Not that it ever proved itself viable to begin with, requiring as it did the voluntary participation of the troubled homeowner’s current lender, but HUD just announced that FHASecure is finished as of December 31st.  Kaput.

FHA stills does (and did long before FHASecure was announced in Sept of ‘07) 100%+ combined loan to value (CLTV) refinances, assuming of course that you can convince your current lender to assume that 100%+ risk by subordinating the balance of any current financing to the new FHA 1st loan.   That’s proven to be a grandiose assumption.

The main difference between the two programs is that while FHASecure required that you be in default, regular 100%+ FHA refinances require that you not be in default.   Go figure.  If that all sounds really stupid, like maybe the right hand didn’t know that the left hand had already spilled the beer, then I’m not alone.  To make FHASecure an even bigger joke, banks now imposed minimum Fico scores of 580 to 620 for all FHA loans, something impossible to maintain when you have defaulted on your mortgage.

Anyway, we can at least strike FHASecure from the list of pseudo solutions to the foreclosure mess.  The sooner we blow out all the legislative smoke, the sooner we can find and try to rekindle the spark of stability in housing.

I know I sound grumpy , but Merry Christmas anyway!

Well, it’s time to get back on my pony here. The site hack I experienced recently combined with this crazy market took the wind out of my sails. But like the fires that have brought nuclear winter to Sacramento–maybe I should say nuclear summer since it’s a 111 degrees today–conflagration in the mortgage industry show no signs of coming under control. So here are a few updates:

INDYMAC BANK IMPLODES

Renown for their dismal customer service attitude toward the mortgage broker community, Indymac Bank bellied up this week. Confessing that federal banking auditors had found the bank to be “no longer well capitalized”, Chairman and CEO Michael Perry announced that the company would take a powder, lay off 3800 or so employees (including some very decent folks locally), and completely exit the forward mortgage business until they can “improve their capital ratios.” That’s corporate double speak for “we’re outta here.”

While promising “to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks,” the company has left borrowers stranded and attempted to extort additional fees in exchange for not canceling existing rates locks. I had one refinance ready for docs that isn’t going to fund, and my associates have buyers packed in to the Bekins van who must now quickly find an Extended Stay while they secure alternative financing. At this point, we are having trouble working through the remaining staff to resolve issues. If you have an Indymac loan, find a replacement, now.

PMI IN RETREAT

Kiss 10% down investor loans goodbye. The same is true for owner occupied, cash out refinances. The mortgage insurance (MI) companies are in full retreat. In recent weeks there have been announcements that as of July 14, MI will no longer be available for any investment properties or cash-out owner refinances in declining markets.

That basically leaves only owner occupied purchases and rate & term owner refinances eligible for 80%+ LTV financing.  And MI for 5% down payments are evaporating as well, leaving borrowers scrounging around for at least 10% down on conventional loans.  If this announcement is a canary in the coal mine, it is quite conceivable that we will soon find ourselves in a 20% down payment world again. Wouldn’t that be lovely. If everyone suddenly needed 20% down, do you think that would freeze the recovery in its tracks?

Thank God for FHA and 97% financing, not to mention the Nehemiah down payment assistance program, which brings me to my next update…

NEHEMIAH FACES RENEWED CHALLENGE

Although I think it unlikely that we’ll see any tightening of FHA requirements in this election year, Nehemiah is facing new challenges from HUD. If it is decided that Nehemiah does artificially inflate property values and distort the market, say goodbye to this program. Sacramento’s sub $350k market has been re energized by investors and first-time buyers, the latter category leaning heavily on substantial seller concessions to overcome their lack of funds for down payment and closing costs. For now, Nehemiah is still around. Best to save up some money. FHA won’t go away, but buyers may have to have their own 3% down payment before long.

That’s it for now. Call me if you need help with financing on the west coast.

Freddie Mac reported that 30 yr fixed rates had dropped to an average 5.875% with one-half point last week. Today was a fairly quiet day devoid of economic news that would sway the markets. The big news of the week comes Friday with March�s employment numbers. Economists surveyed expect a net loss of 70,000 jobs, exceeding February�s 63,000 loss.

CalHFA Pulls Back Max LTV

CalHFA has cut back its maximum loan-to-value in �declining markets� from 100% to 95%, following a long processional of lenders and programs that have recently said goodbye to 100% finanincing. FHA (97% LTV) is all that is left, but if you add a twist of Nehemiah you can get to 103% of the purchase price. Again, there are no income limits for FHA or Nehemiah, and the maximum FHA loan limit has been increased to $580,000 for the Sacramento MSA.

Need help with an FHA loan? Don�t trust your future to someone who has only just started doing these. Call me.

In my last post New FHA & Conforming Loan Limits Announced, frequent Lending Clarity commenter and knowledgeable industry professional Catherine Coy provides a link to Fannie Mae�s guidelines and pricing policies.

A quick read of Fannie�s guidelines revealed some key points about the new conforming loans, or what Fannie calls Jumbo Conforming loans. This list is by no means comprehensive, so you�ll have to read it yourself to get all the details. These are just the ones that seemed particularly noteworthy to me:

Fannie Mae Jumbo Conforming Highlights

• Fannie will start accepting delivery of 15 & 30 yr fixed-rate mortgage on April 1 and 5/1 ARMs on May 1. (Lenders will probably begin originating these immediately)
• All new jumbo conforming loans must be manually underwritten.
• No �Cash Out� refinances allowed
• Fixed rate, 5/1 interest-only, and 5/1 fully amortized loans only
• Minimum Fico 660
• Max purchase LTV/CLTV for fixed is 90% (700 Fico required over 80%)
• Max purchase LTV/CLTV for ARMs is 80%
• Max rate & term refi LTV/CLTV is 75/95%
• Max 2nd home and investment purchase LTV/CLTV is 60%.

Here�s the matrix�
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The Nehemiah program has survived the most recent challenge by HUD, who has tried previously to shut the program down. Hud threatened again last Fall to ban the program which it accused of causing foreclosures and artificially inflated housing prices. The U.S. District Court disagreed yesterday, sticking by its previous temporary ruling that HUD failed to adequately prove its case or consider reasonable alternatives.

Nehemiah still faces an IRS challenge to its non-profit status, so get it while you can. It may survive, but who knows.

If you�re not familiar with the Nehemiah program, read my recent post entitled FHA + Nehemiah: A Path to 103% Financing. With the popular 100% loans disappearing rapidly, this is one of the few options left�..and it�s one of the best combos out there for consumers.

Call me or email me to find out why or for more information on FHA + Nehemiah.

Sub-prime mortgages have largely evaporated. What remains are a few offerings in the 10�11% range with nasty prepayment penalties and the potential for future rate resets.

So what do you do if you or your client have sub-prime credit?

Try Fannie Mae�s DU engine. Although most lenders think of Fannie/Freddie as prime credit only, both offer approvals for lower credit grades. Even with a credit score in the high 500�s, you may be able to secure a Expanded Level I, II, or III approval. While these do carry higher rates�7.5% to 8.5%� you can at least secure a safe, standard 30 year fixed rate loan that doesn�t have a prepayment penalty or nasty reset two years down the road. And, 100% financing is available!

And here�s an added bonus. Fannie Mae offers a Timely Rewards Payment Option. If a borrower demonstrates a �Good Payment History�, the lender will lower the rate with fees or refinancing. The following is taken directly from the Timely Payment Rewards Disclosure and Note Addendum:

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The California State Teacher�s Retirement System (CalSTRS) created a home loan program for teachers back in 1984. I used to do a lot of them until the market went crazy and prices drove everyone into stated income loans. However prices are retreating to more affordable levels again, and CalSTRS restructured its program in 2004 to be significantly more helpful

CalSTRS offers a trio of programs. The Standard Conventional and the Zero Down 95/5 programs are solid performers, but the stand-out in the group is the �80/17� loan. Here�s why:

The 80/17

The 80/17 provides a combo 1st and 2nd that totals 97% of the purchase price. The 1st is 80%, eliminating PMI entirely. The 17% 2nd loan carries the same rate as the first. Both are set by STRS and as of this date are 6.625%. But here�s the cool part�payments are deferred for 5 years on the 2nd! Simple interest accrues�no compounding�and the borrower begins making amortized payments in the sixth year�

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