Archive for the 'Mortgage Programs' Category
The New FHA: What You May Not Know About Appraisals
During the sellers’ market of the early 2000’s, FHA loans were the forgotten stepchild of the mortgage business. No seller would even talk to a buyer approved through FHA or VA. One big reason for that avoidance was the FHA appraisal and related property issues.
All that has changed.
While an FHA approved appraiser must still be used, the rest of FHA’s appraisal requirements have been brought into parity with those of conventional loans. Here are some key improvements:
- Pest reports: No longer required. Pest reports used to be an FHA fact of life, and every structure on the property—the broken down shed in the back forty included—had to be inspected. The seller was required to fix or tear down that shed and repair all Section I & Section II inspection items. Today, even if a pest report is written into the Contract as a condition of purchase, the lender will likely only ask for a letter signed by the buyer confirming that all conditions of the Contract have been met. The only time a pest report will be required is when the appraisal calls for it.
read comments (4)“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.
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:
Don’t remove the loan contingency until the loan has funded.
If common sense and research studies hadn’t already convinced you that you should use a mortgage broker (vs. a mortgage banker or direct lender), then chew on this:
Countrywide and Washington Mutual, two of the nation’s largest mortgage banks, stated this week that they are facing “unprecedented disruptions” in the secondary market for mortgages that could adversely impact earnings and financial condition. Unprecedented disruptions. Hmmmm… that’s a vague and scary phrase, but what does it mean?
It means that if you arrange your home loan through a mortgage bank and they experience an unprecedented disruption of the we-can’t-fund-your-loan kind, you may be sleeping in the U-Haul at the close of escrow.
Think I’m exaggerating? Everyone’s heard about the demise of American Home Mortgage (AHM)—one of the nation’s 10 largest mortgage bankers—who one week ago had exactly that type of unprecedented disruption. The were about 7000 people suddenly without jobs, but more to the point there were $800 million in approved loans that didn’t close. U-Haul must have had a great weekend. Those borrowers and AHM employees did not.
How is a mortgage broker different?
The Mortgage Carnage Continues
Monday Update
American Home Mortgage called it quits on Friday, filing for bankruptcy protection.
Today, both Aegis Mortgage Corp. and National City Mortgage’s home equity division stopped accepting new applications. Aegis indicated that it would NOT be able to meet its present funding obligations.
AltA loan programs, home equity loans, and pay-option arms remain frozen until further notice, and Wells Fargo’s jumbo rates were priced all the way up at 8% this morning.
I’ve never seen anything like this in 18 years.
Stay tuned. It’s going to be a wild ride.
Another Wave of Mortgage Underwriting Changes
Yesterday from First Franklin…..
First Franklin no longer allows loans at >95% LTV. This applies to all doc types. Loans at >90% LTV have a maximum loan amount of $500,000 and require a minimum 680 FICO. This applies to all doc types. 90% loans are not available for first time homebuyers. To qualify for >90% funding, borrowers must have owned a home during the previous 3 year period. The Stated Plus and Blended Access programs have been discontinued.
Today from Chase Home Equity…
- Effective August 6, 2007, all stated income/stated asset home equity loans and lines are discontinued, except…
- Self Employed borrowers with 700 Ficos
- *Commissioned salespeople are considered salaried, not self employed
Today from Wells Fargo…
- Alt-A Discontinued Until Further Notice
- Due to the appetite and demand for this product in the secondary market, we are not able to obtain pricing from our investors. Until we find out more, the rate sheets will not have pricing for this product. A newsflash will be going out soon regarding unlocked pipeline and loans locked that are not yet delivered.
- Thank you for your understanding during these market conditions. Please let us know if you have any questions.
Are you working with an experienced, full-time professional who is staying ahead of the rapid changes in the mortgage business?
Minnesota Overreacts to Mortgage Abuse
In one of the biggest overreactions to mortgage lending problems, the State of Minnesota has passed legislation outlawing stated income mortgages. On April 20, the state legislature passed House File 1004 and Senate File 988 aimed at limiting abusive home lending practices. But did they go too far?
Oops, I Think the Baby Was in That Bucket
Requiring that borrowers must now document income and assets for all loans on primary residences and 2nd homes, the law prohibits the use of any Stated Income, No Ratio, No Doc, & No Income/No Asset loan. In other words, the only way a borrower can get a loan after August 1st is to show pay stubs, W-2�s, tax returns, and bank statements.
This would make it impossible for many self-employed people, not to mention those with income from unseasoned second jobs, notes or child support/alimony lasting less than three years, to secure a home loan. See my previous post on 4 Reasons to Keep the Wage Earner State Income Loan for a better understanding of this issue. Dumb idea? Yes, I think so.
And That Ain�t All
Minnesota�s bill also bans all negative amortization loans as well as prepayment penalties on loans of less than $75,000. It establishes an agency relationship for mortgage brokers with civil and criminal penalties to go along with it. Now, we can discuss the merits of suitability standards and penalties, but before you decide whether this legislation actually protects consumers or just covers legislators� asses, read this: