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To say the least, Colorado Mortgage shopping is confusing and difficult. Being out gunned on the confusing topics of the US and Colorado home loan industry, the American consumer is left without an appropriate shopping method. And sadly, many Americans are just now finding out their lack of any prudent shopping system is responsible for putting them into a needless foreclosure, or pushed them into a decision that comes back to haunt them.

Generally speaking, there are two methods to shop for a home loan.  You can employ the work of a bank which would be considered a “retail broker” or work with a mortgage broker, also referred to as a “wholesale broker”.

Either way you choose to move forward, there are a few important items to remember when you decide to select who to work with.  Listed below are some of the more important topics for you to pay particular attention to.

By choosing to work directly with the bank you can expect to see:

Product Offering:
The loan program(s) offered will be only the loan programs offered by that bank.  One would ask, what would be the difference?  Some lenders choose to specialize in certain areas of lending.  Often times, a bank will take an application from a client without looking for a match to the banks guidelines and product offerings.  When the client completes the application, the banker can either grant financing to the client or decline financing.  If declined, the client will need to start the entire process over with another bank.

Licensed in the Industry:
With all that our industry has gone through it still amazes me that loan originators in the bank are not required to obtain state and federal licensing.  For many more reasons than I am able to share in this blog, the Federal Legislators have collectively decided to not require the banks to maintain licensing, the same licensing that is required for all brokers that operate in the mortgage industry (except for banks).

Pricing Opportunity:
Often the general public would believe that the best pricing and deals are offered directly by the bank.  Ironically, this isn’t always the case.  To understand this, one must apply the ‘blue light savings special’ as employed by one of the discount retailers.  Banks buy and sell money all the time.  When they buy, they don’t always properly estimate the consumer’s response through consumption.  If a bank places a commitment to money and orders to much, it will fall short of commitment and lose money.  When all is said and done, you will find that the bank would much prefer to not over commit and will often price the cost of money higher as they have little ability to change the order in mid stream.  This leaves the consumer with a set price that can often be higher than what the market can fetch.

By choosing to work with a Wholesale Mortgage Broker / Banker you can expect:

Product Offering:

Often times a mortgage broker will have access to many lenders, many of whom are the same banks that you would sit down with at a retail bank branch. Offered on the wholesale market, banks and lenders treat the Mortgage Broker as a contract employee that is not promised an income, rather must fend for themselves when it comes to being profitable.  Because of this, the Mortgage Broker is able to shop the lenders and find where the best deal is for that day / loan program.

Licensed in the Industry:
In the mortgage industry the Wholesale Mortgage Broker has burdened the brunt of the legislation.  Not to say that it wasn’t deserved or needed, rather to simply point out that many statistical studies prove that over half of all loans originated that ended up in foreclosure we originally originated by a bank, not a mortgage broker.  For the consumer, this is a good thing to have all Mortgage Brokers tested, background checks completed, national registry required, finger printed and monitored by state and federal regulatory agencies.  This move to maintain licensing in the wholesale arena and not the banks will produce a higher quality of service and product offering on behalf of the mortgage broker.

Pricing Opportunity:
This being the most important and obvious difference in the whole equation.  Although there may be a tendency for individual mortgage brokers to price differently (some higher than should be), the general consensus is that due to the mortgage brokers ability to shop the banks and lenders, the pricing available to the wholesaler is much better than offered at the bank.  By utilizing the same ‘blue light’ analogy, mortgage brokers are able to shop for the bank that has too much commitment out there and must sell its paper before it expires.  When this happens, deeply discounted loans are made available and can only be found by utilizing a mortgage broker in the wholesale arena.

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Colorado Mortgage and Mortgage Rates:

The Federal Open Market Committee wrapped up its two-day meeting deciding to hold rates steady and giving indication that this would be their policy for some time to come. Specifically, the Fed made no changes to its much followed statement about “exceptionally low levels of the federal funds rate for an extended period.”

The statement did reaffirm the Fed’s commitment to reel in some of the liquidity with several facilities set to expire on schedule Feb. 1 and the Term Auction Facility now slated to sunset on March 8. There was no change to the mortgage-backed securities program, still on target for wrap at the end of the first quarter.

Regarding the economy, the Fed was more specific with regard to household spending, which now “is” rather than “appears to be” expanding at a moderate rate, and on business investment, where “equipment and software appears to be picking up, but investment in structures is still contracting.” The Fed also stated that “bank lending continues to contract,” but “the pace of economic recovery is likely to be moderate for a time.”

There was one nay vote, with the President of the Federal Reserve Bank of Kansas City Thomas Hoenig believing that “the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.”

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An extension of the $8,000 first-time home buyer tax credit appears all but certain after the Obama administration called on Congress to give house hunters more time to claim the popular tax perk. The move comes shortly after Senate lawmakers stuck an agreement to not only push back the measure’s looming deadline but expand it to allow current homeowners and more affluent buyers to claim the credit. “We welcome efforts taken by Congress to extend the first-time home buyers tax credit for a limited period,” Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan said in a joint statement today. “This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide.” Here are five things you need to know about the development:

1. Roots and impact:
A tax credit of as much as $8,000 for certain qualified first-time home buyers was included in the Obama administration’s sweeping ,which the president signed in mid-February. The measure was designed to stimulate additional demand for residential real estate and help absorb the overhang of unsold properties that was putting downward pressure on home prices. Along with cheaper home prices and attractive mortgage rates, the perk has helped reduce the glut of unsold properties. Mark Zandi, the chief economist at Moody’s Economy.com, expects the tax credit to result in as many as 400,000 additional home sales by the time of its scheduled expiration at the end of November. But trade groups—like the National Association of Home Builders and the National Association of Realtors—have been lobbying Congress to push the deadline back, arguing that failing to do so would jeopardize recent signs of stability in the housing market. The NAHB, for example, blamed yesterday’s weaker-than-expected new home sales report on the tax credit’s impending expiration.

2. Extending the deadline:
Although various proposals to extend and expand the credit have circulated in Congress for weeks, Senate lawmakers finally reached a deal in recent days. Under the terms of the agreement, the deadline for first-time home buyers to claim the $8,000 credit would be pushed back to April 30, 2010. But the term “deadline” doesn’t mean the same thing as it does in the current credit. The Senate agreement stipulates that buyers must have a sales contract on a house by April 30 to be eligible, but it gives them an additional 60 days to close the purchase. That’s much different from the current credit, in which transactions must be closed by November 30. Looked at one way, the effective deadline of the credit under this agreement is actually the end of June.

3. Existing buyers:
But perhaps the most significant change is that current homeowners would become eligible for the tax perk as well. The current credit prevents home buyers who have owned a primary residence within the past three years from claiming the credit. The agreement, however, would allow current homeowners to claim up to $6,500 as long as the property they are vacating has been their primary residence for at least five years. Expanding the credit beyond first-time buyers is intended to boost home sales to “move up” buyers—those moving from one house to another—which some lawmakers, most notably Georgia Republican Sen. Johnny Isakson, argue is essential to a housing recovery.

4. More-affluent home buyers:
The agreement also enables more affluent Americans to claim the tax credit. Senators moved to increase its annual income limits from $75,000 to $125,000 for single buyers and from $150,000 to $225,000 for married couples. These limits apply to both first-time and move-up buyers, although neither can purchase a home for more than $800,000 and still get the credit. Anyone taking the credit on a 2010 purchase can claim it on his or her 2009 tax return. And as long as home buyers live in the property they purchased via the credit for three years or more, the tax credit does not have to be repaid.

5. Credit controversy:
Zandi estimates that the Senate agreement would generate more home sales than the current credit would. “It’s broader, and the industry is geared up to take advantage of it now,” he says. But first-time home buyer tax credits have already cost the government more than $10 billion in lost revenue, and Zandi expects that the Senate agreement would cost at least as much. And although it’s been popular with those purchasing homes, some economists have called the credit an inefficient use of federal resources. Calculated Risk, a financial blog, has estimated that Uncle Sam has paid $43,000 for every additional home sale. And the Senate agreement—which enables households making more than $200,000 a year to claim the credit—could certainly appear overly generous in a time of trillion-dollar budget deficits.

At the same time, the credit has recently been linked to widespread abuse. Russell George, the Treasury Department’s inspector general for tax administration, told a congressional panel last week that 19,300 taxpayers had claimed the first-time home buyer credit before they had even purchased a home. In another 74,000 cases—totaling more than $500 million—taxpayers claimed the credit despite evidence that they had owned a home within the past three years. And in at least one case, a 4-year-old claimed the credit, George said.

Although the agreement appears to have broad bipartisan support, it still has to get out of the chamber. Along the way, it could be stripped of certain generous provisions. But in light of the White House support, it appears all but certain that at the very least, the first-time home buyer tax credit will be extended beyond its November 30 deadline.  By Luke Mullins.

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