She chicken littles the title but then goes on to say that a family she interviewed wondered if they could refinance and lo and behold they could. So no need to panic, it worked out.

Getting away from the article now, the point I want to make is this. You do not automatically have to put 20% down to get a loan in 2009. There are, for example, plenty of 3% FHA loans to be had. There are mortgage programs that offer a whole slew of possibilities. One of my colleagues heard from a National City lender talking about some of the programs available. We have programs available at Howard Hanna Mortgage Services, along with more than 120 million bucks to lend. Plenty of other lenders I have not mentioned here do too.

My last point is this. Stricter or more conscientious loan practices, however you want to describe them, are good for us and our economy. Second, there are home loans being made every week. I had a listing go under contract two weeks ago, and have two buyers with pre approval letters (and a few buyers in same category but have been with me longer) ready to find a home.

Teresa Dixon Murray makes one point that bears fleshing out. You can be afraid to find out if you qualify for a loan. You can be afraid to check with your lender to see if you qualify for a refinance. The truth is, once you make the calls you will feel much better. Knowing what your situation is and how to move ahead is the way to go on any financial matter.

If you qualify for a loan you can get one. As opposed to the years that got us into this mess when you may have gotten one even if you didn’t qualify. Which situation is better for our economy? So if you were tempted to just read the headline on that PD article yesterday, remember that grain of salt that says, is this the real story?

Rant over, Peace Out, Ohm…. 3C

This article from CNN Money features Clayton Homes/Mortgages out of Tennessee. The business was bought by BH a few years ago because they liked the way they did business. Yes they are a home builder (mobile and prefab) but that is not why it got my attention.  Their banking arm or lending arm utilizes practices that make so much sense, they have not seen the same instability as so many other lenders/bankers around the Country.

This is not about thinking outside the box but using common sense lending practices. Most of their buyers are not speculators; they do not offer initial low prices to corral people into their loans.  They hold their own mortgages instead of selling them off.

Quotes from the article:

What’s behind the portfolio’s strength? Clayton is more careful about lending because it keeps all loans on its own books rather than offloading them to others by means of securitization.

As Buffett wrote, “When we make a mistake in making or buying a loan, it costs us money, not some buyer thousands of miles away who ends up with an RMBS, CDO, or (horror of horrors) a CDO squared.”

Another important fact is that Clayton has banked on homebuyers who can afford their monthly payments and who purchased their houses for shelter, not for speculation. Clayton also avoided the mortgage industry practice of enticing buyers with low initial payments, followed by much higher payments a few years down the road. Most notably, Clayton’s customers aren’t likely to walk away from a house simply because it has lost value.

We know, at Howard Hanna, that our mortgage arm is strong.  We have our own reserve funds (I think 125 million dollars). Back in the heady days of 2004 and 2005, some of my potential clients would get irritated that they couldn’t qualify for a loan with Howard Hanna Mortgage Services. But the truth is, this (by today’s standards) conservative approach to lending has helped HHMS stay solid and sound, much in the same way as the Clayton example here. I bet some of the people who harrumphed at HHMS (and subsequently me) during those years wound up with high interest loans they had trouble paying. Just like so many others around the US.

After all the scary instability banks and mortgage lenders are facing these days, I have a feeling more of them will be trying to follow the Clayton business model. Clayton, btw, has about 45% of it’s portfolio in sub prime loans. But as the quotes above show, they hold the loans and they loan mostly to owner occupants not speculators. Their success rate can be measured this way:

 ”….The company’s loan delinquency rates have been stable: On June 30, 2004, the rate was 3.26%; last year it was at 3.5%; and now it’s 3.82%. (In comparison, the delinquency rate in the traditional housing market is around 6.4%.) Annual credit losses are running steady at a reasonable 1.5% of the loan portfolio. And Clayton’s foreclosures have actually dropped from two years ago, from 5,823 to 4,588….”

A good model indeed.  Peace Out – 3C

Just a few highlights and comments:

1. Ohio’s foreclosure rates have doubled since 1999 but what I found truly interesting is that the biggest spike seems to have occurred in 2001, long before most anyone was paying attention.

2. Ohio unemployment rates hit 6% in ’04 and ’04 (no doubt exacerbating the foreclosure issue). According to stats and GCNHS testimony, by January 2007 our unemployment rate was 5.3%.

3. Ohio’s mortgage delinquency rate rose in the third quarter of last year. This is why we are not seeing an abatement of foreclosure filings. I found this quite significant.  And of course people who are delinquent in their payments are the most at risk for filing a foreclosure.

4. ARMs, or adjustable rate mortgages were prominent in this testimony. People who use them in conjunction with sub prime loans were at a very high risk for being a future foreclosure candidate.

#4 makes so much sense to me. I implore people to do a thorough analysis when they are thinking about getting a mortgage loan.  First, if you are not accepted as a prime loan candidate (meaning you have credit issues, lower salary issues, more debt than income, etc), my first suggestion would be to call Neighborhood Housing Services of Greater Cleveland.  They are a non-profit and they can advise you as to whether or not in  your specific financial situation you should consider a sub prime loan or an ARM. It truly makes sense to get an expert opinion before you do something you might regret.

5.  is not much of a revelation: sub-prime mortgages accounted for the highest percentage of foreclosures in Ohio.

I also found it interesting that as of now apparently Nevada and North Dakota have moved ahead of Ohio in foreclosure filings.

I’ll let you read the testimony on your own. Here is the NHSGC website. Call them if you are worried about being delinquent on payments or please call them (and this is my idea) if you were told by a lender you do not qualify for a ‘prime’ loan. Call NHSGC before you move forward with a sub prime loan. Peace Out – 3C

If someone calls you to say you had a charge on your credit card and it is absolutely impossible that charge is yours, you might feel violated and feel like the person on the phone is trying to help you. Some times they are not but are really just trying to get more ID info. Teresa gives you good advice about NOT giving any information over the phone.

She also talks about how writing a check or doing an electronic payment doesn’t give you any grace periods anymore. It’s more true than ever, if the money is not there, don’t charge anything until it is!  Peace Out – 3C