Marc's Mortgage Matter's

One time Cleveland Indian outfielder Oscar Gamble (on the left) was the first inductee into the Big Afro Hall of Fame. Membership really hasn’t expanded much over the years, so we’re very pleased to nominate Oakland A’s outfielder Coco Crisp (middle photo). First, how cool is it that his parents named him after a breakfast cereal, and second, as an A’s fan, could all that hair slow him down a bit on the base paths? If wind resistance slows him by even half a second, it could cost the team a few runs during the season.

Coco has always worn his hair in corn rows, and when he was asked if were going to keep his new Super Afro look, he said ”Yeah, if I can get my jersey over it.”

I have always wondered why it is so difficult for my clients that have money in the bank and perfect credit to be approved, while an FHA buyer that has a gift of 3.5% down payment and no cash reserves zips right through the system. I lost one last month. My borrowers had $2.5 million verified in the bank, looking for 35% down on a $200k loan. But they are retired and have little income. Part of it is their choice - they don't take more than they need from the accounts for tax reasons. So, the debt ratio was over 45 (it was 47) and loan was denied. After I told them, "Sorry, we were denied due to lack of income," they paid cash the next day.

You may have seen reports that the federal government is proposing new mortgage finance rules under which only home purchasers who can afford a minimum 20 percent down payment on a conventional loan would get a shot at the best available interest rates and terms.

That is correct, and it's deeply sobering news for large numbers of first-time and moderate-income buyers who can't come up with that much cash or afford to pay higher rates.

But some of the other requirements that federal agencies and the Obama administration are proposing in the same plan have gotten much less attention, yet could prove just as troublesome for consumers:

-- Strict mandatory debt-to-income limits. Under the proposal, to get the best mortgage rates, you'd need to spend no more than 28 percent of your gross monthly income on housing-related expenses, and you couldn't have total monthly household debt that exceeds 36 percent of your income.

There would be no flexibility to go beyond these ceilings, unlike in today's marketplace where Fannie Mae and Freddie Mac consider debt-to-income ratios along with other factors through their electronic underwriting systems. Freddie Mac, for example, has an overall debt-ratio limit of 45 percent of an applicant's stable monthly income.

-- To refinance your existing mortgage and replace it with one carrying the best available interest rate, you'd need no less than a 25 percent equity stake in your house to qualify. If you sought to take any additional cash out through a refi, you'd need 30 percent equity. Today's typical requirements for a conventional refi are nowhere near as strict.

-- Pristine credit standards. For example, if you were 60 days late on any credit account during the previous 24 months, you'd be ineligible for a mortgage at the best available terms.

These are all core features of what may be the most sweeping and controversial set of changes in decades for the housing and mortgage markets. The so-called "qualified residential mortgage" (QRM) proposals were released at the end of March by banking, securities and housing regulators, along with the Department of Housing and Urban Development. The agencies were required by the 2010 financial reform legislation to come up with new standards for low-risk conventional mortgages.

Congress did not specify precisely what a "safe" mortgage should look like, but directed the agencies to consider such factors as full documentation of borrower income and assets plus avoidance of toxic features such as negative amortization and balloon payments. Congress was silent on the subject of minimum down payments.

For a really weird story, Far East National Bank was once struggling to raise needed capital, and in the middle of all this, their Chairman, Henry Hwang, was kidnapped and his bank paid the ransom. No one ever found the kidnappers, but the Chairman showed up, claiming he’d escaped, and guess what? He suddenly had the capital they needed. What a coincidence that the ransom amount was almost exactly the amount of capital the bank needed to raise. I don’t think he was ever charged with faking his own kidnapping, but a lot of people thought he had.

Question: What do these guys have in common? Sammy Sosa (609 home runs), Manny Ramirez (556 home runs), Roger Clemens (354 wins and 4,672 strikeouts), Mark McGwire (583 home runs), Barry Bonds (762 home runs), and Rafael Palmeiro (569 home runs).
Answer: All were stupendous natural talents, and it’s doubtful that any of them will ever make it to the Hall of Fame because of steroids.
And what’s with Sosa’s skin?

Sammy insists he’s not trying to look like Michael Jackson, but it kind of looks like it, doesn’t it?
A few high profile black guys turn sort of white and the tabloids go bananas. Meanwhile, millions of white people are trying to get tan for summer, and no one blinks an eye. Crazy.

A jury on Tuesday convicted Taylor, Bean owner Lee Farkas on all 14 counts in a $2.9 billion bank fraud trial. Farkas testified in his own defense at the trial and claimed he did nothing wrong, saying he was unfamiliar with details of his business. Funny. The judge ordered marshals to take Farkas into custody immediately, a relatively unusual step since most defendants are allowed to remain free until they are formally sentenced. The 58 year old Farkas will be sentenced July 1 and could spend the rest of his life in prison. The sentencing guidelines call for a 20-year sentence on each of the 14 counts.

Does Donald Trump really think he’s electable? What if clever opponents insist on having an outdoor debate one afternoon, knowing that the winds pick up during the day?

If good hair has anything to with winning the nomination, how about Mitt Romney? Maybe even Coco Crisp, but not Donald Trump. How can he run for President if he can’t campaign outdoors on a windy day?

Today we had Jobless Claims, and two weeks ago we had the release of the employment numbers. A story from the Wall Street Journal recently noted, "If you want to understand better why so many states-from New York to Wisconsin to California-are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments are the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?"

Besides Wisconsin and Indiana, every state in America (including Pennsylvania and Michigan!) has more government workers on the payroll than people manufacturing industrial goods. Wyoming and New Mexico "lead" the nation with more than six government workers for every manufacturing worker.

There's little motivation for potential homebuyers to jump into the fray at the moment, so they aren't. Affordability conditions are really quite good; mortgage rates are low and steady at the moment, home prices are down and there are lots of properties to choose from. Still, absent competition from other buyers or urged on by ever-escalating prices, would be homebuyers continue to stay away from the market.

The poor housing climate is one of the factors keeping the recovery from gaining much traction. There are many jobs created by a robust housing market which have simply not been created yet and probably wont be for some time yet to come. In fact, even some jobs those "created or saved" during the beneficial interest rate environment are starting to disappear, with about 3,400 mortgage-related jobs disappearing from Bank of America and Wells Fargo in the past month. Simply, refinancing activity cooled considerably, and there has been no surge in home sales to support them.

The news in that regard doesn't promise to get much better. With a push-me, pull-you tug of war in the markets between slower growth (and lower rates) and rising inflation (and rising rates) factions, mortgage rates have come to a virtual standstill at a place which leaves them only marginally attractive from a refinancing standpoint. Of course, something on the order of 25% of the homes which might benefit from a refinance are underwater and won't be participating anytime soon, and there are probably millions of other folks who cannot qualify for a refinance from job losses and other life events.
That weak job market is also serving to keep folks wary of making any plunge into new debts, let alone the sizable commitment a home and mortgage will be. It's little wonder, then that at realty offices and builder showrooms it is quite the silent Spring, a period of which we are nearing the halfway point.

Jacob, age 92, and Rebecca, age 89, living in Miami, are all excited about their decision to get married. They go for a stroll to discuss the wedding, and on the way they pass a drugstore. Jacob suggests they go in.
Jacob addresses the man behind the counter: "Are you the owner?"
The pharmacist answers, "Yes."
Jacob: "We're about to get married. Do you sell heart medication?" Pharmacist: "Of course, we do."
Jacob: "How about medicine for circulation?" Pharmacist: "All kinds."
Jacob: "Medicine for rheumatism?" Pharmacist: "Definitely."
Jacob: "How about suppositories?" Pharmacist: "You bet!"

Jacob: "Medicine for memory problems, arthritis and Alzheimer's?" Pharmacist: "Yes, a large variety. The works."

Jacob: "What about vitamins, sleeping pills, Geritol, antidotes for Parkinson's disease?" Pharmacist: "Absolutely."
Jacob: "Everything for heartburn and indigestion?" Pharmacist: "We sure do."
Jacob: "You sell wheelchairs and walkers and canes?" Pharmacist: "All speeds and sizes."
Jacob: "Adult diapers?" Pharmacist: "Sure."
Jacob: "We'd like to use this store as our Bridal Registry."