Mortgage News

Thursday, January 31, 2008

Real Estate Lenders Declining Market Value Guidelines Affecting Thousands

Back on December 5, 2007 Fannie Mae quietly released mortgage-underwriting guidelines that would affect thousands of homebuyers and owners and further test the current real estate market. Now the full impact of this change will be felt almost immediately.

The guidelines updates the maximum loan to values (LTV - here is a LTV calculator) that Fannie Mae will purchase from mortgage lenders whom are selling loans to the GSE (which is just about everyone currently since the Wall Street MBS fiasco)

In summary, all maximum loan amounts are cut by 5% across the board if your property is in a “Declining Property Value Area” as deemed by the following:

A) Automated underwriting systems from Fannie Mae and Freddie Mace return a declining property value notice

B) Property falls into MSA, CBSA or Zip code considered a declining according to the written guidelines from PMI companies.

C) Real estate appraiser notes property as located in a declining market.

Some individuals where already affected via the Fannie Mae automated underwriting system which had its own set of areas built in but now, many more will be since the major PMI companies are enforcing their own guidelines.

Following are some of the notices and start dates from the major PMI companies:

AIG United Guarantee – 5% per automated underwriting system – Jan. 5

MGIC – all properties in California & Florida – Jan. 14

Radian – Download the attached 200 page PDF for areas – Feb. 1

RMIC – as per Automated Underwriting - Jan. 28

So a buyer who saved up his $15,000 to equal the 5% down payment requirement of $300,000 will now need $30,000 to purchase if he wants the same mortgage financing to purchase the home.

Additionally the cost of PMI coverage itself is going up in most of the areas further pushing up the total monthly payments for buyers.

Since the business has been slow and many real estate agents and mortgage lenders have not had any transactions they are going to be caught off guard by this update, leading to many recent pending transactions being cancelled.

So what is a homebuyer supposed to do?

The current options for home buyers is to now use government loan programs such the FHA home loans which requires down payments as little as 3% or for veterans the VA home loan program which allows for 100% financing.

There are other available options but all are more expensive. For example buyers may qualify for the conforming 100% financing options which carry a significantly higher interest rate and PMI rate and be required to put down only 5%.

As a result of these changes, I believe that property value declines maybe further accelerated in these areas and you will see the NAR’s Pending Home Sales Index drop dramatically over the next few months directly due to these changes.

Those homeowners who have been thinking about refinancing should seriously consider doing so now as not only will are they affected by actual property value dropping but now also the decrease in maximum loan to value amounts.

Have any of you reading this had this experience yet? What do you think the impact will be in these areas?

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Wednesday, September 12, 2007

HUD's FHASecure Loan Conference Call Highlights

Today, HUD had a FHASecure conference call to clear up questions on the FHASecure program. Here are some new highlights and take-aways from the call.

First and foremost, the FHASecure program is simply an extension of the traditional FHA home loans with accomodations for home owners who have become delinquent to due mortgage payment resets of adjustable rate mortgages.

Here are some important items discussed.

- If property was recently listed on the MLS for sale you can still refinance as long as the MLS listing is cancelled before closing.

- You can add a non-occupant co-borrower to qualify as per traditional FHA qualifying guidelines.

- Borrowers who owe more than existing FHA loan limits may still be able to refinance if existing lender or a new lender is willing to do a subordinated second mortgage for the difference even if exceeding 100% of the loan to value.

- FHASecure program can be used to consolidate both a first mortgage and a second mortgage that was not a "purchase-money" second (which Fannie Mae / Freddie Mac consider a cash-out refinance) up to the 97% LTV but no more than current FHA loan limit.

- Borrowers who are delinquent can do FHASecure refinace to bring their loan current and finance all late fee's and payments.

- No 12 months seasoning requirements to complete a mortgage refinance.

- The upfront MIP and monthly MIP will remain the same for most likely the next three months. Next week HUD may release some new guideance for future adjustments.

- FHASecure refinance interest rates will be at current FHA market rates.

Other important upcoming items.

- If FHA loan limits are raised, the FHASecure program will also follow those limit increases.

FHA will be posting some Q & A's from the meeting today on their websites in the next few days. Remember that HUD simply insures FHA loans and FHA home loans and the new FHASecure refinance loan are originated and funded by FHA mortgage lenders.

If you are behind on your mortgage the FHASecure program maybe able to help you. You can inquire into the FHASecure program here.

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Thursday, September 06, 2007

Updated FHASecure Refinance Loan Program Details

Yesterday, we received detailed information from HUD regarding the new FHASecure loan. In case you haven’t heard, FHASecure is a new program that allows for some borrowers to complete a mortgage refinance out of an adjustable mortgage into a fixed rate loan even if they are behind on mortgage payments and have multiple lates or even facing foreclosure.

The initial release indicated the main FHA loan qualifying guidelines of the FHASecure program which are as follows:

- Homeowner must have a history of on-time mortgage payments before their adjustable rate mortgages teaser rate adjusted and reset.

- The adjustable rate mortgage must have adjusted after June 2005 up to December 2009.

- Must have three percent cash or home equity in the home.

- Must have a verifiable and continuous history of employment, and

- Sufficient income to make the mortgage payment as per debt to income guidelines.

According the HUD this new FHA loan program will help an estimated 240,000 families avoid foreclosure by refinancing to fixed rates.

Here are some more detailed guidelines of what is possible under the FHASecure refinance loan program:

- The mortgage that is being refinance must be a non-FHA adjustable rate mortgage.

- If the borrower is currently behind on mortgage payments, the loan underwriter must be able to determine that the mortgage rate and payment adjustment of the non-FHA adjustable rate mortgage i9s what caused the homeowner to become behind on mortgage payment.

- The borrower must show that they were making timely mortgage payments for the previous 6 months of the ARM loan adjusting.

- If there is enough equity in the home (up to 97%) and the loan amount is below the maximum FHA loan limit, the FHASecure refinance will allow for missed mortgage payments to be added into the new FHASecure loan amount.

- Maximum FHA loan to value (aka: LTV) ratios 97.15% total. Under certain circumstances with loans below $50,000 maybe as high as 98.75% -

- FHASecure refinance program will allow financing of the first non-FHA adjustable, any original purchase second mortgages (i.e. piggyback loans), mortgage closing costs, mortgage prepayment penalties and late charges. FHA loans will also allow the financing of missed payments as noted above. The main requirement of this is that the maximum FHASecure loan amount cannot exceed the maximum geographical FHA loan limits or the loan to value guideline of 97.15% noted above.

- Borrowers must have the capacity to make the new FHASecure loan payments. This is determined by debt to income ratios that FHA home loans will follow. The new FHA loan payment cannot exceed 31% of the borrowers income and the total monthly obligations including the mortgage payment cannot exceed 43% of the income.

This maybe the most important part of these new FHASecure loan guidelines.

- If the new FHASecure loan amount is not enough to pay off the existing first adjustable rate mortgage, loan closing costs and arrearages, the lender may execute a second mortgage at the time of closing to pay the difference. The combined FHASecure first and subordinate non-FHA second mortgage MAY exceed both the geographical FHA loan limits and maximum FHA loan to value guidelines.

What is not clear currently is if the original mortgage lender can carry this second mortgage or only the new mortgage lender. If it is a new mortgage lender, we will need to wait to see which lenders will offer these second mortgages and what their maximum loan to values and income to debt guidelines will be.

The FHASecure program provides an excellent opportunity for distressed homeowners to refinance their mortgages. Especially those who already have mortgage lates or worse facing foreclosure. The FHA loan allows for extremely competitive mortgages rates that would be otherwise unavailable.

We will be keeping an eye on the availability of the FHASecure program for our clients and shortly will be providing some tools to help borrowers and lenders determine if they qualify for the FHASecure refinance program.

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Tuesday, September 04, 2007

FHA to the Rescue with FHASecure Refinance Program

On Friday, President Bush and HUD made an announcement that will help an estimated 240K people avoid losing their home to foreclosure. The new FHA program allows individuals who are currently behind on their mortgages to refinance but only under certain circumstances. Below are the basic guidelines for the FHASecure loan program.

1 - You must have had good payment history prior to your interest rate adjusting.
2 - The mortgage rate "reset" or adjustment must have happened after June 2005 and up to December 2009.
3 - There must be at least 3% equity in the home. (here is a real estate equity calculator)
4 - You must have a history continuous employment.
5 - You must have sufficient income to afford the new mortgage payment.

Some additional notes regarding qualifying for this FHA program.

- Your new mortgage amount cannot exceed the maximum FHA loan limit in the area.
- Stated income loans are not allowed.
- You do not need to be behind on the mortgage currently in order to qualify for the FHASecure program.

This is an excellent opportunity for those caught by rising rates of their subprime mortgages adjusting. Here are some mortgage calculators to help you determine an estimated adjustment of your 2/28 mortgage or 3/27 mortgage.

View a copy of the original release from HUD.

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