The waiter delivering cold food

I just got an email from a client. It's tough to be a salesmen for a mortgage company these days and the latest example is from a client who is asking for a transaction to be approved a certain way. In the old days, I think this deal would be declined anyway (the issue is whether the client plans on occupying a home).

Do I believe the client? Yes, but those are my PERSONAL feelings, not my professional feelings. As a salesperson, we have to take what we are given by operations and spin or use it the best we can. I can see operations point on this transaction, but when do we have to say, an underwriters feelings or the mass opinion on a conference call does not contain personal feelings. Operations personnel make decisions based on facts, but do their personal animosities and personal agendas creep into decisions? You'd have to say yes, sometimes they probably do. For what one persons goals may sounds totally unrealistic and ridiculous to another. And if your underwriter doesn't think what YOU are doing jives with what THEY would do, the potential for conflict arises.

I've long heard inthe news about financial institutions making decision based on race, creed, national origin etc. But I have NEVER personally seen it. I'm a salesperson, I believe and sell what the client tells me. Have I ever looked at the government monitoring and said, wow this guy is black, we better not give him too much money, not even close. I don't care if the client is purple. There is a loan to fund and I want to get paid. So then if any discrimination is being perpetrated, it's being done by the people who generally hold themselves out to be the righteous protectors of credit standards. But they are just people too.

But when operations effectively calls a borrower a liar, what course do you take. There is no other course but the truth. When there is no data or facts to discpute the borrower and no reason exists not to trust the borrower, shouldn't we then believe them?

It's a sad indictment on our profession, but these are precarious times and loans are being funded and repurchased and bought back and repacked again...and then someone finds something wrong and the loan is a buyback? It's almost dizzying. Why would anyone even grant credit- well money of course, but there isn't even enough of that these days. At least not in my pockets.

Sometimes, more often than before, it makes me wonder why on earth I have choosen this profession.

Your rate is floating?!?!??!? Now what do you do?

Rates have really risen quickly catching many of us, including me, left holding a wet bag of floating loan applications. When the loan officer told you to hurry up and get those items to him so he could lock your loan now sounds not so much like a sales pitch, but a true call for urgency on your part.

But don't freak out. Rates are expected to fall back a bit soon. But we may have left the lowest of mortgage rates in the history books. However, no one really knows, including yours dearly.

Here is my recommedation if your loan is floating.

If your loan is for a purchase, you are most likely going to need to lock something -so take the new higher no points rate, and know that historically speaking its a really good rate. If you qualify for a higher rate or adjustable mortgage take it and run.

If you are tight on your debt to income ratio get used to a term called discount points. You'll need to pay some of these to buy your rate down, in other words, get it lower to qualify.

If you are a refinance loan. Hang back, you most likely haven't ordered an appraisal yet and hopefully didn't pay a nonrefundable application fee - so you can wait. Check in daily with your loan consultant and check to see what your rate is for that day. Have a number in mind and when it hits, take it.

Don't be greedy. Yeah I said it. You know who you are. If your rate gets back to 4.5% don't try to hold out for that extra .125% in rate. Take the benefit and feel good. No one times the bottom of a market.

OK, that's all kids.

Ouch 10 yr hits 3.51% @ 92.64 For those of you regular folks..that's bad

We experienced our first 4 rate change day today. Rate are over 300 bps higher than a month or two ago. Refinances are slowing and the pace of decline in values is picking.

What's the bright side you say? Well prices will continue to fall and those with resources and good credit can pick up property with what appears to be a new low in values since the implosion of the Real Estate bubble.

$9 Trillion in home equity lost since 2006

It's a huge number. We all lost about $1.7 trillion in home equity this year alone. This could be good or bad depending on how you look at it. Massive drops in values create investment opportunities. Properties can now be acquired and debt service with average market rents. So you can buy an asset that will eventually increase in value again and the investment will pay for itself while appreciation takes place.

Now if you are a homeowner one way to limit your exposure to your currently underwater or zero equity properties is to buy at today's prices. If you are fortunate enough to be able to afford the qualification buy another home as a rental and use that valuation to offset some of your loses on your current properties. When home values increase you will have achieved appreciation on two properties at an overall low.er cost basis.

Go Rental, Go Investment!, 2011 will be a great year to acquire real estate.

Rate Check Check Check Microphone Check

Wow, what a rate roller coaster these days. Rate are mostly stable this week although higher that the previous 30 days on average. The general concesus it rates will chop around these levels for the near term with a tendncy to rise over the first two quarters next year...which is RIGHT around the corner.

Prudent lending advice is to apply with your lender or broker of choice and float the rate while processing and underwriting take place. All the while you should be working with your lending professional to lock on a dip.

Of course, you can just lock today too...I mena 4.5% at no points for 30 year fixed base rates is still pretty darn good.

Just when you thought it couldn't get tougher to get your loan approved....

Today I read the news that we will get new rules from FANNIE related to underwriting guidelines. Rob Chrisman wrote, "The new DO/DU version will enforce underwriting changes that will allow buyers to use gifts and grants from nonprofit groups for their minimum 5% down payment. Currently, borrowers had to contribute a minimum 5% down payment from their own funds, but additional down payment money could be from a gift (though never from a home seller). The exception was for borrowers who put 20% down: all that money could come as a gift. But with overlays, many lenders now require a down payment of 10% or more, the new rules mean that borrowers will still have to come up with extra funds - either their own or gifts. But with Version 8.2 comes tougher DTI ratios: the maximum ratio for those seeking a conventional mortgage will drop to 45 percent from 55 percent under the new guidelines. Buyers who have missed a payment will have 5% of the total balance added to their ratios. And borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, up from four."

Wow, sure is going to see who will be able to buy these foreclosures. My bet the rich will get richer.

Good stuff!

QE2 Explained....

Rates..Always good to take stock of where we've been and where we are today.

I always track rates. I live for rates.  Daily morning rates, mid-day price improvement, late market deterioration. It's as close as I will get to being a wall street trader ala my favorite hotel thrasher Charlie Sheen, which is just fine with this California boy.

When someone asks me what the rates are and I tell them. I will many times get back, "That's too high,  and so and so is offering -0.009% with no fees at all. In fact, the lender said I would get a vacation to Hawaii, and a new car!!" Obviously the later is a shot at levity. But the point being is that many people say many things, and sometimes they are actually speaking the truth or at least comparing apples to apples. Sadly I'd say the majority of mortgage quotes given on websites are half truths at best and many times just plain wrong.

Go to bankrate.com and see the average lowest possible rates - then call the person you know or trust, whether they are a broker, lender, DRE, DOC, CRLMA, NMLS, NORML (the later again a shot at levity), and complete the loan process with them.

Until you complete the application process, and I mean ALL the loan application fields filled out, all income doc, all assets information. Yes, I want all the pages of the bank statements. No, I don't care you get massages at Madam Wong's in the city. Tell your mortgage professional what you want. If we can get it, we'll give it to you. Then and ONLY then, will you know what your loan terms will end up looking like.

But look at this chart - and marvel at your timing...Money is as close to free than it's ever been; whether you believe that is a good thing or not rates are dirt cheap.

Top Ten Mistakes Realtors Make in Today's Mortgage Market

Top Ten Mistakes Realtors Make in Today’s Market



Today more than ever Realtors play an even more critical role in determining financing options for their clients. Even though many Realtors are not familiar with the intricacies of today’s lending environment. Sure, they know it’s tougher, but do they know how to help? Here is a top ten list that Realtors can use to aid in the mortgage process for your clients.

#10 – Don’t even look at one property prior to receiving a pre-approval from a competent lender or mortgage broker. There once was a time when pre-approvals were silly because EVERYONE got approved. But now you need to review every piece of borrower income and asset documentation with a fine tooth comb to make sure there are no landmines within those documents and others that could potentially kill your transaction.

#9 – Condo’s are tough. Before you show a client a condo, make sure it is an FHA approved condo or has the ability to be financed for FHA. If your client is not an FHA buyer, then you should certainly make sure the condo project is lendable. Is there any litigation currently pending? Is there enough reserves? Is there a special monthly assessment that could affect borrower qualification and debt to income ratios?

#8 – Ask the borrower to immediately start gathering their financial documents. As noted in #10, borrowers need to complete this process prior to looking for a home. As a Realtor you should make sure you aren’t wasting time showing buyers properties that cannot afford.

#7 – Participate in the pre-approval process. Sure many of you just want to see the baby and you don’t want to hear about the labor pains. But seriously, the more involved you are in the financing side, the easier it will be for you on the real estate side. Plus you relay to your clients your expertise in finance as well as real estate.

#6 – Determine the long term goals for your client with this property. The sooner they start thinking about investments, exit plans, or how long they plan to hold and sell, or turn a primary residence into a rental property, the easier our job will be to find a suitable mortgage that fits the borrowers plans.

#5 – Get a pre-approval letter that can be easily modified. If your lender has prequalified a buyer to $500,000 but you are making an offer at 450,000. You certainly don’t want to tell the listing side you have more room. Get a WORD document and change the purchase price lower. This is a great tool when you are working up an offer at midnight and your loan officer has decided to finally get some rest.

#4 – Understanding closing times is critical for Realtors when determining how to present an offer. If you are making an offer for an REO property and the REO property manager wants a 15 day escrow and you have an FHA buyer then you need to know that won’t happen. Financed buyers are up against cash buyers all day, and for some sellers, a cash deal at a lower offer price is more desirable.

#3 – Work with your lender. Calling your lender and screaming at them to, “Close this deal now!!” This does nothing to help close the deal. The Loan Officer much like you has to close loans to get paid just like you. So next time, when you approach the lender, ask first is there anything I can do to help, and then if you get no response, yell and scream.

#1 – Work with Michael A. Foote, CMB. With over twenty years of finance experience you need a professional is today’s fast paced and ever changing market.

We've been here before...

There was a great article today from Rob Chrisman that referenced a small article about the HOLC. A very old acronym from the Great Depression. HOLC the old/new mortgage bail out model . The article makes interesting comparisons to today's mortgage market and the tools that were used to save home during the the Great Depression. You will find the comparison encouraging.

FHA News Release from Caliber Funding

Important FHA MIP Changes


Effective 10/4/10 – Applies to all FHA Loans with a Case Number date on or after 10/4/2010

Upfront MIP will go down to 1% for all FHA loans with Case Number date on or after 10/4. This will impact the amount

disclosed in Block 3 of the GFE.

Monthly MI will go up significantly for all loans with Case Number date on or after 10/4. This amount is

disclosed in all places where the monthly amount owed appears on the GFE (several places). The premium

will depend on the Amortization Term and LTV:

LTV Annual Premium for Loans > 15 Years

= or < 95 percent 0.85

> 95 percent 0.90

LTV Annual Premium for Loans > 15 Years

= or <90 percent -None-

> 90 percent 0.25

Under-disclosure of the monthly amount owed on the GFE may result in a RESPA tolerance violation. There

is no cure for the tolerance violation.

FNMA Loan Quality Initiative

Policy Effective 10/4/10

Caliber Funding has established policies and procedures in compliance with Fannie Mae SEL-2010-01

Selling Guide for the Loan Quality Initiative (LQI).

1. Effective October 1, 2010 Caliber requires documentation in the submission package that all parties

to the loan transaction are to be verified against the LDP/GSA list for all files, including but not limited

to, Government and Conventional products.

2. As a reminder, all FHA files require the FHA Case Number Assignment and CAIVRS report.

Un-disclosed Liabilities and Re-underwriting Requirements

Caliber Funding requires that all loans, regardless of channel, be underwritten using a tri-merge credit

report from an accredited agency.

In order to assure that a borrower has not incurred any new debts between the date of their application

and the loan closing, Caliber Funding will obtain a “Gap” report from 1st American / Credco on every

transaction within 5 days of closing.

The responsible underwriter on the transaction must review and clear the gap report. In reviewing the

report attention should be paid to any debts, inquiries or balance increases which have occurred since

the original credit was pulled and the file was initially approved.

Social Security Number Validation

Caliber Funding requires that the Social Security Number associated with each borrower in the

transaction be validated outside of the documentation provided by the borrower / broker.

Excluded Party Lists

Caliber Funding requires that all parties to the transaction, regardless of product, including but not

limited to the borrower(s), broker, originator, processor, appraiser, and realtor(s) be checked against the

standard HUD Limited Denial of Participation (LDP) and GSA lists.

Borrower Occupancy Verification

Caliber Funding recognizes and shares concerns in the industry regarding occupancy misrepresentation

and has implemented several steps in underwriting to help insure the borrower’s occupancy is as stated

on the loan application.

Caliber

Today and Tomorrows FHA Borrower: New changes to FHA lending guidelines and their effects on borrower qualification.

Well the summer is almost over and as we head into another fun filled school year in my home, FHA has some new rules for me to follow at the office. The job to qualify people for a home loan has never been tougher. As many recent mortgage borrowers can attest, the application process can be daunting, haunting, and overall intrusive to no end. Many borrowers feel the headache is not worth the reward.

Now we have word from HUD that FHA rules and guidelines will be changing yet again. Most notably and directly related to borrower qualification are the new MI requirements. These requirements were signed into law by President Obama on August 12, 2010 and gave the HUD secretary more authority and flexibility to change and modify the FHA program as needed to ensure continued liquidity in the mortgage market place.

Effective for originations in the beginning of October 2010, Upfront Mortgage Insurance goes from 2.25% to 1.0% for loans greater than 15 years in duration and over 95% loan to value. This is basically all low money down FHA purchase 30 year fixed loans. But wait, that’s good news. You thought this article would be glum didn’t you. Yes, that is good news, but HUD also changed the monthly mortgage insurance from the current .55% to 1.55% for the same type of transaction.

But what does this really mean to the average FHA borrower? Let’s take a simple hypothetical purchase transaction. The borrower is buying a home for $275,000 and is going to put down the 3.5% and will finance his upfront mortgage insurance premium. Here is how this deal looks today versus post October 2010 changes.

                                                Old                          New

Borrowers pmt. @ 4.500%     $1374.90                 $1358.06

MMI Monthly MI Pmt            $121.63                   $346.00

Totals                                      $1496.53                 $1704.26

FHA has essentially raised the borrowers Principal, Interest and Mortgage Insurance Payments by $60 a month. This is an increase of 12+%.

While this increase seems timely considering the government’s spending of late and talk of expiring tax credits and new taxes too. This increase will get FHA much needed capital, more quickly, by requiring borrowers to pay more monthly versus financing a large amount of the overall insurance over the life of the loan.

With rates still hovering slightly above the all-time lows, this modest increase should not impact the purchase market a great deal. There maybe a few borrowers who are squeezed out of financing a higher priced home, but maybe that is the strange side-effect, some borrowers will not be able to buy as expensive of a home as they would like. And that is OK.

FHA Changes

FHA is changing it's terms, yet again. FHA will increase it's MMI or monthly mortgage insurance premium to as high as .90% from the current .55% and it's UFMIP or upfront mortgage insurance premium to 1% from the current 2.25% for purchase transactions. The result, plenty of technology updates and confused Loan Officers. The question is how will the streamline refinances be affected by this?

4% 30 year fixed...

It's official - we've hit 4% 30 yr fixed. I would offer a high balance client 4% 30 yr fixed today...4% has a small rebate, so smaller loan balances probably won't get that offer...yet.

Should you go with a Big Bank or smaller local mortage company

Posted on my blog a few days back was a link to an article regarding Realtors sending prospective buyers to direct lenders versus the big banks. The reason? Time.



I wanted to expand on that previous article and talk about the advantages of using a small or mid-size company versus the drawbacks of not using a big bank.



The simple truth is your loan will most likely end up with a big bank or at least their servicing group. Bank of America currently services several trillion dollars in mortgages. That’s “T” for trillion. But this doesn’t mean going direct to a big bank will provide a quick and painless refinance or purchase money loan. In fact, in many cases, big bank customers will pay a higher rate and fee combination.



Almost all big banks give access to their vast financial resources through intermediaries called correspondent lenders. These are direct lender that fund their own loans and then sell them to a bigger bank. This structure is common and has been in practice for decades.



So it would seem that going to a correspondent lender would increase prices. But it doesn’t, and here is how. The big banks have overhead and huge operations that eat into other division’s profits or losses. Another way to say it is the banks aren’t just in the business of making home loans. Mortgage Bankers and other direct lenders are solely interested in originating loans. The difference is the direct lender is focused on making loans and structures their company to provide the most efficient platforms in which to originate. As a result, turn times, pricing and overall customer service are generally far superior to the bigger bank.



This isn’t to say big banks are always slower or always higher priced. Ultimately your loan officer or mortgage consultant is the best indicator of how well your loan application process will go. But you can’t tell how good or how bad they are until you are deep in the process.



The best way to find a mortgage company is through due diligence and referrals. You can’t beat a trusted family member or friend who has something nice to say about the person or company that completed their transaction. And make sure that person works for a direct lender or small community bank and your service times should be reasonable.



So the top five reasons to NOT use a big bank are:



#1 You’ll be lost in the shuffle when applying. The big bank application volume is amazing since many think the big bank should have lower rates.



#2 Big banks take advantage of their brand and will provide rates that are above the national average



#3 You may not necessarily receive the personal touch with a big bank. Smaller companies are more nimble and better able to adapt to the changing needs of specific client needs. Turn times at some major banks are upwards of 90 days.



#4 Big bank closing times can take 60-90 days. Most purchase contracts are being written under 30-45 day close scenarios. If you can’t close within that time you may suffer per diem penalties for not closing on time. These fees can be anywhere from $75 a day to over $300 per day.



#5 The Big bank don’t care about you. Bank of America now holds a financial relationship with 1out of every 2 people in the country. Do you think they will miss or appreciate your business?

10 Yr Hits 2.80%

In another sign of continuing pressure to keep rates lower and that mortgage production is not keeping with demand the 10 yr hit 2.80 @ 105.0+ !!

You can get a 4.25% 30 yr at no points and probably no fees if the deal is uber-clean and low LTV.

National Mortgage News - Loan Closings Drag On and On at the Megabanks

More evidence we are moving toward mortgage bank and mortgage broker originations. Unless YSP is truly going away. However, when I checked this AM, we still show YSP on wholesale rate sheets.
Here is a great article about Realtors who are now starting to refer busines away from the MegaBanks. Nice article Mr. Muolo.

National Mortgage News - Loan Closings Drag On and On at the Megabanks

Yield on the 10 Yr could hit 2.5%

According to one of the fathers of mortgage backed securities. Lewis Ranieri, the co-inventor of the mortgage backed security, believes the yield on the 10-year Treasury could fall to as low as 2.5% this year.
That would continue to further lower interest rates which are almost to 4% on a 30 yr fixed rate.

da' bidness

I watched this morning as "The Obama" signed FinReg 2010 today. I still have little understanding on how this is going to be implemented or what the impact really will be, but this guy has some great insights. One thing is for sure mortgage lending will continue to be an industry in the middle of a sea of change as we try to apply these new rules and business practices going forward and interact with a brand new agency to protect the consumer. I'm sure this will be a seamless integration of government entities, not. 

The bad news for consumers is this will no doubt increase the costs of borrowing. Is that bad? Well to me it means less people will qualify for loans, which means less competition for homes, which equals lower home values, which will increase interest rates, which will further slow the pace of borrowing.

Future looks bright!

FINREG - Grapevine Except from National Mortgage News

Found some interesting yet conflicting commentary on the bill. Here you go!

FINREG excerpt, ADIOS MTG BIZ


Feast your eyes on pg 1439:



ix) for which the total points and

fees payable in connection with the loan do

not exceed 2 percent of the total loan

amount, where the term ‘points and fees’

means points and fees as defined by Section 103(aa)(4) of the Truth in Lending

21 Act (15 U.S.C. 1602(aa)(4));



This relates to what is called "qualified mortgage" and is every fixed rate loan now being originated. EVERY FIXED LOAN

by frankenstyle July 14, 2010 8:53 AM





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It also dictates your max rate. Line 12 on pg 1436.

by frankenstyle July 14, 2010 8:56 AM





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Frank, you have a link handy to that?

by BuySide July 14, 2010 10:34 AM





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It's a bit more complicated than that. Frankenstyle, you may be looking at an older version of the measure. Below is a link to the Conference Committee version of the bill. See Title XIV of the bill starting on page 26 of that title, where it defines a "qualified mortgage". This entire bill is a real mess, but especially the mortgage provisions. Anyone voting for it needs to be voted out of office. More can be done to fix financial regulatory problems with much less legislation and gamesmanship by politicians. Call your Senator and compain if they are voting yes on this.



http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/Financial_Regulatory_Reform062410.html





(vii) for which the total points and fees (as defined in subparagraph (C)) payable in connection with the loan do not exceed 3 percent of the total loan amount;



‘‘(C) POINTS AND FEES.—

‘‘(i) IN GENERAL.—For purposes of

subparagraph (A), the term ‘points and

fees’ means points and fees as defined by

section 103(aa)(4) (other than bona fide

third party charges not retained by the

mortgage originator, creditor, or an affil21

iate of the creditor or mortgage origi22

nator).

‘‘(ii) COMPUTATION.—For purposes of

computing the total points and fees under

this subparagraph, the total points and



fees shall exclude either of the amounts described in the following subclauses, but not

both:

‘‘(I) Up to and including 2 bona

fide discount points payable by the

consumer in connection with the mort7

gage, but only if the interest rate

from which the mortgage’s interest

rate will be discounted does not ex10

ceed by more than 1 percentage point

the average prime offer rate.

‘‘(II) Unless 2 bona fide discount

points have been excluded under sub14

clause (I), up to and including 1 bona

fide discount point payable by the

consumer in connection with the mort17

gage, but only if the interest rate

from which the mortgage’s interest

rate will be discounted does not ex20

ceed by more than 2 percentage

points the average prime offer rate.

22 ‘‘(iii) BONA FIDE DISCOUNT POINTS

23 DEFINED.—For purposes of clause (ii), the

24 term ‘bona fide discount points’ means

25 loan discount points which are knowingly

paid by the consumer for the purpose of

2 reducing, and which in fact result in a

3 bona fide reduction of, the interest rate or

4 time-price differential applicable to the

5 mortgage.

6 ‘‘(iv) INTEREST RATE REDUCTION.—

7 Subclauses (I) and (II) of clause (ii) shall

8 not apply to discount points used to pur9

chase an interest rate reduction unless the

10 amount of the interest rate reduction pur11

chased is reasonably consistent with estab12

lished industry norms and practices for

13 secondary mortgage market transactions.



HAD ENOUGH??...

by oldbe July 14, 2010 10:55 AM





--------------------------------------------------------------------------------



This is the amended version:



http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:s3217as.txt.pdf

by frankenstyle July 14, 2010 11:00 AM





--------------------------------------------------------------------------------



So, in a nutshell, Barney Frank has succeeded in the disassembly of an industry. Unless I'm misinterpreting something.

by wherewasi July 14, 2010 11:22 AM





--------------------------------------------------------------------------------



correct, this basically removes any chance of a subprime product from entering back into the market based on a limit of 1.5% above the "prime offer rate"

Wasn't it yesterday that said 25% of citizens are below 599 now? Housing market, meet your doom.

by frankenstyle July 14, 2010 11:34 AM





--------------------------------------------------------------------------------



I think the opposite. Brokers will be limited on fees. Subprime will be originated through the finance companies that can service the loan. The Beneficials of yesterday should be making a comeback. Self Employed will be getting a cash flow loan that documents their ability to repay through bank statements. Those with big money will rule again. Originators used to today's big splits and making big money on a loan will exit.

by the voice of reason July 14, 2010 12:04 PM

FINREG

So I have eagerly, OK not eagerly, awaited the passing of the FINREG 2010 what is touted to be the biggest increase in government oversight in the financial industry since the great depression. Of course, I am keenly interested in how the bill will impact me, my family, my career, and therefore my future.

So I get on the Internet last night and guess what. No one has published a detailed accounting of what this bill will actually create. I've seem some bullet points, but even those bullet points fail to fully layout or even explain how the bill will change the mortgage market. Some talk has been "Yield Spread is illegal now", is it? I don't see that - wholesale companies are everywhere and last rate sheet I checked had rebate all over it and lots of it.

2300 or twenty-three hundred. It seems like ever more when you write it out. But that is how many pages it takes to protect the consumer from the evils of the banking empire. Funny enough, no one who voted for it has even read it. And even if you did ( and I am not going to) the text would likely cripple your brain into a mush unrecognizable to all but physicians.

Written by attorney's and legally like minded MBA's, the bill is really only a road map and rough draft on how to prevent the train wreck that is the financial crisis.

Even this morning, after the bill has been signed and ready to deliver to the President for signature,Goldman Sachs settled with the SEC and largest earthquake recorded in DC struck. You tell me what that means, but in my world that's an omen.

So what does this mean for consumers since we clearly cannot determine how this bill will really impact lending. They say no more Stated Income loans? Well unless you have 5% capital at risk for those loans (that's not that much) It also exempts FHA and many want fannie mae and freddie mac added to that exemption. So the big banks won't lend then...Well they really aren't right now all that much anyway. So expect it to get harder- not easier to get a new loan.

Fees? Did you say fees. yes these are the things we will all need to get used to seeing more of. Banks will undoubtedly send the costs of ANY new legislation on to the consumer in one way or another. Just wait to see how expensive it will become to have checking account.

Bottom line, no one really knows the true impact of this bill. But one thing is for sure - it's gonna be expensive for all of us.

fannie mae ok's bk's after two years?

some have asked if fannie mae will allow a new purchase with a bk being dismissed over 2 yrs ago. the short answer seems to be only if a dependent or spouse passes away or a bonafide medical issue causing extreme financial distress. yes....it must all be documented. most loan officers are just declining these - so stay informed.

Published with Blogger-droid v1.4.7

4.5% at no points - feels good to lock rates this low.

closing times are still consistently 25 days on average.

Published with Blogger-droid v1.4.7

The role of the mortgage broker in today’s mortgage market. “GFE” Good for Everything, or a good faith estimate.

With the launch of the 2010 Good Faith Estimate we read articles about the fall of the mortgage broker and that brokers will be unfairly disadvantaged when reporting rates and terms. I am here to call all that poppycock. The simple truth is a borrower can clearly determine how much is being charged or made by the broker and when dealing with a bank or direct lender a borrower does not see all the income being made on their loan. The “TIL” or Truth In Lending Statement still reports the same APR for a broker and lender assuming the same exact terms even if the broker is receiving lender compensation for the loan. Lender compensation or yield spread premium is how brokers offer no points loans and is no different than a bank selling your loan to Freddie Mac except a bank does not disclose this income they receive.

But let’s not forget the role of a mortgage broker. The broker should be presenting him or herself as an authority in the market place, and have multiple investors whereby to deliver their loans. The assumption being that the broker has delivered the best loan product for the client at the most competitive rate and terms to the best individual investor at the time. And every broker should be able to beat a big bank or big bank lender – if they want to. But therein lies the real issue - broker abuse.

Being a mortgage broker became the go to job in the 90’s 00’s for many getting into the industry - and licensing couldn’t have been easier. It just became too easy for mortgage brokers to hijack their clients and charge excessive fees all the while really only being regulated by the wholesale lenders themselves. Of course, those firms had insatiable desires for more paper, so that wasn’t really good oversight, and the states and federal government were apparently asleep for 10 years.

Having originated both as a broker and lender after the new GFE was put into place; I feel I am as capable as anyone to speak to the differences between dealing with a direct lender, bank, or mortgage broker. There aren’t really any differences.

Direct lenders will tell you mortgage brokers cannot be trusted to fund a loan, and mortgage brokers will tell you the banks take 90 days to close. The reality, they are both accurate. There are brokers who can just simply not operate in today’s lending environment and can therefore really train wreck a transaction. But equally frightening is that banks do often take months to close the most simple of refinance or purchase transactions. And often time tell clients late into the process they are not approved or the transaction cannot be completed. Many times due to their own lack of experience mortgage professionals.

Today more than ever it is important to know who you are working with – and be familiar with the actual experience level. Referrals are always great way to determine who to work with. This is not a part-time job. Mortgage professionals need to be licensed and educated in all aspects of residential lending in today’s market. Mortgage brokers generally need even more licensing and education than their bank peers. So your local mortgage broker may be the most knowledgeable mortgage professional available and the cheapest.

So before you go knocking the mortgage broker make sure you are comparing apples to apples and oranges to oranges, and most important, work with someone you trust.





With over twenty years experience in mortgage lending, a Certified Mortgage Banker Designate (CMB) from the Mortgage Bankers Association of America, and billions in funded loan experience, I can assist you and/or your clients with the most important financial decisions related to your residential and commercial real estate. Please call or email me today



Michael A. Foote, CMB
Certified Mortgage Banker

949.584.4600

Rate Update

Clearly, rates have hit all time lows - I have been tracking rates for quite awhile and we are truly at a new low. Today's rates are 4.625 no points for a standard purchase or refinance mortgage. Non-owner or investor pricing is down to 5.00 and almost under 55 for the first time I've seen ever.

If you are in a position to benefit from a lower rate, for heavens sake get your application in today.

Lock your rate --- Look at the chart it's time

Here is a chart of the 10 yr t-bill from 1962 to date..Clearly you can see that you are in a dratiscally low period. It's time to get it done - If you are going to get mortgage financing of any type for any purpose it's time to pull the trigger. Ironically, applications were at a 13 year low last week. 

Last year chart of the 10-Tbill

For those of you "playing the market" and waiting to time the interest rates just right - please review this chart. It's SOOO low for the last year and you can see we've shot up a couple of time already this year. These swings result in mortgage rates for 30 yr products to fluctuate between a 4.6% and 5.550% for a base interest rates.

Shop for a mortgage - Pick your mortgage professional - trust your mortgage professional - and you will end up happy.

You can always apply with me here.

Rate Update and Comparable Sales

Treasury yields continued their upward trend today thereby increasing mortgage rates modestly. For those of you who had not locked you rate - I suggest you take advantage of still historically low rates. Quit trying to time the market and lock the perfect rate. It does not exist.

Comparable sales are becoming a greater and greater drag of refinance and purchase transactions. As sales for existing homes continue to drag, those sales prices are further preventing some homeowners from refinancing since depressed sales, are in fact, sales.

Well those market rates are already on the way out - well there are actually already gone. The 10 yr is at 3.29 as of this post which is a 48% pop from yesterday - If yo didn't lock your loan you are out of luck on the lowest of rates. Still worth locking if you are purchasing a home - but if you are trying to time the lowest time - you missed it. Sorrym but as I always say be prepared - submit your loan NOW and wait to lock the rate when it is at it's lowest, then order an appraisal and bam you are done....DO NOT WAIT TO SUBMIT YOUR LOAN APPLICATION. If you do, you will not be ready to lock when it is time.

USDA Back but not really

Update to my earlier post. Basically the guarantee fees and rules may have changed as big lenders are no longer allowing their correspondents to originate this product - so for the time being you are out of luck if you are looking for this product.

USDA Mortgages? I thought they graded my beef not my credit.

Yes, it is the same USDA that grades and approves our meat and many other components of our agriculture industry. But in fact, USDA also offers mortgages via guarantees made to lenders both large and small. One of the key departments within USDA is Rural Development, whose mission is to bring housing, modern telecommunications, safe drinking water and a bumper crop of benefits to our country’s rural communities.



Although our government and economy have been ravaged from the mortgages originated over the last many years, government agencies are in fact trying to stabilize our housing market by providing support for capital markets, guarantees for lenders, and through government subsidized programs such as these. One of the most popular programs is the USDA Guaranteed Rural Housing Mortgage.



So what is a USDA 502 Guaranteed Rural Housing (GRH) Mortgage like anyway? It happens to be one of the only true 100% No money down purchase products on the market today. The other 100% mortgage product is the VA mortgage. Some basic qualifying guidelines are, the borrower must occupy the property, is a citizen of the country or admitted for permanent residency, does not have non-occupying co-borrowers, and will sell their existing home, if one is owned.



Some program highlights are the property must be located in eligible rural area. These are normally any town with a population of 25,000 or less – and it cannot be adjacent to a large metropolitan area. There are no loan limits and sales price limits…Yep I said it, no limits. There is a one-time USDA Guaranteed fee – and yes, you guessed it that fee can be financed. You can even roll in all closing costs if the appraisal comes in higher than the sales price.



The USDA 502 program does not require monthly mortgage insurance. This is a significant advantage over FHA financing in that respect. This savings can be as much as .55% per year and most likely more if FHA raises their monthly mortgage insurance requirement. These purchase transactions can even include new construction.



USDA even allows refinance of an existing USDA GRH loan provided there is a financial benefit via rate reduction or payment reduction. This program ONLY allows 30 year fixed rate mortgages that are fully amortized. The program allows for condominiums and PUD’s along with the standard Single Family Residence.



If you have credit issues, this program may still be for you. Although 620 credit scores and higher are preferred, 580-619 are considered with compensating such as reserves, job stability and more. Less than 580 credit scores are regarded as a much higher risk and require more due diligence then most lenders are willing to commit to in today’s market.



So is this a great program, in a word yes. Clearly 100% I hard to find and without Mortgage Insurance, makes the USDA Guaranteed Rural Housing program represents the highest amount of leverage available for a primary residence purchase on the market today.



So where do you start? Find a lender that offers USDA financing. Mortgage Lenders, Banks and even mortgage brokers have access to this program. Finding an educated Loan Officer however may pose a challenge. Since the USDA Rural program is fairly small in the mortgage landscape, your typical mortgage call center loan officer is just not going to be familiar with this loan. So make sure to do your research and feel comfortable with the person originating your loan and always check references.

USDA Rural Housing is back...more to follow

The Agriculture Department has reopened the Rural Housing Service single-family program by offering lenders $2.5 billion of conditional loan commitments, according to Rep. Ruben Hinojosa, D-Tex

Top Ten Dos and Don'ts While Buying a Home As a First Time Homebuyer

Top Ten Do's and Don'ts While Buying a Home As a First Time Homebuyer

By: Michael Foote


I recently attended a seminar in which a startling statistic was thrown out. 47% of the previous months residential sales were by first time homebuyers. As a banker this is an important statistic. I need to make sure that segment of the buyers is served to the best of my ability. To that end, I want to share some of the mistakes I've seen during my 22 year mortgage career made by borrowers/buyers.

#10 - Do not change jobs

The purchase process is daunting enough as it is, but to compound things and get a new job during the process may just jeopardize your prospects for an easy loan approval. Hey, I am not saying you can't take a great opportunity I am just saying it can cause issues.

Here are two examples. You have a nice W-2 job paying $75000 a year and you decide the company net door has a job similar with a smaller base salary but offers additional commission and bonus structure that you will likely earn more in the long run. Well an underwriter does not know if the job will work or not and cannot forecast earnings for you. She would likely be required to qualify you on only the base salary as there is no history of the commission or bonus income.

In another example you are a CFO for a plastics company and are hired away by another firm in another industry. Provided base salary and compensation are guaranteed there would likely be no underwriting concerns.

The best solution is to delay any job change until after your financing is complete.


#9 - Do always file tax returns and keep copies



You'd think it would go without saying but many out there still don't file tax returns regularly. Taxes are due in April and if you delay filing you must have filed an extension prior to applying for a loan.



Delinquent tax filings will always complicate and almost eliminate any form of reasonable financing out there. So if you are going to buy a house, you need to have filed your tax returns and up to date.



#8 - Do keep your monthly mortgage statements and other monthly statements for any and all debits of credits.



I am a big fan of keeping documentation from any financial transaction where my money is involved. Well I probably keep too much, but if you are applying for a home loan, there are a whole host of reasons why you should have six months of bank statements, bills accounts statements etc. You should also have at least 3 years tax returns on hand. In the mortgage business we often need support, proof, and documentation to prove many things in a borrower's financial picture. Having these documents handy will save you time and frustration if you have them out and available earlier.



#7 - Don't co-sign for anyone



It is certainly possible you have the wherewithal to co-sign for another person or family member. I cannot share with you how many times I've seen this ruin someone's credit scores. If at all possible avoid doing this ever. If you sign for someone else be prepared to have to qualify with those additional payments as if they were your own debts.



#6 - Don't move money around in accounts



When you are buying a home, you are telling the bank that you are credit worthy, you have been able to properly save the money required for the down payment and closing costs and in some cases you have the reserves to show additional strength.



It is very hard to prove that you have saved properly and have "seasoned funds" if you have recently transferred or had amounts of money transferred between your own accounts and the accounts of others.



Your money should be sourced properly and seasoned appropriately or else additional time consuming conditions will be added to your application.



If you absolutely have to move money - keep every receipt small and large and the statements both with drawls and deposits.



#5- Research your monthly payments options



There is no substitution for experience when it comes to mortgage banking. I pride myself and a very good and very educated mortgage professional. In todays mortgage market it is more important than ever to be technically proficient in all forms of conventional, portfolio and government lending.



Once you do find you mortgage professional you need to consider your payment obligations versus the home and sales prices that will come with them.



While we in lending qualify using your gross wages you are paying with your net income every month. Even though you may qualify for a mortgage does not mean it makes financial sense. It is always important to heavily weigh financing and the tools available for down payment assistance and lower start rates.



#4- Do the math



Know what you are getting into. Read your disclosures we send them to you for a reason. Know what your mortgage terms are, how must it all costs, what your payments are.



#3-Do choose a bank or verified direct lender



Although I have been a mortgage broker in my career I have to say that dealing with a direct lender and/or bank is today the best way to go. The shear truth is these institutions are better able to adapt to the ever changing lending atmosphere. That is not to say there are not good brokers, you just don't have time to figure out who is good or not.



#2-Do make sure you are ready for the commitment of ownership



Let's face it, you are thinking about settling into a home, investment, and an anchor. Houses are a look like pets. You can't just leave them. You have made a commitment. Are you thinking about moving to China for that job or back to Kansas, to be with Dad? If you are contemplating these things...it's not time to buy.



#1- Do Relax



If you are lucky enough to find the right mortgage lender he or she will instill the confidence that will help get through the emotional rollercoaster of buying a home. It is the biggest financial transaction you will be part of and undoubtedly that strike fear in many. I am here to tell you it's all going to be OK. If it is meant to be it will be. If you've done what I've said above you'll be fine.



And congratulations on your new home!



With over twenty years experience in mortgage lending, a Certified Mortgage Banker Designate (CMB) from the Mortgage Bankers Association of America, and billions in funded loan experience, I can assist you and/or your clients with the most important financial decisions realted to your residential and commercial real estate. Please call or email me today



Michael A. Foote, CMB

Certified Mortgage Banker

949.584.4600 begin_of_the_skype_highlighting 949.584.4600 end_of_the_skype_highlighting

michael@michaelfoote.com



Article Source: http://EzineArticles.com/?expert=Michael_Foote

Down Payment Assistance programs

May 27, 2010


Down Payment Assistance Programs (DPA’s) for First Time Home Buyers

By: Michael A. Foote, CMB

There is money available for first time homebuyers today. In a much needed addition to financing products available today, down payment assistance programs are available once again. Down Payment Assistance Programs are generally a local, state or federal grant or bond program designed to assist certain persons with certain income levels in certain areas, with money that can be used for down payment and closing costs on many purchase loans.

These tax free grants or loans are generally forgivable provided the buyer stays in the home for a designated amount of time. And these dollars can dramatically change the amount of money required for closing when these first time homebuyers buy a home. For example, a typically FHA borrower may have to come up with over 4-7% total of the sales price whereas a borrower with a WISH down payment assistance program may only need to bring in 2-3% total. That’s a huge amount of money on a several hundred thousand dollar transaction. If you amortize out that difference the savings are literally tens of thousands of dollars since most closing costs are financed in the new mortgage.

So what does the process with “DPA” look like when compared to the regular loan process. Quite frankly, it’s seem less to the user insofar that the lender will generally have to deal with the additional hoops during the process. For the borrower/buyer they probably wouldn’t know the difference. The only real difference is a potential for a slightly longer loan processing time.

So is DPA a good idea? Well, lately it has been a challenge for Realtors to get clients using FHA let alone FHA WITH Down Payment Assistance so an argument could be made that using DPA on an Offer to Purchase could be a determining factor for the seller’s side when these choose the offer to open escrow with.

The only cure for this pitfall will need to be more product on the market for properties up to the $400,000 range as DPA generally have no purpose and no qualifying borrowers as the sales price rises and/or in areas of high per capita income.

Undoubtedly, DPA has a place in today’s financing landscape and those of in the industry are happy to have it, it is one more additional tool to increase homeownership for low to mid income families. And this product will help sell the forecasted shadow inventory rumored to be lurking around the corner. Only time will tell if that come to fruition or not.

These programs are not free from abuse, there have been in the past scams related to DPA and officials, lenders, and large institutions have really scaled back what is allowable as DPA. Also economics play into the availability of these from all the time. There are many DPA’s completely drained of funds. One bank, Pacific Mercantile, where I work, has two great programs and there are more out there. When consulting your mortgage banker, make sure you inquire into available DPA programs by city, county, state, and federal levels.

Jumbo Mortgages..are actually available

Well it's official lenders and investors are looking for jumbo product. With jumbo rates the lowest they've been for awhile AND a private securitization market that has awaken partially, originators are now being tasked with getting those jumbo borrowers into refinance and buy more property.

What will be different than the jumbo loans of several years ago, will be a steady dose of income documentation..real income documentation, verification of assets, and real clear view of the properties value. Yes, investors want the product but they want the least risky available.

We will not see a stated income deal for...check that. I predict that we will in fact see a state income type transaction for the self employed. Even the Fed's have spoken about the need for loan products geared to our self employed citizens (voters). And I agree wholeheartedly that these products should be available to sophisticated borrowers who understand leverage and risk.

As long as the mortgage industry does not take advantage of itself and keeps these jumbo guidelines in order and with transparency of risk to all, a niche in the mortgage industry can again flourish.

Expect 80% as a maximum LTV and borrowers will need to document everything. Rates for these types of mortgages run about 5.75%-6.00% depending on the particulars. Adjustable and Fixed rates are available. Rates of course float and change often.

For jumbo loans to and the niche to prosper values will need to remain static or at least rise slightly to ensure borrowers have skin in the game. If the economy were to falter again, and values suffer, then more jumbo borrowers will default. So as long as the current economic climate continues to improve, so shall the availability of specialized loan products.

The Mortgage Broker Awakes

We got some very good news for the nation’s small business mortgage brokerage community. FHA recently had announced that they would allow FHA lenders to fund loans originated by mortgage brokers not directly approved by HUD. What this means is all those mortgage brokers who did not have the ability to become FHA approved can now start serve a market argued to be anywhere from 15-30% of the market for new home loans.

The big question was if major lenders would pick up on the ruling and actually allow historically non-fha-brokers to originate this product. The product is itself complex as compared to conventional products and requires a highly level of discipline and even requires specialized FHA DE's or underwriters. The answer to the question at hand appears to be answered as Flagstar Bank has released comments about the ruling and a recently held conference call with HUD. Brokers should expect by December of this year to be able to originate and deliver FHA loans for funding.

In what has been a very difficult several years for the mortgage broker, and with new legislation that would further impair the brokers ability to compete, this is a small silver lining.

Of course the broker has a long way to go. Broker market share was once reported to be as high at 80% of all mortgage originated, that number is now south of 14%. With that drop in market share, many have left the business all together. It is very clear, many just weren't prepared for the brutal shut-off - there was no slowdown.

Only time will tell if pending legislation and new originations will keep the broker afloat - it wasn't the brokers fault alone that the mortgage market to collapse, but they are the last group related to finance that hasn't recovered. Banks are now reporting record earnings and the investment banks cannibalized themselves and are paying out record bonuses. Let's hope the small businessman mortgage broker again has his chance to show his professionalism and dedication to providing quality mortgage finance.

The New Mortgage Market - Age of the order taker dies

There once was a mortgage sales disneyland filled with people who recently sold bottled water, cell phones, cars, insurance, crack, and pretty much everything else related to sales. Why? Because we couldn't hire people quick enough. Those people were fortunate, or not fortunate depending on how you look at it, to meet a person in the mortgage business and if they were real lucky, the subprime mortgage business. And that person then recruited the poor unlucky soul. The money was sickening. These guys and gals were pulling down over a million a year...Now that time of irrational exuberence is bust. Many of those that once flew high in the sky are now back in a world or brutal financial reality where the bills pile up and we all are back to balancing our check books, if it balances at all.

Why do I state the obvious facts? Because it is important for those looking for financing today that our industry has been left to the true mortgage professionals. Those left are in it because this is what we do, we don't sell cars, insurance, crack - we sell mortgages. I want those left in the business to feel proud that we are still here providing financing to all americans regardless if this is the niche business of the year - I am proud to continue to offer great financing to qualified individuals and businesses.

The pointless ocean moans on top of each conventional mathematics.

Freddie Mac asks U.S. for $10 billion

You have to wonder just where is the bottom for these losses.
Freddie Mac, the bailed-out mortgage-finance giant, reported Wednesday that it continues to lose money and needs an additional $10.6 billion in assistance from U.S. taxpayers.

The most recent earnings report follows three straight quarters in which the McLean-based company did not need infusions from the Treasury. Still, the firm is struggling to recover from the mortgage-market meltdown; it reported a net loss of $6.7 billion in the first quarter of 2010, compared with a loss of $9.9 billion a year ago.

Freddie Mac is turning to the Treasury again mostly because of a change in accounting. Revised rules that took effect this year require companies such as Freddie to move all mortgages they guarantee -- but don't own -- onto their books. This shift alone caused the company's equity to drop by $11.7 billion, helping to plunge its net worth into the red.

Under the terms of Freddie's September 2008 bailout, taxpayers make up the shortfall in any quarter when the firm's net worth is negative. The accounting change, along with the firm's loss and a $1.3 billion dividend payment to the Treasury, pushed Freddie's net worth to a negative $10.5 billion, down from a positive $4.4 billion last year.

http://www.washingtonpost.com/wp-dyn/content/article/2010/05/05/AR2010050505227.html

Fed to stop purchasing MBS

A widely anticipated end to the Fed's purchase of Mortgage Backed Securities is set to end this month. After the last couple of years this should scare everyone, but it doesn't seem to be raising the fear level at all. Recently, PIMCO's Bill Gross said that another 35-50 bps and MBS will be attractive to his firm. That being said you could expect rates to rise another .50% to get Bill's interest. But is this really true? It's all about the spread, and if the rate of a mortgage loan and the cost of funds has a wide enough spread - then buyers for the paper will come. The questions is how much does the spread need to be. In my opinion if you are waiting - DONT WAIT get your mortgage done - PDQ. If you have 6% or higher or have interest only debt of anykind get it wrapped up into amortizing debt stat.

More FHA Changes...For the better in my opinion We need FHA to be heathy

Federal Housing Administration (FHA) Commissioner David Stevens has announced a new set of policy changes designed to strengthen the FHA's capital reserves.

The FHA will increase the mortgage insurance premium (MIP) from its current level of 1.75% to 2.25%; update the combination of FICO scores and down payments for new borrowers; reduce seller concessions from 6% to 3%; and implement a series of measures aimed at increasing lender enforcement

U.S. Housing and Urban Development Secretary Shaun Donovan previewed the changes in December 2009, noting the FHA would announce additional details before the end of January.

“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” Stevens says. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history.”

In addition to raising the up-front MIP by 50 basis points, the FHA will request legislative authority to increase the maximum annual MIP that it can charge.

If this authority is granted, the FHA will then shift some of the premium increase from the up-front MIP to the annual MIP. This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing, the agency explained in a statement Tuesday.

The initial up-front increase will be included in a mortgagee letter to be released tomorrow, Jan. 21, and will go into effect in the spring.

Additionally, new FHA borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.

The agency says this change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

The FHA additionally says its current seller-concession limit of 6% exposes the agency to excess risk by creating incentives to inflate appraised value. Reducing the seller-financing cap to 3% will bring the FHA into conformity with industry standards on seller concessions. This change will also be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

To support its lender enforcement initiatives, the FHA will begin publicly reporting lender performance rankings to complement currently available Neighborhood Watch data. The rankings will be available on the HUD Web site starting Feb. 1.

This is an operational change, FHA says, to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action, as Neighborhood Watch data is currently publicly available.

The agency will additionally enhance monitoring of lender performance and compliance with FHA guidelines and standards by implementing the Credit Watch termination through lender underwriting ID in addition to originating ID. This change, effective immediately, will also be included in a mortgagee letter tomorrow.


Starting in early summer, the FHA will implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process. Specifications of this change will be posted in March and subject to a notice and comment period before going into effect.

Moreover, HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes amendment of section 256 of the National Housing Act to apply indemnification provisions to all direct-endorsement lenders and legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This latter authority would permit HUD to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

SOURCE: Federal Housing Administration

HUD lift 90 Day Flipping Rule

HUD TAKES A NEW POSITION ON THE 90 DAY FLIP RULE … It’s OK Now!

HUD now believes the real estate market will benefit by allowing buyers to use FHA financing to purchase a home even when the seller has been on title for less than 90 days. Up to this point, only banks had the privilege of selling their recently acquired foreclosures to FHA buyers. Now investors and others who acquire real estate and want to sell within the first 90 days can. The waiver of the 90 flip rule is for one (1) year and takes affect on February 1, 2010. With tight underwriting guidelines, many home buyers are realizing that FHA financing is their only way to afford home ownership. More reasons why I like this change:



§ FHA buyers will have more homes to choose from

§ Investors will be able to attract a larger pool of home buyers

§ Buyer and seller agents will increase their closing ratios

§ Mortgage brokers will have more lending options for their clients


HUD’s updated policy comes with restrictions designed to prevent fraud so investors … pay attention:

1) There can be no relationship or interest between the seller, buyer or other parties to the transaction



2) Seller’s profit is limited to 20 percent above their acquisition cost


3) HUD may allow a sales price in excess of the 20 percent limit if the lender can document legitimate rehabilitation to the property and/or a second appraisal supporting value. In addition, the lender must order a property inspection and provide the report to the buyer prior to closing.

4) The same property flipped mutiple times ... big red flag and a No No!



KEY INFORMATION: Home buyers should expect some FHA lenders will not follow HUD's waiver and continue to impose the 90 day restriction. When getting pre-approved for financing, I suggest home buyers ask their mortgage advisor if they have lenders who accept HUD's waiver. If they don't, find a different mortgage advisor who does so you can shop till you drop and avoid surprises later.

Commercial market continues slide into 2010

The commercial real estate market will continue to get worse, only more slowly in 2010. But what does this mean for commercial property owners.

The overall assessment of Grubb & Ellis Company’s 2010 Real Estate Forecast released today, predicts another year of slow recovery. This doesn't bode well for owners looking to refinance debt. If values continue to slide albeit slower, equity positions will be reduced and available credit will be limited. The best best for commercial property owners is to convert all short term maturing debt into longer term fixed rate products.

Vacancy rates continue to rise as well. As this continues expect lenders to further tighen credit for new commercial financing. For access to many different commercial lenders, visit

HUD Eliminates 1% Cap on FHA Mortgages

In today's environment of help the customer and regulate the lender even more, HUD has decided to remove the 1% cap on FHA mortgages. Although state and federal guidelines will prevent usurious charges by any broker or lender, the rule change is designed to help FHA lenders to stay in compliance with the new RESPA rules starting this year. There is a chance that this will increase the cost of borrowing to borrowers in lower value states. If HUD puts a percentage limit on costs then we should see no discernible increase in overall borrower costs and this may even allow some lenders to lower their minimum loan amount thus making credit available for more lower income borrowers. We'll see. One thing is for sure, lenders, technology vendors and the like will no doubt experience pain putting these new rules in place. The sad reality is if they just enforced the existing rules, these changes would not be necessary. Get ready for even more regulation and licensing hurdles in 2010.

Happy New Year All!