Week In Review - What the passing of BIlly Mays and Michael Jackson can teach us...

There was easing in rates from a couple of weeks ago, as in about .25% better. This has helped us drop down to the mid 5% range again for qualified borrowers. The discussion is that this trend may continue and we may see them come down a bit more over the next couple of weeks. However, nothing in life is ever guaranteed but if you look back to my rate sheet update from early June, I mentioned they might ease in July, August and September. See sometimes even I get lucky!

In other News:

• November 30, 2009 is the Deadline for the 1st Time Homebuyer Tax Credit - Why mention this in early July??? Because we all know how long short sales can take, especially if you are working with a buyer who is making offers on short sales. Soon, if they want to take advantage of the tax credit, they may need to begin looking at other types of purchases that might move quicker. The worst thing would be for a buyer to get a home the 1st week in December and miss out on the tax credit. Food for thought.

• Monetizing the $8,000 Tax Credit - In addition to the above deadline, there has been some circulation as to the ability to monetize the $8k tax credit. Monetize = using the money as an additional down payment or to help offset the costs associated with closing the loan. The $8K cannot be used as part of the down payment and as of now I haven't come across any companies that are working with borrowers to help them monetize the tax credit. I may have given this information already but it's a good refresher. See below:

• WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.

• Tribute to Michael Jackson- Last week, while heading to Whistler, BC (an hour north of Vancouver and a very gorgeous place to visit indeed); the news came out that the "King of Pop" died. Sometimes we think these things are insignificant, but the man truly crossed all boundaries. The coverage in Canada was as prominent as that in the US as it was the only thing on the radio and news. The interesting part is truly what his genius built. You don't have to be a fan of Michael Jackson as a person to see what his body of work means. There is no doubt that someday, should I have a little boy, he might try the moonwalk and to emulate the dance steps in "Billie Jean". Michael Jackson was an interesting character but he gave lasting memories to many people all over the world and that is a feat all on its own.

Often we miss greatness only when it's gone and we fail to realize the lengths at which one must strive to become great. People who some may consider great, pour their lives into becoming great at their passion. Think Abraham Lincoln, Wayne Gretzky, Michael Jordan, Michelangelo, George Washington, Bill Gates, and the list goes on and on. Greatness is achieved and earned, not given.

The last example of this was when watching "Pitchmen" a show on the Discovery Channel about Billy Mays and his partner Anthony Sullivan (in a nutshell they help inventors sell their products). In the show, they played an old clip from 1983 of Billy Mays, the renowned Oxi-Clean guy, selling a car shami on TV. They all had a good laugh about it. Why...because it was really bad. It didn't even seem like the same Billy Mays. But he worked hard, honed is craft and in the end became the most successful TV Pitchman of all time. His greatness isn't defined by his early beginning but that he was determined to become great at what he did.

We might all do better by learning from this example. The biggest decision lies in where we decide to be great.

HAPPY 4th of JULY.

It's all in the Spin!

Life and our outlook on it, is sometimes dependent on how we Spin the situation.

It's the "Half glass full vs. Half glass empty" theory. But it is true, we can apply it to any situation.

For example, with mortgage rates increasing over the last couple of weeks there are two recurring thoughts:

1. "I can't believe rates have increased to the mid 5% range. That is outrageous."
2. "Rates have increased but at least we aren't paying 6.5%-7.5% like the historical averages. A thirty year fixed rate in the 5% range, is still a great deal."
   

Two statements - Two completely different outlooks.

It's the same with gas prices. They have gone higher but they aren't at the highest levels we have seen them (think March/April of 2008)

The question remains: Does it make it any easier?

NO - Is of course the resounding answer.

We all want the best rate, the cheapest gas, the easiest road. But it usually doesn't happen. I locked my fair share of loans in the 4% range, but those people didn't hold out for lower rates, they seized the opportunity. Sometimes timing isn't perfect and we wait too long until what was great passes us by.

I think the goal is to do what you believe is best at the time: based on past experiences and using good decision making skills. They say that "hindsight is 20/20" but perhaps those that say that dwell too much on the past. Think of why you make the decisions at the times that you made them and you will find that you probably made the decision with the best possible information you had available and were okay with it.

Life changes: sometimes for the good and sometimes for the bad. But one thing remains, another decision is always around the corner. How are you going to Spin it so that you make the best decision at that time. Don't let negativity keep you from moving forward...that might lead to regrets you never want to experience.

"Monetizing" $8000 Tax Credit for Down Payment

On May 29, 2009, HUD released Mortgagee Letter 2009-15.

Initially this letter appears to help First Time Homebuyer's to use their $8000 Tax Credit as a part of their down payment before they actually receive the credit back from the government.

Based on my research this is not the case!

Currently their are 10 States that are participating in "First Time Homebuyer Tax Credit Loan Programs" - for purposes of this blog and since I work in AZ, please note that Arizona is not on the list.

In addition, if you read the entire Mortgagee Letter there is a very important Condition listed:

"Pursuant to 12 U.S.C. 1709(b)(9), the homebuyer's downpayment required for eligibility for FHA insurance may not consist of any funds (including funds derived from a sale of the homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction(or by any third party or entity that is reimbured, directly or indirectly, by the financially benefiting persons or entity). Accordingly, the proeeds of the sale of the tax credit to FHA approved mortgagees, the seller , or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefitting person or entity), may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs." - See Mortgage Letter 2009-15, Page 2

Notice the first part that says, "including funds derived from a sale of the homebuyer tax credit". You cannot use the money in place of the 3.5% down payment, based on the comment above.

The secondary financing essentially works like this: A company could "purchase" your $8k tax credit, charge you $200 for lending you the $8K and put requirements on how you pay them back.

Important points on how they can be repaid:

• No Cash Back to the Borrower
  
• Second lien cant exceed the total amount needed for down payment, closing costs and prepaid expenses.
  
• Secondary financing can be "soft" - Meaning no repayment required until the sale or refinance of the property.
  
• Must include payments in qualifying ratios if they are required.
  

Basically the mortgagee letter is intended to let buyers use the $8K tax credit to help pay for closing costs and any extra down payment above the 3.5% required by FHA.

There is no way, up to this point and based on my research, to not be required to put 3.5% down into the new home, unless the money is gifted from a relative.

Hopefully that clarifies the new mortgagee letter. I don't know whether it is good or bad...I just know that it might not be what people were hoping for. Sure it would help get more 1st time homebuyers into homes, but the DPA programs were opposed by HUD for a while, why would they enact a new guideline to help bring DPA programs back???

Kind of makes you stop and think that the perception this might be available in the future is just that - perception and not reality.
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here is good news though - 1st time homebuyers or people who haven't owned a home for the past three years, can still receive an $8000 tax credit on the purchase of their new home between now and December 1, 2009 (unless the bill is extended by President Obama).

Happy 1st week in June.

All Quotes taken from Mortgagee Letter 2009-15 from HUD Website: http://www.hud.gov/news/index.cfm