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Real Estate Column: Proposed Mortgage Legislation
by Randy Kampf
The current state of the mortgage industry is on everyone’s mind nowadays, and with good reason: Media headlines of “Mortgage Meltdown,” “Subprime Mess,” and “Pending Legislation” are everywhere.
We are witnessing the industry going back to the basics of pre-2000 lending: documentation of income, minimum credit score requirements, and verification of assets.
That’s not to say that stated income or no-documentation loans are not available anymore. Guidelines have been drastically tightened on these types of loans. Many lenders have gone out of business while others have restricted their loan programs.
We’ve recently seen these programs slowly re-enter the lending market. Interest rates held steady in 2007, averaging 6.18 percent in January, rising to 6.62 percent in August and then easing to 6.24 percent in November.
To put it in perspective, mortgage rates were 13.64 percent in November 1984 when I entered the mortgage industry. What other changes can we expect in the lending industry? Let’s talk about the proposed legislation, which isn’t guaranteed to pass:
• The Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R. 3915) was developed to address the current mortgage crisis and protect borrowers from lending abuses that can lead to foreclosure.
• The Federal Housing Administration Modernization Act would raise loan limits in high-cost areas of California and the East Coast and cut down payments. It is considered a crucial relief measure for consumers who need to refinance out of adjustable-rate loans into lower-cost fixed rate mortgages.
• The Home Ownership Mortgage Emergency Act would allow certain borrowers who are 60 days or more behind on their payments to withdraw up to $100,000 penalty-free from their retirement accounts to bring their loans current to avoid foreclosure, or refinance into a more affordable loan.
• The Escrow, Appraisal, and Mortgage Servicing Improvements Act would ban all forms of lender or broker interference in appraisers’ valuations and would require high-cost, subprime mortgages to carry escrow accounts to handle property tax and insurance payments.
So far 115,981 mortgage originators have signed a petition against H.R. 3915. One of the major points of contention in this proposed legislation is the elimination of the YSP (Yield Spread Premium). The YSP is used to offset or eliminate up-front fees. We have already seen lenders limit this over the years.
The bottom line of these proposed legislative bills is geared toward customer service, ethics and accountability. The only real estate bubble that burst was that of the predatory lender. Gone will be the day when the consumer is treated like a lamb in a wolf’s den.
Update on SF Real Estate
When we separate what we read in the newspapers and see on TV regarding the real estate industry, San Francisco is considered an island. While the majority of the country witnessed double-digit depreciation in property values, real estate in the City actually gained almost three percent. While this number does not match the gains of year’s past, it shows how different we actually are.
Real estate in San Francisco is still a “seller’s market.” Multiple contracts are being received on listings; do you dare low-ball an offer on a home you really want? That’s like going to an antique auction and losing the bid on a nice piece of furniture for $50.
How many times will you kick yourself for not realizing the years of enjoyment you lost?
“Homes priced over one million in the Upper Market are holding their values and open house activity is very strong,” according to Jim Rudoff, real estate agent with McGuire Real Estate and Duboce Triangle property owner. “We are seeing between 15-50 groups of people at the Sunday Open Houses.”
Foreclosures and short sales are more prevalent in the East Bay where builders overbuilt and land is abundant. It always goes back to supply and demand: San Francisco has a limited supply of homes, while the demand is still strong. Everyday someone either moves here, or thinks about moving here.
Why would they want to live anywhere else?
Randy L. Kampf has been a mortgage broker since 1984, a SF resident since 2006, a neighborhood emergency response team volunteer, and a fundraiser for AIDS charities. He was a captain in a volunteer fire department in Houston, for 10 years prior to moving to San Francisco, and assisted at the Houston Astrodome during Hurricane Katrina.
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