Archive for February, 2010

What’s Your Code of Conduct?

February 23, 2010

When any organization starts out, one area to develop and maintain is how you intend to run your business – your corporate philosophy or code of conduct.  As a growing company licensed to conduct business in 5 states (Michigan, Indiana, Kansas, Tennessee and Florida) with more to come, we needed our priorities to be established early on. 

The National Association of Mortgage Brokers (NAMB) provides a standard list of suggested business practice guidelines.  With a desire to focus on our clients, I think we took most of their suggestions a step further.  Here is a summary of our code of conduct, a Borrower’s Bill of Rights so to speak. (You can find the detailed list on our website.) 

  • You have the right to compare the fees of different mortgage companies.
  • You have the right to be informed about the total cost of your loan.
  • You have the right to know all fees associated with your loan up front.
  • You have the right to have us help you compare competitor’s fees – and we will.
  • You have the right to know what fees are nonrefundable if you decide to change your mind.
  • You have the right to ask us what we will do for you and how the process works.
  • You have the right to ask us to explain any charge or term you may not understand.
  • You have the right to a credit decision based on facts and to not be discriminated against.
  • You have the right to a full explanation if your loan is declined.
  • You have the right to home loan information, like HUD’s “Shopping for Your Home Loan” booklet.
  • You have the right to refer us to others. (We love this part!)
  • You have the right to be appreciated by your favorite charity for your continued support.

Bottom line – treat others with respect and honesty. 

What governs your business decisions?  What bottom line do you hold to?  Leave a comment and let us know what the non-negotiable details are for you.

Are You Confused Yet?

February 19, 2010

If you are not in the mortgage industry or pay particular attention to this topic in the media, you may be confused by the talk of impending changes by the Federal Reserve and how that will affect the housing market.  So let’s break this down so your mom can understand this.

When you secure a home loan, more often than not, the lender who provided you the mortgage loan is not the one you end of sending your monthly payments to.  Shortly after you close on your loan you can receive a letter stating you now have a new mortgage lender to work with.  Understand this does not change the parameters of your loan, it only changes who collects your monthly payments and (if you have an escrow account) who sends the payments out to your insurance provider, and local municipalities for property taxes, etc.  Behind the scenes some investor now holds the loan so that the original lender can in turn lend out more money.

When the housing market started getting soft and interest rates dropping, investors started slowing down on purchasing these investments.  Look at this from their perspective, they make less return on their investment and a much higher percentage of those loans were going into foreclosure.  So they stopped buying as many as they had in the past.  The trickle affect of this was that the original lenders had less money of their own to lend out to consumers like you and me.  The Federal Reserve stepped in and starting buying many of these loans to keep the market going; and it worked.

The reason for recent hubbub is that this particular program from the Federal Reserve is set to end on March 31 of this year.  Uncle Sam will then stop this support, that to date has purchased $1.3 trillion worth of mortgage loans.  (Just for fun, 1 trillion is a 1 followed by 12 zeroes; and 1.3 trillion is very close to the size of our federal deficit.  But what are a few bucks between friends?  Whoa.)

This is where the “what happens next?” question comes into play.  The big item of speculation now is the impact this will have on the housing market and the overall economy.  Industry forecasters are predicting anything from modest bumps in interest rates (less than a 1% increase) to a noticeable climb (a 2% increase or more) and everywhere in between.  Now, unless you have a crystal ball, no one knows exactly what will happen.  But let’s put some things in perspective.

Historically speaking, rates at 7% are still low compared to what they have been.  Anyone hear of a rate at 11%?  Any takers for relatives who once had a mortgage at 13%?  Also keep in mind the rule of supply and demand.  If interest rates suddenly or drastically increase, the amount of buyers will decrease – it now costs more to secure a home loan.  So if there are fewer buyers, there will be proportionately more homes on the market available to purchase.  As the quantity of for sale homes increases, the price will decrease due to an increase in supply for the available market.  So while the cost of securing a loan may increase, the size of your loan may decrease.  Again, it’s all relative.

My point in all this?  The marketplace is always moving and adjusting to outside forces.  If you don’t like the way the pendulum is swinging right now, hang on.  Like the weather in Michigan – it will change.

What’s the Difference?

February 16, 2010

What’s the difference between a Short Sale, Foreclosure and HUD Home?

Some time ago, we posted a series of articles on different terminology related to home purchases that can often create confusion.  This post covers three more – Short Sales, Foreclosures and HUD Homes.  The current housing market has more homes available that are not the traditional transaction.  Here are just three you may want to know about.

A Short Sale is a home that is being sold by the current owner where the selling price is less than the current balance owed on the mortgage.  Many times there are outlying factors that force a short sale, such as relocation for a job change or a homeowner who has fallen behind in payments and is trying to salvage some equity or avoid foreclosure.  The advantage of purchasing a home in short sale is that you can get the home for its true market value, and not an artificially inflated price. 

The primary disadvantage to purchasing a short sale home can be the time involved.  In many cases, the bank is unaware of the seller’s intentions to sell the home, therefore once the bank receives the offer they must spend a great deal of time investigating the details.  This process can take months.  Unless you have written a deadline to your offer being accepted, you could be locked into this transaction until it is either approved or denied by the bank.  In some cases, the bank can pre-approve a short sale, but keep it mind it has been approved for a specific price.  Any other offer must be resubmitted and approved by the bank.

A Foreclosure sale means that the bank has full possession of the home and is the seller you will be negotiating with.  A foreclosure purchase is most like a traditional home purchase out of these three examples.  The biggest advantage of foreclosure sales is that you are dealing with a seller who has no emotional ties to the property.  It is simply a matter of recovering as much of their money as possible.  The second advantage is that you can purchase a home at a value much below market value.  You are free to negotiate price and seller concessions, but keep in mind the bank has based the selling price on a recent appraisal done to determine value.  The final selling price boils down to how desperate the bank is to sell the property.  So while you can offer a lower price, don’t be insulting.

The disadvantage of foreclosure homes is that they generally require repairs before you can assume occupancy.  The seller (the bank) also has more control of the sales process and can back out for any reason, such as an amended contract with a condition they find unacceptable.  Start by writing a sales contract that you understand, protects your interest and with terms you can agree with.  By reading your contract carefully and in detail you can generally avoid most areas of contention.

A HUD Home is an FHA owned property where the home is made available to individual, owner occupied buyers for the first 10 days it is on the market.  After these initial 10 days, all bids are reviewed at one time.  If no offers are accepted investment buyers can then place bids on the property.  Again the advantage of these types of sales is the ability to get the home for a price under the typical market value. 

The biggest disadvantage to a HUD home is that the asking price is set at an “as is” appraised value.  Any bid for more than this amount must be paid in cash at close by the buyer.  If your sales price is higher than the asking price, you can only mortgage the asking price less your down payment.  Be prepared to move quickly if you have your eye on a HUD home; if the repairs are at a minimum these homes will move quickly.  Generally homes purchased by investors require significant improvements to bring them back to acceptable safety standards.

Don’t be afraid of these types of transactions, just do your homework and work with licensed professionals who have experience with these types of purchases.  They can help you navigate the process successfully.

Non-profit Spotlight: Gilda’s Club Grand Rapids

February 11, 2010

Cancer is one of those words that stirs deep emotions. Nearly every person has been impacted by the disease in some way, either personally or along side someone they know and love.  Gilda Radner felt the emotional and physical impacts of cancer first-hand when she was diagnosed with ovarian cancer in 1986.  However, a significant difference in her journey was when she became part of a cancer support community.  Knowing the benefits of having the support of others who understand and truly care, Gilda wished that anyone dealing with cancer would be able to receive the same kind of support she did.  After her death three years later in 1989, Gilda’s husband, Gene Wilder, and her cancer therapist, Joanna Bull, began to plan a free cancer support community called Gilda’s Club.  The first club opened in 1995 in New York.

Gilda’s Club Grand Rapids began out of a similar expression of love and compassion.  Twink Frey went through her cancer journey without a community and social and emotional support and knew there had to be more.  She was soon joined by two other cancer survivors, Deb Bailey and Susan Smith to change this.  Together they founded Gilda’s Club Grand Rapids and opened their doors in February of 2001.  Gilda’s Club Grand Rapids opened a second Clubhouse in Lowell in September, 2009.  These clubhouses serve the six-county area of Allegan, Barry, Ionia, Kent, Muskegon and Ottawa. 

“We need Gilda’s Club to fill the gap that exists between the doctors and the patient.  Gilda’s is a great place to get information and support during the entire process.”

~Al Kaczanowski

Gilda’s Club is more than a support group; it is a community of compassion and understanding that travels the cancer journey with everyone impacted by the disease – patient, spouse, children, extended family and friends.  Their entire goal is to make the path that cancer leads you down a little easier.  From the moment you walk through their doors you instantly feel at ease.

“Gilda’s Club has been a tremendous source of support for us as we have adjusted to what this cancer diagnosis means for our family. We feel welcomed, supported and understood here.”

~Kathi, Age 40; Andrew & Megan, Ages 12 & 9

Each month more than 200 support groups, lectures and workshops are offered for free to adults, children and families with program activities also offered in Lowell and Allegan.  Events range from health and fitness classes to formal lectures to casual social gatherings.  Classes and support groups focus on every stage: diagnosis, treatment, grief; for all ages.  The point of each one – you are not alone.  

“Gilda’s Club is a place to come and get support, love and friends. It’s a home away from home that is always open when you need it. The people at Gilda’s Club are there to help you in whatever way they can, and they actually care about every single person who walks into that red door.”

~The Stob Family

It is very easy to get involved with Gilda’s Club Grand Rapids if you would like to help.

  1. Volunteer.  Your help would always be welcome to help with mailings, serve as a program host, assist at events or make phone calls.  Volunteer orientations are available twice a month that will introduce you Gilda’s Club and help you find ways to use your talents.
  2. Financial Support.  Your generous gift will be used to help anyone on a cancer or grief journey.  The non-profit organization exists entirely on donations.  Therefore 100% of every dollar donated stays in the local community.
  3. Share.  Tell everyone you know about the amazing community of support that Gilda’s Club Grand Rapids offers.  This Monday (February 15) Gilda’s Club Grand Rapids will be 9 years old.  To celebrate, they are hosting an Anniversary Open House at the Grand Rapids Clubhouse on Monday, February 15 from 9am – 9pm.  Come out for a slice of cake and a tour!      
  4. Empower others.  Awareness Home Funding is proud to partner with Gilda’s Club.  We donate $250 every time we close a home loan.  This program applies to all our home loan programs, purchase or refinance.  If you don’t need a home loan right now, we can still help.  Please refer us to your family, friends and colleagues and together we can help Gilda’s Club Grand Rapids. 

 “Gilda’s Club Grand Rapids is extremely grateful to Awareness Home Funding and its customers for donating funds to help families living with cancer and grief in our community. Every single dollar raised stays right here in West Michigan and makes such a difference to our members who come to Gilda’s Club to learn, share and laugh together on their cancer or grief journey. Cancer happens to the whole family and we believe that the social and emotional support for all ages available at Gilda’s Club is as essential as medical treatment. The need for our free program is currently up by 40%, while donations have decreased by 30%. We offer our heartfelt thanks to Awareness Home Funding for helping us close that gap and for recognizing the important need for a Gilda’s Club support program here in West Michigan.”  

~ Lindsey Rodarmer

Physical and Financial Fitness – Who is Responsible?

February 9, 2010

We recently found a blog post by Philosophy Professor Nina Rosenstand from San Diego Mesa College where she raised the question of whether or not staying slim was a moral responsibility.  She implicitly asked who should ultimately be responsible for our own physical health, and whether or not an employer could assume this task.  While the focus of her article was on physical fitness, it got us thinking.  Who is ultimately responsible for your financial fitness? 

In the same way our weight is used as one indicator of physical health, a person’s credit score is used to portray a person’s financial fitness.  Your credit score measures your fiscal responsibility from the past up to the present.  Like your weight, this too is only one indicator of your overall financial health.   A credit score doesn’t account for factors outside of your control like a company closing leaving you without a job and therefore no income, that potentially leads to foreclosure.  Your credit score doesn’t explain a divorce that suddenly cuts your income in half. 

However, do the occurrences of life totally void us of all responsibility when it comes to our finances?  Are “we the people” to some degree responsible for this messed up economy due to our collective lack of financial accountability?  Can we be allowed to wash our hands of financial integrity just because “life” happens?  Shouldn’t we expect the unexpected to happen?   

Being financially sound (i.e.: strong credit scores, emergency savings, balanced budgets, living within our means) has many benefits such as lower health and auto insurance rates, better interest rates, and even job offers.  Should we push the blame of financial blunders onto someone else?  At what point do we say this is my life, my finances, my responsibility?  Along with teaching our children about living healthy, we need to also teach them financial responsibility.  Perhaps we might find that sound financial health can lead to better physical health.

We are not so ignorant (nor arrogant) to think that hiccups are not going to occur along the path of life.  They do.  And if you have not experienced one, odds are you will at some point.  As a company we are bound by industry and legal regulations to enforce set standards of acceptable financial health.  However, we also want to help our clients improve and maintain optimal financial health.  We cannot fix a client’s struggling credit any more than we can do sit-ups for you, but like a personal trainer we can offer guidance, suggestions and helpful ideas. 

What are your thoughts?

Non-Profit Spotlight: American Red Cross of Greater Grand Rapids

February 8, 2010

If you have ever done a general search of non-profit organizations in any given area, you will find hundreds of groups that all work to better the communities we live.  Some focus on families as a whole; others on specific needs of individuals; and still others work to better the areas that impact our lives, our pets, our neighborhoods, our schools.  Despite knowing that many of these groups exist, how much to do we really understand about what they all do to better the lives they touch.  Here is the focus of this post.  (Check back for more groups in the future.) 

History

Let us personally introduce you to the American Red Cross of Greater Grand Rapids.  They have a long and rich history than spans over 93 years.  The Greater Grand Rapids chapter was founded in 1917 during World War I in response to a call to action to support the war effort.  They offered assistance with hospital services in France as well as to military personnel passing through Grand Rapids, MI.

In the 1920’s and 30’s, Veteran assistance services were added that also expanded to include preventative health education programs.  The health programs were a direct result of needs arising during the massive flu epidemic of the time.  Services expanded again during the Great Depression to include food and clothing distribution.

When World War II broke out, the Grand Rapids American Red Cross chapter again rose to the call for help with nursing, lifesaving, and water safety training.  Transportation and youth services were also added during this time.

The 1960’s brought the Civil Rights Movement, and in keeping with their commitment to community, the chapter’s social awareness and activity also increased.

From the 1970’s to the 90’s more services and community assistance programs were added again.  This time programs were in the areas of CPR and first aid training, accident prevention, pet emergency training, childcare education classes, HIV/AIDS education, and diversity training.  The Gulf War and area disaster relief efforts were also an ongoing focus for the chapter.

 Throughout the years and various changes in size and scope of services offered, the vision of the American Red Cross of Greater Grand Rapids has consistently been to offer compassionate volunteers committed to helping others.  That has never changed. In the past fiscal year (2009) over $1.9 million dollars of support went out in various forms to better the lives of residents in Barry, Ionia, Kent, Montcalm and Ottawa counties.  The work of the local Red Cross impacts more than 70,000 individuals annually in this area.  This is one tightly run ship with only 9¢ from every dollar received going to operational expenses.  Keep in mind the chapter also supports projects on a national and international basis.

Focus

Locally the chapter’s current focus, as always, is disaster assistance.  This time of year often brings calls for help from victims of home fires.  The cold weather can force residents struggling to make ends meet look for alternative heat sources that often create unsafe situations resulting in house fires.  The American Red Cross of Greater Grand Rapids is ready and able to help.  They also offer an ongoing service of free transportation for elderly and disabled persons who need to get to various appointments or errands and do not have or cannot afford other means of transportation.  For example, getting to a doctor appointment, a dialysis treatment, or even picking up a prescription.  If you are in need of transportation assistance, simply call the Greater Grand Rapids Chapter at (616) 456-8661 one week in advance.  One of the 70 volunteer drivers utilizing one of 11 vehicles will be happy to assist you.

Nationally the Greater Grand Rapids Red Cross chapter remains focused and ready to assist with disaster relief in cases of hurricanes, tornadoes, floods or whatever tragedy may occur.  With the goal to always be ready, the Grand Rapids chapter offers a thorough training series for disaster services volunteers.  The training focuses on mass feeding, sheltering, mental health support, driving emergency vehicles and logistics.  The purpose of the training is so that when disaster strikes, an army of volunteers are ready to go into action and know how to act to avoid chaos.  One key component to the training is that it is exactly the same in every chapter across the country.  Teams can quickly be assembled from all over the United States and every member will be able to effectively offer help and assistance when needed.

On the international front the focus now is obviously Haiti.  One important point here is any funds donated locally for Haiti relief will be channeled to the national Red Cross for aid and assistance.

So how can you help the Red Cross? 

  1. The first level of response from the community is always funding.  Since this is solely a donation funded organization, financial support is needed to keep the services going. 
  2. You can volunteer.  Currently they have areas of opportunity in IT support, reception and as disaster managers.  Every other Wednesday, the American Red Cross of Greater Grand Rapids offers Life Savers Tours that will introduce you to the chapter and their work.  Call (616) 456-8661 to sign up for the tour that also includes a free lunch.  The date of the next tour is February 17. 
  3. This is the Red Cross, so you can always donate blood.  As you know a single donation can be used in many ways to help many people.  This month blood drives will be conducted locally on February 16, 23 and 26. 
  4. Increase your support.  The reason Awareness Home Funding has partnered with the Red Cross is because of our program to support non-profit organizations.  We donate $250 every time we close a home loan.  Maybe you are not in the market to purchase or refinance a home, but someone you know may be.  When asked, let us know you would like this donation to support the American Red Cross of Greater Grand Rapids.

The American Red Cross of Greater Grand Rapids, committed to helping others with compassionate volunteers.

RD Loans – A Great Option to Consider

February 5, 2010

An RD loan is a Rural Development home loan offered by the Rural Housing Service specifically for moderate to lower income residents buying homes in rural areas.  A rural area is defined as a community with a population of 10,000 residents or less.  Although some communities located outside of a metropolitan statistical area can qualify with populations up to 20,000 residents. 

In plain English this means if you would like to purchase a home in an area that is not a large city there is a program available.  For most, when you initially think of what a rural area is you might envision acres of farmland or large acreage properties where your neighbor is a mile away.  Not so.  In many instances rural areas are just outside of major cities.  In fact in the state of Michigan, more areas qualify for rural status than areas that do not.  Many of these areas are cozy suburban towns with close knit neighborhoods and strong local schools. 

Another point to note is that the RD loan program cannot be used to purchase or refinance farms or large acre properties where the land far out values the home.  This is a program for consumers who meet the typical credit requirements of obtaining a home loan.  They are just in a slightly lower income bracket and do not have enough funds on hand for a 20%+ down payment.  If this isn’t a program that helps the “little guy” I don’t know what does!  The largest advantage of RD loans is that they currently remain one of the last true “zero down” home loan options.  (VA loans are the other zero down payment option.)

The basic guidelines for an RD loan include:

  • Loans may be used to purchase a single-family, primary residence.
  • On a refinance, the existing loan must already be an RD loan.
  • A borrower must lack sufficient resources to provide a down payment for a conventional loan (typically 20-25% of the purchase price).
  • The RD loan allows a borrower to finance up to 100% of the appraised value of the home without requiring private mortgage insurance. 
  • A one time funding fee is charged and may be financed as part of the loan.  (For purchases, 2% of the loan amount is charged.  On refinances, the fee is .5% of the loan amount.  See you Home Loan Specialist for specific details.)
  • The property must be located in a designated rural area, have all-weather street access, and have approved water and waste systems.
  • The value of the site may not exceed 30% of the total appraised property value.
  • Sellers may contribute up to 6% of the purchase price toward closing costs and pre-paids.
  • Gift funds are allowed.  (Consult a Home Loan Specialist for specific criteria.)
  • Currently, only above ground pools are allowed with RD loans.
  • The property may not be active farmland.

With comparable interest rates, high LTV (loan to value) allowance and no monthly mortgage insurance, RD loans provide a great option to home buyers who may have thought they could not qualify for a home loan.  Talk with one of our Home Loan Specialists (866-982-9823) about the specific details and how this program can work for you.

The Other Side of the Coin

February 2, 2010

As your parents most likely told you growing up, there are two sides to every coin; and therefore two sides to every story.  On one side we have the home buyer’s tax credit with up to $8,000 available for first-time home buyers and up to $6,500 available for existing home owners.  This has been a great program that has helped many buyers.  Some of our clients have used this to essentially recoup their closing costs.  Others have used this to update or furnish their new homes.  However they are choosing to use the credit, there is money coming their way.

So, what’s the catch?  The other side of this coin is what it takes to actually receive the tax credit.  In mid-January, the Internal Revenue Service released the new Form 5405 for the credit that needs to be included with the buyer’s return.  Along with the form, buyers also need to include proof of residency, the signed HUD-1 statement from the closing, and a copy of their driver’s license.  “Great!” you say.  Not a problem.  However there is one little catch.  Because of this extra documentation, filing electronically will not work – the IRS e-file system is not equipped to handle these pieces.  That means taxpayers with these claims must file a paper return and that means filing via mail.  Filing by mail means it will take time.  For your 2009 taxes this can mean up to 8 weeks for the refund, up to 16 weeks for an amended 2008 return.

 Why the extra hoops here?  The short story is the IRS is requiring more documentation to stop those individuals who have already taken advantage of a good thing and cheated the program.  So now, you need to prove you purchased a home and that this is indeed your home.  Bottom line, the credit is available and a significant value, just don’t spend it before you have it.  Your parents probably told you that one too.

For more information, click here for a link to instructions for Form 5405.

Mortgage Credit Certificate (MCC) Program

February 1, 2010

Home ownership is a great source of pride and personal satisfaction.  At Awareness Home Funding we enjoy helping our clients reach this goal.  And with the Mortgage Credit Certificate (MCC) program, we have another tool to assist you. 

The MCC program is a Federal tax credit on the mortgage interest you pay on your home loan over a calendar year.  While this does not reduce your monthly mortgage payment, it is a dollar for dollar reduction from the amount of your Federal Income Tax liability.  To date, for the five states we conduct business, only Michigan and Indiana have this program.  (Kansas does not have this program and Florida stopped the program due to lack of funding.)

The beauty of the program is that it effectively reduces your annual interest rate. 

For example: In Michigan the program offers a full 20% tax credit on the amount of annual interest paid.  On a $100,000 mortgage at 6% interest, the approximate annual interest amount is $6,000 for the first year.  At the full 20% tax credit, $1,200 can be deducted from the amount of Federal Income Tax you owe.  ($6,000 x 20% = $1,200; making your effective interest rate 4.8%) 

The MCC credit remains in effect as long as your home continues to be your principle residence and the original mortgage remains in place.  If you refinance your home loan, sell your home, or purchase a new home as your primary residence, the credit program will end.  For most homeowners who participate in this program, there really is no need to even consider a refinance since their effective rate is already reduced.

 The benefits of this program are significant! 

  • In many areas of Michigan and Indiana, you do not need to be a first time homebuyer to qualify.
  • In Michigan, up to 20% of your mortgage interest can be credited on your Federal tax return.  Plus, the remaining 80% of mortgage interest paid will continue to qualify as an itemized deduction on your Federal tax return. 
  • In Indiana, 20-35% of your mortgage interest can be credited on your Federal tax return dependant upon the size of your mortgage loan amount.  Again, the remaining 65-80% of interest paid will qualify as an itemized deduction on your Federal tax return.
  • Since the MCC is applied after all other credits are subtracted, any unused portion may be carried forward against future Federal Tax returns for up to 3 years.  (See your tax advisor for specific federal credit criteria.)
  • The program is effective for the life of the original mortgage.
  • The program may also be applied to individuals with current non-taxed income, but who have the potential for taxable income in the future.
  • Most mortgage loan programs apply.

Talk to one of our Home Loan Specialists today for how this program can work for you!