From the Record:
Lisa Meserole was two weeks away from closing on her new Hackensack condo when she got a shock: Her lender, American Home Mortgage, was not going to fund her loan — or for that matter, any loans — because the company was filing for bankruptcy.
“You want to know stress?” Meserole said. “I thought I wouldn’t have a place to live — where was I going to go?”
Meserole’s mortgage broker scrambled and found another lender for her, and she bought her condo in mid-August, as scheduled. But her experience throws a spotlight on how the North Jersey housing market has been affected by the national mortgage crunch — especially in the more affordable towns where first-timers buy houses.
The fallout includes:
• Buyers who, just a few months ago, would have been able to buy without a down payment or even proof of their income now find that’s no longer possible. Many have dropped out of the market.
• Other buyers have to pay more for their loans. Interest rates on jumbo mortgages — more than $417,000 — have climbed to an average of about 7.4 percent, though some regional banks are offering lower rates.
• In the most extreme cases, house sales just fall apart. “I have had two closings die at the table because the banks could not fund [the mortgage],” said Crystal Burns, an agent with Re/Max Advantage Plus in Teaneck. “And there is literally no recourse.”
In Wayne, Coldwell Banker agent Bob Lindsay has a sale that is supposed to close Monday. His clients, the sellers, have booked a moving van and are ready to go.
But last week, the buyer’s mortgage lender, First Magnus Financial Corp. of Phoenix, filed for bankruptcy, and the buyer’s mortgage broker began searching for another lender. As of 6 p.m. Friday, Lindsay still had not heard whether the financing is in place.
“If the sale doesn’t go through, what do they do?” Lindsay said of his clients.
So far, most of the pain has been felt in towns where first-time buyers tend to look for homes, such as North Arlington and Bergenfield. In these areas, many recent buyers had used no-down-payment loans and other non-traditional mortgages to get into a high-priced housing market.
But mortgage lenders have stopped writing these risky loans, because Wall Street investors, spooked by a rise in mortgage delinquencies, no longer want to invest in them. And mortgage lenders’ requirements for borrowers have been changing overnight in response to the mortgage turmoil.
“We’ve seen people who thought they had a 5-percent-down mortgage who now need to put 10 percent down,” said Teri Gamble of GoldStar Realty in Oradell.
Similarly, Ivana Crecco of Camelot Realty in Hackensack said she is not working with any buyers who don’t have a down payment and a decent credit score.
“I won’t waste my time, because I know the deal won’t go through,” she said.
Even buyers with good credit have recently found that in a world of tighter credit and slumping house values, bank appraisals have become unforgiving. Geraldine Tecchio of ERA Nalbandian in Saddle Brook said she has worked on several deals where the appraiser valued the house at less than the sale price. In those cases, the bank refuses to write the mortgage for the amount needed. Either the seller lowers the price or the deal falls through, she said.
Geraldine Tecchio of ERA Nalbandian in Saddle Brook said she has worked on several deals where the appraiser valued the house at less than the sale price. In those cases, the bank refuses to write the mortgage for the amount needed. Either the seller lowers the price or the deal falls through, she said.
There’s a third option: the buyer can increase their downpayment to maintain the previously agreed upon loan-to-value ratio.
My wife and I just learned that we wouldn’t be able to fund our home loan for a reasonable rate. We sold our 6 bedroom, 4.5 bath home and leased it back for a year. This gave both of us time to figure out which direction the market was going. It also gave my wife and I time to find that perfect home for our family. The irony of this matter is that the builder had offered a $ 100K incentive if we used thier lender. However, I learned that thier lending arm had passed our loan package on to one of its [brokers] without any explanation whatsoever. This was a huge red flag for me, but my wife, who was handling the process, didn’t even think to ask why or even tell me about it for that matter. I found out on a fluke in mid-July when I called the builder’s lending arm after dropping her off at the hospital for in-patient Iodine 131 treatment to let them know we had received a buildout date from the construction superintendent (July 27th). I did this in the interest of shoring up financing and locking in to a reasonable rate. As we got closer to July, I placed a few more phone calls to the broker, who at one point told us our loan was in underwriting. As of this past Friday 08/24/07, we’ve been told the only thing available is a 9.5% APR with a minimum of 3 years before we can re-fi, which was absolutely out of the question!
What’s sad about this entire matter is that over the last month, I was persistent in asking my wife to have the broker fax my credit report to us. I didn’t receive a copy until the aforementioned date. In retrospect, had I received it a few weeks earlier, I could have taken care of inaccurate information that could have raised my mid-score of 622 higher. What’s even more frustrating is that the broker suggested I pay off a few small credit card debts whose history showed as always being current. He suggested doing so would raise my score by 20-30 points. I did this without hesitation literally 15 minutes after receiving this advice, but I never receieved any update on whether this actually improved my score!
Here’s what adds insult to injury: Three years ago, we bought the aforementioned home for $ 360K. We put down only $ 20K, which meant we were paying PMI. I made around $ 30K less in earnings. I hadn’t been in my job but for a year. We secured a 3 year ARM and re-financed to a 30 year FRM. Conversely, the home we had expected to move into this month would have cost $ 324K. We were going to put down $ 55K, which would have borrowed $ 269K ($71K less than what we borrowed a few years earlier). What’s more, my debt to income ratio was significantly worse back then! Now, I only have our SUV whose balance is $ 20K. All other debt has since been paid in full.
In closing, I am thoroughly disappointed the builder’s lending arm or broker didn’t call any of the negative items on my credit report into question. Nor did they suggest I/we write letters of explanation, or offer to challenge the items in question. All things considered, my family still has a roof over their head in a very nice apartment complex… Wow! What a reversal of fortune this has been! I am totally dismayed at this entire experience. At this point in time, our revised strategy is to bring our down payment up to $ 80K, which will allow us to avoid PMI if we stay at or below $ 400K. My credit score should improve between now and then… the only question I have in my mind is whether it will reach or go above 700 between now and this time next year?
From the Daily Record:
Wealthy can get loans
If you are in good financial shape, getting a mortgage even now — with the credit markets in trouble — is “a piece of cake,” said Dave Muti, a lawyer and mortgage planner with Millenium Home Mortgage in Parsippany. (He apologizes for the misspelling of “millennium.”)
“Getting a mortgage is a breeze,” he insisted, “if you have full documentation, a 700 FICO, a lot of money and a six-figure income.”
Documentation means evidence supporting your income and assets. FICO, from Fair Isaac Corp., is short-hand for your credit score; 640 is considered acceptable.
But if you’re considered a risky borrower — with little or no documentation, a low FICO score, irregular income, plenty of credit-card debt and so forth — things have gotten tough.
“Funky loans,” as Muti calls them, are virtually relics.
Mortgages with no documentation and loans covering the entire cost of a house have just about flown the coop — along with many of the mortgage companies that used to make them.
“If you have poor credit, you’re absolutely going to have a tough time now,” agreed Keith Gumbinger, vice president of HSH Associates, a mortgage-reporting agency in the Pomp-ton Plains section of Pequan-nock. “But for traditional borrowers, the money is there.”
Not that the well-to-do aren’t sharing some pain.
Getting jumbo mortgages — for more than $417,000 — is harder and more expensive these days. (A $417,000 mortgage is the largest that can be sold to Freddie Mac or Fannie Mae, two government-chartered agencies, which buy mortgages to help lenders have available cash.)
Jay and Mary-Jo Kaiser, who just moved from one Florham Park home to another, had no trouble getting a mortgage.
His FICO score was about 825 — unusually high. He is regularly employed — as a salesman at Logistics Management in Chester. Plus, he has a decent-sized investment portfolio. (“But not enough to retire on,” he said wistfully.)
To lock in a mortgage, Kaiser, 53, didn’t even have to add his wife’s income; she is a teller at Hudson City Bank in Florham Park.
Homebuyers seeking mortgages aren’t generally turned down so much as discouraged, said Arthur Aranda, president of Garden State Mortgage Corp. in Englewood, which writes mortgages throughout the state.
Someone with a FICO score below 640 and without a verifiable source of income might have trouble, he said. “But there are always exceptions.”
With so many borrowers recently making down payments of three percent or even less, putting down as much as 10 percent would help, he said.
Another couple who found it a cakewalk to get a mortgage are Kenneth and Angela Burns of Chester, who were bidding on another house in Chester.
They offered $1.15 million for a five-bedroom house on three acres. They locked in a 20 percent-down hybrid mortgage at 7.625 percent, which they obtained within a week — his FICO score was about 720, considered very good.
The mortgage carries a fixed rate for 10 years, then becomes an adjustable-rate mortgage. They will pay only the interest on the $920,000 loan, not any of the principal.
But at the last minute, the deal fell through.
This would have been their third house in Chester — Angela Burns likes to buy houses, fix them up, then resell them.
They also wanted a bigger house.
Kenneth Burns is a divorce layer in Iselin and Angela Burns is an interior decorator and graphics artist.
Why were they buying a house now?
“The market is soft, prices are down,” Kenneth Burns said.
Did he think he might have trouble getting a mortgage?
“Considering all the doom and gloom out there, it was remarkably easy,” he said.
Geraldine Tecchio of ERA Nalbandian in Saddle Brook said she has worked on several deals where the appraiser valued the house at less than the sale price.
There’s a third option: the buyer can increase their downpayment to maintain the previously agreed upon loan-to-value ratio.
With so much inventory out there, why would a buyer choose to knowingly overpay. If the appraisal didn’t come in, it’s a wake up call. The seller needs to lower his price, or he or she will just be in the same boat next time they get an offer.
This could be a blessing in disguise. It sounds like you are sitting on a very respectable down payment and you are working to bring up your credit score. With that down payment and a higher FICO, you will be in the driver’s seat next year. I also strongly believe that your patience will be rewarded with lower house prices
Lisa Meserole don’t be such a baby.
This isn’t the end of the world. This time next year, you’ll be jumping for joy that you didn’t buy any RE.
RE is a sinking ship. Stay away.
A quick story to tell. Bid on a house about 3 months ago and the seller snubbed my bid which was about 15% below asking. Then it went under contract about a month ago and I got a call this weekend that they would be interested in my bid now that the contract fell through.
This is going to cost these people now because of their greed they will have to take about $30,000 less than i originally offered.
The housing market is bad and loans are tough to get so sellers are going to have to give more and more to get deals done. The party is over for good. If they do not take it who cares many houses to choose from.I’ll get even a better price next year and a better house for less.