patrick.net

Regarding Agents Not submitting offers, I'm in a similar situation as we speak. I can't give the details at the present time, but suffice to say, there is now a lawyer involved.

The real question is, why is anyone buying right now?

Or shopping for that matter?

From what I have read, it's the 8k tax incentive and FHA subprime hysteria. But if an 8K window makes the difference between affording/assuming a mortgage and not affording/assuming, something is wrong.

My short sale bid turned into a foreclosed home, into a investor purchase, into the investor selling back to me.

How did this transpire, i found a house an contacted the listing agent directly and offered her to be my selling agent. An incentive for her to take my bid and for her to keep the commission.

It turns out she offered another name to be my sales agent for the house.
It turns out that sales agent was the actual owner that was being forclosed on.

She attempted to sell the her own house as a short sale and represent me as the sales agent.

Well the bank didn't buy it and thought there was a scam going on. So the house was foreclosed on.
My Bid was rejected.

Turns out she knew investors that were able to purchase the home from the bank within the same week it got foreclosed.

Now she was able to convince the investors to sell it back to me.

Now I'm in week 2 of escrow and ready to submit my documentation to underwriting.

What is the moral of the story.

You need a lot of luck for a short sale to go through.

Austinhousingbubble says

From the WSJ in June:

Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn’t well known is that a parallel subprime market has emerged over the past year — all made possible by the Federal Housing Administration. This also won’t end happily for taxpayers or the housing market.

Last year, banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100 percent taxpayer guarantee. Many of these have the same characteristics as subprime loans: low down payment requirements, high-risk borrowers, and in many cases, shady mortgage originators. FHA now insures nearly 1 of every 3 new mortgages, up from 2 percent in 2006.

The FHA is almost certainly going to need a taxpayer bailout in the months ahead. The only debate is how much it will cost. By law, FHA must carry a 2 percent reserve (or a 50-to-1 leverage rate), and it is now 3 percent and falling. Some experts see bailout costs from $50 billion to $100 billion or more, depending on how long the recession lasts.

I could'nt agree more with this piece. In my opinion, FHA is going to be the next Sub-Prime. Basically the Fed is buying up MBS (1 trillion worth) to inject liquidity in the Mortgage market. These MBS are just toxic assets and my estimate would be that the losses would be a minimum of 10% to the Fed when these securities mature. So that would be a 100 Billion loss, which I would think would be spread over a period of 10 yrs. The liquidity being injected by this Fed purchase is also being used to perpetuate risky lending and would most probably result in a loss of another 100 Billion over the same 10 yr period.

This illustrates my misgivings about the darker side of cheap money/debt

http://washingtonindependent.com/50130/why-you-should-care-that-your-neighbor-took-out-a-toxic-mortgage

The only thing that will surely stop this madness is if people just quit buying. Anyone who does in this atmosphere is the biggest fool.

Short attention spans, cognitive dissonance and cheap money (meaning much higher prices, neatly designed to keep you in over your head and to keep property tax revenues high) combine to make logical, skeptical thinking seem obsolete.

Teddybearneil says

Austinhousingbubble says

From the WSJ in June:
Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn’t well known is that a parallel subprime market has emerged over the past year — all made possible by the Federal Housing Administration. This also won’t end happily for taxpayers or the housing market.
Last year, banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100 percent taxpayer guarantee. Many of these have the same characteristics as subprime loans: low down payment requirements, high-risk borrowers, and in many cases, shady mortgage originators. FHA now insures nearly 1 of every 3 new mortgages, up from 2 percent in 2006.
The FHA is almost certainly going to need a taxpayer bailout in the months ahead. The only debate is how much it will cost. By law, FHA must carry a 2 percent reserve (or a 50-to-1 leverage rate), and it is now 3 percent and falling. Some experts see bailout costs from $50 billion to $100 billion or more, depending on how long the recession lasts.

I could’nt agree more with this piece. In my opinion, FHA is going to be the next Sub-Prime. Basically the Fed is buying up MBS (1 trillion worth) to inject liquidity in the Mortgage market. These MBS are just toxic assets and my estimate would be that the losses would be a minimum of 10% to the Fed when these securities mature. So that would be a 100 Billion loss, which I would think would be spread over a period of 10 yrs. The liquidity being injected by this Fed purchase is also being used to perpetuate risky lending and would most probably result in a loss of another 100 Billion over the same 10 yr period.

I was just revisiting this blog and had to update my assessment. I recently saw a video on CNBC.com of Diana Olick interviewing the FHA Boss. I have to admit now that my assessment of the FHA is not the same as it was before. Apparently the average credit score of the new borrowers is 690 as compared to a historic average of 630 that the FHA had before they expanded their lending activity. To me this alone should insure the FHA against major defaults. Given that the FHA's loans or even the MBS that the Fed has been buying for that matter actually have a better borrower quality with lower home prices would be a major factor. So, I now think that the FHA lending expansion and the Fed purchase of 1.45 Trillion worth of MBS should be winners hands down and a great investment tactic!! I was hearing the boss of Auto Nation speak on the C4C program and apparently the average credit score of the C4C customer was 730! I am like wow! Although I am totally against any kind of bailout or handout by the government, I am now in the camp that believes that the C4C was a great program simply because it benefited the good people (citizens who pay on time). Similarly from a totally negative opinion on the Homeowner credit of 8K, which also I believe benefited the good people because lending standards have been tightened and documented income is a must, so it is no longer possible for the speculators to get in!! I have always been a believer that a 20% down payment should never be a pre-requisite to getting a loan, especially where we apply the Rent vs Own logic!! If the Rent vs Buy logic works for the documented income and credit score is above average, then they are good borrowers!!

I'm requesting advice on reasonable closing costs. I was high bidder on a bank owned home in Florida. The real estate agent is trying to get me to go with her mortgage broker. The good faith estimate is on a loan amount of $132,000. Are the following fees in the good faith estimate reasonable?:

810 Processing fee $695.00

812 Broker fee $650.00
Admin fee $595.00

1101 Closing/Escrow Fee $250.00

Thanks

nope. Unless your credit score is sub-600

My momma told me, ya better shop around...

(Captain & Tenile)

(Smokie Robinson and The Miracles)

From a buyer who once got burned: DO NOT PAY THESE FEES. Do NOT pay a processing fee. Do NOT pay a broker fee (this is a ripoff kickback; I walked away from a signing years ago because this was thrown in at the last minute). Do not pay an admin fee (same as processing fee; what is the difference?). The closing fee is reasonable. I had a similar loan amount in 1993 ($137K), and my closing fee was $375. My total settlement charges came to a tad over $3,000. You should not ever pay more than 1.5% of your TOTAL loan amount in TOTAL ESCROW CHARGES, INCLUDING PREPAID ITEMS SUCH AS POINTS AND INTEREST. If you do, you are being ripped off. In other words, $2700 MAX TOTAL settlement charges on a $132K loan would be reasonable. Right now, you are at $2200, and your prepaid interest and other charges have not been figured in. They have you on the hook for a potential $2,000 in garbage fees. Pure padding. Pure ripoff. Tell them to stick it where the sun doesn't shine. Some fees directly related to the loan (points, prepaid interest, etc.), are tax deductible, but all those crap fees listed are not, not one cent of them. Do not let a bank rip you off. Walk out the nearest door. Shop around. If more buyers did this and/or just walked away, the garbage fees would disappear. They exist mostly because stupid buyers allow them to exist or your "representatives" have allowed middlemen to hijack the homebuying process.

chrisborden I appreciate your lengthy response. I'm co-signing this loan with my son trying to get him a place to live while he goes to college; and he'll qualify for the $8K tax credit. Its an FHA loan so there is an upfront MIP of $2,284.87. Some additional numbers: Estimated closing costs - $5,829.31, Total estimated settlement charges - $11,443.62. Total monthly payment - $1,194.14. I did squawk about the fees a couple of days ago and he did knock off a loan origination fee of 1% or $1,305.64, and said he could get a bit lower rate now. This dropped the monthly payment down to $1,140.00 or so. I still thought he could do better though with these "processing" "broker" and "admin" fees, which seem high. You've helped confirm my suspicions.

EastCoastBubbleBoy says

Regarding Agents Not submitting offers, I’m in a similar situation as we speak. I can’t give the details at the present time, but suffice to say, there is now a lawyer involved.

The one job they HAVE TO DO, and they can't do it. Realtors are worthless.

I think about healthcare, and how I don't ever see a bill save the one from my insurance company. If I was forced to pay my doctor, I'd be shopping around. Realtors are the same problem: One more layer of fluff meant to insulate me from the butchery.

robg77 says

chrisborden I appreciate your lengthy response. I’m co-signing this loan with my son trying to get him a place to live while he goes to college; and he’ll qualify for the $8K tax credit. Its an FHA loan so there is an upfront MIP of $2,284.87. Some additional numbers: Estimated closing costs - $5,829.31, Total estimated settlement charges - $11,443.62. Total monthly payment - $1,194.14. I did squawk about the fees a couple of days ago and he did knock off a loan origination fee of 1% or $1,305.64, and said he could get a bit lower rate now. This dropped the monthly payment down to $1,140.00 or so. I still thought he could do better though with these “processing” “broker” and “admin” fees, which seem high. You’ve helped confirm my suspicions.

My advice would be for you to check with a Credit Union. When I bought my home last year, I just shopped around till I got the best rate (from my Credit Union ultimately). Fortunately the Mortgage Broker (who was the husband of my Realtor Agent), who got me the first quote and which included ALL the fees/charges that you mentioned, was good enough to admit that I had a better deal (from my Credit Union) than he could ever get!!
Have you checked with ING? If they lend in your state check with them also.

Dear Rob: Wow! I am so glad to help. You did very nicely, getting rid of that $1300-plus waste. If they want your business, they'll come to you.

Rob, $11,000-plus settlement charges on a $132K loan? That is 10% of the loan, which sounds impossible. No mortgage in the universe costs that high a percentage of settlement costs. Something is way, way off there. You are being royally ripped off. I suggest you run from that transaction now.

Even $5200 is far too high for that mortgage amount. I can't figure the math on that situation. Something stinks.

Yea, unless you're counting the down payment as part of it - but those charges seem exorbient.

robg77 says

I’m requesting advice on reasonable closing costs. I was high bidder on a bank owned home in Florida. The real estate agent is trying to get me to go with her mortgage broker. The good faith estimate is on a loan amount of $132,000. Are the following fees in the good faith estimate reasonable?:
810 Processing fee $695.00
812 Broker fee $650.00

Admin fee $595.00
1101 Closing/Escrow Fee $250.00
Thanks

Ok Rob, I just pulled up my HUD Settlement document. My Loan amount was 121500 from my Credit Union. I did not pay any 810 or 812. I did pay an Admin fee of $ 500, which was re-credited to my account as a 'Promo Credit'.

I paid

803- Appraisal Fee - 325
807 Tax Service Fee - 90
1101 Settlement Fee - 250
1108 Title Insurance - 100
1201 Recording Fee - 95
1301 Survey - 378.88
1306 TRansfer fee - 85
1111 Endorsement Fee - 122.0

The rest of the big costs was just Escrow Taxes and interest and insurance.

My total closing cost was ONLY $ 1590 EXCLUDING down payment.

Hope that helps.

I appreciate all the comments and suggestions regarding the closing costs. I'm going to list everything to demonstrate how ridiculously complicated these estimates are for someone who doesn't flip houses every couple of years:

This is the original estimate which was prepared 9/17/09

800 Items Payable in Connection with Loan
801 Loan Origination Fee 1.000% $1,305.64
803 Appraisal Fee 450.00
809 Tax related service fee 79.00
810 Processing fee 695.00
812 Broker Fee 650.00
flood cert 4.00
Admin fee 595.00

1100 Title Charges
1101 Closing/Escrow Fee 250.00
1108 Title Insurance 325.00
Florida Form 9 Endorsement 70.00
8.1 Endorsement 50.00
Courier Fees 50.00
Survey 325.00

1200 Government Recording & Transfer Charges
1201 Recording Fees 250.00
1202 City/County Tax/Stamps 464.97
1203 State Tax/Stamps 265.70

Estimated Closing Costs $5,829.31

900 Items Required by Lender to be Paid in Advance
901 Interest for 15 days @ $20.2962 per day $304.44
902 Mtg Ins. Premium 2,284.87
903 Hazard Ins. Premium 1,500.00

1000 Reserves Deposited With Lender
1001 Hazard Ins. Premium 3 mths@$125.00/mth 375.00
1004 Taxes & Assessment Reserves 5 mths@$230.00/mth 1,150.00

Estimated Prepaid Items/Reserves 5,614.31
Total Estimated Settlement Charges 11,443.62

Total Estimated Funds Needed to Close: Total Estimated Monthly Payment
Purchase Price 135,300.00 Loan Amount 132,848.00 Principal & Interest 754.30
Est. Prepaid Items/Reserves 3,329.44 Cash Deposit/Contract 4,500.00 Hazard Insurance 125.00
Est. Closing Costs 5,829.31 Real Estate Taxes 230.00
PMI, MIP, Funding Fee 2,284.87 Mortgage Insurance 59.84
Homeowner Assn. Dues 25.00
Total Estimated Funds needed to close 9,395.62 Total Monthly Payment 1,194.14

Whew, I think that's all the applicable entries (unfortunately it doesn't look the same as I typed it; the columns are all screwed up)!

What part of Florida was this in?

The house is in Orlando.

Rob,

If you noticed I did pay ALL of the 11XX items and there is nothing you can do about the 12XX items as they are mandatory nor can you do anything about the 9XX or 1001/1004 items either as they look mandatory too. Since you already mentioned that you were able to knock off 801, the only other 2 items that you can possibly knock off are 810 and 812.

Cheers and Happy Home buying!

Rob, 801 is points; those are tax deductible. Your appaisal fee is very high. Mine was $325 on an only slightly larger loan. 810 and 812 are garbage, as you've been told by many of us. 1101 and 1108 you have to pay; those are reasonable. That $425 survey fee reeks of garbage; I have never heard of any such thing. Most government fees are standard from state to state; you have to pay those. If you can, avoid PMI, 902. Put 20 percent down and be done with it; it is very hard to remove, and in these days of hard to prove equity, you might not ever be able to do so; 903 is homeowner's insurance. Pay it all in advance, and don't let a lender force you to carry an escrow account. Make all your payments on your own. This will cost you more. I have never heard of a lender that pays interest on funds deposited for payments in advance. Do not let them do this to you. If they won't agree to a non-escrow account; WALK AWAY AS FAST AS YOU CAN. Do not let them require you to deposit FIVE MONTHS of assessment and insurance in advance. This is a ripoff. Pay it yourself, month to month or a year at a time. I hate to be blunt, but if you cannot afford to pay things in advance BY YOURSELF, then you are getting in over your head. And what is that $2284 "funding fee" at the bottom? You are being ripped off. WALK NOW. It is impossible to have such outrageous closing costs on a $132K loan. I have had three mortgages whose total closing costs have not approached half that figure. Take my advice, wait or walk. Do not proceed, do not pass go. You lose.

Oh, and that $230 a month homeowner's dues? More garbage, and not tax deductible, unless you are a landlord. So you just lost $2800 of your tax advantage right there. Again, I hate to be so blunt, but this loan is a major scandal being perpetrated against you.

this thread is one of the most helpful I have had on here in a while. Thank you guys very much. I plan to have my lending agent buddy pull up this page and expalin the stuff to me face to face ... I hope to post his retort if one is given.

My take on Chrisborden comments:

The Appraisal Fee could vary from appraiser to appraiser or state to state I am not aware if there is a standard rate

I did not crib about Survey Fee because it sounded some kinda mandatory stuff..you may wanna check what it is..and if you find out that it is not mandatory and you can have it knocked off, then let the forum know.

Homeowner's insurance - I would agree with chrisborden, because I did that myself. Shopped around for a cheap insurer, by the way, I am paying less than $ 800 for a home whose replacement value is $ 250K, and pay it yourself directly either in 1 lumpsum (which is what I do) or in monthly instalments.

My Credit Union does pay interest on funds deposited on advance. I did not question the escrow because I just thought it would be more convenient for the money to be collected in the monthly payment rather than me coming up with a lumpsum (my annual tax liability in Houston for a home that is valued at 185K is almost $6K) and other than keeping a few months advance money with bank, which earns interest, there was no other disadvantage.

The Homeowners dues are actually the Home Owners Association fees, which are mandatory, I pay them.

"I asked her how can I be sure that my offer was submitted to the bank. She acknowledged that it is a problem, and the one she has seen personally with one of her clients"

Buyer signs on the offer... agent signs and PDF the file/ email it to the Bank and CC: buyer.
Realtors have the scanners and email address of the banks already.
Jes! you would think people would be more organized.

thomas.wong87 says

“I asked her how can I be sure that my offer was submitted to the bank. She acknowledged that it is a problem, and the one she has seen personally with one of her clients”
Buyer signs on the offer… agent signs and PDF the file/ email it to the Bank and CC: buyer.
Realtors have the scanners and email address of the banks already.
Jes! you would think people would be more organized.

and what proof is the buyer handed to show: A) bank was sent the offer, and B) bank's response?

Hi Teddy. Good points, all. Appraisal fees are all over the map, but $375 sounds high, even where I am out West. Survey fee? I'd ask. Never heard of that, unless it is called something else. And going through credit union, good for you. I didn't really know credit unions did that, as I have no experience with them save for an auto loan. And if you want the convenience of escrow deposits, who am I to say you are right or wrong? It's just that I'd demand interest on that money. But in Rob's case, $11K for settlement fees on a $132K loan? Something stinks, as I said. That is outrageous. And yes, homeowner fees are mandatory, so subtract that from any tax benefits you might realize. Thanks for writing. I try to do my homework, which is probably why I'm thriving in early (debt free, payment free) retirement at 54. Too bad not everyone thinks and acts smartly, as I always did (smug, smug, grin, grin). ):

"and what proof is the buyer handed to show: A) bank was sent the offer, and B) bank’s response?"

The realtor emails to bank and cc: to your email account therefore you have an audit trail. Banks should acknowledge they received the package back by email both to your agent and you. Therefore they have accepted your package and you have proof. The acknowledgment should be personal and not automated. Of course they should have say a limit of 24-48 hours to respond either way on final decision... yes or no!

I gotta say, in the case of Orlando, you'd definitely have been better off renting. There's no benefit to owning whatsoever. You don't want to be trapped in a mortgage in Central Florida right now - and frankly not for a long time. That city was one of the most notorious markets for markups during the bubble, so even a place priced at a seemingly reasonable 135K is very likely worth 90 to 100K on a good day. Owning land there will prove to be a liability unless your son plans on putting down roots. The problem there, though, is the employment picture in Central Florida, which is abysmal. I guess you could always rent it back out once he's graduated, but I know of very people anymore that rent. Think about it...who do you know that rents? Apparently, now, not even students, as I have known several parents that bought condos for their college age kids; I think most of them have 'walked away' since graduation.

I always wonder why anyone would want to live in what amounts to a swamp 365 days of the year. Been there once for eight hours. Worst eight hours of my life. If you GAVE me a house on the beach I wouldn't go.

Thanks for all the feedback.

I wanted to do a 20% down loan, but was told I couldn't because my son doesn't have a credit score. I thought that was ludicrous, because if I walked away they would have my 20% plus the house. But I confirmed it with Wells Fargo (whose estimated funds needed to close were $3,500 less than the broker the realtor wants me to use). Supposedly, when you have two people applying for a loan they go with the lowest credit score.

We had the home inspected a couple of days ago and the A/C was on the blink, so I had the realtor ask the bank to pay for fixing it. I'm just waiting on that decision. You've all given me some ammo to take to the mortgage broker in the meantime to negotiate better terms, which I appreciate. I feel like I owe this realtor because she showed about 5-6 houses to my son; three of which we bid on, but lost to a higher bidder.

I feel like I owe this realtor because she showed about 5-6 houses to my son; three of which we bid on, but lost to a higher bidder

Yes, Orlando (as well as Miami) is speculator crazy, just as it was flipper crazy. Another good reason to wait things out.

Also - AC on the brink in the Southeast = mold. It doesn't take long. Make a point of this during your inspection!

Rob: Listen to your own red flags raised in your last post. But listen, listen to this: You do not owe the realtor ANYTHING. Realtors are sharks. Period. You must look out for YOUR self-interests at all times in what will be a major financial commitment. You owe no loyalty to anyone but yourself. YOU will pay for a mistake; the broker will not. You do not owe anyone any explanations. Listen to what you said in your last post. 1) YOU said the realtor is steering you to a much higher priced loan. 2) YOU had to ask the realtor to ask the bank to pay to fix the A/C. The realtor is not doing his/her job by steering you to a higher priced loan. He/she is bleeding you. PLEASE, PLEASE, LISTEN TO YOURSELF! Do NOT proceed with this broker. Do NOT play bidding wars; that is exactly what these thieves want you to do so they can rip you off. You are being lied to and cheated. OK, you didn't get the condo. Move on. Be patient, friend. Be patient. Slow down. Don't play the games. You are committing your income for dozens of years to come on a major purchase. You are not planning for a party.

robg77 says

Thanks for all the feedback.
I wanted to do a 20% down loan, but was told I couldn’t because my son doesn’t have a credit score. I thought that was ludicrous, because if I walked away they would have my 20% plus the house. But I confirmed it with Wells Fargo (whose estimated funds needed to close were $3,500 less than the broker the realtor wants me to use). Supposedly, when you have two people applying for a loan they go with the lowest credit score.
We had the home inspected a couple of days ago and the A/C was on the blink, so I had the realtor ask the bank to pay for fixing it. I’m just waiting on that decision. You’ve all given me some ammo to take to the mortgage broker in the meantime to negotiate better terms, which I appreciate. I feel like I owe this realtor because she showed about 5-6 houses to my son; three of which we bid on, but lost to a higher bidder.

It is true about the lower of the 2 credit scores rule. I tried to help out a friend in an exact similar situation a couple years ago and that is what I found out. About 'owing the realtor', I would say never have that feeling. The way I bought my home was not by a realtor showing me any homes, but researching online myself, selecting homes that I wanted to see and then have the realtor show me the properties! When she said her husband was a mortgage broker and would be glad to arrange the mortgage for the home, I clearly told her that I would be shopping around and would use him only if he gives me the best quote! My take on Mortgage Brokers is that they are good ONLY for the Sub Prime borrower. Prime borrowers can have their way with the banks on their own!! By the way what is your son's Credit Score?

As far as I know he has no credit score because he has never had any credit. That's what he told me.