Archive for August, 2007
“FHA Secure”: The Solution to Foreclosure?
President Bush today announced FHASecure, a new FHA refinance program designed to help trouble homeowners keep their homes. The new program should provide an option for at least some of those people headed into foreclosure due to interest rate resets and skyrocketing mortgage payments.
Who will benefit?
Hard to say just yet, but here are five criteria listed on the HUD cite:
To qualify for FHASecure, eligible homeowners must meet the following five criteria:
- A history of on-time mortgage payments before the borrower’s teaser rates expired and loans reset
- Interest rates must have or will reset between June 2005 and December 2009;
- Three percent cash or equity in the home
- A sustained history of employment
- Sufficient income to make the mortgage payment
Number 3 in particular interested me. After all, if a homeowner needs to have 3% equity (or cash) in the home, this lifeboat won’t hold the folks who owe more than their homes are worth. That will be a key question for many here in Sacramento CA. I was hoping this might be similar to the old FHA Streamline Refi’s we did years ago. Value and appraisals were not an issue then and the borrower could refi to a lower rate as long as they had been current on their existing FHA payments.
read comments (13)Sacramento Mortgage Rate Update
So what are mortgage rates doing?
That’s an interesting question. The conforming 30 year fixed rate has actually been falling. That is the bright star in a dark sky. But, it helps pull FHA, VA, CalHFA and any agency 100% programs down with it.
Freddie Mac last week reported the average 30 year fixed rates in the West at around 6.5% at half a point. And although things are bouncing around a bit, conforming rates continue their gradual decline. That makes it a great time for borrowers who can cobble together a down payment and document income.
Jumbo rates–and pretty much everything else–are a different story. The customary 25 basis point spread between the conforming (under $417k) and jumbo rates has widened in recent weeks to at least 100 basis points, putting the best jumbo 30 yr rates in the low 7% range.
A good alternative is to structure a 1st/2nd combo, keeping the 1st at $417k and piggybacking a 2nd behind it. If the combined loans still meet the lender’s requirements and you can find the required 2nd, you’ll have a lower payment that way.
A good mortgage broker can offer you options no bank can match. We can even obtain 1st and 2nd loans from different sources when that saves you money.
Nobody can do what a mortgage broker can.
I posted my Friday article about appraisals and “declining markets” over on Active Rain. It was popular enough to achieve “featured post” status and a good discussion ensued. To read those comments click the Active Rain link.
“Check Your Appraisal”
….was the heading on yesterday’s email from Wells Fargo Wholesale. This is a heads-up to Realtors and home buyers…
Fast Rewind
In mid July, FannieMae issued Announcement 07–11, entitled Collateral Valuation Practices and Declining Markets. Here are several key points from the memo:
- FannieMae’s Desktop Underwriter (DU) Version 5.7 released July 22, will now generate a message when it thinks that a property is located in a declining market.
- The appraiser must also indicate when the property is in a declining market.
- The lender is responsible for ensuring the accuracy of the appraiser’s work.
- Any pressure by the lender on an appraiser will cause the mortgage loan to be subject to immediate repurchase by the lender.
What’s The Big Deal?
The appearance of that term—declining market— in an appraisal has thrown a monkey wrench into many a loan approval. Appraisers avoid saying it, and lenders discourage the use of the term. However, FannieMae is tightening its jaws on past practice with this announcement. The teeth in those jaws are threat of immediate loan repurchase by the lender.
Today’s Mortgage Underwriting Changes
From BofA today….
All Expanded Criteria products will be suspended until further notice. Expanded criteria products include, but are not limited to, Stated Income/Stated Asset; Stated Income/Verified Asset; No Income/NoAsset; , No Ratio; and 80/20 (combos).
All Expanded Criteria pipeline applications must be locked by end of day Friday, August 24th.
Expanded Criteria is also known as Alt-A product. It’s where we go for folks that cannot fully document income to qualify, like nearly all self-employed people. Investors are no longer showing up to bid on any of this stuff in the secondary market. Banks have no choice but to stop making these loans until investors are willing to buy them again.
Bank of America is also making change to standard conforming product adjustments for all loans locked on or after 8/27/07.
This means rates will increase for lower credit score borrowers and smaller loan amounts on conventional financing.
More Lenders Falter
Lehman Brothers announced today the closure of its sub-prime subsidiary BNC Mortgage. Lehman Brothers will continue to originate prime mortgages through its Aurora Loan Services platform but is discontinuing all sub-prime originations.
More sad news from my rep at Accredited Mortgage yesterday afternoon:
I’m sure you’ve all heard the news that we’ve ceased accepting new loan applications. As you can surely guess, this means I am no longer employed. I wanted to thank all of you for your business and wish you the best of luck in the future. My email account will be shut off shortly. If you’d like to stay in touch, here’s an alternate email.
HSBC, Europe’s largest bank, restructured its U.S. mortgage operations and announced plans to close an Indiana office.
Finally, this mysterious communication from Homecomings Financial.
Just a quick suggestion for Agents and Buyers in this jumpy market:
Don’t remove the loan contingency until the loan has funded.
I recognize that some agents have always taken this approach. Others—I am of this school of thought—believe that once in Contract it’s best for both sides to determine quickly whether or not there is a deal. Sellers don’t want to waste time with a buyer who picks apart the transaction, and buyer’s agents want their clients to quickly satisfy themselves as to the condition of the property and the financing terms. Does anyone want these decisions to drag out only to blow up at the end. Of course not.
But this market has presented a new challenge: lenders who leave borrowers twisting in the wind, lenders who suddenly meet “unprecedented disruptions” and cannot, or will not, fund a previously approved loan. This is happening with alarming frequency..
If you are a listing agent, counsel your sellers to be flexibile and patient. Request more detail about the lender involved, the borrower’s qualifications, Fico scores, or the type of financing involved. But if you can’t be a little adaptable in this market, your buyer may decide to leave the party before it gets started.
So, I’ll say it again: