As the US economy continues to struggle to emerge from one of the most costly recessions in modern times, those of us in the mortgage industry find ourselves more challenged then ever before in our careers. As the founder and CEO of Superior Mortgage Corp., a privately held mortgage banking company with over 22 years experience, I have a unique view of what is happening (not to mention sometimes a little cynical). Many of the changes and new regulations are certainly justified but much of the effort to correct what went wrong in the past is misguided. These days it seems every politician, state, or federal regulator is looking to make a difference and correct the ills of the past. That is admirable but the problems are not easily corrected, especially in a manner that will actually help the consumer and not do major damage to the thousands of mortgage professionals that have always done their job in an honest and professional manner and the millions of consumers that have always borrowed responsibly.

Here is some of what is happening with my opinion of the true affect on correcting the problems that got us in to this mess.

1. We have experienced many underwriting changes all of which have made borrowing money more challenging and supposedly safer for lenders. Let's face it, major change was needed. Underwriting guidelines had become a joke. Large bank lenders and Wall Street firms drove lending volume by pretty much doing away with all the common sense guidelines that we followed successfully as an industry for years. But now just like a pendulum, the changes are going too far. Fannie Mae and Freddie Mac are in government conservatorship and want out. In the meantime it appears good business logic is absent in the recent changes. My fear: if they keep taking away the ability to lend to good borrowers, they are negatively affecting supply and demand and continuing the downward pressure on home values. Simple economics. The fewer the number of people that qualify for loans the less demand to buy the lower prices have to go. Do you know who suffers more losses when this happens? Us, the taxpayer, since we now own the largest source of mortgage money in the world, Fannie Mae and Freddie Mac. Not to mention Fannie Mae and Freddie Mac increase their own losses when values continue to trend down.

2. We have a new rule in lending called Home Valuation Code of Conduct or HVCC. The idea of the HVCC is great. It requires lenders to remove the influence anyone in loan production may have from the appraisal process. You see, over valuation was blamed for much of our current crisis and in fact it certainly contributed. The problems our customer service has suffered as companies struggle to be compliant are forced to use "Appraisal Management Companies" that often lack local real estate knowledge and take much longer to complete appraisals. These Management companies are often owned or influenced by big banks which figured out how to use this new federal law to create a profit center at the expense of hard working, honest professional appraisers. Maybe in the end this will turn out to be a good control.Right now the jury is out.At Superior we built an internal system with all the processes and controls required to meet the letter of the new law while still providing the best and most accurate appraisal service we can provide.

3. Another new law requires even more accuracy in what is known as the "Truth in Lending" regulations. The annual percentage rate (APR) that is disclosed to consumers for over 20 years (and never really helped them shop the way the government envisioned) now has to be accurate to within 1/8 of 1 percent. When any of the loan terms change that affect the APR by more then 1/8 of 1 percent the lender must re-disclose in writing and prove the consumer received the new disclosure. Then the transaction can not close for 3 business days. Get this, even if the APR goes down in favor of the consumer this new Federal Government regulation is there to protect you by not allowing you to close your loan for 3 business days. This regulation has great intentions and will probably help a few consumers while frustrating many more. The problem comes down to trust and working with trustworthy individuals. Unfortunately the mortgage industry has no credibility because of 10% or 20% of the people that abused the system for their own benefit. That leaves the honest professionals and our honest consumers to meet the challenge of the new regulations. My suggestion, work with one of our professionals and understand before you start the process that new regulations designed to protect you may add a few extra days to the process.

4. More education required. Well it is about time. Imagine trusting your largest financial debt transaction to be handled by someone with NO formal education in mortgage banking. Bye, bye part timers and in it for a quick buck loan officers and welcome to dedicated professionals. Of course we just like the underwriting pendulum swinging too far and some of the education requirements appear they will be onerous but that is okay if it helps police out those individuals that are not dedicated to helping people borrow the right way with loans they understand and can afford.

5. On the bright side the Federal Government has certainly taken some consumer friendly actions. The Fed has been buying Mortgage Backed Securities to the tune of $20 billion or more per week for most of this year. That has helped keep rates really low. Historically low fixed rates in the fours and fives. In addition anyone buying their first home has had a good shot at getting an $8,000 tax credit (speak to your tax professional ASAP). Now when we thought this great tax break may be over the new bill is passed extending the credit through the first quarter of next year and adding a $6,500 tax credit for anyone who has owned and lived in a primary home for at least five years and wishes to buy another home. You can contact a Superior representative for details and remember to always check with your own tax preparer for confirmation of your ability to qualify for these credits.

6. Other good news: Home sales have picked up considerably in most parts of the country from this time last year. Values are thought to be stable in most markets and even starting to increase in the best markets. Inventories are still large so interested buyers have a lot to choose from and are still able to drive great bargains. So are we out of the woods yet? Maybe not but at Superior we are optimistic about the future of housing and the economy.

We are ready and dedicated to help you understand how to borrow responsibly so you will be able to enjoy your home for years to come. We are the mortgage banker you can trust!

Steve Cors

CEO

Superior Mortgage Corp.

Ocean County and Monmouth County, NJ First Time Home Buyers that utilize a NJ FHA mortgage may also be eligible to use the $8,000 First Time Home Buyer Tax Credit as part of their down payment at closing.

Key points about the announcement:

• Home Buyers must still have 3.5% of the down payment from their own funds.  Use of the tax credit is in addition to not in place of the minimum 3.5% down payment required for an FHA Loan.
• The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the buyer. 
• The tax credit may not exceed the anticipated credit due to the home buyer based on the computations on form IRS 5405.
• Lenders must review the homebuyer’s credit report to ensure there are no unpaid student loans, or other obligations that could be offset against the credit.

In order to obtain funds for the down payment home buyers in NJ may use the state's Smart Start Down Payment Assistance program which is only offered through state approved lenders.  This program offers up to 4% of the first mortgage amount for the down payment and actually quailfies as the buyers 3.5% minimum down payment.  The combination of this assitance along with the advance of the tax credit will allow home buyers to close on their home with little or no money out of their pocket.

These options are not the only ones available for renters to stop paying their landlords mortgage.  USDA and VA loans allow for 100% financing and when combined with a sellers concession lets a buyer close with little or no money out of their pocket.

The best way to to make sure you close on your mortgage by Novemeber 30th when the tax credit expires is to  Be Prepared  and get Pre-qualified-this will make the entire home buying process move along much smoother.

This week there was a proposal by HUD to make the $8,000 First Time Buyer Tax Credit available for First Time Home Buyers to use as their downpayment.  At this time the Federal government has not made any official announcement regarding when or if this will actually happen, however, NJ First Time  Home Buyers have other options.   

New Jersey's First Time Home Buyer Program gives buyers the opportunity to take advantage of downpayment assistance.

• Smart Start-The state's down payment assistance program will provide up to 4% down payment assistance to eligible buyers.
• $5,000 Prefund Program-buyers eligible for the Tax Credit can receive a loan up to $5,000 in order to use the Tax Credit as a portion of their down payment.

Buyers utilizing FHA Financing can also use a gift from a family member as part or all of their 3.5% down payment.  When any of these options are combined with a sellers concession(where the seller covers the buyers closing costs) it can easily make the dream of buying a home a reality.

If you are considering buying a home at this point your primary goal should be to get pre-qualified for your mortgage and start shopping .  This will give you time to address any credit problems and comfortably shop for that perfect house.  In order to qualify for the tax credit you will need to close on your new home by November 30th 2009.

With national home sales up 2% in February, we are optimistic that new and existing home sales will continue to increase in the coming months due to historically low interest rates, affordable homes, and the first time homebuyer $8000 tax credit. Fixed rates from 4.5% to 5.25% are incredible. All across America consumers are realizing how low rates really are and are taking advantage of them.

Our refinance activity is very robust and while realtors may not see a direct benefit from refinance, they absolutely will see an indirect benefit. When thousands of homeowners get great low rates, it lowers their monthly bills which stabilize housing by making it more affordable. This helps put a floor under housing prices. These same homeowners are also now able to spend the money they save on mortgage payments, anywhere from $100 to $800 on average, on other goods and services which helps to stimulate the economy.

New Jersey First Time Home Buyers accounted for 49% of home purchases in the state during 2008 according to statistics from the National Association of Realtors.

This percentage should increase as we move forward in 2009 and more buyers take advantage of the following market conditions:

• New Jersey Home Prices are lower when compared to 2008.
• 2009 New Jersey Loan Limits are up to $625,500 in Monmouth and Ocean County, NJ
• New Jersey First Time Home Buyers using an FHA Mortgage only need a 3.5% down payment.
• FHA Mortgage Insurance including the Up Front Mortgage Insurance Premium(UFMIP) continue to be the best option for buyers with a low down payment.
• $8,000 First Time Home Buyer Credit that does not have to be paid back compared to the $7,500 Tax Credit from 2008 that is required to be repaid.
• Historically low interest rates

If you have been thinking about buying this spring may be the time to act!

Some other interesting New Jersey Home Buyer Statistics from the National Association of Realtors:

• Median age of First Time Buyers was 30
• 65% of First Time Buyers were between the age of 25 and 34
• Median Income of First Time Buyers was $82,500 compared to $60,600 nationally
• 22%  purchased due to improved affordablitity
• New Jersey Median Home Price was $306,500 compared to $204,000 nationally
• 79% of all buyers believe their home purchase was as good or a better investment than stocks. (54% felt it was a better investment and an additonal 25% felt it was at least as good)