FHA and Industry Highlights

In regular follow up with the Realtors® I work with often, and with some of my clients using the fabulous NEW FHA guidelines for their new home purchases mortgages--- I discovered an unusual situation:

Many of the "For Sale" home listings were NOT saying the home could be bought by a new buyer using an FHA mortgage!

When I asked the Realtors® why the MLS listings were excluding these, I found some serious confusion about what a SELLER might or might not have to do if they offered their home listing to an "FHA buyer".

Unfortunately, there is an enormous--- a HUGE-- amount of misinformation on the internet and elsewhere about FHA backed mortgages. In the past, sellers were required to pay certain closing costs (up to maybe $500) for any new buyer using an FHA backed mortgage on their home sale.

NOT ANYMORE! And not for some time :-).

Simply now: ANY home-for-sale (listed by a private seller FSBO (for sale by owner), by a private seller using a Realtor/Broker, by a seller who themselves already have an FHA backed loan on the home they are selling, by a bank seller (REO), by HUD....etc)--- any seller of a home--- does NOT have to pay ANYTHING towards a new buyer's costs--- NOTHING, NOT A DIME if they don't want to.

The new buyer with a qualified FHA backed mortgage can pay all their own closing costs if they want to. The seller pays nothing.

Now--- the seller CAN pay up to 6% of the CLOSING costs portion (NOT the 3.5% needed for the statutory DOWN PAYMENT amount) for a new buyer using an FHA backed mortgage--- but THEY DON'T HAVE TOO if they don't want to. Period.

Also and by-the-way, MOST of the buyers today are using FHA backed mortgages. Unlike the past where an FHA loan was usually linked to borrowers with "less than perfect credit", today, the FHA backed mortgages often offer lower rates than conventional mortgages and no hassles over an ever increasing mortgage insurance qualification battle.

So sellers, if you want to increase your chance, GREATLY increase your chance of a successful home sale, let your home be sold to any qualified buyer. And tell your Realtor® to list your home that way.

To check on this and other FHA MYTHS, you can call the FHA office: 800-225-5342 and also visit www.HUD.gov (and follow the links on the FHA logo to the FHA website)...and/or .download this page I copied and put into a PDF about FHA MYTHS

This just came in from my secondary market rep this morning:

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Stock market up; bond market prices higher, and mortgage market on fire this morning.

The Fed has made a massive move to unlock the credit markets that so far have resisted all attempts to light the fire. In a surprising move this morning the Fed announced an $800B spending binge that may finally get mortgage rates down. The move is Bernanke's attack on deflation and getting credit markets functioning again.

The Fed will purchase as much as $600B in debt issued or backed by government-chartered housing-finance companies.

It will also set up a.....

Continue reading "Dropping Rates....Washington's Nov. 24th Move" »

I recently created this info for a new first time home buyer when he asked what he would need to buy a home in Hawaii (he currently makes about $3600 a month income....and had about $5000 saved up):

........

1. Ask the Realtor for the minimal house and condo prices available for your area

2. You will want to have a minimum of 3.5% of the purchase price of the house available for the down payment in addition to another 3-4% in closing costs. The seller can pay the closing costs portion (up to 6%) if they are able and are negotiated to do so by your Realtor.

3. The down payment/closing costs comes from your normal checking and/or savings accounts (you want to be sure there are no....

Continue reading "How Much $$ Do I REALLY Need to Buy a House?" »

While this news has been out for a little while, I thought I'd make sure that everyone is on the same page. Underwriting guidelines continue to be squeezed as the market looks for ways to combat the heavy losses due to foreclosures. In the last couple of months these changes have (or will) gone into effect:

1. Mortgage Insurance companies will no longer provide mortgage insurance on investor transactions. Therefore, investor loans now require a minimum down payment of 20%.

• Keep in mind, even with 20% down, there are some pretty big pricing hits; while the hits are still there with 25% down, they are quite a bit lower.

2. The ability to qualify when keeping a current property as a rental and buying a new home to live in, is much more difficult. Here are the new guidelines impacting this process:

• Conversion to an Investment Property: Fannie Mae will permit the 75% rental income calculation to be used IF there is documented equity of at least 30 percent in the existing property. The rental income must be documented with a copy of the fully executed lease agreement AND a copy of the receipt of a security deposit from the tenant and deposited into the borrower's account. If the 30 percent equity cannot be documented then both the current and the proposed payments must be used for qualifying AND 6 months PITI for BOTH properties will be required for reserves.

• The FHA process is not quite as challenging, but close. it requires only a 25% equity position. And will not require the additional reserves.

3. Pricing hits for credit scores on conventional loans. The hits kick in at 60% LTV and become more dramatic as the LTV climbs and the FICO score lowers.

• Example, an 80% LTV loan has a 1.75% pricing hit with a 670 FICO. In the past, that FICO was considered pretty good. For conventional pricing, not anymore!

• FHA hits appear to be limited to FICO scores under 620.

4. Mortgage Insurance is tightening down, especially on condos with LTV's of 90% or greater!! Make sure your lenders get their Mortgage Insurance approval as soon as possible, not just their loan approval!

5. Don't forget, the FHA new down payment of 3.5% goes into effect on January 1st. Best recommendation is to get a home under contract by the end of November
so it closes and FUNDS by Dec. 31, 2008.

Please do not hesitate to contact me with any questions. My industry is changing, It's important that we understand the changes and how they impact our clients!

(This article came to me from an anonymous loan officer)

No political views are intended in this email. This is for information purposes only and is intended to help you discuss this topic with your clients!

Not only do I like this article, but it reminds us that present rates are so good compared to any other time in recent history.

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Do Rates Drop After a Presidential Election?

Everyone is buzzing about the prospect of lower mortgage rates after the Presidential election. Is there any truth to the rumor that mortgage rates drop after Presidential elections? What about changes in trends?

It's important to note a few things about the history of mortgages in the U.S. before I explain why....

Continue reading "Do Rates Drop After a Presidential Election?" »

Old Article (2002), but still applicable

(...though usually the 10-year Treasury note benchmark now is closer to 3 percentage points spread...see below):

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"If you're going to purchase a home or refinance, it's a good idea to grasp how mortgage interest rates are linked to the bond market. Understanding the relationship can give you a heads up on when rates will be moving higher or lower.

Banks and other lenders use the bond yield on the government's 10-year Treasury note as the benchmark for setting mortgage interest rates.

There's always a spread between the Treasury note bond yield - which is the yearly return paid to bondholders - and what lenders are charging as interest for a home loan.

The spread lately has been.....

Continue reading "What's the Rate Today? (Use a Crystal Ball or....)" »

The following is an article from CNNMoney and gives an update on the
current upswing in the everyday (these days!) volatility of mortgage rates:

(Also, remember that a bank/broker can only lock an offered interest
rate against an actual property address....and with an actual new or
current borrower's conditions. The lock is good only for a certain
number of days and can be extended for a few days, at a cost.
If the lock expires, or a different property is ultimately chosen for a
new buyer, the rate and the lock go away and borrower starts over.)

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Mortgage rates spike - biggest jump since '87

Rate on 30-year fixed mortgages jump could climb higher still.

One cause: Government's rescue efforts.

By Les Christie, CNNMoney.com staff writer
Last Updated: October 16, 2008: 10:24 AM ET

NEW YORK (CNNMoney.com) -- Low mortgage rates, the one bright spot in a devastated housing market, are on a rapid rise.

Freddie Mac reported Thursday that the average 30-year fixed-rate mortgage has hit 6.46% - up from 5.94% the week earlier. That represented the largest weekly increase since April 1987, when the 30-year rose 0.84 points.

Bankrate.com also charted the spike. The investment Web site reported that the average interest rate on a 30-year, fixed-rate mortgage jumped to 6.74% on Wednesday from 6.2% the Wednesday before.

Translation: A borrower with a $200,000 mortgage would pay about $1,225 a month at 6.2%, and $70 more, $1,295 at 6.74%.

Mike Larson, an analyst with Weiss Research who participates in Bankrate.com's weekly mortgage rate surveys, expects to see rates top....

Continue reading "Mortgage Rates Spiking" »

See the attached FHA/HUD recent mortgagee letter for more details.

A borrower is required to put a down payment of only 3% on a home purchase loan (instead of the recent 3.5% that was to take effect Oct. 1, 2008).

The 3% rule is valid until January 1, 2009. After that, the 3.5% rule takes effect.

Download HUD Mortgagee PDF Letter

The following article is from nytimes.com. It talks about what happened Friday evening. Basically the Feds are taking over Freddie and Fannie. This wipes out all their equity but will keep them running and provide enough liquidity at cheap rates to help the housing market.

This could be the signal that things are going to get better. Rates are going to come down, credit will be easier to get, and we will start working off all the excess real estate inventory we have.

Things are going to get better. But hang on to your hats, it's still going to be a bumpy ride.

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September 6, 2008

U.S. Rescue Seen at Hand for 2 Mortgage Giants

By STEPHEN LABATON and ANDREW ROSS SORKIN

WASHINGTON -- Senior officials from the Bush administration and the Federal Reserve on Friday called in top executives of Fannie Mae and Freddie Mac, the mortgage finance giants, and told them that the government was preparing to place the two companies under federal control, officials and company executives briefed on the discussions said.

The plan, which would place the companies into a conservatorship, was outlined in separate meetings with the chief executives at the office of the companies' new regulator. The executives were told that,...

Continue reading "The Bottom of the Housing Market?" »

This in this morning from another of our major lenders about DPA programs:

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> Effective with all FHA loans underwritten on or after October 1, 2008 Seller-Funded DPAs are prohibited.
> The final approval and sign off of the MCAW MUST precede October 1, 2008.
> All loans containing a Seller-Funded DPA must close by October 31, 2008.
> [lender] will cease accepting new registrations wherein the applicant is utilizing a Seller-Funded DPA on September 1, 2008.
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And this notice about elimination of Seller funded down payment assistance programs from a 3rd lender:

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The seller or other interested third party cannot participate in a down payment assistance programs unless the borrower is approved by September 30, 2008. FHA confirmed the definition of “borrower approved”:

Eligibility will be determined by the following:

· For loans run through FHA TOTAL Scorecard via DU or LP the “date of the last scoring event”.

CAUTION: Any resubmission to DU or LP after 9/30/08 will cancel eligibility for loan using a seller funded down payment assistance program.

· For manually underwritten cases, eligibility will be determined by the date of underwriter signature on the MCAW or the Loan Transmittal form.

CAUTION: Backdating on the MCAW or Loan Transmittal form is not allowed.

AND

· The appraisal must be completed and approved by the DE underwriter as part of “credit approval” for the seller funded down payment assistance loans by 9/30/08.

Due to the termination date of 9/30/08 and in order to ensure we have an insurable loan, [Lender] will require all FHA loans using a seller funded down payment assistance program to be credit approved, as noted above, and MUST CLOSE AND FUND by 10/31/08 in order to be eligible for financing with us.

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As a heads up since some of you mentioned you have buyers right now that need to use seller assisted down payments...

One of our primary banks we use for purchase loans just gave us the deadline for their loan submissions deadlines for any loans that will include seller paid down payments. I expect the other lenders to follow with similar deadlines.

We were earlier advised we could have until October 1 and have loans in the pipeline by then but these are some of the changes that are happening very quickly these days.

The loan rate has to be locked by next Friday the 22nd (so hopefully your mortgage person will have the buyer's application and supporting docs in hand by that day).

You need to give your mortgage broker an accepted offer on the chosen house by September 8-9th so the loan file can be completed and in to the bank's underwriting department by that Friday the 12th.

The house has to close by Sept. 30.

In the turmoil of the US financial crisis...Fannie, Freddie problems and all, one would believe gold metal would still be climbing.

But oil and precious metals and commodities are falling...and falling. The good news is oil is closer to $115 a barrel and not over $150 as some analysts were predicting. Retail gas prices are dropping too.

So why, even as we speak, does gold (and even oil) keep falling...gold already down more than $200 off it's high of $1030 an ounce earlier in the year when it too was predicted to keep its climb past the $1200 mark. (Here is a good site to check for current/live prices)

The term global impact is no more a novelty of thinking. Natural disasters in China, Japan...the massive flooding in the Midwest of the US (though the death toll not anywhere as extravagant as that of China's flooding, some say the US flood is the worst flooding in recorded history), along with the financial disasters of our US mortgage and housing markets all affect the demand for energy (many are just not driving as much, businesses are finding alternative distribution means, etc), and affect those Asian and European countries grab for base gold too as their own economies now feel the slow down that might have begun in the US but now are world wide.

With world-wide economic slow down, the dollar shows a bit stronger (even as in the news it too fluctuates stronger/weaker against the complexity of factors)...and the demand for gold drops. Where the price of gold will head as the fall manufacturing cycle begins is anyone's guess.

The combination of elements that in the past might have signaled corresponding affects in other associated arenas now behave outside those expectations. Witness the rise and fall of mortgage rates behaving outside their norms of triggers.

The future should be an interesting show!

In light of the "exciting" :-) news we had this week about Nehemiah and seller down payment assistance changes, etc, I had an updated conversation about seller contributions with one of my major player account executives at one of the lender/banks/investors I use to fund my loans.

For perspective, at least 25%, and more likely up to 40% of the purchase loan business nationwide will be affected with the new DPA changes.

Though the following is lender specific for now, because of the outcomes of recent FHA lender audits and the loan scrutiny that will come out of the new law, the following will more than likely soon be more of the norm from our lender investors:

The seller can now and after October 1st contribute up to 6% financing concessions to pay the closing costs of a buyer (and until October 1, 2008, an additional 3% to pay the buyer down payment requirement through a program like Nehemiah).

The seller can pay for any of the upfront closing costs EXCEPT for the loan interest amount.

After running through some scenarios and suggestions from the rep, and should the "no down payment assistance" be made an actual reality by October 1st (if litigation doesn't stop this provision), I will legally still be able to create a few strategies for your buyers that will help them at least lower their monthly payments and loan balances and keep their out-of-pocket costs to a minimum.