Bart and Patti Reid Broward County, FL real estate | 954.306.7414
One thing I have learned is that many customers meet with a loan officer and fill out an application and then they feel like they enter a black hole. They don’t know “what happens next” or “who all these people are”. Today, I thought I might shed some light on the typical roles and responsibilities of the participants. Now not every company has the same job descriptions and workflow procedures, but since we all have to end up in the same place, they are fairly similar.
I will assume your loan officer helped you complete your application and explained all the disclosures, including the Good Faith Estimate and Truth-In-Lending, and they gathered much of your documentation to support your income, assets and credit-worthiness. Further, they ran your credit report and maybe even obtained an approval through an automated underwriting system. Of course they advised you as to loan product options and discussed rate lock choices. For most, the amount of information can be overwhelming. But what happens next?
The Processor
Your file is submitted to the Processing Department. The main function of the Processor is to verify all the information on your application, as well as order the appraisal. They will verify your employment history and income via the mail, the phone and/or confirmation from the IRS. They will source the necessary funds for closing and reserves; they will help dispute and/or explain any credit reporting challenges. They will review the Contract of Sale and the appraisal. Then they will assemble all of the relevant documents and submit them to the Underwriting Department.
The Appraiser
The Appraiser is an independent third party who gathers information about the home and gives their opinion of value. Appraisers weigh many factors- comparable homes that have sold recently in similar locations, homes currently for sale, the condition of the property, the replacement cost, what the home could rent for, etc. The appraiser is supposed to protect the borrower and the lender. No one wants the buyer to pay too much, and the lender needs to make sure their cash investment is satisfactorily secure. The appraiser is not usually an engineer. They do not certify as to the “life expectancy” of the home or its improvements; however, they do often raise issues that should be addressed by a home inspector.
The Underwriter
I have long referred to underwriting as “the speed bump of the mortgage process”. Underwriters are charged with protecting the company from fraud and unsound decision making. While the borrower, the loan officer and the processor are pushing to get a closing, the underwriter says “slow down”. They look at the quality and consistency of the documentation. They add common-sense to the factual analysis of the automated systems. Files are approved, suspended or rejected. (If the LO and Processor did their jobs correctly, rejections are rare.) Most of the time, the underwriter will find some areas that need further clarification or documentation….and so the file goes back to the Processing department.
The processor and LO work with the borrower to satisfy the conditions. The file is then given back to the underwriter for review and hopefully the issuance of a Clear To Close.
The Closing Department
The Closing Department is focused on making sure the lender is covered legally. They review the title report (checking for gaps in the chain of title, certificates of occupancy, real estate tax numbers and payments, as well as judgment, bankruptcy and Patriot Act searches). They prepare the closing documents for the lender and have them executed and delivered for recording.
As you can see, there are many people who are working towards a successful closing. Each of them are trying to make sure the borrower is qualified and informed of what their future holds, and, at the same time, they are trying to protect the lender from making faulty underwriting decisions.
Existing-Home Sales Move Up in August
RISMEDIA, September 25, 2010—Existing-home sales rose in August 2010 following a big correction in July, according to the National Association of Realtors. Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6% to a seasonally adjusted annual rate of 4.13 million in August from an upwardly revised 3.84 million in July, but remain 19.0% below the 5.10 million-unit pace in August 2009.
Lawrence Yun, NAR chief economist, said home sales still remain subpar. “The housing market is trying to recover on its own power without the home buyer tax credit. Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty,” Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.43% in August from 4.56% in July; the rate was 5.19% in August 2009.Yun added, “Home values have shown stabilizing trends over the past year, even as the economy shed millions of jobs, because of the home buyer tax credit stimulus. Now that the economy is adding some jobs, the housing market needs to steadily improve and eventually stand on its own.”
The national median existing-home price for all housing types was $178,600 in August, up 0.8% from a year ago. Distressed homes rose to 34% of sales in August from 32% in July; they were 31% in August 2009.
NAR President Vicki Cox Golder, owner of a real estate company in Tucson, Arizona, said consumers have been getting mixed signals about the housing market. “People understand the good affordability conditions with stable home prices in most areas, but they’re concerned about the economy and speculation on Wall Street,” she said. “We need to stick with the facts about the long-term value of homeownership and avoid unrealistic assessments. Tight credit and slow short sales are ongoing problems—expediting short sales will help the market recover more quickly.”
Total housing inventory at the end of August slipped 0.6% to 3.98 million existing homes available for sale, which represents an 11.6-month supply at the current sales pace, down from a 12.5-month supply in July.
A parallel NAR practitioner survey shows first-time buyers purchased 31% of homes in August, down from 38% in July. Investors rose to a 21% market share in August from 19% in July; the balance of purchases were by repeat buyers. All-cash sales slipped to 28% in August from 30% in July.
Single-family home sales rose 7.4% to a seasonally adjusted annual rate of 3.62 million in August from a level of 3.37 million in July, but are 19.2% lower than the 4.48 million level in August 2009. The median existing single-family home price was $179,300 in August, up 1.2% from a year ago.
Single-family median existing-home prices were higher in 10 out of 19 metropolitan statistical areas reported in August from a year ago (the price in one of 20 tracked markets was not available). Existing single-family home sales were down in all 20 metro areas from August 2009.
Existing condominium and co-op sales increased 8.5% to a seasonally adjusted annual rate of 510,000 in August from 470,000 in July, but are 17.1% below the 615,000-unit pace in August 2009. The median existing condo price was $174,000 in August, which is 2.8% below a year ago.
Regionally, existing-home sales in the Northeast rose 7.9% to an annual level of 680,000 in August but are 24.4% below August 2009. The median price in the Northeast was $260,300, up 7.6% from a year ago.
Existing-home sales in the Midwest increased 5.0% in August to a pace of 840,000 but are 26.3% below a year ago. The median price in the Midwest was $149,600, up 0.4% from August 2009.
In the South, existing-home sales rose 5.2% to an annual level of 1.62 million in August but are 13.4% below August 2009. The median price in the South was $155,000, down 1.5% from a year ago.
Existing-home sales in the West jumped 13.8% to an annual pace of 990,000 in August but are 16.1% lower than August 2009. The median price in the West was $214,700, which is 2.5% below a year ago.
A recent survey, a snapshot survey of U.S. four-bedroom, two-bathroom home listings, found a $1.7 million difference between America’s most expensive and most affordable housing markets. Newport Beach, Calif., led the list of most expensive real estate markets in America, with an average home listing price of approximately $1.83 million for property listings meeting the subject home criteria. By contrast, America’s most affordable housing market was Detroit, Mich., with an average home listing price of approximately $68,000.
The report provides the average home listing price of more than 18,000 four-bedroom, two-bathroom properties that were listed between February and August 2010 from nearly 300 select U.S. markets. The U.S. average for the surveyed listings was approximately $353,000. Markets included in this report were required to have at least six properties fitting the above criteria within the relevant timeframe.
Detroit, the most affordable market, is the only major U.S. city that looks South to Canada. Residents of the Motor City take great pride in Red Wings hockey and appreciate the city’s hard-working industrial and automotive history.
In addition to Detroit, America’s most affordable real estate markets are as varied in culture and trivia as they are in listing price ranges:
* Grayling, Mich., is home to many top cross-country skiing destinations.
* Sioux City, Iowa, has been recognized as a top U.S. economic community for areas between 50,000 and 200,000 people.
* Cleveland, Ohio, is home to the Rock and Roll Hall of Fame.
* Muncie, Ind., has gained notoriety for its successful prep sports programs.
* Norfolk, Neb., is home to many healthcare and manufacturing companies.
* Kansas City, Mo., is just behind Rome, Italy, for the largest number of fountains in a city (more than 200).
* Canton, Ohio, is home to the Professional Football Hall of Fame.
* Port Huron, Mich., features the School of Strings, which presents over 50 concerts a year with its Fiddle Club, Faculty and Student Ensembles.
* Topeka, Kan., was once temporarily renamed “Topikachu,” in honor of the Pokémon franchise.
* Homeownership Affordability: In total, there are 85 U.S. markets in the survey with average reported listing prices less than $200,000. There are 183 markets (out of a total of 296 surveyed) that are less than $300,000.
* Great Midwest: Michigan has three markets on the most affordable housing list (Detroit, Grayling and Port Huron), and all 10 of the most affordable markets are in the Midwest.
* Low Monthly Payments: Put in perspective, a $200,000 30-year-fixed mortgage at a 4.5% rate could cost a buyer a relatively low monthly mortgage payment of just above $1,000. The average $68,000 four-bedroom, two-bathroom home in Detroit could average less than $350 a month.
* Pacific Paradise: Out of the 10 most expensive real estate markets, six are from California: Newport Beach, Palo Alto, San Francisco, La Jolla, Pasadena and Santa Barbara.
* Above $750,000: The survey included 25 housing markets where the average listing price for the subject home was more than $750
“Enough with the doom and gloom about home ownership.” – WSJ 9/16/2010
WOW! If that quote was attributed to the National Association of Realtors or the National Association of Home Builders, it would have been quickly dismissed. However, it was the Wall Street Journal that was calling for the end of the ‘doom and gloom’ talk surrounding real estate.
We are finally seeing a powerful backlash to all the recent claims that home ownership should never have been part of the American Dream. It is about time!
Experts have been posting on the financial advantages and the other non-financial benefits of home ownership for over a year. Now it seems that they are part of an ever growing army of believers preaching the advantages and opportunities available in today’s real estate market. Who have joined this cause? Let’s name a few.
In an article last week, 10 Reasons To Buy a Home, Brett Arends reported:
Sure, maybe there’s more pain to come in the housing market. But when Time magazine starts running covers that declare “Owning a home may no longer make economic sense,” it’s time to say: Enough is enough.
He then posted 10 reasons to buy a home today:
Karl E. Case is a professor emeritus of economics at Wellesley. Professor Case is also co-creator of Standard & Poor’s Case-Shiller House Price Index and is recognized as the one of the foremost authorities on real estate today. In a New York Times op-ed piece earlier this month titled, A Dream House After All, he said:
I have never quite understood what the American dream really means when it comes to housing. For some people, it means having a solid and fairly safe long-term investment that is coupled with the satisfaction of owning the house they live in. That dream is still alive.
Others, however, think the American dream is owning property that appreciates by 30 percent a year, making a house into a vehicle for paying bills. But those kinds of dreams have become nightmares for the millions of foreclosed property owners who have found themselves sliding toward bankruptcy.
But for people with a more realistic version of the American dream, buying a house now can make a lot of sense.
The only segments of the housing market that are showing sales growth are the price points over $1 million. That market is up 6.1 % in the second quarter of this year vs. the second quarter last year. A recent survey showed that over 30% affluent buyers are planning to either build/buy a new primary residence or a second/vacation home in the next twelve months. It appears the wealthy believe now is the time to buy!
Fannie Mae just released their National Housing Survey. The survey reported:
Our iconic financial newspaper, our nation’s real estate pricing expert, the wealthiest people in the country and 70% of everyone else think now is the time to buy a home. It probably makes sense to listen to them.
Although I have been helping people sell their homes for over 20 years, in all different types of situations, the short sale process is one that is becoming increasingly popular yet most misunderstood. I have had my share of experience with sellers and buyers of short sales, and there is no set formula for each sale. Click on this source of information and will answer most questions you may have, or not even realize you should ask. If you are considering the purchase of a short sale, this may also help you to understand the process and help you decide if it is your best option.
If you are going to purchase a home that is a short sale, be sure you have the patience and the ability to walk away from the transaction if it isn’t all that you want it to be. Many times, after waiting for months for the bank to approve the sale, you may be asked to make up a cash difference or pay for assessments that the seller is obligated to but did not pay. In turn, the seller may not agree with the terms the bank has imposed upon them for the short sale and they may cancel the short sale themselves, leaving you to start looking for a home all over again. Any way you look at it, short sales are not for faint-hearted.
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