If you were reading our blog about two months ago, you may remember an article about Upcoming FHA Changes. Well, these changes are going into effect on Monday, October 4^th.  Here’s what you need to know.

Will these changes affect me? Why are they changing the FHA program?

First of all, it’s important to note that these changes are not retroactive. If you have an existing FHA loan, or your FHA case number was requested before October 4th, your mortgage insurance will be calculated using the current rules, with a larger up-front premium and a smaller monthly premium. If you apply for a mortgage through the FHA program on or after October 4th, 2010, these changes apply to you.

These changes were implemented to increase HUD’s Capitalization ratio, or the amount of funds that it has in reserve to cover the number of mortgages that it takes on. This is a good thing, because if HUD were to stay undercapitalized, FHA loans could be harder to come by.

FHA Insurance Changes – Effective Oct. 4th, 2010

Currently, FHA Mortgages require an up-front mortgage premium of 2.25%, or $4,500 for a $200,000 house. This is a cost that you pay (usually financed into the loan) “up-front” in order to get the FHA mortgage. You then pay an ongoing annual mortgage premium of somewhere between 0.5% and 0.55%, depending on your down payment and loan to value ratio. You pay this premium monthly, so we figure out the annual premium and divide by 12. On a $200,000 mortgage, your monthly mortgage insurance would be between $83 and $92. If you apply for a 15 year FHA mortgage, these premiums will actually be lower.

These changes, effective on Monday, will decrease the up-front mortgage premium to 1% (or $2,000 on a $200k home) while increasing the annual premium to 0.85% to 0.9%. Again, your annual premium rate depends on the size of your down payment and loan to value ratio. On a $200,000 mortgage, this increases your monthly mortgage insurance to between $142 and $150, an increase of about $58 monthly.  Again, a 15 year FHA mortgage will have reduced mortgage insurance costs.

The FHA Reform Bill that passed two months ago allows FHA to increase its annual premium to a new cap of 1.55%, so a year from now we may only have fond memories of 0.9% annual premiums.

Seller Concession changes?

A “Seller Concession” takes place when a seller pays (through their proceeds of sale) some or all of the closing costs & prepaid expenses for the buyer of their property. In the current market, it has become common for a seller to pay some or all of the third party fees for a buyer, to help them reduce the total cost of purchasing.

Using a $200,000 purchase on a 30 year fixed FHA loan, the minimum downpayment is 3.5%, or $7000.  Closing costs & prepaids could easily amount to another $6000-8000 depending on the taxes, insurance costs, time of year, etc.  Being able to cover these additional cost for a buyer can help the seller find more qualified borrowers or lower the total purchasing costs for a buyer of their home. Currently seller concessions are capped at 6% (of the sale price of the home) for FHA Mortgages.

There has been speculation, but no official statement, that this percentage could be lowered. This could make things much tougher for consumers, because in smaller markets where real estate is much cheaper, the 6% concession is needed cover all of the buyer’s costs.

If HUD decides to lower the amount that a seller is allowed to contribute towards a buyer’s closing costs & prepaids, it could slow down some already-troubled markets.

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Geoff Boyd – PrimeLending – Clackamas, OR

Hi everyone, this article comes straight from our resident expert in online marketing, Aaron Jones. He’s good at what he does, so listen up and give it a shot; you won’t be sorry!

In this market, it helps to have an edge. Our ‘Internet Marketing for Real Estate Agents’ series is here to help you succeed in this fast-paced information driven business environment. It’s Easier than you Expect & more Important than you Realize.

Search engine optimization (SEO): The process of improving the visibility of a web site in unpaid search results.

Hold on there, get your finger away from the ‘close’ button – don’t let the technical terms spook you – this is a very valuable tool and you will have a grasp on the basics if you give this article a chance.

Ready? Here we go.

First of all, if you have an online presence and want people to be able to find you, your website or your listings, SEO is a valuable tool for you. You do not need to have a website to implement this type of internet marketing, but it certainly helps.

Let’s define what I meant when I said “Online Presence“. If you have ever commented on a news article, set up a Facebook account or posted a listing online, you have an online presence. Most people consider their company or personal website to be their ‘online presence’, but that is only a part of it. Internet marketing and SEO is all about promoting yourself, your listings and your business online, making every online interaction and website as effective as it can be for driving search results and getting found.

So the first real step in search engine optimization is to know what your online presence looks like. How do you do that? Google Yourself. It may sound silly, but if a referral customer is looking for a way to contact you, they will probably be typing your name into a search engine. Look for content that casts you in a less than professional light; you may be surprised at what you find! There are ways to get content removed from search engines, but the best way to clean up your online reputation is to create and promote the content that you want customers to see.

Your personal brand is important, but business comes first. SEO is one of the keys to selling real estate online – this is the #1 way to get more eyes on your listings, and with a little patience, you can do it yourself. Now, SEO stands for Search Engine Optimization, but since Google has over 70% of the market share for online search, we will stop saying “search engine” and start saying “Google”. Don’t worry, most search engines work in a similar way, so if you work towards good scores in Google, you will get results in the rest as well.

I should also mention that, while I do Online Marketing for a living, there are a lot of people out there who will charge an arm and a leg for what I’m about to explain to you, so be very careful if you decide to hire someone to do this for you, you might get taken for a ride.

Without further ado, here is part one on how to use SEO to build your business online. Stay tuned for part 2 next week.

The Three Ways that Google Ranks your Online Presence

1) The Content

This is the first and perhaps most valuable piece of the puzzle. Google can only read text that you can copy and paste, so if you upload a picture of your amazing listing flier, you shouldn’t be surprised if no-one can find it; Google needs the text to correctly categorize and rank it. There are ways to do SEO for images, but it is always better if there is text accompanying or explaining the image. The best thing about this is that since your website is already mostly text, you are halfway there, the next step is optimizing that text.

Google categorizes and ranks your content based on what words you use and how often you use them. If you were using Google several years ago, you may have run into websites that were just huge blocks of nonsensical text. People used to use this technique, called “keyword stuffing” to promote their website on Google. Now it will just get you banned from search results.

Think along these terms. If you were a customer, what would you search for to find this piece of content (house, agent website, blog, etc)? What specific words would you use? If you use those words in your website or online listing, you are helping your customers to find you, and that is great news for everyone! Well, except for your competition.

2) The Context

Context is very important for SEO and Google is really starting to use context to drive search results. For example, if you search for VA Loan or VA Mortgage, your results will be targeted towards Veterans, but if you search for VA Housing or VA Property, your results will be about Real Estate in Virginia – computers are getting smarter, so you need to make sure that your content has the right context.

How do you give context to your content? Part of it is the website that the content is hosted on. A post on Activerain.com or Trulia.com will have the natural context of real estate information, while a article from the Wall Street Journal will automatically score higher on financial topics. If you are putting the information on your website, Google gets that context from your websites “Meta Data”. Long story short, Meta Data is information that is in the code of your website (or isn’t, but should be, depending on who designed it) and it tells search engines what the website is about. If you are brave, look at the source code for your website (usually can be found by right-clicking on your web page) – otherwise simply use this tool to discover what your meta data says about your website. If you want to change your meta data, you have to edit your website – I would ask whoever set it up in the first place to do that for you, or Google it if you are feeling brave.

Quick primer on meta data – there are MANY types of meta data, the three most important for SEO are Keywords, Description and Title.  Keywords should be words that are relevant to your content, separated by a comma.  Description is a short (160 characters or less) chunk of text that describes your content.  Title is the “name” of your page, and should not exceed 60 Characters,

The last way that Google gets context for your information is through outbound and inbound links. If both Activerain and the Wall Street Journal link their readers to your post about the financial aspects of real estate, you will get an added benefit for both Financial Topics and Real Estate Topics, because known experts have linked towards you. If you are linking out to them, it gives added context to what your material is about.

3) Competition

Online marketing has been a big thing for several years now, so your competitors might have beat you to the punch. Don’t get discouraged , just because you are starting behind is no reason to not start – you can and will catch up, but it will take a bit of time. If you are just starting with online marketing, you are not going to stand a chance against Amazon, Ebay, Zillow or other internet powerhouses, so I would encourage you to start small.

Here are the questions you should ask yourself – what piece of the market do I own? What clients do I really connect with? What are specific words used for my area (town, county, city, nicknames).

People tend to “search” like they talk, so remember that you have to put yourself in the customers shoes. A person coming into town to find a house to move into will not necessarily use the same words or phrases as a local. They may use zip codes, landmarks or other non-standard language to try to find what they are looking for. Once you know who your audience is, you can start talking like them. If you have multiple audiences that use different language, it is better to have multiple pages or articles that target each audience rather than trying to talk like 3 groups at once.

In the second part of this article we will give you some examples of how SEO works with social networking and blogging. We will also show you how to track your progress for the best results!

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Follow us on twitter for current news, advice and market status updates.

Have a question or something to add? Leave a comment or send us an email

Geoff Boyd – PrimeLending – Clackamas, OR

A long time ago, almost 3000 years ago to be precise, Greece was the ruling power in the Mediterranean. Their rich mythology and language are still around, thanks to some scholars who remembered the first rule of any task, Write It Down. Many of you who can still remember middle school will recall the story of Sisyphus; a King who angered the Gods so greatly that he was given a simple but impossible task. Sisyphus was to roll a boulder up a mountain, but every time he got close to his goal, it would roll right back down and he would have to start over. A lot of effort for no net result.

Just like Sisyphus, the Federal Reserve Bank is trying to push our economy out of the recession. Their most recent strategy? Buying more treasuries. By purchasing these securities, they will decrease the supply of treasuries, raising the price and driving down the required return, you know the drill. This is Economy 101 stuff, and interest rates will go down as a result.

There is just one problem; our economy is going to come rolling right back down the hill. What I mean, of course, is that this plan to stimulate the economy doesnt address the problems that the economy is facing. With unemployment through the roof and the savings level rising, a very large portion of our population is changing how they “do” money – if they have extra, they save for when things get worse. You can look at the economic reports and they tell the whole story – new and existing house sales are at all-time lows, building permits and materials have not recovered either, but savings are up and spending is way down.

So, the solution is to make lending more affordable, right? Wrong. In the state of our economy, with a true unemployment rate assuredly over 12% and possibly near 18%, even the least savvy of Americans understands that you don’t rearrange the deckchairs on the Titanic. If the economy is going down the drain (and for some, its reached rock bottom), it doesn’t matter how low an interest rate you can get, you won’t have money in the bank or food in the pantry. Unemployment is an anchor that will continue to pull our economy down until the joblessness problem is solved.

The Fed seems to believe that low rates are the key to recovery. This is where they must have skipped the chapter in the economics 101 book; “the economy doesn’t work if people don’t have jobs”. Unfortunately, the answer is right in front of them. Thomas Hoenig, Kansas City’s Fed President, has repeatedly dissented with the Fed’s continuing decision to keep the Fed Funds rate near 0. His most recent statement is that the Fed is making a “dangerous gamble” by continuing to force rates down.

The Fed refuses to listen, perpetuating the Boom / Bust cycle that reminds me of that ancient boulder rolling up and down the mountain. Unfortunately, the only way to get some footing is find a bottom…..a real bottom, and this would be very painful.  Our country can create and maintain growth, real growth, but the interventions that we have seen in the past 2-5 years have made it hard to get any traction because they create the illusion that we are experiencing a recovery.  The Stimulus Checks, New Homebuyer Tax Credit, Auto Incentives, and all the rest of the government interventions, do not seem to be helping create any lasting growth.  This is because they are not creating foundations upon which the market can stand and build from.  For now, they are simply fluff to make it appear as if the Fed is doing something.   The real truth is that we will come right back to where we started unless the American people are able to start working again.

If you follow the news, you might have seen recently that a lauded FHA reform bill recently passed into law and has been sent to the President. This bill, H.R. 5981, allows FHA to raise it’s mortgage insurance premium (MIP) also known as monthly mortgage insurance (MMI) from the current cap of .55% to a whopping 1.55% – this increases the monthly amount that you pay for insurance if you opt for an FHA loan. This was partially balanced out by a decrease in the upfront MIP to 1%.

This is, from our perspective, a mixed bag. It doesn’t completely destroy the benefits of FHA over Conventional Mortgage (low down payment remains the same) but it is a net downturn when it comes to marketing this type of loan. This change was made because FHA is critically under-capitalized (0.5% capitalization as opposed to the 2% required of them) and they needed to make changes to insure that they can stay liquid if things get even worse.

Why are they under-capitalized in the first place? As you can see below, HUD (the government entity responsible for FHA) has seen a spectacular spike in demand since 2007. Since their growth was so quick, the funding that they had and the loans currently adding money into their system were not enough to maintain a healthy capitalization ratio. Their solution? Up the monthly mortgage insurance across the board for new loans (many of their older loans no longer require the MMI). This will increase their liquidity, but ends up costing the consumer more in the end. Here is a chart that we threw together to show just how quickly their demand changed.

Today we got the newest unemployment data, and it’s not pretty. The Jobs report was expected to come in near -90,000 jobs in July, and instead we got -131,000. Worse than that, the revision for June shows an additional 100,000 jobs lost. Lets just call it a “margin of error”. This report, coupled with an increase in consumer saving, tells us that we are a long distance away from true recovery in our economic climate; many people do not have jobs and those that do lack consumer confidence and probably fear that they will be the next one to get axed; hence, they save more.

The one thing you wont see anywhere on this jobs report? Emergency unemployment recipients. these people, who have been taken off the normal structure of unemployment, magically disappear as far as this report is concerned, so instead of having a clear, concise view of hire/fire in our economy, this economic indicator is severely compromised, and may actually present a rosier picture than reality dictates.

So, the Fed is “fluffing” the numbers to make things look better.  9.5% is not good………..we all know that.  But the reality is much worse.  Scary huh? That’s one big reason why the Personal Saving Rate in the US jumped back above 6%….because consumers are afraid that more bad news is on the way.

I do have some good news though………..your weekend is almost here. ☺

So, primary research time. I decided to take a look through the records and see who was still in the game, lending-wise, in Oregon. What I found, may not surprised you – about 7 out of 10 licenses are inactive at this point; a virtual exodus from what used to be a overcrowded business. Without being too rude,…. at the peak of the housing boom, I could have sworn that some lenders were hiring monkeys to take loan applications!  So, I guess the moral of the story is that nowadays you have to be a true professional to make it in this business.

For all of our readers in the Real Estate, Construction, Mortgage and Housing fields, what do you think? Is your profession becoming less popular? Are you having a harder time finding customers? Have old colleagues jumped ship? Answer our poll and leave a comment!

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Follow us on twitter for current news, advice and market status updates.

Have a question or something to add? Leave a comment or send us an email

Geoff Boyd – PrimeLending – Clackamas, OR

And you’d better start swimming or you’ll sink like a stone,
For the times they are a changing.
- Bob Dylan

Mortgage Bonds are down this morning in what appears to be some profit taking by the market. Stocks on a whole seem to have rebounded from yesterday’s major dip, but that recovery has been largely tempered by some negative financial data released today.

Job Growth below Expectations

But at least it’s still growth! The ADP job report, which is based on a view of roughly 12% of the private-sector payrolls, shows a growth of only 13,000 jobs in the last month. The ADP data is often skewed, and we will see much more accurate numbers on Friday, when the June Jobs Report is due. I wont even tell you what economists expect this report to show, but I will tell you that it is expected that 250,000 census jobs were lost in June, so any positive underlying number will be swallowed up by that.

Homebuyer Tax Credit Extension Revived Again

This controversial Tax Credit Extension has been pulled from the edge of death so often that its starting to resemble Dick Cheney. Seriously though, the House tacked this on to an Unemployment Extension bill and pushed it through quickly yesterday. The senate already has a version of this bill in the works, its expected that they will vote on it today in time for the President to sign it into law.

Europe Surprises Everyone with some Good News!

The ECB released data early this morning that shows less reliance on it’s lending programs than originally expected, a much-needed boost to confidence in EU liquidity that got investors attention. The overall gain in stocks this morning is mostly attributed to this piece of news, which basically shows that the EU members, as a whole, had more stable legs under them than was originally expected.

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Follow us on twitter for current news, advice and market status updates.

Have a question or something to add? Leave a comment or send us an email

Geoff Boyd – PrimeLending – Clackamas, OR