Time Magazine Cover: THE UNITED STATES OF TEXAS

Front Cover of Time Magazine Oct. 28 Issue:  THE UNITED STATES OF TEXAS, Why the Lone Star State is America’s Future.

This article is an excellent reference for all Realtors in Texas.  Here are a few pointers from the article that are worth mentioning:

“The real reason Americans are headed to Texas is much simpler.  Migrants are being pushed (and pulled) by the major economic forces that are reshaping the American economy as a whole: the hollowing out of the middle class, the increased costs of living in the U.S.’s established population centers and the resulting search by many Americans for a radically cheaper way to live and do business."

“Along with the affordable housing and a warm climate, newcomers are drawn by the notion that in the case of Texas, jobs are plentiful.  Texas’ unemployment rate is currently 6.4% - high for Texas but below the national rate of 7.3%.”

“Over the past 20 years, more than 4 million Californians have moved to Texas, according to Weinstein.  “That’s two cities the size of Houston,” he notes.

“Jed Kolko, chief economist for San Francisco – based real estate website Trulia, says that from 2005 to 2011, 183 Californians moved to Texas for every 100 Texans who moved to California. “Home prices, more than any other factor, cause people to leave,” Kolko says.

“IT’S NOT JUST CHEAP LIVING that draws people to Texas.  It’s also jobs.  In the past 12 months, Texas has added 274,700 new jobs – that’s 12% of all jobs added nationwide and 51,000 more than California added.   In a Moody’s Analytics study, seven of the top 10 cities for projected job growth through 2015 will be in Texas.   Four Texas cities topped the list:  Austin, McAllen, Houston and Fort Worth.”

“In fact, from 2002 to 2011, with 8% of the U.S. population, Texas created nearly one-third of the country’s highest paying jobs.”

“From 2001 to 2012, the number of lower-middle-income jobs in Texas grew by 14.4%, and the number of upper-middle-income jobs grew by 24.2%.  If you look at the U.S. without Texas over the same period, the number of lower-middle jobs grew by an anemic 0.1%, and the number of upper-middle jobs shrank by 6%.  …… If you pull Texas out of the puzzle of the United States, the rest of the country falls down!”

My parents and I are originally from Taiwan.  They moved to Texas in the 80’s to seek better opportunities and a better future for me and my brother.  Although I love being Chinese and fortunate enough to experience dual cultures, I know my parents made the right choice.  I am able to give my children the kind of opportunities and education my parents worked so hard for.  

Reference: Time Magazine / October 28, 2013

Article by: Tyler Cowen

THIS WEEK'S ECONOMIC REVIEW / Why is the mortgage interest rate going up?

Economy Review This Week 09/12/2013

Employment figures were a key newsmaker last week, and whether or not the news was favorable depended on the eye of the beholder. Specifically, the economy added 169,000 in August, which put the unemployment rate at 7.3 percent, the Bureau of Labor Statistics reported last week. This was little changed form July, but the lowest since December 2008. On the face of things, that’s good news, but it skirts the issue of people who have given up looking for work, which is described by the labor-force participation rate. For August, the percentage of working-age people either working or looking for work, dropped to 63.2 percent from 63.4 percent in July. This was its lowest rate since 1978. Ignoring the participation rate and going by the 7.3 percent rate, the number of unemployed Americans totaled 11.3 in August, the number of long-term unemployed (those jobless for 27 weeks or longer) hovered at 4.3 million. The long-term unemployed accounted for 37.9 percent of the total unemployed population. The number of Americans involuntarily employed part time for economic reasons, such as their hours were cut or they were unable to find full-time work dropped by 334,000 to 7.9 million in August. While the monthly unemployment scenario’s progress was unclear at best, more recent employment scores were more upbeat, with first-time claims for jobless benefits remaining at a five-year low. First-time claims for unemployment insurance filed during the week ending Aug. 31 dipped to 323,000, a decline of 9,000 from the previous week's revised figure of 332,000, according to last week’s report from the Employment and Training Administration. The four-week moving average was 328,500, a drop of 3,000 from the prior week's revised average of 331,500. The total number of unemployed Americans covered by jobless benefits during the week ending Aug. 24 dropped to 2,951,000, a loss of 43,000 from the previous week's revised level of 2,994,000, the Administration also reported. The four-week moving average was 2,979,500, a decrease of 18,000 from the previous week's revised average of 2,997,500. Switching gears to real estate news, construction spending during July notched up 0.6 percent over June’s revised rate of $895.7 billion to hit an annual rate of $900.8 billion, the Census Bureau reported last week. Compared to last year, July’s rate was 5.2 percent over July 2012’s rate of $856.3 billion. Spending on private construction hit an annual rate of $631.4 billion in July, which was 0.9 percent higher than June’s revised June estimate of $625.6 billion. Residential construction hit an annual rate of $334.6 billion in July, which was 0.6 percent over June’s revised estimate of $332.7 billion. Finally, in international trade, the trade gap widened in July with exports of $189.4 billion and imports of $228.6 billion creating a trade deficit of $39.1 billion, which was up from $34.5 billion in June, the Census Bureau and the Bureau of Economic Analysis jointly reported last week. July exports were down $1.1 billion from June’s exports of $190.5 billion, while July’s imports were $3.5 billion higher than June’s imports of $225.1 billion. This increase in imports was due to a combination of increased crude oil prices as well as consumer spending on goods from overseas, which could point to an improving economy, according to some analysts. This week, we can expect: Monday — Consumer credit for July from the Federal Reserve. Wednesday — July wholesale inventories from the Census Bureau. Thursday — Initial jobless claims for last week from the Employment and Training Administration; August import and export prices from the Census Bureau; and August budget from the Treasury Department. Friday — August retail sales totals and July business inventories from the Census Bureau; and August producer price index from the Bureau of Labor Statistics.

"Am I in the right market condition to purchase a home?"

The basic question that every prospective buyer asks: "Am I in the right market condition to purchase a home?"

I started in the finance industry working for a large national bank and I've seen the real estate and mortgage markets change many times over.  So my answer to this question is, "Are you in the right financial condition to purchase a home?"

In first 6 months of 1994, when I just started my working career, the average mortgage rate at the time was 7.25%.  In Dec. 2001, my husband and I closed on our current house at around 7% for a 30 year fixed rate, which was the national average.  In Dec. 2002, we refinanced our house at 5% for a 15 year fixed rate, which was considered the historical low at the time. Afterwards, we saw the rate just kept dropping.  Did we make the right choice based on market condition?  Probably not, but we made financial choices that were good and right for us. 

As reported on The Dallas Morning News yesterday, under "Your Money" Section: Mortgage rates rose this week, Freddie Mac said in it's latest report, with lenders offering a 30-year fixed home loan to solid borrowers at an average of 4.57 percent - up from 4.51 percent last week and a full percentage point higher than a year ago. The average 15-year rate rose from 3.54 percent to 3.59 percent.

Our economy has gone through the recovery and the government says the economy is in the building phase.  Our GDP is up, auto sales are experiencing growth it hadn't seen for a long time,  and the unemployment rate has steadily dropped, so inevitably we will see interest rates rise again.  Still the current interest rate is very low compared to what my parents had to pay when they bought their house (around 9% in the late 80's).  Overall, we are in a very good economic period, so regardless of market condition, sit down with an experienced loan officer and go through your budget analysis.   It's not about the market, it's about investing in your future.  

Reference from The Dallas Morning News printed on Sept. 6, 2013. 
Reference from www.mortgage-x.com
http://www.mortgage-x.com/general/historical_rates.asp

From The Dallas Morning News "Are N. Texas home prices rising too fast?"

Here is some good news for Real Estate professionals. Steve Brown with Dallas Morning News wrote an article that puts Dallas real estate market in perspective:

"Dallas area has recouped everything lost in the recession and then some when it comes to residential real estate values."

"In July, the price of pre-owned single-family homes in North Texas was up 12 percent from a year earlier.  And pre-owned condominium prices jumped an unheard of 17 percent year of year."

"The median price of houses sold by real estate agents through their multiple listing service is about 40 percent higher than it was in January 2009."

Information courtesy of Steve Brown and The Dallas Morning News

FHA Underwriting Guidelines changes for Disputes on Credit Report

For most borrowers working with credit repair companies, "Disputes" listed on credit report are not allowed for most lenders under FHA Guidelines. Here is the revision FHA made effective October 15, 2013, to following:

*Guidance on collections and disputed accounts
*Clarify guidance on judgments

This guidance applies to all FHA programs with the exception of non-credit qualifying streamline refinances and the Home Equity Conversion Mortgage.

HUD 4155.1, Mortgage Credit Analysis for Mortgage Insurance 4.C.2.d, Collections and Judgments is re-named Credit Analysis of Collections and Judgments 4.C.2.e, Paying Off Collections and Judgments is re-named Capacity Analysis of Collections and Judgments 4.C.2.f, Previous Mortgage Foreclosure is re-named Handling of Disputed Accounts Re-designation of sections; Previous Mortgage Foreclosure through Short Sales, starting with 4.C.2.g to 4.C.2.m. HUD 4155.1 4.C.2.d Credit Analysis of Collections and Judgments Collections and judgments may indicate a borrower’s disregard for credit obligations and must be considered in the creditworthiness analysis. The guidance below applies to loans with collection accounts and all judgments. Medical collections and charge off accounts are excluded from this guidance. Documentation Requirements: Collection Accounts and Judgments Applicable to Manually Underwritten Loans: The lender must document reasons for approving a mortgage when the borrower has collection accounts or judgments. Regardless of the amount of outstanding collection accounts or judgments, the lender must determine if the collection account or judgment was a result of:  the borrower’s disregard for financial obligations;  the borrower’s inability to manage debt; or  extenuating circumstances. The borrower must provide a letter of explanation with supporting documentation for each outstanding collection account and judgment. The explanation and supporting documentation must be consistent with other credit information in the file. Applicable to Loans Run Through TOTAL Mortgage Scorecard: TOTAL Mortgage Scorecard Accept/Approve – There are no documentation or letter of explanation requirements for loans with collection accounts or judgments run through TOTAL Mortgage Scorecard receiving an "Accept/Approve" despite the presence of collection accounts or judgments. These accounts have been already taken into consideration in the borrower’s credit score. If TOTAL Mortgage Scorecard generates a "Refer," the lender must manually underwrite the loan in accordance with the guidance above applicable to manually underwritten loans with collection accounts and judgments. 4155.1 4.C.2.e Capacity Analysis of Collections and Judgments Collections - FHA does not require collection accounts to be paid off as a condition of mortgage approval. However, FHA does recognize that collection efforts by the creditor for unpaid collections could affect the borrower’s ability to repay the mortgage. To mitigate this risk, FHA is requiring a capacity analysis of collection accounts with an aggregate balance equal to or greater than $2,000, as described below. If the total outstanding balance of all collection accounts for all borrowers is equal to or greater than $2,000, the lender must perform a capacity analysis as detailed below. Unless excluded under state law, collection accounts of a non-purchasing spouse in a community property state are included in the cumulative balance. All medical collections and charge off accounts are excluded from this guidance and do not require resolution. Capacity analysis includes any of the following actions:  At the time of or prior to closing, payment in full of the collection account (verification of acceptable source of funds required).  The borrower makes payment arrangements with the creditor. If the borrower has entered into a payment arrangement with the creditor, a credit report or letter from the creditor verifying the monthly payment is required. The monthly payment must be included in the borrower’s debt-to-income ratio.  If evidence of a payment arrangement is not available, the lender must calculate the monthly payment using 5% of the outstanding balance of each collection, and include the monthly payment in the borrower’s debt-to-income ratio. TOTAL Mortgage Scorecard Accept/Approve/Refer - Regardless of the Accept/Approve/Refer recommendation by TOTAL Mortgage Scorecard, the lender must include the payment amount in the calculation of the borrower’s debt-to-income ratio.   4155.1 4.C.2.e Capacity Analysis of Collections and Judgments Continued Judgments - FHA requires judgments to be paid off before the mortgage loan is eligible for FHA insurance. An exception to the payoff of a court ordered judgment may be made if the borrower has an agreement with the creditor to make regular and timely payments. The borrower must provide a copy of the agreement and evidence that payments were made on time in accordance with the agreement, and a minimum of three months of scheduled payments have been made prior to credit approval. Borrowers are not allowed to prepay scheduled payments in order to meet the required minimum of three months of payments. Furthermore, lenders are instructed to include the payment amount in the agreement in the calculation of the borrower’s debt-to-income ratio. FHA requires judgments of a non-purchasing spouse in a community property state to be paid in full, or meet the exception guidance for judgments above, unless excluded by state law. Reference : For information on the Credit Analysis of Judgments, see HUD Handbook 4155.1 4.C.2.d. HUD 4155.1 4.C.2.f Handling of Disputed Accounts, Continued Disputed Derogatory Accounts Indicated on the Credit Report If the credit report utilized by TOTAL Mortgage Scorecard indicates that the borrower is disputing derogatory credit accounts, the borrower must provide a letter of explanation and documentation supporting the basis of the dispute. The lender must analyze the documentation provided for consistency with other credit information in the file to determine if the derogatory credit account should be considered in the underwriting analysis. Guidance for TOTAL Mortgage Scorecard Accept/Approve loans with disputed accounts . Disputed Derogatory Credit Accounts greater than or equal to $1,000 If the cumulative outstanding balance of disputed derogatory credit accounts of all borrowers is equal to or greater than $1,000, the mortgage application must be downgraded to a "Refer" and a Direct Endorsement underwriter is required to manually underwrite the loan as described above. Disputed Derogatory Credit Accounts less than $1,000 If the cumulative outstanding balance of disputed derogatory credit accounts of all borrowers is less than $1,000, a downgrade is not required. Excluded Accounts  Disputed medical accounts are excluded from the $1,000 limit and do not require documentation.  Disputed derogatory credit accounts resulting from identity theft, credit card theft, or unauthorized use are also excluded from the $1,000 limit. However, the lender must provide in the case binder a credit report, letter from the creditor, or other appropriate documentation to support the dispute, such as a police report disputing the fraudulent charges. Mortgagee Letter 2013-24, Continued HUD 4155.1 4.C.2.f Handling of Disputed Accounts, Continued Disputed derogatory credit accounts are defined as follows:  disputed charge-off accounts,  disputed collection accounts, and  disputed accounts with late payments in the last 24 months. Disputed derogatory credit accounts of a non-purchasing spouse in a community property state are not included in the cumulative balance for determining if the mortgage application is downgraded to a "Refer". Non-derogatory disputed accounts are excluded from the $1,000 cumulative total. Non-Derogatory Disputed Accounts and Disputed Accounts Not Indicated on the Credit Report. Non-derogatory disputed accounts include the following types of accounts:  disputed accounts with zero balance,  disputed accounts with late payments aged 24 months or greater, and  disputed accounts that are current and paid as agreed. If a borrower is disputing non-derogatory accounts, or is disputing accounts which are not indicated on the credit report as being disputed, the lender is not required to downgrade the application to a "Refer." However, the lender must analyze the effect of the disputed accounts on the borrower’s ability to repay the loan. If the dispute results in the borrower’s monthly debt payments utilized in computing the debt-to-income ratio being less than the amount indicated on the credit report, the borrower must provide documentation of the lower payments. Paperwork Reduction Act The information collection requirements contained in this document are pending approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2502-0059. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.

Reference from:  U.S. Department of Housing and Urban Development
Mortgagee Letter 2013-24