Fears in the mortgage market and housing sectors have been front page news for the past two and one-half months. It has seemed as if the turmoil in the financial marketplace has become like a global virus. There are fears of an even more urgent contagion surfacing, and it seems as if the fear may impede people's buying and selling decisions.
Tulsa area real estate expert Darryl Baskin and Jeff Sargent, president of ONB Residential Mortgage continue telling folks around the area that calm is what is needed in our market. When people watch the national news, their stomachs begin to churn and fear can take over unless the voice of reason can be heard. Yes, there have been problems in the mortgage industry. Yes, there are less products offered to assist people in buying homes. Yes, there are still plenty of programs available for qualified homebuyers. The Tulsa area has not been damaged as other regions in our nation have. Our area is one of financial diversity, as Tulsa businesses invested in other industries after the oil bust in the early 1980s in an effort to keep our local economy stable and maintain future growth. So far, their forsight has proved very effective in maintaining our current lifestyle and growth.
The loans created by greedy sub-prime investors were meant to fail, and many people fell prey to unscrupulous mortgage brokers and were duped into taking loans that folks eventually could not afford. These companies and those products are dropping like flies. It was this greed that is causing the financial fears felt by all Americans. As we are in the second most stable market in the U.S., we should not hesitate when considering buying a home. Consider dealing with local lenders and make sure that you are an informed buyer. Make sure to ask your lender if they fund their own closings (meaning they bring their own check to your closing). Ask for total disclosure of costs, which is a copy of a Good Faith Estimate, Truth In Lending Disclosure, copy of your loan application (Form 1003), and don't forget to ask what your 3 credit scores are and make sure that you are given a booklet that will inform you about purchasing a home. These are all items that a reputable lender will give you when you apply for a loan. There are many other things to be aware of when considering a lender. You can contact real estate expert Darryl Baskin of The Baskin Team @ 918.258.2600 for any real estate questions or Jeff Sargent, president of ONB Residential Mortgage @ 918.481.6833 for any mortgage lending questions.
Monday, August 27, 2007
Friday, August 10, 2007
What is happening to the mortgage market?
According to my friends who are connected to Wall Street, we are seeing history in the making in regards to the meltdown stimulated by mortgage defaults.
But, what has caused all of this and what does it mean? First, what it means is there will be many lending institutions go out of business. According to Mortgage lending implode http://ml-implode.com/ there have been 115 lenders gone out of business and 14 more on the "watch list." While money is tightening it will force more institutions out of business and create tighter lending practices for those who remain standing. It also means high-risk loans will either go away or will cost more through higher interest rates.
In the past several years "creative" lending practices spurred a flurry of activity for mortgage lenders. It became common practice to issue loans to those with documented bad credit, those who "stated" their income and assets (absolutely no documentation to verify), and made either little or NO downpayment. "Interest only" and "reverse amortization" loans were also created. On the former, the borrower only makes the required payment and their principle balance never reduces. The reverse amortization loan is when the principle balance of the loan increases if the borrower only makes the minimum required payment. I have had several folks call me literally in tears when they realized after years of payments, they owed more on their mortgage than they did when the mortgage was originated! When housing prices were increasing at historic levels, the borrower could sell their house if they got into a financial bind, but when pendulum started swinging the other direction and housing prices started to decrease, many folks found themselves in trouble.
What it all means is this; due to recent events those risky loans will either go away completely or will be available at a much higher interest rate. In the past several months we have seen rates on sub-prime market increase dramatically, last week we saw a huge increase in rates for ARMS and Jumbo loans. We have also seen many loan programs disolve. As recent as today, our "piggy back" loans such as 80/20, 80/15/5, and 80/10/10 now have an added cost. All of the above are cosidered higher risk loans so they will be available at a higher cost.
I feel like we have forgotten that owning a home is a privledge that we must earn through showing financial responsibility. You work, pay your bills on time, live within your means and save money. It is really pretty simple and those people are rewarded.
Let's look at the positive side, we live in a very affordable real estate market - well within the conforming range. The Greater Tulsa Association of Realtors for the Tulsa market reports our average sales price on single-family homes is $124,900. Our real estate market is not as volatile as other markets in the US.
It will be evermore important to use a lender you can trust. Bank of Oklahoma/BOK Mortgage is the top lender in the this area and have solid lending practices. We still have a large variety of programs both through secondary market agencies (Conventional, FHA and VA) and portfolio lending (programs created and funded through Bank of Oklahoma).
Just remember as with everything - this too shall pass. People will still buy and sell homes.
If you to talk about this subject you can reach me at 918-488-7353
Karen Heston, Mortgage Banker
Bank of Oklahoma Mortgage
But, what has caused all of this and what does it mean? First, what it means is there will be many lending institutions go out of business. According to Mortgage lending implode http://ml-implode.com/ there have been 115 lenders gone out of business and 14 more on the "watch list." While money is tightening it will force more institutions out of business and create tighter lending practices for those who remain standing. It also means high-risk loans will either go away or will cost more through higher interest rates.
In the past several years "creative" lending practices spurred a flurry of activity for mortgage lenders. It became common practice to issue loans to those with documented bad credit, those who "stated" their income and assets (absolutely no documentation to verify), and made either little or NO downpayment. "Interest only" and "reverse amortization" loans were also created. On the former, the borrower only makes the required payment and their principle balance never reduces. The reverse amortization loan is when the principle balance of the loan increases if the borrower only makes the minimum required payment. I have had several folks call me literally in tears when they realized after years of payments, they owed more on their mortgage than they did when the mortgage was originated! When housing prices were increasing at historic levels, the borrower could sell their house if they got into a financial bind, but when pendulum started swinging the other direction and housing prices started to decrease, many folks found themselves in trouble.
What it all means is this; due to recent events those risky loans will either go away completely or will be available at a much higher interest rate. In the past several months we have seen rates on sub-prime market increase dramatically, last week we saw a huge increase in rates for ARMS and Jumbo loans. We have also seen many loan programs disolve. As recent as today, our "piggy back" loans such as 80/20, 80/15/5, and 80/10/10 now have an added cost. All of the above are cosidered higher risk loans so they will be available at a higher cost.
I feel like we have forgotten that owning a home is a privledge that we must earn through showing financial responsibility. You work, pay your bills on time, live within your means and save money. It is really pretty simple and those people are rewarded.
Let's look at the positive side, we live in a very affordable real estate market - well within the conforming range. The Greater Tulsa Association of Realtors for the Tulsa market reports our average sales price on single-family homes is $124,900. Our real estate market is not as volatile as other markets in the US.
It will be evermore important to use a lender you can trust. Bank of Oklahoma/BOK Mortgage is the top lender in the this area and have solid lending practices. We still have a large variety of programs both through secondary market agencies (Conventional, FHA and VA) and portfolio lending (programs created and funded through Bank of Oklahoma).
Just remember as with everything - this too shall pass. People will still buy and sell homes.
If you to talk about this subject you can reach me at 918-488-7353
Karen Heston, Mortgage Banker
Bank of Oklahoma Mortgage
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