Orlando Mortgage Blog

I heard a television commentator make a statement this morning that "The real estate market hasn't been this bad nor seen sales numbers this low since 1995".

WHOA THERE TRIGGER! Just a dang minute pardner (ok enough Roy Rogers sub-text). I knew 1995 personally and 2010 is no 1995 in most ways that should be relevant to discussion. First and probably most important of all is the "fact" that the annual national average unemployment rate in 1995 was 5.6%, and that's just slightly more than half, 1/2, 50% of what it is today. But set that minor point on the sidelines for a moment. The 30 year fixed rate "Mom & Pop's" standard loan of choice was running around 9.5% +/- most of that year. Once again, that's just slightly more than twice what it is running today.

Now, 1995 was the year congress emasculated the GLASS / STEAGALL ACT effectively opening the door to what banks had been limited to doing for the previous 70 years, eventually killing the Act altogether in 1999 and we were off to the races. A man at Countrywide Mortgage liked it so much he expanded his business based on the new change. Thank you very much for that, Barney and Mr. Dodd, who were the two big names given praise for all their help in getting it done and helping push Fannie and Freddie into finding new ways to put more folks in homes. So, how did that work out you guys? Oh, and why are you two now the biggest front men of the latest and what I believe will prove to be dumbest new law since then, though on it's surface "consumer friendly" protective regulation to regulate the financial industry. But, DC can say they "did something". More over kill and not enough "self-regulation". It will prove to be just another power grab in my opinion and already appears to be doing little to help consumers and we are already seeing many negative impacts leaking out of the cracks.

Like what you may ask?

• The credit card law change...did your limit go down and your rate jump up before the new law takes effect? The card providers figured it out didn't they? Did you know this change alone has had a negative impact on many borrowers credit scores and therefore their ability to borrow anything. Forget the huge rate increases, by lowering your limit the available credit goes down and that is looked at negatively on every credit score today and lower scores limit credit availablility.
• The RESPA disclosure law changed. The new mortgage Good-Faith-Estimate gives far less information that a consumer really wants though it went from 1 to 4 pages in length...sound like the government to you? Even persons in the business still have trouble with it at times. Consumers were not helped with the end product. Ask anyone in the business.
• The appraisal on a home mortgage cannot be ordered now until a consumer has received the Truth-In-Lending form from the lender by mail or express delivery. Emails or faxes are currently not allowed. That adds several days to every loan transaction today. That's causing backup in lender pipelines now. Even minor changes can delay closing due to redisclosure being required.
• Thanks to Mr. Cuomo, NY Attny General, who pushed Fannie and Freddie into accepting his vision of what the appraisal process should be (took effect 5/1/09) the HVCC appraisal rule requires appraisals to be ordered through an independent appraisal management company selected by the lender, with no sales force involvement up front what-so-ever (that's supposed to be the main advantage to the consumer) who then order the appraisal on a next in line rotation basis. We can't even call them to run a "What do you think value range question by them before they go out" by law any more. It's a blind order. The average cost went up about $70 per job (about $370 +/-) but the the appraiser now only makes $190 to $225 again +/- , there's incentive (in my experience). Fannie and Freddie had to buy in to it and FHA has too. The concern is "How hard is the appraiser going to work if they have to do more for far less?". And what happens to service turntimes. Remains to be seen. I have an opinion. Who can say if that helps or hurts average real estate values. What's your opinion? It could go away, but lenders are expected to keep the basic guidelines if it does.

 So let's review:

• 1995 Unemployment Averaged 5.6% vs. 2010 running at 9.5% TERRIBLE
• 1995 30yr fixed ran 9.5% +/- vs. today's 4.5% and lower  WONDERFUL
• Credit card regulation changes. Have you been helped or hurt?
• New RESPA disclosure regulation. Good in Theory, Effectiveness Doubtful...
• The whole HVCC regulation appraisal thing...not a lot of happy campers so far.

I think I just convinced myself that even though there are so many obstacles out there today, who's at fault doesn't really matter. For those of us that can take advantage of today's fantastically low rate picture and great prices on a huge supply of properties, opportunity abounds to restructure our finances or live in the home we want to live in. Don't let the talking heads get you down. I was always taught that the worst of times are the best of times to take advantage of making money or finding ways to improve your financial picture. 

Look out for your family. We have many products like Conventional, FHA purchase and refinance including FHA "streamlined", and NO PMI HARP loans to help you do just that!

This Tirade was provided by...Bill Wilbanks