More can afford a home, but lenders remain tight-fisted

The Los Angeles Times

Nearly half of all California households can now afford the median-priced home in the state – but that’s no help if they can’t get mortgages

Making sense of the story

• Six years after the subprime mortgage meltdown, banks remain tight-fisted, even with
  solid borrowers – a fact they attribute to shifts in government regulation and demands
  that they buy back bad loans.
• Mortgage credit has not eased much since 2007, according to Federal Reserve surveys
  of loan officers, even while low rates and the housing recovery have borrowers lined up
  seeking financing.
• First-time buyers and self-employed borrowers must jump through especially complex
  hoops. Even gold-plated applicants must justify the smallest quirks in their finances in
  excruciating detail. And, processing applications can take months.
• Lenders say their cautions stems in part from uncertainty over a tougher new regulatory
  environment, along with unrelenting demands from government-sponsored mortgage
  buyers that the banks repurchase soured loans.
• Salaried professionals with credit scores in the high 700s have the best shot at being
  approved for a mortgage loan in this environment, along with borrowers who have never
  missed a payment and want to refinance.
• However, even these borrowers may face stiff documentation demands, including having
  to explain any bank deposit other than a regular paycheck.

Stress-Free Service Ranks High

Mortgages

The New York Times

By LISA PREVOST

Published: February 28, 2013

Ease and convenience matter as much as cost to some people shopping for mortgages in the wake of the foreclosure crisis.

About a third of consumers are willing to pay more for a mortgage that comes with superior customer service and less stress, according to a recent survey of 618 people conducted by the Carlisle & Gallagher Consulting Group, which focuses on the financial services industry.

In a detailed report released in February, the firm presented the findings as instructive for big banks that want to win more mortgage business in a market increasingly crowded with independent lenders and community banks. “It’s incumbent upon banks to get to know their customers again and understand what’s driving their decisions,” said Doug Hautop, Carlisle’s lending practice leader.

The survey group was weighted toward the higher end of the income scale — almost half of those interviewed earn more than $100,000 a year. Slightly more than half had either bought or refinanced a home since 2010.

Asked to name the most important factor in the mortgage-selection process, more than 80 percent of the respondents cited cost, a response “that goes without being said,” Mr. Hautop said, given that “folks always want the lowest price.”

Still, a certain “high-touch” segment expressed a willingness to pay more for a less stressful application process. In particular, the 18-to-35 age group seemed most inclined to pay more for convenience and direct access. “That millennial age segment values more the technology investments, the ability to have real-time access,” Mr. Hautop said.

After cost, consumers cited trust in the financial institution and customer service as major factors, signaling a general frustration with the mortgage process and, the study noted, big banks in particular.

Topping respondents’ list of pet peeves (after high cost) was slow execution, followed by difficult communication, and an inability to track the status of an application. And chief among their expectations was having direct access to a mortgage representative — 70 percent of respondents want it. Asked if they would be satisfied with an online chat, most said no.

“Because the experience has been where there’s a lot of repetition in documents being submitted, and a long cycle, people would rather have one rep so they only have to explain things once,” Mr. Hautop said.

One in three respondents would consider taking their business to Walmart if the discount retailer offered mortgages. While the question was hypothetical, the response indicates the power of trust in brand, Mr. Hautop said.

A separate survey last November by Fannie Mae also reflected consumer sensitivity to trust. Seventy percent of the 1,000 homeowners and renters polled cited the reputation of the lending institution as a major influence on their choice of lender. Cost competitiveness actually scored lower, at 62 percent.

Michael L. Moskowitz, the founder and president of Equity Now, a direct mortgage lender based in Manhattan, said the Carlisle survey’s findings confirmed what “we knew instinctively.” Cost advantage is key, but it doesn’t matter if the company doesn’t have a reputation for treating customers well, especially when it comes to speed of closing, he said.

The study showed that big banks are sitting on considerable unrealized potential among customers: 70 percent of respondents would prefer to have a mortgage with their primary bank. Only 40 percent do.

Banks therefore “have a leg up in the process,” said Matt Hackett, Equity Now’s underwriting manager. “They basically just need to meet expectations.”

A version of this article appeared in print on March 3, 2013, on page RE7 of the New York edition with the headline: Stress-Free Service Ranks High.

New Buyer’s Strategies

Robert Jonez  DRE#01759487

If you have had the chance to read this blog lately, you may have noticed that the housing market is on the rebound, with home sales up by 12.3 per cent over last year. Prices are going up, with economists predicting that interest rates will be climbing also. These factors, coupled with a shortage of houses listed for sale, make for a Seller’s Market, in which there are now multiple offers on properties. These multiple offers escalate the price of a property, sometimes twenty or thirty thousand dollars over asking. Also in this market, the competition is much more fierce due to a larger amount of cash offers, although financed offers are still being accepted.

For Buyers, this is not particularly good news, but these issues can be dealt with if the Buyer is not afraid to adapt to the situation. This means adopting a new Buying Strategy. This new market requires possibly a larger down payment than normal to cover escalations in property prices due to multiple offers. Properties are being appraised a bit lower now, so there might be a larger gap between appraised value, which banks loan money on, and the selling price. Buyers should make themselves available to view properties as soon as they come on the market. New listings are now getting large amounts of Buyers looking at them the first day that they are on the market, and offers are being written on that first day.  A Buyer MUST be able to write an offer immediately on a property that he or she likes, which means, if the offer is not for cash, that loan applications have to be kept current and updated. Waiting for a price reduction, or trying to bargain down the price will not work in this market. Properties are selling very quickly, with no reductions, and usually price increases.

Most of all, PLEASE BE REALISTIC. Homeowners and Realtors know what their properties are worth. You will be much less successful in your search for a home if you are looking for a super bargain. You will not get a $600,000 property for $400,000 in a great area, unless the property is seriously flawed.  And please be aware that your Real Estate Agent, besides working hard to find you the perfect home, is in the Real Estate business to make a living. It is not fair to her or him to be taking up time that could be spent with someone who is flexible, focused and ready to buy.

Here’s to a successful purchase!