low rates do not mean a thing if you can’t qualify!!!

MATTHEWS, NC – JANUARY 8: Brooks Troxler, owner of a small IT company called TroxTech, poses for a portrait at his office in a small office park in Matthews NC on January 8, 2019. Troxler is waiting for loan approval from the Small Business Association so he can close on a property that will allow him to expand his business. Because of the government shutdown, there are no federal workers at the SBA to approve his loan and his property deal is in jeopardy. (Photo by Logan Cyrus for The Washington Post via Getty Images)

Today Freddie Mac released its weekly rate survey.  The benchmark thirty-year mortgage is now at 4.450%.  The fifteen-year mortgage came in at 3.890%.  The Freddie Mac rate survey is the industry standard which consumers and professionals used to gauge and monitor rate activity.  The report data is compiled from a sample of Freddie Mac lenders across the nation.

 

Verifying income hampered

 

The dip in mortgage rates has resulted in a spike in mortgage applications.  The trick for lenders processing those applications is being able to have the loans fund in light of the Government shutdown.

Some applicants who are tied to the shutdown have voluntarily pulled their applications and some have seen lenders pull their applications because it is hard to verify income that does not exist.

 

IRS affected by shutdown

Another effect is not being able to verify income using the standard 4506T process.  The 4506T is a process initiated by lenders in wake of the 2008 financial crisis.  It is an internal revenue form that most borrowers execute as part of the documents when making an application.   It is used to match the income as reported on your federal income tax reporting.   Unfortunately, due to the shutdown the IRS cannot verify income as reported.

The drop-in rates have helped to spur what was stalled real estate activity.  While the shutdown is one metric affecting the economy, experts are pointing to the imposed tariffs and basic international uncertainty as further softening that may erode consumer confidence.

In the meantime, those whose income can be verified are more aggressive in taking advantage of the rate dip before the window closes.

 

Snapshot of this week’s rates:

  • 30 year fixed rate – 4.450%
  • 15 year fixed rate – 3.890%
  • 5/1 Adjustable rate mortgage 3.83%

Conforming Loan Limits increased

~ Fred Thomas, III ~ Leave a comment 

above photo Mel Watt, director of the Federal Housing Finance Agency (FHFA), from left, Jerome Powell, chairman of the U.S. Federal Reserve, Steven Mnuchin, U.S. Treasury secretary, and Jay Clayton, chairman of the Securities and Exchange Commission (SEC), listen during a Financial Stability Oversight Council (FSOC) meeting at the U.S. Treasury in Washington, D.C., U.S., on Tuesday, Oct. 16, 2018. Powell said at the meeting he is worried about a spillover from hard Brexit, but stocks and Treasuries showed little reaction. Photographer: Andrew Harrer/Bloomberg via Getty Images

 

Today, the Federal Housing Finance Agency (FHFA) announced conforming loan limits would increase from $453,100 to $484,350.  For higher cost areas (see map below) the new limit will be $726,525.  FHFA was created as the umbrella agency for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

Fannie Mae Headquarters, Washington, DC (Photo by Alex Wong/Getty Images)

Freddie Mac Headquarters, McLean, VA (Photo credit should read PAUL J. RICHARDS/AFP/Getty Images)

They purchase home loans from a network of lenders across the nation.  The lenders originate the loans from consumers who are seeking to finance their home purchase or to refinance their existing mortgage.  The lenders also work with mortgage brokers, credit unions and other organizations who have direct contact with consumers.

Once the loans are funded, they are packaged and sent to respective investors (i.e., Fannie Mae and Freddie Mac) and sold as securities, which are backed or collateralized from the property.

 

The Impact

Nationally the average loan amount is $229,000.  The new guidelines take effect for mortgages that originate starting January 1, 2019.  The increase will help those who see home prices continue to rise.

Conforming loans are those where the loan amount is $484,350 OR LESS.  Any loan amount in excess of that loan is defined as a “Non-Conforming” loan.  For borrowers the impact is typically ½ point or 50 basis points on the interest rate.

 

As an example based on current limits

Loan Amount Rate Payment Mo. Difference
$453,100.00 4.81% $1,816.00 -$188.00
$453,101.00 5.31% $2,004.00

The bottom line difference could be approximately $190 each month.  So, while the monthly payment is crucial, the move also provides those with higher loan amounts an additional $31,250 to deal higher prices, while being able to obtain more affordable interest rates.