Thank you Mom!
I would not be where I am today without my mother. She was an entrepreneur well before her time. She taught me the importance of a strong work ethic at a very young age and it is something completely inbred in me.
Fortunately, I ended up with some of my mother's great qualities. She is intuitive, smart and has a fantastic sense of humor. I am glad I inherited those from her. We live in such a fast paced society and I think we all need to laugh more. I try to find humor wherever I possibly can. Given what the Mortgage Industry has been through it is the one thing that kept me sane. As a kid, my mom told me that sarcasm would get me nowhere. I never outgrew the sarcastic whit and now she thinks I am hilarious.
People often ask me how I had the guts to start a business and whether I went to school for it. There are a lot of reasons why my business partner and I started our business, but whenever that question comes up I am always reminded of my mother. In my early college days, I decided it was more fun to go out with my friends than study. I figured it would be a lot easier to do that if I switched my major to something less demanding. I told my mother my plan and what did the supportive parent in my life do? Well, she called the school and said as soon as I wrote a check for my education I could change my major. Until then, I would continue to study business. Would I be anything different if I changed my major? Who knows, probably not, but, the message I received was to start taking school more seriously. It was a big sacrifice for my mother to send three kids through private education and I needed to make that worth it. After that phone call, that is what I did.
They say being a parent is the hardest job on earth. So whether you are a mom, dad, auntie, grandmother, sister, friend…whatever…you are probably a parent in some type of way. My claim to fame is being a self-proclaimed super auntie. I think my 4 year old niece validated that when she told me she wanted to marry me. Mother’s Day is a good time to think about the people who are/were inspirations in your life and remember what you learned from them. It is also a good day to think about who you inspire. They may not appreciate what you do for them now, but, they will someday. Thanks mom, I owe everything to you.
Happy Mother’s Day to all!
My Day With Annika
Recently, I was very fortunate to spend a day with Hall of Fame golfing legend, Annika Sorenstam. I have met many professional athletes and other celebrities. I have never been “star struck” that is, until I met Annika. It was a truly surreal experience and one to check off the bucket list. For all she has accomplished, she is genuinely approachable and completely 
down to earth.
For anyone who has played or watched golf, you know the game takes a lot of time. However, the average time to address and hit a golf ball generally takes 30 seconds or less. That leaves a lot of time to talk. I was able to ask Annika all about her career and learn so many things you simply do not read about in the press. I could not help but correlate much of our conversation to my career at radius.
There is no doubt I would love to play golf for a living, but, that is simply not going to happen in this lifetime. I may not play on the LPGA, but, I think radius has earned its tour card and our success is widely attributed to how Annika achieved hers.
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Surround yourself with the best team Annika has had the same coach for her entire career. When she decided she needed to step up her fitness level, she hired an amazing trainer. Both these people are still connected with her today, even after her retirement. My business partner, Keith, and I have surrounded ourselves with incredibly talented people. Sue Goodrich, our VP of Operations is a “hall of famer” in our eyes. We have a team of dedicated people who are driven by integrity and desire to be the best they can be.
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Practice There is no question you need raw talent to become a superstar at your game. Annika certainly has an innate ability to hit a golf ball, but, raw talent can only get you so far. You have to work at what you do. Keith and I have spent countless hours working on our games and I believe our work ethic has always trickled down to our exceptional employees. I often wonder if modern technology has been a blessing or a curse. I do know I have not taken a true day off since cell phone technology came into our world. We are always working, and my golfing buddies are usually shaking their heads at me when I work my way down the fairway on a Saturday morning. I know it is what I need to do in order to be the best in my profession.
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Passion I asked Annika if she goes out and plays for fun now that she is retired. She said she does not and probably will never be a social golfer. She is so passionate about it that she cannot enjoy it if she is not playing at the level that she played at with rigorous practice. While there are far more glamorous professions, we are truly passionate about mortgage banking. Bob Melone, one of our top performing loan officers actually dubbed the phrase “mortgages are sexy.” Of course it made me laugh out loud and I told him that is not something we could actually publish. As he explained what he meant by his unexpected comment, his passion for his work was so obviously evident.
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Experience For anyone who watches professional sports, there is undoubtedly a lot of young talent out there. That being said, it is often the “old timers” who are still the stars. I vividly remember watching with chills, as Tom Watson at 59 years old almost won the British Open. While I do not like to admit how long I have been in the mortgage business, since I still think I am 25 years old, there is something to be said for doing the same thing year after year. I know I like my airline pilot to have gray hair.
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Humility Annika did not win every tournament she played and her losses made her stronger. It is safe to say the mortgage industry has been through a major shakedown. 
Thankfully, our dedication to integrity and our core values are the biggest reasons we are still standing. We are constantly looking for ways we can do things better and we have grown as an organization because of it.
Most of us who live in the “real world” can only dream of being a professional athlete, astronaut, President of the United States or whatever your childhood aspirations were. We can forget to focus on being legends in our own worlds. I know my day with Annika reminded me of that and I am very thankful for my business partner Keith who gave me one of the best Christmas presents ever. I only hope he is figuring out how to top it for next year!
If you have your own experience that you would like to share, please leave us a comment!
Warm Wishes,
Sarah Valentini - President of radius financial group inc.
Unemployment & Foreclosures
In no way am I suggesting that there were not any systematic issues in the mortgage market
product sets and Under Writing criteria that contributed to the housing and mortgage meltdown that began in the fall of 2007.
It is interesting, however, to review the attached graph. This tracks the US Unemployment Rate and Total Loans Past Due….. they almost track each other in lockstep. This would suggest from a technical analysts position, and some plain old common sense, that if we can get the unemployment rate down we will see improvements in delinquencies and thus less foreclosure inventory.
How has the housing market burst effected your neighborhood or your thoughts on homeownership? Are you still on track? We would love to hear your comments.
Yesterday, the Obama Administration and Attorney General Eric Holder announced that they and 49 States Attorney Generals had reached agreement with the five largest mortgage servicers.
The $25 Billion Dollar settlement provides homeowner relief, new protections and stops mortgage servicing abuses. The agreement is with Wells Fargo, Bank of America, J.P. Morgan Chase, Ally Financial and Citigroup.
Once again, GREAT HEADLINES for Candidate Obama, but solving nothing!!!
The facts that you will not see in the press:
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Loans owned by FNMA and FHLMC are EXCLUDED from the settlement. One might scratch their head and ask why?? Well, any principal right downs of FNMA and FHLMC loans would fall on the shoulders of the US Taxpayer.
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It is estimated that nearly 22% of all homes having a mortgage are underwater and this “negative equity” is estimated at greater than $700 Billion Dollars. $10 Billion Dollars of the settlement is earmarked for principal reductions…… a paltry number against the real problem.
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You must be delinquent or near “eminent default” to be eligible for $17 Billion Dollars of the settlement!!! Can we say Moral Hazard or Eminent STRATEGIC Default!!
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If you are part of the 93% of homeowners having a mortgage and remaining current on your loan you may attempt to get your piece of the settlement that sets aside $3 Billion Dollars to assist in refinancing your loan. If you didn’t read the statement correctly, I will repeat myself: NINETY THREE PERCENT OF ALL AMERICAN HOMEOWNERS WITH A MORTGAGE ARE CURRENT ON THEIR LOANS!!
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The settlement also requires cash restitution to approximately 750,000 homeowners who legally lost their homes through the foreclosure process. Each will receive a check for $2,000. Folks, I can’t make this stuff up. A court of law has determined that the bank has a right to enforce its mortgage contract and to foreclose on your home and you get a check for $2,000??
Until we can get some adults in the room to cease the assault on our Banks and Mortgage Industry there will be no possibility of ending the housing crisis. This settlement is a “shakedown” of an industry and no one is willing to realistically seek solutions to our housing crisis. I have said so many times before and will say so again……. the market needs to clear itself and set bottom. Foreclosures need to be accelerated and the shadow housing inventory needs to be cleared. Artificial stalling of this process will only drag on and on, eventually deepening the crisis and not putting us on a path to recovery.
Yesterday, President Obama announced his Blueprint for an America Built to Last calling for action to help responsible borrowers (those current on their mortgage) and support a housing market recovery. This is a follow up to his State of the Union address and the announcement of his plan.
Once again, while this rhetoric and ideas make great news “Headlines” they are almost entirely election year posturing and the President knows this.
His plan proposes to allow both GSE (Fannie/Freddie) and Non-GSE loans into a new FHA Streamline Refinancing program. The estimated cost of this program is between $7-10 Billion Dollars and he intends to pay for the program with a “Bank Tax”. This has no chance of passing the current House of Representatives and will be DOA. Even if this were resolvable, what lender is going to take on a “new loan” and “risk” that is knowingly upside down/underwater??
The only way to solve our housing crisis is to let the inventory clear and get a bottom of the “market” defined.
Buying a condominium is getting trickier for anyone who wants to put down only 3.5 percent and have the government insure their mortgage.
The issue isn't just the borrower's financial wherewithal. It's the building's, and plenty of condos no longer get a thumbs-up from the Federal Housing Administration.
Since Feb. 1, 2010, condo buyers haven't been able to secure unit-by-unit "spot" approval for FHA-backed mortgages if an entire building was not certified. Instead, the federal government set criteria to determine the financial viability of an entire building before deeming the project as FHA-approved, even if it had previously been certified. An approval lasts two years. 
The number of rejected buildings is adding up, due to bad paperwork and bad balance sheets as an increasing number of condo associations struggle with rentals, short sales and foreclosures. It is jeopardizing the plans of condo sellers who rely on the FHA's stamp of approval as a marketing tool and condo buyers who either want or need an FHA-approved building.
The effects of those rejected buildings are likely to linger, particularly if more stringent down payment requirements take effect for homebuyers, and could hamper any recovery of the housing market.
For the first nine months of 2011, the FHA's share of the overall home purchase market was 37.4 percent nationally, but the share for condos would have been higher because FHA-insured loans are popular with condo purchasers, said Guy Cecala, CEO and publisher of Inside Mortgage Finance. "They have the most-used program out there," he said.
Since Oct. 1, 38 percent of condominium communities that have gone through the certification process have been rejected by the FHA.
"It's a critical year for buildings," said David Hartwell, a Chicago attorney who represents condo and homeowner associations. "This is a whole new world that we live in now. I see more rejections than acceptances, and the reasons I see clients rejected aren't quickly curable."
For buyers like Kristy Fender, of Chicago, FHA certification is a must-have on her list, and not just because it lets Fender and her fiance, Dan Harvey, make a smaller down payment on a home purchase. She also figures that in approving buildings the FHA is doing the due diligence that she would otherwise have to do.
But the process has been much more complicated than Fender imagined, and she's wasted a fair amount of her time. During the past few months that she's looked at units in Chicago's South Loop, she's incorrectly been told that a unit can get spot approval and has looked at units that were listed as FHA approved, only to find out the certification had expired. Her real estate agent, Bette Bleeker of Prudential Rubloff, wound up routinely checking property listings against the FHA's website of approved buildings.
"It's been very frustrating," Fender said. "There's a lot of wishy-washy information out there."
Fender and Harvey now plan to make an offer on a South Loop condo, but the offer will be contingent on the association getting the building certified for FHA financing. Bleeker has spoken with the building's management company.
"If sellers were aware of it, they would certainly be more proactive with their management companies and not let their certification lapse," Bleeker said. "There's a whole education curve that needs to be done here, at the buyer level and the seller level."
Many times, particularly in smaller buildings, it is a real estate agent or lender that informs an association that its certification has expired.
In addition to not knowing about the process, a lack of knowledge of the rules and the many gray areas within them is compounding issues for condo buildings. So, too, is not submitting all the required documentation. Many buildings are denied simply for missing or incomplete paperwork, which has led to the creation of a cottage industry of companies and attorneys that help shepherd associations through the process.
"It seems like there's always something additional that (the FHA) wants," said Steve Stenger, president of Condo Approval Professionals LLC. "Once it expires, FHA lending stops. Lenders can't get case numbers; the FHA won't insure them. That whole section of financing dries up."
Among the specifics that the FHA looks at is that a building is 50 percent owner occupied, that no more than 10 percent of units are owned by one investor or entity, that no more than 15 percent of the units are 30 days past due on their monthly assessments, and that at least 10 percent of the association budget be set aside for capital expenditures and deferred maintenance. But some of those rules also come with a little wiggle room.
The FHA also looks at special assessments and pending litigation, two areas that can raise red flags.
"It's really not that onerous," said an FHA spokeswoman. "A lot of it is just basic information. We do have some that have been appropriately rejected because they are unstable."
Financially, the 249-unit condo building at 1620 S. Michigan Ave. in Chicago is stable, said condo board President Jeanette Johnson. Nevertheless, she worries that the building won't pass the test when its certification expires next month because of the high number of renters residing in units.
"I'm anticipating that the board will try to do the recertification, but I don't know if we'll qualify," she said. "We'll need to evaluate that before we spend any money. It's definitely on the radar screen."
If the building doesn't qualify, Johnson said, it's likely the board would look to change its declarations and bylaws, itself a difficult and lengthy process, to gradually reduce the number of renters allowed in the building.
The Community Association Institute believes the FHA's requirements are having a "chilling" effect on the market, and the trade group has asked for flexibility in the guidelines.
"When it comes to the condo market, that is the gateway to affordable housing, and FHA should play a critical role in that," said Andrew Fortin, a vice president at the trade group.
The FHA hopes to publish its condo certification rules in the Federal Register this year for public comment. Among the areas that may be open to additional flexibility is the requirement that no single entity can own more than 10 percent of a building's units, a spokeswoman said.
But in the meantime, associations continue to grapple with the rules.
"There are new, more onerous guidelines to comply with, and there are definitely challenges," said Jason Will, national condominium sales manager for Wells Fargo Home Mortgage. "The smaller or self-managed homeowners association might not be aware of the guidelines changes until they have a buyer. You actually have a real transaction in jeopardy."
Some associations are deciding that the effort and the expenses tied to the application process, which can run into the thousands of dollars, aren't worth the payoff and are letting their certifications lapse. In some instances, that position reflects a bias against what are thought to be lower-caliber buyers who need the FHA's backing.
"It's the owners that are trying to sell their units versus the owners that want to live in their units," said Jonathan Bierman, a property manager at Forth Group, a condo association management company.
Many in the housing industry say that position is short-sighted, given consumer demand for FHA-backed mortgages.
"In an economy where it's difficult to sell your condo, (FHA approval) is almost imperative," said Kerry Bartell, a Buffalo Grove, Ill., attorney who represents homeowners associations. But, she noted, "We have a lot of clients that say they want to do FHA certification, and we say, 'Don't spend the money, because you're not going to make it.' "
This President continues, like no other President before, to rule this country as if he were the King and not the elected President and representative of the PEOPLE of the United States. He has wielded “unchecked power” unlike anything seen in US History…… from EPA Regulations, National Labor Relations Board actions and a Justice Department that is boarder line CRIMINAL in its actions.
By doing a recess appointment of Richard Cordray as Director of the Consumer Financial Protection Bureau (CFPB) he has put into motion the “teeth and bite of the Dodd-Frank Act” and this could have very disastrous outcomes for the US Economy and the housing market specifically.
If you want the housing and mortgage market to robust and stable once again, President Obama MUST not be re-elected and Dodd-Frank MUST be repealed or at least castrated of its “unprecedented and without congressional oversight” powers. This bill and the CFPB are so un-American and fundamentally at odds with the checks and balances of our US Constitution that it is sickening.
There will be no economic or housing recovery until this is corrected!!!
THEY’RE BACK!!!!
At the end of last month, the Obama Administration and the Federal Housing Finance Agency (FHFA) announced the expansion of the Home Affordable Refinance Program (HARP). In early 2009, the Obama Administration announced/released the HARP program to much fan fare and making broad claims that it would help over four (4) million American Homeowner Families refinance their current underwater mortgages into current low interest rates. Well time has proven that this was much hopeful thinking on the Administration’s part as less than 25% of the 4MM claim were successful in their refinance attempts. Per FHFA’s own reported stats only 894,000 borrowers were processed through HARP.
Well, now they are back. Recognizing that many potential homeowners were precluded from participating in the HARP program because their home values had sunk significantly more than expected and their current mortgage (or including subordinate debt/piggy back loans) exceeded 125% of the homes current value….. this rule has now been removed.
Many in the industry, including me, think this will make the HARP program a greater success than its original version. The other major change that was made was that the Representations and Warranties (Reps & Warrants) required by the maker/creditor of the new loan are substantial modified in favor of the lender….. this was a major obstacle in the first version. This should encourage ALL market participants to engage in the new HARP.
FNMA and FHLMC (GSE’s) have been charged by FHFA with the task of publishing complete rules and risks guidelines to their secondary market seller’s no later than November 15th, 2011. Once released, we would expect a fairly short window of acceptance and roll out of the revised loan programs by the major secondary market loan aggregators. More to come.
Some bullets of the enhancements to the HARP Program are as follows:
- Eliminating certain risk-based fees to the borrowers if the refinance into shorter terms.
- Removing the 125% LTV ceiling for fixed rate mortgages.
- Waiving certain Lender Reps & Warrants to encourage participation by the lender.
- Eliminating the need for an appraisal (and its expense) if there is a reliable AVM (automated valuation model) estimate provided by the GSE’s.
- Extending the end date of HARP until December 31, 2013.
It is important to note that this program is ONLY for loans that are already owned or guaranteed by the GSE’s. Also the original loan must have been sold to the GSE’s on or before May 31, 2009.
Click here to download the announcement from Fannie Mae.
Lastly, if you happen to be in Puerto Rico, make sure to stop by the Ritz Carlton Lobby Bar and request Orlando to make you one of his WORLD FAMOUS House Mojito’s, simply wonderful!
To start off, I am far from a techie. I don’t even know how to put music on my ipod…but, when I heard Steve Jobs had passed away, I cried. Steve Jobs was an amazing visionary leader. I am sure most of you know his story and that he started his company out of his garage at age 21. While I would never in a million years compare what we have done at radius to even his most minute accomplishments…it made me think…we started radius when I was a little older than 21 but, certainly young enough that my mother thought I must have taken to drugs in order to leave my stable management position and start a business. While we were not in a garage, we were in temporary space with two different phone systems on each side of the room. So, if you received a call on a line at the other side of the room, you physically had to walk over and answer it at another desk. Looking back, we have come a long way…
I am attaching the famous commencement speech Steve Jobs made at Stanford. Everyone should read this and click on the video and listen to it. I suggest it is something you put in your calendar to listen to once a month until you learn to live by it. He was wildly successful because he put his heart into what he did and he loved what he did. Yes, I understand that he created “very cool” things and who wouldn’t love that…but, trust me, there are so many things behind the scenes to run a company, his job was not all fun and games. But, he loved it and hence his success.
Your job may not be as “cool” but, each of you have the ability to create your own destiny. You can be incredibly successful and have enormous earning potential. Does money create happiness? Of course, not, but, it gives you opportunities for more experiences in life. If you cannot learn to love what you do and be great at it, you should find something you love and pursue it. I want to play on the LPGA, but, since that isn’t happening in this lifetime, I make sure I get up every day and do the best job I can possibly do so that my position is rewarding to me. This is what I attribute my success to. You have the choice to do the same thing and you need to start today…you never know when your last day will be here. Carpe Diem.
So….. what is going on with Mortgage Rates?
Last week, at the conclusion of the Federal Open Market Committee (FOMC) meeting, the Fed announced it’s much anticipated “operation twist” program.
Operation Twist was last utilized by the central bank (Federal Reserve Board, FRB) in the early 1960’s in an effort to lower interest rates and spur the economy. It did not prove entirely effective at that time as it only had the impact of moving rates down over the term of the “operation” by about 10BPS. It was basically considered 
an ineffective monetary tool and it is the reason that it has not been utilized again in over a half of century.
So….. what is it?
Operation Twist is the utilization of the FRB’s balance sheet to attempt to flatten the interest rate curve making the difference in the “duration spread” of interest rates reduced. As you are all aware, the shorter the duration of a loans interest rate period the lower the interest rate, thus a 1 YR ARM versus a 5 YR ARM versus a 30 YR FXD all have different interest rates from lowest to highest respectively. The flattening of the curve, or even the potential inversion of the interest rate curve, are considered ABNORMAL environments. So the FRB’s actions are to create an artificial and non-market based impact to the interest rate curve.
So….. how do they do it?
The FRB intends to sell (which is the bond markets word for borrow) $400 Billion US of maturities shorter than 3 years (the short end of the curve). This will create excess “supply” in the market and which economics 101 taught us that excess supply lowers prices and in the bond market world, lower prices mean higher yields. So, short end curve rates increase. The FRB then intends to utilize this “borrowed” money to become a buyer (which is the bond markets word for lend) of maturities ranging from 6 to 30 years (the long end of the curve). This will create excess “demand” in the market and which economics 101 taught us that excess demand raises prices and in the bond market world, higher prices mean lower yields. So, long end curve rates decreases.
The curve flattens.
This is a very dangerous bet by the FRB. Their borrowings will be at an inflated rate for a short duration and when these mature and become due their “refunding” costs will most likely be much higher and potentially higher than their “investments” in artificially high yields at the long end of the curve……. creates a potential perfect storm for significant losses and inflation pressures.
So…. why now?
The FRB is out of monetary tools to meet its two pronged mandate…… maximum employment and stable prices.
The overnight lending rate is basically zero.
We have already had Quantitative Easing on two occasions, known as QE1 and QE2.
They are supporting a weak dollar policy.
So their discussions at the FOMC must have centered around two options: do nothing or “do the twist”!!!
Three brave FOMC members voted to do nothing; Richard Fisher, Narayana Kocherlakota and Charles Plosser.
So…… where are mortgage rates headed?
Since operation twist will not end until June, 2012, I would expect that we see artificial support of the mortgage interest rate market through that time. Obviously yesterday and today had major moves in the long end of the UST market and moderate moves in the MBS market. UST to MBS spreads have widened. There is a reason for this…… mortgage originators and mortgage servicers are under intense pressures due to volume and portfolio runoff, they are additionally the primary sellers of TBA MBS in the market. The 4 remaining big aggregators, Bank of America, Chase, Wells and Citi will do their best to slow originations and servicing run-off, by holding rates higher as long as feasibly possible.
Let me be clear…. rates are headed lower
and for an extended period of time!!
