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Where Does The Money Come From For Mortgage Loans?

In the “olden” days, when someone wanted a home loan they walked downtown to the neighborhood bank or savings & loan. If the bank had extra funds laying around and considered you a good credit risk, they would lend you the money from their own funds.

It doesn’t generally work like that anymore. Most of the money for home loans comes from three major institutions:

  • Fannie Mae (FNMA – Federal National Mortgage Association)
  • Freddie Mac (FHLMC – Federal Home Loan Mortgage Corporation)
  • Ginnie Mae (GNMA – Government National Mortgage Association)

This is how it works:

You talk to practically any lender and apply for a loan. They do all the processing and verifications and finally, you own the house and now you have a home loan and you make mortgage payments. You might be making payments to the company who originated your loan, or your loan might have been transferred to another institution. The institution where you mail your payments is called the “servicer,” but most likely they do not own your loan. They are simply “servicing” your loan for the institution that does own it.

You see, what happens behind the scenes is that your loan got packaged into a “pool” with a lot of other loans and sold off to one of the three institutions listed above. The servicer of your loan gets a monthly fee from the investor for servicing your loan. This fee is usually only 3/8ths of a percent or so, but the amount adds up. There are companies that service over a billion dollars of home loans and it is a tidy income.

At the same time, whichever institution packaged your loan into the pool for Fannie Mae, Freddie Mac, or Ginnie Mae, has received additional funds with which to make more loans to other borrowers. This is the cycle that allows institutions to lend you money.

What Freddie Mac, Ginnie Mae, and Fannie may do after they purchase the pools, is break them down into smaller increments of $1000 or so, called “mortgage backed securities.” They sell these mortgage backed securities to individuals or institutions on Wall Street. If you have a 401K or mutual fund, you may even own some. Perhaps you have heard of Ginnie Mae bonds? Those are securities backed by the mortgages on FHA and VA loans.

These bonds are not ownership in your loan specifically, but a piece of ownership in the entire pool of loans, of which your loan is only one among many. By selling the bonds, Ginnie Mae, Freddie Mac, and Fannie Mae obtain new funds to buy new pools so lenders can get more money to lend to new borrowers.

And that is how the cycle works.

So when you make your payment, the servicer gets to keep their tiny part, and the majority is passed on to the investor. Then the investor passes on the majority of it to the individual or institutional investor in the mortgage backed securities.

From time to time your loan may be transferred from the company where you have been making your payment to another company. They aren’t selling your loan again, just the right to service your loan.

There are exceptions.

Loans above $227,150 do not conform to Fannie Mae and Freddie Mac guidelines, which is why they are called “non-conforming” loans, or “jumbo” loans. These loans are packaged into different pools and sold to different investors, not Freddie Mac or Fannie Mae. Then they are securitized and for the most part, sold as mortgage backed securities as well.

This buying and selling of mortgages and mortgage backed securities is called “mortgage banking,” and it is the backbone of the mortgage business.

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Affordable Foreclosure Alternatives Program

In this current economic crisis, millions of homeowners facing financial hardship and possible foreclosure actions are requesting the help of agents with the Certified Distressed Property Expert® (CDPE) designation. A CDPE is a real estate professional with specific understanding of the complex issues that confront homeowners in distress. Through comprehensive training and market experience, CDPEs are able to provide real solutions for homeowners facing hardships in today’s market.  Paul Wheeler has achieved the CDPE designation.  As a professional trained to address specific needs, he does not merely assist in selling properties, he helps clients find solutions.

The rising number of foreclosures in this country is simply too big to ignore. That is why a government-backed program HAFA has been released that aims at streamlining foreclosure avoidance options.

If you think that a short sale might be a good solution for you, call us at 669-8559 to discuss this and other possible options.

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Home Buyer Tax Credit Deadline Is April 30th

Home Buyers don’t miss out! The tax credits offered by the Federal Government has been extended through April 30, but is not expected to be extended again.

First Time Home Buyers can receive up to $8,000. The credit is for 10 percent of the purchase price of the home and does not need to be repaid. This is a direct credit meaning that you do not need to have incurred any tax obligation to receive money. Also, beginning November 7, 2009, an additional category of new homebuyers, long-time residents (who owned their own homes), was added. The credit for this group is a maximum of $6,500, which, with some exceptions, does not have to be repaid.

To be eligible for a tax credit a buyer must be under contract by April 30, 2010 and close on the property before July 1, 2010.

To get details on tax credit options visit the IRS Website at: www.irs.gov.

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Mortgage Interest Rates In The US Continue To Defy

Mortgage interest rates in the US continue to defy all odds and remain slightly below the 5% range for a 30-yr fixed rate loan.  Below are the average interest rates and APR’s being charged by some of America’s leading mortgage servicers:

30-Yr Fixed                    4.810%     4.925%
30-Yr Fixed FHA            5.125%     5.850%
15-Yr Fixed                    4.250%     4.470%
5-Yr ARM                       3.750%     3.519%
5-Yr ARM FHA               3.750%     3.342%
Jumbo Loans:
30-Year Fixed                5.500%     5.643%
5-Year ARM                   5.000%     3.930%

Remember that these rates will not necessarily reflect the rates offered to every borrower. Rates vary depending on the borrowers financial situation and the way they have managed debt in the past.  We recommended reputable lenders.  Call us (665-8559) if you need contact information for a reputable lender.

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In Need Of A Financial Lifeline?

One way to avoid foreclosure, saving damage to a homeowner’s credit, is a short sale. Paul Wheeler is a Certified Distressed Property Expert (CDPE) and is uniquely qualified to help those interested in a short sale to avoid foreclosure. Visit the site below to learn more and see how Paul and his experienced team can help. Learn more and contact us today!

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The Art Of Staging

When it comes to Staging, what kind of wall art should you use? Since it is all about neutralizing, how can you choose a painting, a print or a picture that is not taste specific?

Well, first of all, try to stay away from flashy colors. Then, I would say that your choice will depend on the room you are staging. For example, in the kitchen, you should play with shapes for your art. Who said that every “chef d’oeuvre“needed to be presented in a frame? Be creative…

Depending on your color scheme, you could play with different shades and use pictures of drinks, food (such as spices), bottles…something really appropriate for the kitchen. Recipes can be really eye catching as well if nicely presented.

In the dining-room, wall art could be plates or placemats, but if you want to keep it simple, a landscape is great too. Landscapes are used the most in Staging because they pretty much go in every room throughout the house. Abstract is a genre of Art that suit the needs of a staged home. And, since Staging doesn’t mean boring, you have a lot more options than still-lives and landscapes. Just remember to keep it simple and to avoid portraits; they are just too personal and taste specific.

The purpose of putting Art on walls when staging a house is not only to look good and appealing. It’s also to anchor a piece of furniture or to create a vignette. (For example: a couple of paintings above the sofa).
Remember that to fill up empty walls; Art is not the only solution: think outside the box. You can also find some great architectural wall art and iron candleholders. Just shop around and you will find endless possibilities.

Good Luck!
Virginie Gill
Certified Staging Expert
Owner of Voilà Design

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From “Blah” To “Wow”! (Part 2)

Last week was about how to get your kitchen ready before the open house; this week, we will talk about the second most important room in your house: the bathroom.

This is a list of some tips you will need:

• Carpets, mats and toilet seat need to go. They simply don’t look clean and they are sometimes responsible for bad smells.

• “Let the sunshine in”. If there is a window in your bathroom, you need to pull up the blinds or shades and if you have any privacy issue, you might want to frost the glass with a film or with a can of paint.

• Tile and grout MUST be spotless; so clean, clean and clean again! If the grout is old, it might be discolored in some places. No need to worry, I have a quick fix for that! Go to your hardware store and ask for a “grout pen”, this thing is magic! But remember, it’s just for touch ups; if you need to re-grout everything, do it. It will pay off in the end.

Buyers are looking for a spa-like bathroom, the kind of bathroom where they will be able to relax after a long day at work.

• Accessorizing is the key to a well-staged bathroom:

  1. Buy a couple of fresh fluffy bath and hand towels.
  2. A candle or two displayed on the shelves, tub or vanity will create a relaxing atmosphere.
  3. You need a clean shower curtain, but try not to get anything too overwhelming for the space. A nice neutral with a simple pattern will do the job.

• Also, clear out the clutter; it will distract buyers. Again, less is more in this case; especially in one of the smallest spaces in the house.

And for the last touch, add freshly-cut, colorful flowers in a simple glass vase and Voilà, your bathroom is ready to impress potential buyers!

Staging tips of the week:
If you have a mirror without a frame in your bathroom, don’t replace it. Just work with it. Did you know that you could buy molding at the hardware store and ask them to cut it to size? Then, apply some heavy duty glue and you got yourself a custom-framed mirror for a fraction of the cost!

Good luck!
Virginie Gill, Certified Staging Expert
Owner of Voila Design

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From “Blah” To “Wow”!

There are 2 rooms in which we know that investing your money won’t be a waste. These 2 rooms are the bathroom and the kitchen, and here are a few tips to bring the “wow” factor in. This week, we will focus on the kitchen.

Make sure everything works well: cabinet doors, pulls and knobs, no leaking faucets.
New hardware for the cabinets is not very costly and it makes a huge impact. Preferably, everything should match in your kitchen (all glass, all stainless steel, all chrome or all oil rubbed brass).

Appliances need to be spotless.

Countertops are one of the most expansive upgrades for your kitchen, but for those of us on a budget, here is a simple fix. If you have laminate countertops, you can freshen it up with paint. Go to your local hardware store and ask for laminate countertops paint.

If you have butcher block countertops, oil them. A small can of oil or wax will do the trick.

If you have a bar, you need to emphasize it. It needs to be defined as an eating area, so stage it with a couple of bar stools and a few accessories. Every counter space counts and it is a great selling feature. If there is a breakfast nook in your kitchen, stage it with a small table and 2 or 4 chairs (depending on the size of the nook). Don’t forget to set the table to create a welcoming atmosphere so buyers can picture themselves living in your house.

It is very important that you de-clutter the countertops; you MUST show off the space. There is no better example of less is more. Pick ONE (yes just one!) small electric appliance (it should be the one you can’t live without and it should look clean): this one can stay! The rest MUST go. Then, use your imagination: wooden or stainless steel bowls with apples or lemons, fresh flowers, a kettle on the stove and you’re good to go.

But no, wait! Remember to bake cookies or a pie before you start your open house. There is nothing better than the smell of baked sweets to attract potential buyers!

There are many more things you can do to stage your kitchen but these solutions should help you get a better idea of what a staged kitchen should look like.

Staging tip of the week:
To clean stainless steel appliances, use a smooth cloth with a few drops of olive oil. Wipe gently and Voilà!

Good luck!
Virginie Gill, Certified Staging Expert
Owner of Voila Design
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Staging: How To Make A Small Room Feel Bigger

We are all well aware that today’s buyers are looking for spacious Tulsa homes with big and airy rooms. So, what can you do to make your small rooms feel bigger?

Here are a few tips:

  • Wall color is crucial. Choose a light color, such as beige, cream, taupe or light green. After all, staging doesn’t have to mean boring!
    Also, by painting the farthest wall from the entry way one or two shades darker, it will become an accent wall and your room will appear bigger and deeper. It will naturally attract the buyers’ eyes. (This works especially for living rooms).
  • Open the window curtains and roll up the blinds to maximize the natural light.
  • Use mirrors (one or two maximum in the same room) to reflect light, as well as shiny objects like candle holders, vases and other accessories.
  • If you have dark floors like hardwoods, try a big white rug to soften up the feel of the room. It helps define a sitting area for example and opens up an entire space.
  • Use fresh cut flowers, like sunflowers.
  • For bedrooms, choose white bedding so it won’t overpower the entire room.

Each of these solutions should help to make your rooms feel bigger, and in turn, make a great impression!

Staging tip of the week:

When you remove heavy furniture, it usually leaves dents on the carpet.

Easy fix: take an ice cube and let it melt on the dents. Once melted, use a scrubbing brush and…Voilà!!

Good luck!

Virginie Gill, Certified Staging Expert
Owner of Voila Design

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Real Estate News

CNN is saying the housing market could get a lot worse because of another wave of foreclosures set to hit the Tulsa real estate market. An avalanche of subprime mortgages are set to hit the market in the next 18 to 24 months.

As these mortgages reset to a higher interest rate along with higher unemployment, it is likely to cause a surge in mortgages going to default. Currently in the U.S., one in ten homes is either in foreclosure or behind in payments. The new numbers could be even more staggering.

Economists warn this could cause housing prices to decline up to 20% more before the market rebounds. Currently losses from the housing bust totaled $3.6 trillion at the end of 2008. Lawrence Yun the chief economist with the National Association of Realtors® estimates losses will likely approach $5 trillion by the time the crisis ends.

If you are facing a financial hardship with either decreased income, higher expenses or job loss, call me. Foreclosure doesn’t have to be your only option. I recently became a Certified Distressed Property Expert, or CDPE, and can help you or anyone you know avoid foreclosure by using a short sale. We can negotiate with the lender to take a reduced payment, pay our commissions, and avoid the damage of a on your credit score.

I know the Tulsa Real Estate market and job markets are tough out there. Let us help you or your friends if they are struggling.