A couple of weeks ago I wrote an article called Qualifying For a Home Loan: 6 Reasons to Consider FHA.  Not all lenders have been around long enough to remember FHA loans.  Those who have remember the extra requirements that made FHA loans unpopular with sellers.  But it’s a buyer’s market today, and all that has changed.

Last week I originated my first FHA Access loan in 7 years, and I was reminded what a great program it is.  FHA Access is a 2nd loan that pairs with a traditional FHA 1st and covers the 3% down payment and all of the buyer’s closing costs.  The Access loan is an 8%, 20–year fixed rate mortgage for up to 6% of the purchase price.

While FHA loans have no income limits, Access does.  The borrower’s income may not exceed 120% of the median income for the area. For most of the Sacramento region, the limit is $78,480.  That’s pretty generous and shouldn’t be a problem for most people.  FHA loans are no longer subject to strict debt to income ratios—instead we submit them through automated underwriting—Access debt to income ratios cannot exceed 43%. 

With all the exploding 100% loans out there, FHA Access offers a path to sustainable home ownership without a big down payment.

Got a comment?  Please leave it below.

Got a question about FHA Access?  Send me an email.

The 30 year fixed rate mortgage rose slightly this week to 6.0% this week for well qualified borrowers.

Inflation Still the Bigger Threat

After last week’s reports showed increases in both the CPI and PPI numbers for February, the Fed declined to lower interest rates and continues to send hawkish signals about inflation. 

However, this week’s falling new home sales and this morning’s declining consumer confidence suggest that the economy may be feeling the effects of the real estate slowdown and the subprime meltdown.  What’s ahead for rates?

Read the rest of this entry »

I was talking today with a woman referred by a past client.  She and her husband were in the middle of a 100% cash-out refinance on their home.  They have a small handyman business and need a “stated income” loan because their tax returns don’t show adequate income.  She was upset because her lender had quoted her 12% on her 2nd loan. 

After telling her she should feel lucky to get any kind of 100% stated income financing right now, I asked why it was so important to pull all of their equity out.  She replied that they had just paid $12,000 to go through an on-line school to learn how to flip properties, and they needed the money to get started.  In fact, she said, they were just dying to get started. 

Read the rest of this entry »

This news hit yesterday in the Associated Press:

Wells Fargo cuts 500 jobs in mortgage unit

Tougher standards means bank will be handling fewer subprime loans

 

Updated: 12:13 p.m. PT March 20, 2007

SAN FRANCISCO - Wells Fargo & Co. is eliminating more than 500 jobs in a division that makes home loans to high-risk borrowers, adding to the economic distress caused by the decaying subprime mortgage market.

Most of the cutbacks, concentrated in South Carolina, Arizona and California, stem from Wells Fargo’s recent decision to make it more difficult for borrowers with blemished credit records to qualify for subprime mortgages.

go to MSNBC to read the rest of this article

…following on the heels of this article from Reuters on February 21st:

Wells Fargo cuts 320 subprime mortgage jobs

NEW YORK, Feb 21 (Reuters) - Wells Fargo & Co. (WFC.N: Quote, Profile, Research) said on Wednesday it is cutting 320 subprime mortgage jobs in two operations centers because it is tightening its lending standards to home buyers with poor credit histories.

About 250 jobs are being eliminated in Fort Mill, South Carolina, and 70 in Concord, California, according to a memo from Lynn Greenwood, a senior vice president of communications for the No. 5 U.S. bank’s home and consumer finance group. Wells Fargo is the largest U.S. subprime mortgage lender,

“As a result of changing market conditions — such as moderating house price appreciation — effective Feb. 16 we tightened our credit policy for a portion of our nonprime lending business,” Greenwood wrote. “This decision directly impacts our nonprime loan volume, which in turn impacts staffing levels in the areas devoted to managing these loans.”

…more 100% financing evaporates, this time from HSBC and affecting what we call ALT A.-not “A paper”, but not quite subprime either.   Keep an eye on your 100% financing, even if it is already approved.   If your lock expires before you can close, you may be without a loan. 

PLEASE LOCK ALL 80/20 SIVA AND FULL DOC LOANS ALREADY REGISTERED TODAY WITH HSBC!!

HSBC WILL HONOR ALL LOANS ALREADY LOCKED BUT WILL NOT ACCEPT ANY MORE!!

NEW GUIDELINES WILL GO INTO EFFECT ON ALT-A IMMEDIATELY

SIVA (stated income, verified assets) MAX CLTV 90%

FULL DOC MAX CLTV 95%

Today’s announcement, posted on their website, entirely unexpected…

LoanCity is closed for business. Today March 20, 2007 is the last day we will be funding loans. To our customers, our staff and business partners - we thank you.

 

There are many people finding out as they near the close of escrow that they don’t have loans after all.  What could be more unsettling than that?  

Does your lender have the knowledge and experience to steer you away from trouble and weak lenders? 

Got a question or concern?  Email me.

Just another in a daily stream of email notices from lenders tightening their guidelines. Take care with your approvals and recheck constantly. The loan you had approved may no longer exist.

Indymac Bank announces immediate changes to their 80/20 program, to take effect Tuesday, 3/20/07 (note today�s date).

All 80/20’s in their pipeline need to be locked no later than today for Indymac Bank to honor this product. This includes all subprime, Alt A, and prime loans that don�t fall within the guidelines below.

These loans have to be locked through the Emits system not the Quick Pricer. Here is a highlight of the changes:

The No Ratio 80/20 will be gone

Full doc will now require a min, credit score of 680 and 3 mos. PITI reserves

Stated will now require a min. score of 700 and 4 mos. of reserves

Maximum loan amount for a 1st mortgage will be $417,000

200% Payment shock requirement will be eliminated

2/6 Libor program will be eliminated

Alternative sources of credit will no longer be acceptable

Got questions or concerns? Send me an email.