For Canadian buyers of homes in the U.S., securing a mortgage has always proven tedious. Lenders that provide mortgages for foreign nationals seem to come and go like the wind.

Fear not. We still have a very active local lender that puts together loans for second homes for foreign nationals – Canadian and otherwise.

They offer a 30 year fixed rate as well as a 15 year fixed rate product (current rates are 7.375% for the 30 year product and 6.75% for the 15 year). I’m not aware of any other lender offering a 30 year fixed rate for foreign nationals.

Typically 25 – 30% down is required, though this lender has some flexibility on down payment requirements “in the right situation for the right borrower”.

The CAD – USD current exchange rate is pushing toward a 180 day high, giving Canadians more buying power than they’ve had in the last six months.

Chart courtesy of  exchange-rates.org

At the moment of this writing, $1.18159 Canadian will get you $1 US Dollar. Just two months ago, it took $1.30 CAD to get a greenback. “Big deal, 12 cents”, you may be thinking. Well, if you’re dropping $100,000 on a house, that amounts to $12,000… Spending $300K? You can do the math.

Hit us up for info on the lender if you’re interested and we’ll get you hooked up.

Additionally, to save what can amount to very significant money, see this post about using a foreign currency exchange. While the Loonie is no longer at parity with the greenback as it was almost a year ago when that post was written, the exchange rate is still quite favorable for Canadian buyers, and we still see many of our friends from the north buying across the Phoenix real estate arena.

Canadian Flag Photo Credit: Creative Commons photo by Ian Muttoo

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This video, from the Chief Tax Economist from the National Association of Home Builders, explains the major points pretty well. The FAQ referenced at the end of the clip is here.

If you’ve got any questions on the home buyer tax credit, fire away in the comments. I am not a tax professional, not do I play one on TV or the Internet, but I’ll answer what I can and point you where to find answers if I can’t!

Hat tip to my friend, the great Maureen Francis, at MiOaklandCounty.com.

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Short sales, where a home owner is selling their home for less than what is owed on it, can be maddeningly frustrating for all involved.

The problem is, mortgage lenders have to approve every short sale. This makes sense, as they are the ones taking it in the shorts and getting paid less than what was originally promised.

Lenders often take weeks to respond to a short sale offer. The general excuse is they are overloaded with requests and under-staffed.

OKfine. But does this give them a license to be idiots?

Case in point:

Short sale offer submitted on Feb 4. The lender approved the short sale on Feb 26 – which is actually quite swift for a short sale.

But, there was a little problem…

It took 12 days to fax the acceptance… generally speaking, a four page fax should only take what, 5 minutes, to send. The Pony Express could have delivered the acceptance faster. . .

Which brings us to idiocy numbers 2 and 3:

So the bank thinks they are providing the buyer a 28 day closing period. But due to the epic fail of the 12 day walk to the fax machine, in reality we have 16 days to close. Given that the buyer has to secure a mortgage, closing in 16 days is next to impossible.

A call to the “Special Services Department” yields this golden nugget:

“Oh, the buyer needs a mortgage? We weren’t aware of that.”

Really. That’s pretty much what section 1c of the purchase contract says, along with sections 2a through 2k.  You know, the section with the big bold label of FINANCING.

Of course that entire page that covers the buyers loan pre-qualification might be another hint that a mortgage was involved. . .

And you want to assess a per diem if it closes late? Uhm, how much per diem? $5 per day? $100 dollars per day? Or would you prefer our buyers simply send you a blank check and you can just fill in whatever amount you want?

Here’s an idea. Instead of failing to read, and being unable to operate a fax machine, and asking for blank checks from the buyer, why don’t these banks just ask the government for money to keep them operational?

Oh wait, never mind. . .

(Note: lenders name and contact info intentionally distorted so their lawyers don’t ask me for a blank check.)

Creative Commons License photo credit:  swanksalot. Thanks!!

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Dubbed the “Mortgage Rescue”, “Homeowner Affordability and Stability Plan", “Homeowner Bailout” and various other names in the press, the official program name is now the “Making Home Affordable” (MHA)program.

Details are available at a new site, FinancialStability.gov. While the site says it is “coming soon” there is already a great deal of information available there.

The Home Affordable Refinance program will “be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.” (source: Department of Treasury MHA Summary of Guidelines)

The Home Affordable Modification program will “help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with an expanded and improved Hope for Homeowners program.” (source: Department of Treasury MHA Summary of Guidelines)

Here are 38 Frequently Asked Questions (FAQs) on both the refinance program and the loan modification program (PDF file from FinancialStability.gov).

Here is an updated detailed program description on the Making Home Affordable Program from the US Treasury (PDF file).

There is also a page available that will guide you through some questions and actions you need to take to see if you are eligible for either of these programs. One of the primary factors in determining if you are eligible is whether you have a  Fannie Mae or Freddie Mac mortgage. Your mortgage service or lender (where you make your payments) should be able to answer this question. Also, both Fannie and Freddie have set up web pages where you can enter some info and they will let you know (as of this writing, the Freddie Mac page is not functioning (Update: Link corrected. FinancialStability.gov had it wrong. Thanks Carl!). The Fannie Mae page is functional).

I’ll have more once I’ve had some time to digest and reflect on this information.

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The mainstream media, the blogiverse and the average Joe on the Street are all abuzz today with the “Mortgage Rescue”, “Homeowner Affordability and Stability Plan", “Homeowner Bailout” – pick your title.

Announced yesterday right here in our backyard of Mesa, Arizona, the President delivered his $75 billion (and counting) plan to stave off foreclosures.

I’ve made it pretty clear here in many past articles that I’m not a fan of big government and/or government intervention in a free market. Color me a conservative – it’s not a crime. But, and I say this with much trepidation, now may be time for the government to do something.

Things I like that Obama said:

But I also want to be very clear about what this plan will not do: It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans. It will not help speculators who took risky bets on a rising market and bought homes not to live in but to sell. It will not help dishonest lenders who acted irresponsibility, distorting the facts and dismissing the fine print at the expense of buyers who didn’t know better. And it will not reward folks who bought homes they knew from the beginning they would never be able to afford.

Speculators (who made up a large chunk of the Phoenix housing market boom) shouldn’t be bailed out. All investments carry risk. These investors knew that (or should have known that) going in. For those “investors” that jumped on the housing market boom without doing their research, oh well. The responsible homeowner and taxpayer shouldn’t have to pay for your ignorance and failure to complete your due diligence.

I’ve seen too many people using their homes like ATM machines. Anyone who thinks home values only increase hasn’t done the 3 minutes of research required to dispel that fallacy. These people need to reap what they have sown. Sorry if that sounds callous.

. . . we will create new incentives so that lenders work with borrowers to modify the terms of sub-prime loans at risk of default and foreclosure.

While it’s unfortunate that lenders need to be incentivized to do what needs to be done, the simple fact is they do. Most of this plan will be voluntary on the part of lenders. Perhaps the planned incentives will motivate some to play that otherwise wouldn’t have.

Things I don’t like that Obama said:

My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair market value – as long as borrowers pay their debts under a court-ordered plan.

Judges are people too, but they are not mortgage or financial experts. To give them the power of reducing principal balances – if unchecked and without proper education/training – is asking for trouble. How many will take the radical step of filing for bankruptcy just to get their principal balance reduced? As Jeff Corbet so eloquently pointed out in his great piece on “MObamanomics”, this provision may motivate lenders to pursue loan modifications. But I’m not sure that justifies a radical step like this.

Through its existing authority Treasury will provide up to $200 billion in capital to ensure that Fannie Mae and Freddie Mac can continue to stabilize markets and hold mortgage rates down.

It’s not holding mortgage rates down that I don’t like. Lower rates (if people can take advantage of them) are generally a good thing. It’s the slinging around of staggering amounts of money that concerns me. $75,000,000,000 here, $200,000,000,000 there, $787,000,000,000 for what some are calling only “Phase 1” of the stimulus package. Hell, I’m wearing out the “0” key.  We’re throwing trillions of dollars at these problems like it’s nothing. That frightens me. I’m not fond of the idea of every future descendant of the Thompson clan having to pay for our mistakes.

What I wish Obama had said:

Elimination of pre-payment penalties: I rarely hear this being discussed. Right now there are tens (hundreds?) of thousands of people (typically with sub-prime loans) basically locked into a current mortgage because they can’t refinance due to (often ridiculous) pre-payment penalties. Many times reducing a mortgage payment by only a couple of hundred of dollars a month would help someone on the edge keep from defaulting on their mortgage.  “Waiving” pre-payment penalties might allow some to refinance, thereby saving their home from foreclosure.

Call me crazy, call me a heretic, call me whatever. What’s about to follow will likely piss some people off. Oh well.

Falling home prices are not all bad: What I see very few people mentioning is that there are some good things about declining home prices. OK, I am a homeowner. Of course I’d love to see my home’s value increase every single day. This isn’t a realistic expectation, but I’d still love it. The simple fact is, declining home values mean homes become more affordable. Better affordability means more people can buy a home. It’s basic economics folks – Demand curves and the Law of Supply and Demand and such. This market will reach equilibrium, with or without government assistance. That equilibrium point may lie lower on the price axis then people would prefer, but the government mucking about isn’t going to change fundamental laws of economics.

On reduction of principal balance

This is a tricky one. Many are saying that unless existing mortgage balances are written down to existing market values, nothing will help. My problem with this is two-fold. Primarily, I simply don’t know how this could possibly be managed. There aren’t enough appraisers on the planet to determine “market value” of every existing home – or even just for homes where the owner wants their principal reduced (which would be basically anyone that bought, or did a cashout refi, on a home in the past 2 or 3 years).

What about the prudent home buyer that saved for a down payment, didn’t use the ATM feature of the boom, and is not currently underwater? They get to slog along as they are now, while the neighbor that refinanced and got cash for the new car and a trip to Disney World gets his principal balanced reduced. In other words, some of get to finance others transgressions. That should go over well.

And when does the writing down of balances stop? Do we just write down mortgage balances carte blanche when prices continue to decline? In 2012 (or whenever) when there is another downturn in home prices, do we engage in another wholesale write down? Home values are cyclical, always have been, always will be. Setting a precedent that the government will step in with a wholesale write down when prices decline could be a recipe for future disaster. 

Will this mortgage rescue plan work?

I don’t know, but I have my doubts. Many of the details are to be released on March 4. Until then, we can only speculate and assume – neither of which are particularly good things to do.

Most disturbing seems to be one of the guidelines that will help people who are underwater on their mortgages limits refinances to 105% of current market value. Prices in Phoenix have dropped 30 – 50% depending on where you look and whose statistics you believe. 5% wouldn’t seem to touch it.

Clearly this isn’t a cure all. Obama even made that point. A step in the right direction? Maybe. Opening a big giant can of crap that may take a generation to undo? Maybe.

I’m not smart enough to know all the answers. A large part of me says that we suffer through it, painful as that will be, and let the market correct itself. I happen to think it will. Guys with Nobel Prizes in Economics think so too.  I suppose a nudge in the right direction could speed things up and/or  lower the pain threshold. But we need to be very careful. I’m not sure we are thinking all the ramifications through as Congress passes trillion dollar bills the no one has read and we start doinking with fundamental economic laws and principals.

I’d love to hear your thoughts. . .

Others Opine:
Morgan Brown at Blown Mortgage
Tom Royce at The Real Estate Bloggers
The White House Blog (yes, that White House)
Jeff Corbet, The X Broker on AR
Michelle Malkin
Chris Butterworth at The Phoenix Agents
Spencer Rascoff (Zillow COO) on Active Rain
Greg Swann on Bloodhound Blog
Have a good link? Drop it in a comment and I’ll add it to the list.

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This could be a huge step in keeping those renting homes from getting the boot when their landlord is in trouble and facing foreclosure. 

And while we’re linking to other articles, this is a must read in my opinion. Chris Griffith, aka TwitterZilla, is an agent in Bonita Springs, Florida and a columnist for the Naples News. She wrote a beauty of an article last Friday titled, Banks don’t deserve bailout. I love this article!

Incidentally, Chris is in Phoenix today and several of us local real estate and Twitter types will be meeting up with her today at San Felipe’s Cantina in the Temp Marketplace. More details on that are here.

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Doris “Tanta” Dungey was an amazing writer on the fabulous finance and economics blog, Calculated Risk. If you don’t read CR, start. It holds a wealth of information.

Tanta had a way of explaining complex (and let’s face it, stupefyingly boring) topics in a way that made them easy to understand by normal people like you and me. She was able to take her 20 years of experience as a mortgage banker and lay down some text (LOTS of text) that covered the entirety of what, how and why mortgages work. She was also wicked funny and a genuinely gifted and nice person.

One of Tanta’s best (of many) posts came in a series that would ultimately be labeled, The Compleat UberNerd. It was a brilliant succession of posts about all things mortgages. From mortgage servicing to Mortgage Backed Securities, REOs and Foreclosures to mortgage insurance and credit scores, if you read through all these posts you will find yourself with a better understanding of mortgage financing than probably 95% of the population—which likely includes your mortgage lender.

I’ve been meaning to link to these posts for a long time. Tanta left us way, way too early. But her legacy lives on through her writing and instruction.

For your education, here are the UberNerd posts. Rest in Peace Tanta.

The UberNerd Collection:

Mortgage Servicing

Negative Amortization

FICOs and AUS (Credit scores and Automated Underwriting Systems)

Private Mortgage Insurance I

Private Mortgage Insurance II

Foreclosure and REO

MBS I (Mortgage-backed securities)

MBS II

MBS III

Delinquency and Default

Reverse Mortgages

Leverage, Ratings, and Forced Unwind

Mortgage Origination Channels

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This is a great program that you should consider attending if you are facing any sort of problems making your mortgage payments. The first and most important step is to contact your lender, preferably before you get into trouble. Don’t just sit around, act. Help the lenders help you. This workshop allows you to do just that. Take advantage of it.

Here is part of the email:

Home foreclosure is a major crisis impacting families in Arizona, and mortgage insurance provider PMI Group (www.homesafepmi.com) is working with local lenders and real estate groups to fight home foreclosure across the country, one community at a time. 

I would like to request your help in spreading awareness of this non-profit workshop in a Phoenix Real Estate Guy blog post that helps educate your readers of the many options available to foreclosure.  Many homeowners misunderstand that lenders prefer to foreclose immediately after a single missed payment – however, foreclosure is typically the most costly option, and banks have developed dozens of workout programs and special financing options to stem the global financial crisis.

Keeping families and homeowners in their homes helps stop the devaluation of mortgage-backed securities.  According to a January 2008 study published by Freddie Mac, fewer than 50 percent of homeowners contact their lender prior to entering foreclosure – our events are intended to change this trend and educate borrowers of the benefits available from their creditors.

We will be visiting Phoenix on Thursday, Oct. 23 with professional financial advisors and representatives from dozens of major lending banks.  More information follows:

What:               Homeownership Preservation Workshop       

Sponsor:          HOPE NOW Alliance (www.hopenow.com) (888) 995-HOPE

When:              Thursday, Oct. 23 from 2:00 p.m. to 8:00 p.m.

Where:             Glendale Civic Center

                        5750 West Glenn Dr.

                        Glendale, AZ 85301

Lenders:          Representatives from dozens of national and local lenders

RSVP:             First come, first served – arrive early to ensure your chance to meet with your lender!
 
Homeowners who need help, but are unable to attend the event are encouraged to:

·  Contact the  HOPE NOW Alliance at 1.888.995.HOPE or www.hopenow.com

·  Contact their lender directly

·  Access free information about options and alternatives to foreclosure at www.HomeSafePMI.com

    * Helpful items to bring to the event:
          o Your last paystub
          o Mortgage statements
          o Credit report
          o Personal budget and monthly income estimates
          o An itemized list of your cumulative debt to all creditors
          o Toys or a game for your children to enjoy while they wait – wait times grow longer in the early evening.

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Upcoming Real Estate Happenings

Low-lifes that prey on people are taking advantage of the confusion, turmoil and changes that are occurring rapidly in the financial markets.

The bottom line — never, ever respond to a request via email or telephone for sensitive personal information such as account numbers, passwords and Social Security numbers.

Scammers can send very convincing emails that link to very convincing web sites. They will often ask you to confirm or verify something by logging in. At that point they’ve captured your login ID and password and can wreck havoc on your accounts.

Legitimate financial institutions don’t ask you to “verify” information via email, the web or even the telephone. If you ever have a question or any doubt about the validity of a request, you should call the financial institution.

Here is the FTC Consumer Alert, and OnGuardOnline.gov is a great site with lots of information on securing your identity online.

Be very careful out there!

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One thing about this that strikes me as odd is how casually people toss around “$700 billion dollars”. I think this stems from the fact that we can’t really comprehend the size of a number like 700,000,000,000.

It’s a stupefying amount of money.

How much is $700,000,000,000 dollars?

Consider this. . . 

If you had 700 billion one dollar bills and you wanted to count them, it would take you 22,197 years. That is assuming you counted a bill once a second, 24 hours a day.

If you laid all your bills end-to-end, the trail would run for 67,834,596 miles — the equivalent of 142 round-trips to the Moon.

Prefer to stack your bills on top of each other? You’re going to need a really long ladder as a stack of 700 billion one-dollar bills would be 47,506 miles high.

Of course your stack of $700 billion would only be 475 miles high if you had 100 dollar bills.

Photo Credit: Tracy R. Olson

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