Mortgage Marketing News

Home Affordable Refinance Program Update 11/15/11

2011-11-17T10:31:00.000-08:00

The Federal Housing Finance Agency (FHFA) has announced the extension of the Home Affordable Refinance Program (HARP) until December 31, 2013; therefore any loan originated on or before this date in the Refi Plus program is eligible for these new features.

The FHFA has also made changes to the Home Affordable Refinance Program (HARP) in an optimistic attempt to attract more qualified borrowers who can benefit from refinancing their mortgage loans. In these efforts Fannie Mae will make changes to their program with Freddie Mac following.

Changes to the program:

Fannie Mae will now make loan to values secured by fixed rate mortgages with a term to 30 years. This will include those loans with terms of 15 years and were previously restricted to 105% loan to value. There will not be a limit to the combined loan to value (CLTV); first mortgage and second, if applicable or home equity line total value ratio, (HCLTV).

Maximum LTV ratio limits for all occupancy and property types

there will be no maximum loan to value ratio for fixed-rate mortgages with a term up to 30 years,

105% loan to value for fixed-rate loans with terms greater than 30 years and up to 40 years, and

ARM loans with initial fixed periods greater than or up to 5 years and terms up to 40 years; will have a maximum limitation of 105% also. (when the loan program permits)

This program will begin with applications taken on or after December 1, 2011.

Current Mortgage Payment History:

the borrower cannot have any mortgage delinquency on the existing mortgage in the most recent 6 month period. No more than one (1) 30 day late payment in the months seven (7) through twelve (12).

Qualifications:

the middle (representative) credit score can be no lower than 620

maximum DTI (debt to income) ratio of 45%

income verified per policies already in place

assets to close (if applicable) will be verified as normal policy

Bankruptcy/Foreclosure:

Fannie Mae has announced that they are not restricting the borrowers on the new loan to meet the standard waiting period and re-establishment of credit criteria for bankruptcy and foreclosure. They have also removed the same guideline and requirement on bankruptcy and foreclosure for the original loan in effect at the time the loan was originated. Please remember that you must qualify in all aspects other than this for the Home Affordable Refinance Program.

As always it is necessary the you; the borrower receive a benefit from the transaction to qualify for the Refi Plus; Home Affordable Refinance.

This can be done by reducing the monthly payment, principal and interest

changing the program from an ARM to a fixed rate

reduction of interest rate or

a reduction in the loan term, ie: (30 to 20) (20 to 15)

Again, please note that sometimes the lender may have a credit score limitation that FNMA does not have but normally if it fits Fannie or Freddie guidelines and in acceptable to the Home Affordable Refinance Program (HARP) there should be no problems. As always these is a synopsis of the changes and there could be other criteria not mentioned here that applies to the lender or Home Affordable Refinance Program.

Mortgage News

2011-10-22T13:04:00.000-07:00

Well, I am back after a hiatus from writing and I am here today to voice my thoughts on all of the Mortgage News Now. I have made a new website and I am geared up to keep everyone posted on not only the Mortgage Facts U Need, but other things I enjoy writing about also. Mortgage changes are symbolic of the economy, ever changing from one day until the next and hopefully I can give some of the most important mortgage news that will benefit your needs.

Interest Rates in Mortgage News

Yes, the mortgage rates are low, running about 4.000 % +- an .125, .375; here and there. Yes it is important to watch the rates if you need to refinance you current mortgage loan, and if you can drop your rate by a significant 2 percentage points. I know, I am old fashioned, but you will not know the difference (hardly) if you can't drop your rate by at least 2.000%. You can merely pay a small additional principal to each payment you are making and it will be the same difference. In fact, you are doing yourself an injustice if you do. Okay, I know that you want better mortgage news than this because you want to save every dime you can as the economy seems to be getting worse; not better. This mortgage news will tell you exactly how you can skip the refinance (if you can't drop by 2 points) and save money. That is actually what we are after, right?

Saving money without the refinance:

If you have a rate of only 5.50% and you can get the rate of 4.000%; why would you pay three (3) % closing cost on, let's say $351K just to change your rate no more than 1.50%. Unless of course you are fortunae to have a hunk of money to either pay out of your pocket or add back to your principal balance. Why, my friend would you want to do that?

Let's say your current mortgage was $353,400 principal balance when you last refinanced. Your payment for 30 years on $353,400 would have been $2006.57 principal and interest per month. If you decided to refinance now at 4.000+-, and if you have paid $17870 on the principal in 42 months the new balance would be $335,529 and you new payment would be; $1601.87, a difference of $404.70. This sounds like a lot of money to save and it is, but you have forgotten about the 2.50 to 3.000% closing cost that you will have to either pay out of pocket, or add back to the loan. (If your appraisal dictates the value needed to add back the closing cost). If you add back the closing cost to current principal balance; $335,529 + 2.75% (being conserative) = $344,756, decreasing your equity position by $9,226. That is of course if you reamortized the loan over 30 years again. If you changed the term to a 20 or 15, your payment will be higher of course but you will save interest and payoff earlier. It will take you a 18 months to regain your equity position of 335,556.94. Oh boy; the originators will hate me for this, but it is something one needs to think about really hard and see how they can save money without refinancing.

How you can actually accomplish about the same thing without paying more closing cost..or adding it to the principal of your loan:

If you have money to burn; take the closing cost and pay down your principal and you have automatically decreased your 30 year mortgage by 20 months almost 2 years, instead of adding back years.

Take the money and just pay an additional 100 dollars a month. You are still increasng your equity position and you will pay off you mortgage early. The more principal balance you pay; the quicker you will pay off your mortgage loan. Be it $25, 50 etc.

You can also amortize you balance for a 20 year payout or 15 year payout and pay that amount each month and this will benefit you as much as the refinance. You are using your own money to pay down your mortgage without paying the additional closing cost that you would have had to pay the mortgage company up front...if you did the new refinance. This latter of course will be the best most beneficial in terms of paying off more quickly.

Mortgage News in General:

Some of the larger mortgage companies are still have foreclosure troubles and bouncing back after the fall. Bank of America is no longer doing business in wholesale. I still say that the banks did not cause the breakdown in mortgage lending. It started at the top and flowed down to the rest of the mortgage industry. If the GSEs has not followed suite with the SubPrime lending business....life would not have been as we see it now. In fact; if congress had not decided that "everybody deserves a home" (at all cost and they do, but not all cannot afford a home); which began the SubPrime lending, then we definitely would not be where we are today. Little good does it do to try and place blame so we just have to accept things as they are and the consequencies of the behaviors. A lot of people made a lot of money without any quilt.

New disclosures are still in the developing process but samples do indicate that they are to implement more transparency and simpleness. This includes the good faith estimate (GFE), truth in lending (TIL) statement and the closing statement (final HUD1). Of course now the regulatory agencies are making sure all things mortgage will benefit the applicants more than ever. My question is where were they in the early 2000's and up?

The mortgage news for the big banks is that they have reported some increased earnings, but stocks have taken a hit for their other losses such as foreclosures or repurchases. Bank of America announced $6.3 billion of new income for the third quarter. This is an increase from a $7.3 billion loss one year ago. Wells Fargo also had about $89 billion of residential loans in the third quarter, but that does not help as they increased their repurchase division by 61%. Citi reported an increase of about 50% in residential loans the 3rd quarter and Goldman Sachs reported a loss for the third quarter. The latter was only the 2nd loss that Goldman had reported since 1999.

Hopefully we can keep you up to date on the major news in mortgage lending and mortgage news worth reporting but always looking out to save you money and give you some hints you might not have thought of.

references: mortgage news daily & mortgage loan facts-u-need.

Married to the law

2011-09-30T22:59:00.001-07:00

Married to the law

HAMP -Home Affordable Modification Program

2011-09-20T12:27:00.000-07:00

The best helpful advice for a Home Affordable Modification Program that can be given is not to expect too much, too fast. It isn't going to happen in 30 days and not likely 90 days. It is a very long process and if you make a few mistakes about your financial position; you could be denied before you are approved.

That said; I will explain. If you have lost your job, have no income, or very little income but expect to have some kind of compensation within the near future (before the mod is approved), and you are the only individual on the loan; (signed the note) do not, tell them your spouse's income if they are not on the loan. If you do, and you start receiving income again; you might not qualify for the modification should you get another job or have income coming in such as retirement, Social Security, part-time employment, or whatever the case may be. If you ever disclose another person's income living in your home, they will use the other person's income throughout the process and it could make your housing ratio sufficient to repay the current mortgage housing payment that you have been struggling to pay or 31% or less. Meaning you could not qualify in as little as one step of the Home Affordable Modification guidelines.

If you have no income coming in and do not see it in the near future; then I guess you have no other choice but to disclose spousal income. Just be sure you will not have income in the near future yourself or know that it will not be sufficient to make your housing ratio 31% and below. Meaning the mortgage payment; principal, interest plus, taxes, insurance, mortgage insurance (if applicable), and homeowners association fee (if applicable) divided by your gross income does not equal 31% or lower. Your housing ratio must be over 31% to qualify for a Home Affordable Modification, using all income that has been disclosed, regardless of who's income you have used when you did not have any income or very little. They will not just use your income at a latter date even though you are the only individual on the loan. These are facts that individuals have experienced trying to get the Home Affordable Modification Program.

This is not standard underwriting guidelines. Most people know that only the borrower's income is used in typical housing and total debt ratios, but in this modification program, they will use any income of person's not on the loan that reside in the home for qualifying purposes in the Home Affordable Modification Program.

Other useful tips regarding the Home Affordable Modification Program:

It doesn't matter that you have car insurance, groceries, child care, gasoline, utilities. These are not considered in ratios, but they do exist and can keep you from having sufficient income to pay a mortgage payment is less than 31%. It doesn't matter with the Servicing Lender...

Yes, they do want a budget, financial statement or outline of your debts, expenses and income.

They want 60 days of bank statements.

They need 30 days of current paystubs or income evidence and sometimes more.

They will request 2 years 1040's, personal tax returns.

If you have been struggling trying to get a Home Affordable Modification and keep getting denied, from one reason or the other, make sure you have read all updated guidelines. Your lender will still use any and all income that has been disclosed to them initially; regardless of whether that income comes from a person who has signed the note being responsible for the mortgage repayment or not.

Home Affordable Modification guidelines do not post every little detail and that is why I have posted this for my readers.

Simplifying Disclosures for Mortgage Loans

2011-07-20T20:45:00.000-07:00

Most mortgage professionals know that the latter Good Faith Estimate, (GFE) Truth in Lending (TIL) and the revised HUD1 – Settlement Statement did not bring closure to transparency or clearly being able to understand all the fees associated with mortgage loans. Simplifying disclosures are like any other thing in life. What might be simple for one just might not be so simple for another. The terms and explanations sometimes used bring more confusion and misunderstandings if one is not in the mortgage business or has not studied up on the mortgage process. Yes it is the originator’s responsibility to explain all things mortgage, but as always with anything, there is only so much time that can be spent explaining things; right? Well, maybe not, but that is how it is. So, to simply say we have simplified mortgage disclosures to make it easier for the consumer is not as simple as we would like and since there are many different interpretations of what simple is.

Actually the latter disclosures were more confusion for some than the one page, legal size which was replaced. It was simply because there were three pages of bunch of mumble-jumble, with a lot of lumping all of the origination fees together. For instance; page 2 number 1 said: Our Origination Charge –This is the charge for getting this loan for you. Number 2 included any points for adjustments for the rate. So many people need this broken down into more simple terms. For instance….instead of the charge for this interest rate is included in our origination charge. Most would think this charge would be spelled out like it was on the old GFE.

The most recent form was too lengthy with too much information at some points but too little clarification of all the cost involved and especially if the loan was originated by a Broker office and not the lender who is providing the financing.

Elizabeth Warren, advisor to the Secretary of the Treasury for the Consumer Bureau has stated that, “A simple, straightforward and consistent presentation of a credit agreement is the best way to level the playing field for consumers and lenders, and among different types of lenders, and foster honest competition.”

On May 18^th, 2011, the Consumer Financial Protection (CFPB) rendered their first revised version of a simplified home loan disclosure by combining the Good Faith Estimate and the Truth in Lending forms. At that time they requested feedback for these form to make sure they knew how mortgage professionals agreed or disagree with its components and layout. They received thousands of comments and suggestions which brought about a second version which was released somewhere around June 29^th, 2011. The latest revisions and samples are ready for review for professionals from Consumer Finance to see if these documents meet the need of transparency.

The forms in question are of course mandated by the Real Estate Settlement and Procedure Act (RESPA) and the TILA (Truth in Lending Act). Comments were requested for the latest version, but due to the July 4^th holiday weekend; turned out to get minimal results. The Mortgage Bankers Association (MBA) has indicated that the Industry needs more clarification to these mortgage loan disclosures and explanations which should be geared to meet and adhere to RESPA rules. MBA wants to have a sit down meeting with Elizabeth Warren; Secretary to the President and Special Advisor to Treasury Secretary, and said that insufficient time had not been spent for comments for the second disclosures. The MBA also dictated that though the form were improved; the closing cost needed a bit more fix as they were inconsistent with RESPA rules and regulations.

Home Affordable Refinance Program Extended

2011-06-10T15:30:00.000-07:00

The FHA has decided to once again extend the Home Affordable Refinance Program (aka HARP.) Perhaps now is the time to look into whether or not this is an option for you. It is a program created to help the millions of Americans who have had trouble refinancing due to decreased home values. When it is successful, it has similarities to a loan modification, but you actually get new mortgage with new terms (lower interest and lower monthly payments.)

HARP may be an option if:

You are current on your mortgage payments (no 30 day late payments over the past year)
Your home is worth less than what you paid for it.
Your first mortgage is not greater than 125% of your home's current market value.
Your loan is owned by Fannie Mae or Freddie Mac.

The best way to find out if you qualify for a Home Affordable Refinance Program loan, is to contact a HARP lender. Not every lender is equipped to assist you. Here is a way to check and see if you quality for a HARP loan through a trusted HARP mortgage lender. Simply complete this mini-application online.

Risk Retention-Qualified Residential Mortgages

2011-05-30T10:14:00.000-07:00

Most have heard or read that something new was coming regarding Risk Retention and what will be identified as Qualified Residential Mortgages (QRM). Quite simply; a 20% down payment is the first step toward having a QRM for the lender to be exempt from retaining a 5% balance of the loan for Risk Retention purposes.

The Risk Retention - Qualified Residential Mortgage rules implied by the Dodd-Frank bill eliminate loans guaranteed by FHA, VA, and USDA (United States Department of Agriculture). This means that these entities of government loans will not retain any percentage of the loan balance or have the implied rules regarding ratio and other criteria. Fannie Mae and Freddie Mac are also release from the potential of risk retention regulations for now. Of course, if and when they are released from conservator-ship the exempt status will again be re-evaluated.

The standards in tact at this writing for mortgage loans to be qualified as a QRM:

Purchase:

20% or more down payment

DTI (debt to income ratios) must be 28% housing ratio and 36% total debt to income or less

High standard for documentation; no loopholes

Past performance on mortgage, rent and other debts with no 60 day late payment within the previous 24 month period

Payment shock

loan to value

income stability and the potential for increased earnings

Refinance:

Maximum combined LTV 75% -Rate/Term

Maximum 70% for Cash Out Refi

With all other qualifying criteria met

Qualified Residential Mortgages will not include any loans which have risk potential which means those which have interest only payments, payment shock, the ability for negative amortization, or any situation which might present a future difficulty of the borrower making the payments. Adjustable Rate Mortgages have not been named at this time but could in all actuality become a problem for future payments if the borrower is not qualified at the adjusted rate of the loan.

The FDIC along with other regulatory agencies to include The Office of the Comptroller of Currency, Teasurer, Board of Governors of the Federal System, U. S. Securities and Exchange Commission, Federal Housing Finance Agency (FHFA) and HUD are the agencies who released the standards for the QRM. Therefore great thought has gone into exactly what is needed to reduce the risk of mortgage loans.

FDIC stated that one of the reason for the vast housing bubble was the fact that the Alt A and SubPrime loans were actually sold to private investors without any risk retention for default. During the years of 2005 and 2006 these loans were made in excess without regard to down payment, DTI ratios and money for closing cost. As we have discussed previously; almost anyone could obtain a mortgage regardless of their credit situation, assets or true ability to make the payments. There were many mortgage options which were hard to understand for the layman and borrowers did not know what the risk were for some products.

The regulators realize that most moderate to low income individuals cannot afford a 20% down payment; therefore they will have options to go to FHA, VA and the USDA route; if they qualify in all other areas. This actually was the purpose of FHA originally and VA was to support the housing interest of veterans.

The FDIC also implies that this is to regain confidence by investors for securitization within mortgage lending as the down fall occurred greatly with the investors being without any potential to save the mortgages which went into default...especially with the vast number of risky loans which were made. Securitization frees up more money for the lenders to make more loans.

Summary:

This ruling is to try to provide stability within mortgage lending again. It is to ensure Banks, mortgage companies and brokers provide quality loans in all areas of origination and that the Risk Potential is less.

This rule, and/or format does not leave out those who are lacking in maybe one area of qualification, and those who have otherwise strong potential for making their mortgage payments in a timely manner as we have already stated. There will always be another option for these perspective applicants. This Risk Retention for Qualified Residential Mortgage guidelines; per this writer is in the best interest to rebuild the lending industry by making everyone liable for those loans which do present a less than favorable outcome.

Risk Retention Rules

2011-03-29T11:24:00.000-07:00

Mortgage Finance- Pending Risk Retention Rules

It has been in all conversations since the mortgage meltdown that someone, somewhere should have been made more responsible with the origination of mortgage loans. I think we all agree that yes, there should have been more advanced scrutiny for the originating lender or originator of the loan, which included the vast number of SubPrime lenders and the investors who bought these loan, those Wall Street Investors and buyers. Instead of course, Fannie and Freddie decided they would join in and wanted to take a piece of the risky loans also, or should we say the $ of profit from higher interest rate mortgages which were risky to begin with. I could go back a few years and tell you exactly what some of these risky loans were but you can review yourself. Of course we know that instead of accountability; there was a flux of guidelines which helped the agencies to profit like the 'bad' guys who took the heat. Oh, let's not leave out FHA. They also changed some of their guidelines. That is facts not fiction.

That said there is a Dodd-Frank bill that is to be implemented and is being reviewed and certain explanations identified for what a 'Qualified Residential Mortgage' is. This Risk Retention bill contains provisions for every mortgage lender who makes mortgage loans more liable as they will retain at least 5 percent share of liability for the mortgage loan they have originated. This is in hopes to generate some stability to the market as this will definitely cause more audits, enforcing of guidelines and impending accountability.

FDIC is meeting today to set their standard of the phrase and it is assumed the other agencies such as The Commission, Secretary of Housing and Urban Development and the Director of the Federal Housing Finance Agencies will follow.

These agencies are actually those agencies which regulate the banks, and financial sectors who make mortgage loans. But, as always in the nation's housing system; there will be exemptions. There always is. With the FDIC set to vote and clarify today, the rule for exemptions for Risk Retention Rules and exactly what a 'Qualified Residential Mortgage' is. There are also hearings about the future of housing going on at Capitol Hill. Most of American's are saying it is about time as we have been into this process way to long now and stability for the housing industry nor the economy has taken place. Of course the banks have more portfolio than their share to get rid of since the HAMP Modification has not been a huge success.

Reports are that Mortgage Banker Association has released some documents for lawmakers which they warrant will also help (or should) with policy making and the stabilization of the housing market. The MBA is arguing that even though private capital should dominate the source of housing credit; the government role is a necessity and that all decisions should be made very carefully. This follows the news that the government is relinquishing their role in homeownership within a certain time and that Fannie and Freddie 'may' go away.

MBA sights that there should still be some foreseeable government role to ensure investor confidence, liquidity and stability to homeownership and rental housing. This would mean of course that there would have to be private investors (not Fannie and Freddie) who would furnish the money to reimburse the mortgage originators so they could have more capital to make additional loans; which of course is risky within itself.

The facts are that without a government role other than FHA, VA, USDA the other sector of loans; what we call conventional lending will be somewhat handy capped when private investors take over, completely. It is the opinion of this writer that the private sector of investors is initially really what caused the financial crisis in the first place; meaning Wall Street Investors such as AIG, Salomon Brothers, Lehman Brothers, and Bear Stearns which sold to J P Morgan Chase because it could not be save. We know that some of these took the American people's money as they were too big to fail. So we wait to hear the final ruling on the governments role in the housing industry as well as who will be exempt from the Risk Retention Rules.

Mortgage News

2011-02-01T10:12:00.000-08:00

We are always looking for something good to report about Mortgage Lending because of course; we have heard so much bad Mortgage News. It is either that all of the banks are doing nothing but get our money, without regulations and the people who take mortgage applications are all crooks.

Well, actually neither of the above are true. the banks are not out just to get our money and not all loan originators/loan officers were crooks and there has always been rules and regulations. Lots and lots of rules and regulations; especially FHA and VA.

The rise and fall of the home-loan industry was due to loose guidelines; therefore re-structuring is essential to get back at least stability within lending and if possible; what we have lost.

That said, The Mortgage Standard reported that Federal Housing Commissioner (FHA), David Steven in a New England Convention; gave a speech and his one sentence that stood out to me was this: "the reining in the home-loan industry is a natural outcome of taking down the entire United States economy."

Truer words could not have been spoken, we will all agree to that. He went on to say that "the home-loan industry needs to support the change that is being implemented by the SAFE Mortgage Lending Act and the Real Estate Procedure Act as a form of self-preservation." He also added; "it is time for us to reinvent our industry." I doubt that few disagree other than those who feel their pocketbooks squeezed by the Loan Officer compensation makeover and possibly those in the Real Estate Industry who have already begun the debate the underwriting guidelines are too touch.

The report mentioned by the Mortgage Standard also stated that the mortgage industry lost $6 Trillion in equity. In the meeting the Commissioner report that in Connecticut alone where there had been 20,000 mortgage brokers there were now only about 3,800. If that doesn't tell us a lot; what will?

It is time for change and people are always objective to change; in almost every part of life. It is unfamiliar and it may cause us a little pain. We know that the main reason for the fall was due to the loose guidelines and regulations to begin with and if the Subprime loans had not been in operation; the mortgage meltdown-mess (some call it) would not be in this predicament. The aforementioned was also similarly said by the same FHA Officer.

The licensing of all loan officers, account executives, and loan representatives will help in some circumstances as far as making sure they people who originate loans, at least have been through some type of study and not someone just off the street to pick up the compensation. The Broker office has always had licensing procedures but the guidelines were flexible. Banks did not have to get individual license but now they will.

The compensation of originators will in fact, weed out those who were looking to make the big bucks, and make all proceeds transparent, which is for the better. Not everyone will be happy, but that is part of life. Everyone made big, big bucks during the Subprime err and that is why so many fell apart when the bigger Subprime lenders started collapsing. It brought down the Brokers who were not prepared for the changes and who did not have the sufficient "good" relationships with the Prime lenders to continue originating loans.

Subprime lenders could also make Prime loans (A paper) loans if approved with a Prime Conventional Lender. At one point Subprime loans were considered B,C,D and etc. and of course the good loans sold to Fannie Mae and Freddie were called Prime or A paper.

Something most people do not realize is that a lot of people with decent and even good credit went to the Subprime lenders before and after Fannie and Freddie relaxed their guidelines. Why? It was because the guidelines were less restrictive regarding seller paid concessions, no mortgage insurance for loan to values greater than 80 % in most cases and loan to values. EVERYBODY was out to get the largest house in the neighborhood, with the highest loan to value and will as little money down as possible, with the seller paying up to 6% closing cost; thinking there would never be a payday.... Unlucky for them; it was a payday because they opted for an ARM loan with the lowest rate that would be adjusting in 3 years to a payment they could not afford.

Okay, to close out this report; let's just say that it is definitely time for change because had the latter change not occurred; America would be in a better economical position today.

Avoid Foreclosure

2011-01-25T08:49:00.000-08:00

Fannie Mae is helping with Hardest-Hit Fund for Unemployment and Reinstatement Programs for those borrowers who are at or near foreclosure. You may be able to avoid foreclosure.

Some may not know that there are state programs which exist to help even those borrower who are about to hit the foreclosure button because they do not have jobs or income coming in and cannot qualify for a Home Affordable Modification or Refinance. Fannie Mae is continually trying to implement ways to help the hardest-hit unemployment areas of housing and especially those who still have not found employment, of course these are programs congress has approved as well. If you are living within one of the states below; and are without a job and income; get in touch with the National Council of State Housing Agencies in your state. Also speak with the lender on your loan. They will be able to tell you also about these programs; or at least they should be.

Lenders must work with Housing Finance Agencies to help those people who have come to them for assistance in helping them retain their home, while unemployed. These agencies have received monies to assist those borrower who are about to lose their home. Let's back up just a little and explain who the Housing Finance Agencies are and how this all came about..

Back in 2010, Fannie Mae and the National Council of State Housing Agencies (NCSHA) signed an agreement to help Housing Finance Agencies (HFA) meet the affordable housing communities they serve. Through this new relationship participating HFA members are granted access to a suite of distinct mortgage lending options designed to help them bridge the affordable housing gap in their state. The relationship or alliance offers the participating HFA members more ways to expand homeownership through unique benefits and special cost of the loan. Each state has their own program and the program will differ by agency and state usually.

This benefit is in addition to the Home Affordable Modification Program (HAMP). For instance; if a borrower who has a permanent modification under the HAMP program, but becomes unemployed they may use a HHF Unemployment Program to make monthly mortgage payments. If the borrower remains unemployed upon completion of the HHF Unemployment Program, the servicing lender must evaluate the borrower for one of Fannie Mae's foreclosure prevention alternatives, including forbearance.

There are 19 states that are receiving HFA funds and those states are: Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee and Washington, D.C.

It is wise to know all of your options and seek to retain your home if at all possible and endeavor to stop foreclosure, which leaves you without having experienced all options available.

New FHA Guides for Reverse Mortgagors

2011-01-16T16:40:00.000-08:00

Taxes and Insurance must be paid!

FHA – The Federal Housing Administration made an announcement early in the month of new instructions and guidelines for lenders and borrowers to follow for those loans which are designated as Reverse Mortgage or Home Equity Conversion Mortgage.

It is common knowledge these mortgages are loans to assist senior citizens who have sufficient equity, or no mortgage loan at all; to finance their home for a certain portion of their equity in their home without having a mortgage payment. It appears from this announcement; that some senior citizens have not paid their taxes and insurance on their homes, thinking, it was included in the process of making the mortgage loan. The lenders are having now to deal with these unpaid taxes and insurance by paying them so that they will avoid foreclosure.

As these items are mandatory for owning a home regardless of whether there is a mortgage payment or not, FHA is making some clear instructions for the lenders to make sure the Reverse Mortgage Borrowers understand that if they cannot pay the hazard insurance and taxes; their home can still go into foreclosure. Lenders cannot pay these items on a continued basis or indefinitely, and not be reimbursed for these funds that have accumulated.

HUD regulations have allowed lenders to make tax and insurance payments on behalf of the elderly clients from the borrower’s available mortgage funds. However, once those funds have been depleted; the lender must advance funds to pay these normally escrowed items to protect FHA’s interest and then be reimbursed from the homeowner. The homeowners have failed to understand this part of the reverse mortgage guidelines and regulations.

It appears now that in some cases these unpaid funds have become a tremendous burden and have grown to a measure that could put the FHA Insurance Fund at risk. The lender cannot pay these funds nor can FHA’s insurance cover this for an undetermined period. This being the homeowner’s responsibility, they must make efforts to repay these funds, and if this debt is not cleared with the lender/FHA, the lender has no other choice. This can result in foreclosure proceedings as these unpaid funds are out of compliance with the mortgage loan requirements and therefore HUD considers this a delinquent mortgage.

With this new problem, FHA has now implemented measures to alleviate this problem in the future by setting aside nearly 3M to housing counseling agencies. These housing counselors will also begin educating those who have become delinquent borrower by not understanding that hazard insurance and taxes must be paid and at some point, in some cases by them; the borrower. They will be offered a repayment plan and given time to clear up the deficiency.

The lenders will send out letters to those who are in a delinquent status and explain the details of recovering from their current non-paid status.

Property Values Still Declining

2011-01-05T11:13:00.000-08:00

Just read something that is really interesting to say the least and it entails that for the first time in a long time or if ever; real estate may now be considered a depreciating asset as Property Vales are Still Declining.

This is not a hopeful picture for anyone who needs to refinance with a balance that is higher than the value of their home or even those who want to purchase a home where the values are still headed downward. It has been reported that many clients are getting preliminary approval and then the collateral can't match up to the value need to get even a rate/term refinance done without mortgage insurance or even at all. This is hurting these people who bought homes at the higher price and now they are coming in at 10, 20K or more; lower in some cases. This tells me as a prior underwriter that the market at that time dictated escalated sales prices. Most of us who worked in the industry know that during the high volumes years, know that everybody made a profit. Values rose because there was such a demand and sometimes those sales prices were inflated for closing cost of 6% and possible any repairs that were needed prior to closing, on top of the real estate commission. We can't take back those years, they happened and now we have the results....kind of sad, isn't it?

What is causing this great reduction in value for so many? With the excessive foreclosures Nationwide, the banks are putting these homes back on the market. The lower prices that these homes are selling for is making the other homes in the same neighborhood have less value. In other words, everyone has to suffer the consequences of the foreclosed properties. The banks can't hold the foreclosed properties until the market "might" change.

When an appraisal report is completed, the appraiser goes into a subdivision to perform an evaluation of the property value; it must be based upon the value of the surrounding homes (within the most immediate area), the same subdivision usually. If the majority of the homes have declined in value; it will bring down the market value of those which have not had foreclosure, regardless of what the previous sales price was or value. When the homes were bought the value was based upon the market value at that time. Prior to 2007, real estate was appreciating and the seller could almost name the price. What happened at lot of the time thought during the boom; if the houses in the immediate subdivision did not give the value needed for purchase or refinance; appraisers were advised by lenders and real estate professionals to step outside the immediate area for comparables. The guidelines allowed that to happen as long as it was reasonable and the amenities were more valuable than the other homes in the immediate area.??? They did and this is part of the end results.

Possible Solution....

For those who cannot refinance your loan due to declining values, just in case no one has mentioned; you can possible get a rate/term refinance up to 97.75% with FHA. Check into it, if you haven't already. Hopefully things will take a turn for the better but it is not anticipated that it will. It appears from the millions of foreclosed properties on the market; that Property Values will Still Decline.

The List of Mortgage Questions

2011-01-03T05:47:00.000-08:00

When applying for any mortgage loan it is beneficial and imperative that an applicant ask questions so they are fully knowledgeable of the product, interest rate, origination fee, points and any closing cost that is being paid in the loan. The lender's agent/loan officer is required to know and be able to explain all questions.

It is your dollars that are going into the transaction; know what they are being applied to.

The List:

Always ask the loan representative to explain any question they ask you that you do not understand why it is being asked. There is never a dumb question; only one that is not asked.

It is imperative that an applicant understands that they should receive at least (3) disclosures within three (3) business days of loan application. If you do not get them, you should call and request them as these disclosures are required by law and you should receive explanations for the cost that is on these forms. Especially the Good Faith Estimate (GFE) and the Truth-in-Lending (TIL) forms. The third disclosure is the Servicing Disclosure which will indicate to you how much of the originators/lenders volume of loans is serviced by them or if they sell all of their servicing.

On the GFE there are fees at the top of the form which include the origination cost of the loan. It is lumped together at this present time on the form. This is the origination fee for the lender and if you are using a broker their fee will be included here also. It will also include any application fee, underwriting fee, and processing fee. You should ask the loan representative to explain all fees which are lumped together. It is law; you have the right...take advantage of this important issue.

Discount points...these points (if applicable) are listed under the origination fees. The only time you should have discount points is when you have an interest rate change. Meaning, if you chose a rate of interest that is not the going rate for the day you have requested. For example: the rate for the day without any cost would be 4.750%. You desire an interest rate of 4.500%. You will have to pay to get a rate less than 4.750%. It can be .125%, .250%, .375% .500% etc., depending upon how low you take it.

You do not have to use the closing agent that the loan originator suggest. Sometimes it can be to your advantage to do so as they may have a special relationship with the closing agent that will make the closing move faster.

Request a list of all the fees being charged by the Title Company, Closing Agent, Closing Attorney as they may be identified if you are not sure what is might be lumped together. These fees will include the following:

Attorney fee, title search, and document prep. Additional title fees will include the Title Insurance (this can run 1% of the loan amount sometimes; if you want an owners policy it is more, but much less than the lenders policy). Note: The Attorney gets a portion of the title insurance fee.

Additional fee that do not go directly to the Attorney include; transfer tax (state tax stamp fees) and recording fees.

You will have to establish and escrow account with reserves for hazard insurance, taxes and possible mortgage insurance.

Pre-paid interest will also be included in settlement charges for closing before the end of the month. For instance; if you close on the 15th of the month you will have to pay 15 days accrued interest. If you close on the 30th, you will only have that day if that is the last day of the month.

You will have to have a 12 month paid up policy of hazard insurance at closing.

Product: you should understand what kind of product you want; at least some of it.

Meaning a fix rate or ARM. If you are obtaining a fixed rate you know that the loan interest rate will stay the same over the life of the loan. An adjustable rate loan will not. Some ARMs are fixed for the initial 1, 3 or 5 years. Ask questions about the initial interest rate change date, the % of change and the remaining change dates. Each product is different for ARM and change dates vary accordingly.

If you choose an ARM loan; ask for the ARM disclosure; it is a requirement of law.

Do not just take any product you are offered to get the loan and understand that interest rate change daily and sometimes they can rise considerably over 3, 5, 10 year span. You mush know that you can make the payment comfortably if the rate does go up.

Ask about the live of loan cap. This is how much the interest rate can go up over the life of the loan.

Ask how much the rate can adjust on each adjustment date after the initial change.

Check the web for going rates. Check different sites and lenders. Know that you are getting the best deal for your financail situation. You are in charge, it is your loan and will be your home, it is up to you to get what you can afford regardless of the debt to income ratio is.

Never make any large purchase (including your home) that you cannot afford. It will come back to bite you; one way or the other. You should remember that you will possibly have higher utilities, upkeep cost, you may need a new car, the kids need to go to college and many other ordinary things. Staying within a comfortable mortgage payment is most important. You do not need to have the largest house on the block if you can't afford it. You can always buy up when your earnings have increased or you have the savings. It is better to play it safe than sorry.

How to get a Mortgage

2010-12-28T11:42:00.000-08:00

The rules have not changed for How to get a Mortgage; but they have changed in many ways on how to qualify. Then again this question may surely include both. Mortgage lending is complex with many rules and regulations which can put an individual in a query really fast as these many guidelines sometimes make an individual who has not had a mortgage loan want to forget it. Please hold on though as it is not as hard as one might think.

Don't let the paper work get you down!!!

Before you apply for a Mortgage Loan it is best to do the following:

1. Check your credit to see what your scores are. A mortgage lender will pull a credit report from all three bureaus. They will use the middle score which is called the representative score. If there are more than one borrower; they will use the lower middle score of the two.

If you have no score; you will need to gather any information about your phone bill, car insurance, rental insurance, utilities, and rent. A credit report must be established, meaning these non-traditional accounts will become your credit history. You will need at least a 12 month history with these accounts paid as agreed without late payments. You loan will be based upon a manual approval most likely as you do not have sufficient trade line for the automated underwriting system which is usually used to give the preliminary decision. Even applying for homeowners insurance will require a credit check and your premiums are based on how good your credit is.

2. If you have credit obligations; know what your debt to income ratio (DTI) is. Meaning take all of your payments, add in your prospective housing payment (what you can afford to pay as a house payment, include taxes and insurance estimates) and divide them into your gross income. **See mortgage payment calculator this page. That is your debt to income ratio and if it is in the range of or below 45% (at this writing as guidelines are changing daily), you may be in the game for obtaining financing. Sometimes the DTI (if the loan can be run in the automated underwriting system) may fluctuate depending upon the loan to value, the credit score and the assets which is indicate on the applicant. The 45% is only a benchmark and may be lower, depending upon your entire credit file. The lower it is; the better it is in How to get a Mortgage.

3. Know upfront how much money you have to put into the purchase of your home loan. This is on important issue in How to get a Mortgage. If you have no funds, then you should step back and re-evaluate why you are applying for a mortgage loan to begin with. Why? Simply because you will have to purchase homeowners insurance, you will need to pay prepaid expenses at closing and the minimum down payment is 3% for products (Fannie Mae's new guideline will allow 3% down payment for some products and these funds may come from flexible sources). The more money you have saved the better off you are; even if you do not have all you need and have to receive a gift from a family member, grant or help from an employer.

Once you feel that you have the credit, assets and employment history to obtain a mortgage loan; it is time to do the following:

1. Gather your documentation for all applicant's, which should include but not limited to:

1 month of paystubs (address anything on your paystub such as garnishments, deductions not explained, child support payments etc.). Have documentation to back up any of these issues or other that might exist. Child support payments require: a divorce decree or paper work from the court for the amount of payments, the duration and frequency.

W-2's to cover the past 2 years. Even if you have changed employment.

If self employed; you will need to provide 2 years 1040 personal tax returns including all schedules. If the business is a corporation you may need business tax returns.

You will need copies of bank statements for all funds being used for the transaction for the previous 60 days minimum. Any large deposits must be explained and documented. If you have received a gift prior to the applying for a mortgage you must provide evidence of who gave it to you, when and it must truly be a gift and not a repayment. If you are going for an 80% loan with a 20% down payment, the entire amount may be gifted from an acceptable source.

**Please note that is much easier not to get a gift prior to applying for your loan. It is much easier once you make application for the loan representative/loan officer to give you explicit instructions on how this should be done. You must have a gift letter with the donor's name, address, phone number, where the funds are located; if they will be given prior to or at closing, and state that these funds do not have to be repaid.

Retirement accounts listed on the application must be documented also; if they are being used for closing, there must be documentation to back up the % invested amount and how the funds may be withdrawn. This includes 401K funds which most will allow for the purchase of a home.

If you have worked for more than one employer within the past 2 years, you will need to provide that information. The lender will sometimes verify all employment by sending a form to be completed directly to the human resources department or management if no human resources.

Any debts that are not listed on the credit report must be verified. You should remember to disclose all information that could affect the approval of your loan.

Usually upfront fees are your appraisal report and credit report fees. It depends upon the lender.

2. It is important to remember to make sure you have given accurate information, acceptable information and nothing pops up at the last minute. Quality Control is done before closing. Which means, the employer will receive a phone call to make sure you are still working which is called a verbal verification of employment.

3. Chose a lender who has a good repetition and one who will fully explain everything you need explained.

4. Ask questions. There is never a dump question; especially if you don't know the answer.

5. Know what kind of mortgage product you have in mind. Meaning you want a Conventional, FHA, VA, USDA loan etc. and a fixed or adjustable rate loan. This information provider does not recommend an ARM...but that is another articles. Tell the loan officer upfront if you need maximum financing. This means approximately 97% loan to value with 3% down payment unless you are getting a VA loan.

6. Look up mortgage terms/glossary prior to going to application but still ask questions.

7. Know that you should receive disclosures if you have a preliminary approval.

8. Know that a preliminary approval usually means that your credit is approved but subject to all other information to be verified is acceptable.

9. Do not take any one's word for what you need; unless you just do not know yourself and cannot investigate it. If you are offered something (a product) that sounds "iffy", or that you do not understand (ask for clarification, full clarification) and tell them you will get back to them after you have thought about it. Research it, call another lender or someone you trust. Do not take any offer that is said to be the only thing you qualify for, unless you understand it thoroughly. Know that interest only loans, means that you are not paying any principal on the debt until the initial interest only period is up and then the balance (which is the original balance since you have not paid principal) will be amortized over the "remaining" term of the loan.

10. If you get that preliminary approval; find that Real Estate Agent to start the process of finding a home you can afford.

Please note this is not every single thing you need to know. Your loan officer may ask for documentation which is from something you have submitted on the application or from something that pops up after the initial application. There are always deviations from the norm, even when you think you have every i dotted, and every t, crossed. This is to help you be prepared and get overwhelmed when you walk into an office; not knowing how any of this works. This is am important piece of; How To Get A Mortgage and hopefully not get blasted with information you are not familiar with. Good luck!

If you have any further questions on "How to get a Mortgage," leave me a message and I will give you my best answer to meet your need. If, I do not know the answer; I will find it for you."

This blog is about helping those individuals who do not understand as much about mortgage as they would like to; know more! We are dedicate to Mortgage Loan Facts!!!

Mortgage Brokers

2010-12-27T14:57:00.000-08:00

Who is the Mortgage Broker?

The Mortgage Broker is the mortgage professional who takes your mortgage loan application at a non-depository institution. He/she request your personal financial information to include your employment history, your income history, your saving ability, you financial obligations and of course will review your credit once you have authorized them to pull your credit report.

The Mortgage Broker usually owns the office and then he/she may have other loan representatives, account executives or loan experts, whichever title they possess; take the application and process the loan at times. The Mortgage Broker is the one who has the license to run the origination's office, has to put up the bond and carry errors and omission Insurance. He/she must also meet certain net worth parameters. Not only this but his/her mortgage experience is relevant and important to the approval process. The Mortgage Broker is approved at the State level. They must have so many hours of mortgage study under their belt before becoming a Mortgage Broker.

The Mortgage Broker office, has certain federal rules and guidelines as well. They must have the Fair Lending sign in the office and clearly indicate their adherence to all Fair Lending rules and regulations. These offices are not without restrictions, rules and regulations and have never been. The Loan Professionals within the office, as well as the Mortgage Broker must be licensed, have a certain amount of experience, be involved in an continued educational programs must keep up with mortgage lending changes and compliance for federal and state, within the industry. They also employ mortgage loan processors, when large enough who process the mortgage loan. These mortgage processors must also be licensed under certain circumstances (in some states); when they deal directly with the mortgage applicant obtaining pertinent financial information.

So, as we continue to discuss Mortgage Brokers; they alone did not turn the mortgage industry upside-down. It was a mixture of consequences from all divisions of the mortgage industry and offices, which is another subject.

The Mortgage Broker has their respective place in lending and those which have survived the crisis, have obviously proven that. They serve the public who are more comfortable with a smaller office concept where they can go and spill their guts, for lack of a better word, about their financial situation. They get the one one one care that sometimes may be lacking in a larger office. Meaning, usually the Broker office does not have as many request for applications as the Mortgage Banker does; therefore each applicant is more important and gets the best possible care.

The Mortgage Broker or the Loan Representative will take the financial information, pull the credit and order the credit report. They can usually tell you upfront after the credit is pulled if the file is processing worthy. What this means is that your determines your file can bee processed for further documentation of income, assets and those things you have stated on the application. In some offices, the Loan Representative will hand over the file to the processor who will, verify income, employment, bank accounts, retirement funds, any other property that may be owed and the entire questions/answers on the application. Once all information is satisfactory and it indicates this loan will be approved; the Mortgage Broker's representative will start the process of finding the right lender for you, the application(s).

The aforementioned, simply means that they go to a lender who is approved through the agencies, who will underwrite the loan, approve and will furnish the money to close loan in their name. Most of these lenders will in turn sell and assign these loans to the investors such as Fannie, Freddie or FHA. Sometimes they service the loan and the agencies pay them a servicing premium for their service of accepting the mortgage loan payments and taking care of the applicant's needs during the term of the loan. Usually these lenders are Mortgage Bankers who are depository institutions. There are Mortgage Companies who are standalone lenders who are approved but usually sell the loan immediately.

Most Broker offices do not close loans in their own name or furnish the money, only on rare occasions they may if their net worth and financial backing is sufficient to furnish the funds for closing with warehouse banking privileges and other criteria. The loans are still usually underwritten by the lender who will receive the loan once it is closed. Usually these Mortgage Brokers have been in business for awhile and have established their lending experience, with capital and employees to perform all functions. These Brokers have liability that those who do not close in their name do not have. Most Broker offices do not want the liability to close and fund in their name. These Brokers still usually sell the loan immediately to a servicing lender and/or one who will sell the loan immediately to the agencies.

With the RESPA changes, the broker fees are in with the lender fees on the good faith estimate, at this moment (although I hear this may be changing) but should be broken out for you and explained. It is under the cost to you for this loan.

This is not all inclusive nor does it give you every detail of how a Mortgage Broker can work for you. It does give you the difference in how the origination process takes place within a Mortgage Broker's office. It is still the Mortgage Broker's responsibility to get for you the most appropriate interest rate, closing cost and loan that meets your needs. In fact, they are your contact person and should looking out for you, the applicant. They are no different that the Mortgage Banker within this respect. It is their duty to provide a quality professional service by helping you understand your mortgage product, your interest rate with any fees, the closing cost fees, the disclosure that you were given and "any" thing that is to do with the mortgage transaction. The new laws dictate experience and professionalism in all areas of mortgage lending including the Mortgage Broker's responsibilities.

Mortgage Best Practices

2010-12-27T10:11:00.000-08:00

In the news lately we are seeing changes within the mortgage industry right and left and it turns out to be said it is for Mortgage Best Practices efforts. Meaning, they are striving to get all loan entities to meet certain standards; industry wide and therefore constitute sound lending practices for all. What happened? It was suppose to be this way forever and the rules and regulations were there.....what happened? We all know what happened and we do not want to return to that status as we are not out of the last one yet.

The guidelines for all mortgage loans cannot be changed to fit a particular group without something going wrong. FHA is classified to be for the middle and lower income individuals. Yet we know in the past few years; after SubPrime, that many, many borrowers went to FHA and obtained financing for the lower down payments and flexible source of funds with 6% seller concessions, who were not classified as middle income. Of course we now know that FHA will only allow 3% seller concessions to meet with the industry standards; they say. With that being said; changes are still occurring daily, some for the good and betterment of our Country, some are due to excessive default from allowing individuals financing without truly qualifying. Just like any other organization; there must be rules to go by and those rules should not have been broken to begin with.

All agencies have changed rules and regulations and starting to sound like they did 20 years ago. Those who qualify, qualify; those who do not; do not. Bottom line. That might sound less than compassionate, but with all due respect; that is how it should be and then we would not have so many people in so much financial pain as they are now. No jobs, no home and possibly from over extension of their credit obligations. It had to change somewhere.

Additional Headlines

FHFA Federal Housing Finance Agency....

has made a rule of significance, they have issued rules which will be beneficial to women, minorities and those with disabilities. This one is issued to Fannie, Freddie, and Federal Home Loan Banks and is the following:

The Federal Housing Agency has issued instructions for compliance to these standards (adhering to women, minority needs in housing and those with disabilities) to: Fannie Mae, Freddie and Federal Home Loan Bank Housing Goals entities. Better said; The Federal Housing Finance Agency (FHFA) has made the rule that the agencies promote diversity and the inclusion of women, minorities and individuals with disabilities in all activities. It states that the rule requires each entity to establish an Office of Minority, Women Inclusion and those with disabilities or designate an office responsible for carrying out the requirements at every level of the organization; to include management, employment and contracting.

So, at this point we do not know exactly what this means but we will see what these changes are about and exactly what they will include for the future of Mortgage Best Practices.

First Time Homebuyer Mortgage -Conventional

2010-12-06T10:04:00.000-08:00

Conventional First Time Homebuyer Loan: This indicates it is in this case Fannie Mae guidelines as Freddie has not joined in yet for this financing.

If you are a First Time Homebuyer and need a mortgage loan, you are in better luck than a month ago. I will explain why. Starting December 13, 2010; details are at; Fannie Mae is changing some guidelines. This is one step that is definitely in your favor. What this information will tell you is that now Fannie Mae is offering some advantage they did not offer before. FNMA did have the Flexible 97% mortgage that is being retired from their line up of available products. Wait, if you have read the above article, don't panic; it gets better and you will see that Fannie is now making available 97% financing on certain other products which can be run in their automated underwriting system. This is definitely a plus for First Time Homebuyer Mortgage-Conventional loans.

Wait...we are not through here: there will also be flexible source of funds for those who qualify and do not have the 5% of their down payment from their own saved funds. These will be for loan to values of less than 80% for 1-4 family unit owner-occupied properties and for loan to values greater than 80% for only 1-unit single family, owner-occupied properties. This is something that Fannie appears to be doing to gain more First Time Home-buyers as FHA has been doing the bulk of these within the past couple of years. There will be restrictions and certain criteria that may apply but this is one great First Time Homebuyer advantage that is now in place. This will eliminate the upfront MIP that one must have with a FHA loan.

Up until now, FHA lending was the option for First Time Homebuyers most of the time because of the flexible source of funds. Fannie had the Flex 97% and the MyCommunityMortgage, but with limited guidelines concerning income limits etc. Now, with these new changes you can now obtain a higher mortgage amount for 1-unit single family, owner-occupied home-ownership. The MyCommunityMortgage has always allowed flexible source of funds with a income limit.

As a First Time Homebuyer Conventional Loan; you should know the following:

FNMA's new guidelines will allow for 3% down payment for flexible source of funds for all 1-unit properties which are owner-occupied.

FNMA as the MyCommunityMortgage with 3% down payment from flexible source of funds for 1-unit properties which are owner-occupied.

Source of funds may be from personal gifts, gift or grant from an entity, employer assistance

Credit should be good, with minimal derogatory issues, which can be address as non-recurring and will be approved by the automated underwriting system.

Reserves will be dictated by the AUS (automated underwriting system) and will depend upon the strength of the file in question. This will include, debt to income ratios and credit scores.

Gifts allowed criteria:

Personal gift may be from a relative, a spouse, child, mother, or father, and blood relative by marriage, adoption, or legal guardianship, fiance', fiancee or domestic partner. Any party to the transaction is not acceptable. Meaning Broker, Real Estate Agent, Builder etc.

Gift funds must be documented with a gift letter, indicating the gift donor; their name, address, and phone number. The dollar amount of the gift, when the funds will be transferred and that no repayment is to be expected from the applicant.

The best solution for gift funds is for the fund to be gifted at closing with a certified check from the donor. So many time people go ahead and transfer funds prior to loan application or closing and do not have all of the paper that this entails. It is highly recommended that one wait to transfer funds until instructions from the lender of choice. Sometimes people lose documents which are vital to a final approval.

The lender must verify the donors ability to give the dollar amount. This includes the following: 1) A copy of the donor's check and a copy of the deposit slip. 2) a copy of the donor's withdrawal slip and a copy of the applicant's deposit slip. 3) a certified check to the closing agent or 4) HUD1 settlement statement showing the gift given by the donor.

Remember that a lender's guideline may vary somewhat from these Fannie guidelines. They could ask for further guidelines to suit the situation at hand. If funds have been transferred prior to applicant, you might have to dig up your documentation to prove who gave the gift, etc. The transfer from the donor to the applicant must always be documented.

Other criteria required for high ratio loans:

Mortgage Insurance is required for any loan to value greater than 80%. It is in the monthly payment or it may be financing in certain circumstances.

Employment should be a minimum of 24 months history, but less is acceptable with a transcript from a university or technical school.

*Source: FNMA. Please note that certain restrictions, guidelines and criteria may apply and may not be listed here in the summary of qualifications. Please refer to your lender of choice for full details and any area of your personal credit situation which may exist.

Fannie Mae Changes - Programs and Borrower's Source of Funds

2010-11-26T18:15:00.000-08:00

As new home sales have declined and with most first time mortgage borrowers struggling to pay the current 5% down payment requirements from their own funds; we are about to see Fannie Mae Changes, Programs and the Borrower's Source of Funds guidelines. These changes will begin with all standard products with the cancellation of the Fannie Mae Flex 97% program, with one exception. Don't panic! The loan to value ratios of 97% will still be in effect but will not be named, Flex 97%, with one key exception. That is, the loan must be eligible for preliminary approval though Fannie Mae's automated underwriting system (DU). The flexible source of funds that were allowed for Flex 97 loans, will now be allowed with the standard FNMA products. That is the great news and something tells me this is to be more competitive with FHA guidelines and boost new home sales up again and the market into a more performing status. These changes will occur December 13, 2010.

Let me remind you that Fannie Mae does not lend money for loans. They issues the guidelines, products, and the Mortgage Bankers and/or lenders sell their mortgages to Fannie and Freddie which opens up more funds to make new loans. Fannie and Freddie then put these loans into pools and make them into Securities and the flow of a mortgage loan keeps on making money in those Securities. The lenders must adhere to these agency guidelines; most do, and if they do not, then they must service and retain the loans in their portfolio.

Fannie Mae Changes to all Standard Products that are DU eligible:

All products will now allow for mortgage up to 97% loan to value and remember these loans cannot be a file that must have manual underwriting. If the file is a manual underwrite, it will be limited to 95% loan to value ratio.

There will be no changes to the loan to value, combined loan to value ratios, and home equity combined loan to values over the original 95% up to 97%. The 97% loan to value will be available as a standard eligibility with the following benchmarks:

one-unit properties

principal residences

purchase and limited cash-out refinances, and

fully amortizing fixed-rate and all standard ARM products.

Not acceptable:

high-balance mortgages

interest-only loans

manufactured homes

construction loans, and

co-op properties

Flexible borrower funds/contributions for all loans:

80% or less loan to value = no minimum borrower own funds required for 1-4 unit principal residence. Funds may be gifted or grant from entity, employer assistance and community Seconds. **Second Homes do not allow for contributed funds as gift, grants, etc. and maximum loan to value is 90%.

81% and higher loan to values = no minimum borrowers own funds required for 1- unit principal residence (is not allowed for high-balance mortgage loans).

The latter will definitely benefit those borrower who need 95 to 97 % financing with little or no saved funds and are buying a 1- unit, owner occupied dwelling. There will be mortgage insurance for loan greater than 80% as usual however, this conventional loan will allow for flexible source of funds (life FHA) and will eliminate the upfront MIP that is added into the loan for the FHA product. Especially since FHA has changed their MIP factors. MI may be financed if needed.

**With loan to value greater than 80% for - 2-4 unit principal residence, Second homes, and High-balance mortgage loans:

minimum contributions of 5% from own funds and after minimum requirements are met; flexible source of funds may be used.

**MyCommunityMortgage with loan to value great than 80% - 2-4 unit principal residence, Second homes and high-balance loans:

minimum contributions of 3% from borrower's own saved funds; after which flexible source may be used for down payment and closing cost.

Here you have some of the latest changes, with more to follow that are taking place within the Conventional realm-Fannie Mae Changes, Programs and Source of Funds and it is state that Freddie will follow suit.

Source: Fannie Mae. **Certain guidelines and restrictions which may not have been mentioned may apply; these highlights may not be all inclusive, and fit all situations which borrowers may have.

Mortgage Banking Terms

2010-11-25T13:51:00.000-08:00

This is a list of Mortgage Banking Terms which are frequently used within the industry. This list is not all inclusive nor is it in alphabetical order.

Mortgage Banker: A firm or individual who originates loans for sale to other investors (such as Fannie Mae or Freddie Mac )and usually is also a depository institution. They usually service the loan also. A mortgage bank is a state-licensed banking entity that makes the mortgage loan directly to the consumer. The mortgage banker unlike the mortgage broker; funds their own loans with its own capital.

Mortgage Broker: A mortgage broker is an originator of loans for a mortgage banker/lender. They act as a go between for the lender who will actually fund the loan and the loan is closed in the lenders name who furnishes the capital to close.

Lender: A lender is an institution who meets certain guidelines and regulations with certain investors such as Fannie Mae, Freddie Mac, FHA, and VA. They are one in same as the mortgage bankers; they originate loans, process loans, underwrite their loans, close and funds the loans with their own capital. These lenders allow brokers to submit loans to them for approval as brokers normally do not fund their own loans.

Mortgage: A formal document; sometimes called a Deed of Trust in some states; which is executed by an owner of a property; pledging that property as collateral for payment of the debt. A non-borrower spouse must sign the mortgage/deed of trust to relinquish their right; should the loan default and go into foreclosure.

Deed of Trust: In some states, the document used instead of a mortgage. A security instrument conveying title in trust to a third party covering a particular piece of property. It is used to secure the payment of the note. A conveyance of the title land to a trustee as collateral security for the payment of a debt with the condition that the trustee shall re-convey the title upon the payment of the debt, and with power of the trustee to sell the land and pay the debt in the event of a default on the part of the debtor.

Note: This describes a kind of paper or document signed by the borrower of a loan that is acknowledging a debt and a promise to repay the debt. When it is secured by a mortgage/deed of trust; it is called a mortgage note and the mortgagee is named as the payee.

Mortgage Note: A document which is a written promise, sometimes called a promissory note; to pay a sum of money at a state rate of interest during a specified term. This note is secured by a mortgage.

Mortgagor: The borrower or owner who has signed a mortgage note/mortgage/deed of trust and pledges the property as security for the debt.

Mortgagee: The lender in a mortgage transaction.

Originator: A person who solicits builders, brokers, real estate agents and other to obtain applications for mortgage loans. Origination (taking of the application and processing the loan request) is the process by which a mortgage banker or direct lender bring into being a mortgage secured by real estate.

Origination Fee: This is the fee the lender charges for the origination of the mortgage application to prepare the file for closing. This may include; processing, underwriting, preparation of documents, verification of employment, verification of assets, credit checks, and inspections. Usually it does not include the appraisal fee and sometimes does not include the credit report. But, all fees must be disclosed to the applicant, as to what makes up the origination fee. Any broker fees must be included and within tolerances.

Borrower: One in same as the mortgagor; an individual who applies and becomes approved for a mortgage loan.

Co-Borrower: A co-borrower is usually the secondary borrower who applies with another borrower to obtain mortgage financing. They do not have to be married to be borrower and co-borrower.

Conventional Loan: A loan that is made by a lender with a maximum loan amount not higher than $417,000 for a one-family dwelling in certain states. It is a mortgage loan not insured by FHA or guaranteed by the VA or Farmers Home Administration.

Non-Conforming Mortgage loan: A mortgage loan in which the loan to value ratio, the term or other aspects of the loan exceed permissible limits specified by regulations within the conforming loan requirements put out by Fannie and Freddie. **Sometimes also referred to as a Jumbo loan because of the loan limits being exceeded.

Jumbo Loan: A loan that exceed the maximum loan limits of Fannie and Freddie. Loan that are greater than, $417K for one unit single family dwelling and $625,500 in high cost areas for loan limits for 2011.

Contingency: A clause in a contract that requires the completion of a certain act or the occurrence of a certain event before the contract is binding.

Convertible Mortgage: A mortgage in which the funds, in the form of a loan as supplied by a lender, convert into equity or a share of ownership after a prescribed period of time. **In a ARM loan; this can also mean that the mortgage loan interest rate may/can be converted to a fixed rate loan at a certain interval and after a certain period of time.

FHA Loan: A loan that is insured by the Federal Housing Administration; sometimes called a government loan. This loan has upfront MIP (mortgage insurance premium- which is default insurance and monthly/annual MIP).

VA -Veterans Administration: Federal Government Agency created in 1930. The Servicemen Re-adjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. The VA home loan guaranty program is designed to encourage lenders to offer long-term, low-down payment mortgages to eligible veterans by guaranteeing the lender against loss.

MIP- Mortgage Insurance Premiums: The amount paid by a mortgagor for mortgage insurance either to FHA or a private mortgage insurance company (MIC).

MIC- Mortgage Insurance Certificate: The certificate issued by HUD/FHA as evidence that he mortgage has been insured. This certificate is the evidence that a contract of mortgage insurance exists between HUD/FHA and the lender, incorporating the HUD/FHA regulations identified in the cert.

Mortgage Insurance: This is a type of term life insurance often bought by mortgagors. The amount of coverage decreases as the mortgage balance declines. In the event the borrower dies while the policy is in force, the debt is automatically satisfied by the insurance proceeds.

Fixed Rate Loan: A loan that carries a fixed interest rate for the entire term of the loan.

ARM- Adjustable Rate Loan: An adjustable rate loan is one that carries a rate of interest that adjust at different intervals depending upon which ARM preselected index. The terms, adjustment schedule, and index to be used can be negotiated by the borrower and the lender. Some ARM loans have a rate that may fluctuate every six months - 12 months. Sometimes the loan has a fixed rate period for the first 12, 36, or 60 months and then it becomes an adjustable rate changing every 12 months.

Attorney In Fact: One who holds a power of attorney from another to execute documents on behalf of the grantor of the power. It is terminated upon the death, relocation, or court-decided incompetence of the grantor.

Power of Attorney: A legal document authorizing one person to act on behalf of another. **For Mortgage Lending: This is when a borrower gives another person the power to sign the mortgage instruments in their behalf. It is usually a here is Specific Power of Attorney and General Power of Attorney. A Specific Power of Attorney is for one specific issue such as signing mortgage instruments on their behalf if they are not available to do so themselves such as servicemen, a borrower who is out of the Country for any reason, and illness, etc.

PITI: Principal, Interest, Taxes and Insurance which makes up the full mortgage payment for the borrower. This may include mortgage insurance.

Interest Only Payment: This is a payment option that usually exist for the first 10 years of a loan. It is exactly what it says; Interest Only and there is no principal paid during this time. The mortgage loan payment after the interest only period is then amortized over the remaining life of the loan.

Assets: accumulation of property that is useful and/or has a value and can be converted to cash.

Liquid Assets: property, funds or paper that has been converted to liquid and/or cash on hand which is ready for use. Liquid assets are usually in the form of money that is deposited into checking, savings accounts.

Money Market Accounts: The financial market that brings investment capital and short-term money instruments (those maturing within a year) such as treasury bills, notes, commercial paper, etc.

Negative Amortization: A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal.

Purchase Agreement (Contract): A written proposal by a buyer to purchase real estate that become binding upon the acceptance of the seller. *this contract/purchase agreement must be signed by all parties of the transaction, to include, the Realtor (if applicable), buyer/purchaser(s), and seller(s).

Verification of Employment: A designated form which is used in mortgage lending to send directly to a borrower's employer to be completed with regard to the borrower's hire date, position, monthly or annual salary, year to date earnings, date of last salary increase, hourly rate if applicable, base number of hours worked each week, two previous years earnings total and the likelihood of continued employment.

Verification of Deposit: A designated form which is used in mortgage lending that is sent directly to the borrower's bank to verify the assets they have listed on the application. The type of accounts, the current balances, the average balances, the dates the accounts were opened and if there are any loans in the borrower's name at the institution.

Closing Agent: This can be an attorney, or title company who does the preliminary work up of the title. They search the title to make sure all prior liens or encumbrances have been cleared and released. This can mean that all prior owners have been released from the title. Title insurance is ordered and that the lender's and buyers interest in the loan is considered of full entitlement without exceptions.

Title Insurance: A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest as purchaser, mortgagee, or otherwise. A mortgage lender will have insurance and the mortgage application/borrower can also have title insurance. It is called lender policy and owner policy respectively.

Title Search: An examination of public records, laws, and court decisions to disclose the past and current facts regarding ownership of real estate. The search is completed to make sure there are no liens outstanding that have not been released or paid off. In buying real estate; one wants to make sure that they have a clear title and a lender will not provide funds without a clear title.

Tenancy by Entirety: The joint ownership of property by a husband and wife where both are viewed as one person under common law that provides for the right of survivorship.

Tenancy in Common: In law, the type of ownership created when real or personal property is granted to two or more persons, without express words creating a joint tenancy: There is no right of survivorship.

Tax Lien: A claim against property for the amount of its due and unpaid taxes.

Tangible Assets: Physical assets such as electrical fixtures as opposed to intangible assets such as customer goodwill.

Sweat Equity: Equity created in a property by the performance of work or labor by the purchaser or borrower.

Subject to Mortgage: A taking of title to a mortgaged property without assuming personal liability for the mortgage debt.

Subordination: The act of a party acknowledging, by written recorded instrument, that a debt is inferior to the interest of another in the same property. Subordination may apply not only to mortgages, but to leases, real estate rights, and any other type of debt instruments.

Settlement Cost: Cash paid at closing by the borrower and sellers to constitute the closing of a mortgage loan. The seller portion is usually deducted from the sales price at closing with net funds after cost; disbursed. This normally includes origination fee, discounts points (if any) title insurance, survey, attorney's fees, and such prepaid items as taxes and insurance escrow payments.

Seller-Servicer: This is a term which Fannie Mae and Freddie Mac use for an approved corporation/lender, mortgage company, or mortgage banking institution that sell and service mortgage for them.

Secondary Mortgage Market: This is the process of lenders and investors who buy existing mortgage which are closed loans or mortgage-backed securities, and in do this, provide greater availability of funds for additional mortgage lending by banks, and mortgage bankers. Fannie Mae and Freddie Mac are considered the Secondary Market.

Securitization: The process of pooling loans into mortgage-backed securities for sale into the secondary market.

Security Instrument: The mortgage or trust deed that evidences the pledge of real estate security as distinguished from the note or other credit instrument.

Satisfaction of Mortgage: When a loan is paid in full; the instrument given by the lender will evidence payment in full of the mortgage debt and is recorded. The borrower is released from liability to the mortgage company. The debt no longer exist. You are not released from liability until the release of mortgage is recorded and the lien will show on a title examination until it is released by the lender.

Ratio Analysis: DTI (debt to income ratio): An analysis in the underwriting of a mortgage loan which calculates the proposed housing expense, plus other long-term debt expenses as a percentage of monthly income. The standard benchmark housing is 28-31%; the total debt to income is 36-41%. **these calculation may be greater if the loan is run in the agencies automated underwriting systems and is preliminary approved through these. This is dependent upon the overall credit and financial quality of the file, including credit, assets, and loan to value.

Right of Survivorship: This is co-ownership of property where if one owner dies, the undivided estate then passes to the surviving owner(s) in the case of joint tenancy and tenancy by entirety (husband and wife).

Right of First Refusal: This is a provision in an agreement or contract that stipulates that the owner of the property must offer the first opportunity to purchase or lease a property to a specified person or company before offering it to others.

Replacement Cost: The cost to replace a structure with one of equivalent value and function, but not necessarily identical in design or material. A mortgage lender usually requires hazard insurance to be either; the full amount of the loan or replacement cost.

RESPA: Real Estate Settlement Procedure Act: RESPA is a federal law that requires lenders to provide home mortgage borrowers with information of known or estimated settlement costs.

HUD1: The document used to prepare and close the loan with the buyer and the sellers cost of closing and is signed by both parties. This form and its contents must meet RESPA guidelines.

Regulation Z: A regulation written by the Federal Reserve Board to implement the Truth-In-Lending Act. It is a comprehensive regulation, containing a full reinstatement of all the requirements of the act and is enforced by the Federal Trade Commission (FTC). Both new real estate loans and assumptions of existing loans come under Regulation Z.

Release of Record: The act of recording a release deed or satisfaction of mortgage to release or eliminate the lien of the mortgage on the public records.

Release of Liability: An agreement by a lender to terminate the personal obligation of a mortgagor in connection with the payment of a debt.

Quality Control: Methods, procedures and policies used to maintain acceptable and dependable levels of quality in the production, selling and servicing of mortgage loans. **this is the measure which are undertaken, prior to and after closing such as verbal verifications of employment to make sure a borrower is still employed, checking asset information etc.

Quitclaim Deed: This is a deed relinquishing all interest, title, or claim in a property by a grantor, but not representing that such title is valid, nor containing any warranty or covenants for title.

Warranty Deed: A deed in which the grantor or seller warrants or guarantees that good title is being conveyed, as opposed to a quitclaim deed which contains no representation or warranty regarding the quality of title being conveyed.

Source: Mortgage Bankers Association of America

Mortgage Loan Facts - The Benefit of a Real Estate Agent

2010-11-15T09:58:00.000-08:00

In Mortgage Loan Facts- it is important to know that The Benefits of a Real Estate Agent has almost become a must with the declining market areas that exist. If you are looking at homes where the property values are declining your sales price/home value may decline also.

A Real Estate Agent is: A licensed individual who has taken hours of training and testing to perform work for a Real Estate Firm. They are trained in market conditions, housing conditions, the concept of a mortgage loan, appraisal concerns, inspections of property, and many other aspects of real estate; to mention some of their expertise. They are your source in finding a home. The seller of the home usually pays the commission for the Realtor.

After you have prepared yourself for a mortgage loan, and obtained a pre-qualification from a lender; it is then time to start the house hunt...yes, you should know what price home you can afford prior to getting The Benefit of a Real Estate Agent. There is no need to waste your time or theirs. Why? Simple...if you start looking for a home and do not know what you can afford; you might find disappointment when you get to the bottom line of what you can really afford. For instance; just like the times we see all the pastries in the bend and we think we can eat the largest one, only to find out; we can't. It looks so appealing and wonderful, we just have to have the largest one....it will not be that wonderful when you can't make that payment in six months, or six years, if you buy something that you really cannot afford.

A Real Estate Agent in there to help you once you have been approved by a lender, not before or they will not know what houses to show you. It is of no good to you to look at homes with sales prices in the 400k range, when you can only afford 300k. You are setting yourself up for disappointment and the inability to be satisfied with what you really can afford.

We now know since the mortgage meltdown, that the art of getting approved and maintaining a loan that performs,one must be qualified to make the payment, not for the initial period of the mortgage only, but for the long haul. The Real Estate Agent is there to assist you with finding the right house, with the right payment and understands the make up of the loan and will not lead you into something other than what your pre-qualification dictates.

This is The Benefit of a Real Estate Agent:

They will show you homes that are within the price, using the down payment from your pre-qualification and within the payment range.

You furnish the Agent with the criteria you would like, square footage, number of bedrooms, baths etc.... and they try to fit it into the home which they show you. It is not always an easy task; because most of us want everything to our expectations, and yet can't afford as much as we want. Why, we get it into our head that since this is a major purchase; the largest one we will ever make; it is up to the Agent to find what we want regardless. They can't perform miracles. They can only show you what you can afford and beyond that it is out of their hands. If the features you want are not in the 300K house and that is all you can afford; you might have to suffice for plain kitchen cabinets rather than custom...remember life goes on even when we do not get exactly what we want. You can always same money to build those custom cabinets or either, find a house with those cabinets and do without another feature you desired. All in all The Benefit of the Real Estate Agent is that you do not get something you can't afford; hand in hand with the lender they are advising you to stay with the affordable.

They will sometimes suggest a lender that they are comfortable working with; this is not a step you have to take. You can use the lender of your choice and I can grant you; that they will not lose the loan because you want to use another lender. Of course if you are informed that a lender if over-charging; then it might be something to look into, but you should have gotten more than one quote to begin with....

The Realtor will usually only show you three home to begin with, hoping that you will be totally satisfied with one of the three. Then more if necessary. When you start looking at more than three homes, you can get confused.

The Realtor pulls the comparables for all of the home to show you what the amenities of the homes in the neighborhood, the values and when they were sold. They have expertise in the market conditions, how many purchases, if they are foreclosures, short sales, deed-in-lieu etc. They do what they do really well.

They can tell you if you are looking at a purchase in a declining market area and give their expert advice about what they know concerning market conditions for the exact area of which you are interested in buying. These are the things you usually do not know without The Benefit of a Real Estate Agent.

Don't leave home without a Realtor to advise you in finding the home of your choice...there may some give and take in what is affordable but The Benefit of a Real Estate Agent will also help with what amenities are really essential over what you merely want.

Mortgage-Preparing for a Mortgage Loan - Part 2

2010-11-13T10:27:00.000-08:00

Mortgage-Preparing for a Mortgage Loan - Part 2

Mortgage - Preparing for a Mortgage Loan

2010-11-13T10:26:00.000-08:00

Mortgage - Preparing for a Mortgage Loan

Mortgage Fraud

2010-11-10T10:37:00.000-08:00

We have read it everywhere and still some believe that Mortgage Fraud is still in the air. There is not a company that exist that truly wants Mortgage Fraud in their work place, unless of course they are nuts. It will eventually be caught one way or the other. Yes, it has existed and sometimes, the person in charge probably turned their head if it meant loosing a Realtor or client; something minor of course. Mortgage Fraud is never fashionable nor is it acceptable.

The question we have is why anyone would allow themselves to give someone a loan; they do not need and on top of that commit Mortgage Fraud? It starts with an applicant having their hopes up to get a home loan. They really do not know what is on their credit report. Sometimes, it can be cleared up, if it is negative and then sometimes it cannot. Then it continues with someone who might not have sufficient income to qualify and they are devastated with this fact and then they have no funds to put into the mortgage loan so....they do not qualify in any aspect of the qualification process. So, what does a loan officer do? With all due respect to the mortgage applicant; the loan should be declined before it ever reaches an underwriter. It is always better to get the news of a decline upfront instead of getting deeper into the loan process and having tons of documentation; that is really no good to anyone. Mortgage Fraud is sometimes undetectable for the consumer, as they might be told that they are going to get their home and they are about to receive help regardless of what the facts appear to be. This is unacceptable and not what any lender wants within their company.

The facts that kill a loan upfront:

Unacceptable credit- insufficient credit lines paid as agreed. 30, 60, 90 day late payments on more than one or two account within the past most recent 12 to 24 month period that are not isolated. Rental history with 30 days late payments. Previous mortgage history with 30 day late payments. Excessive public records; collection accounts, judgments, tax liens, civil liens etc. No evidence that the client has managed their credit in the past 24 to 36 months with any integrity or consciousness. ** Please note that sometimes there are extenuating circumstances which cause derogatory credit ratings. This is when there must be documentation and re-established credit lines still must exist within the past 12 to 24 months following the derogatory ratings. The cause of the extenuating circumstances must be documented and it must be reasonable and there must be evidence that it is unlikely these circumstance will occur again. All of aspects of the file must be acceptable as well, employment, income and assets. This would require a manual underwriting review with extensive analyzing of the situation.

No funds or saving to put into the loan (especially conventional loans) Government backing will allow more for gift funds. Fannie Mae does allow for Flex 97 financing and Community Homebuyer loans which allow for gift. If someone has a 20% down payment, Conventional Fannie Mae loan; the funds may be gifted.

Unacceptable employment history. Five jobs within the past 24 months, with only 6 months here and there..this is not stability and especially if one is hoping from one profession to another. Contract jobs that are not consistent. Rental income from someone who lives in the house with them.

An applicant who is dependent upon a second job income with less than a 12 month history.

An applicant who is dependent upon tip income but has not reported it to the IRS; no history.

An applicant who is dependent upon child support income and/or alimony that cannot be documented.

Debt to income ratios above the normal and normal might be different for each individual depending upon their savings ability or reserves after closing. Total debt to income normally ranging from 36 to 45; again depending upon the entire file, credit scores and repayment ability analysis.

Insufficient income to meet the new debt without causing hardship to the consumer.

Please note that these things are all analyzed upfront for the short term, if there are areas that may be corrected; so be it, but if several or all of these exist, not any loan officer should drag you through the meal when there is no hope of correction. If someone has the audacity to say; I will fix this; you had best run. This is when Mortgage Fraud is about to happen and no one should be a part of that; even if it is your best friend.

All mortgage companies are audited. Things pop us and grab the auditors attention. No one wants to be a part of Mortgage Fraud. Mortgage Bankers do not allow a loan officer to make up VOEs (verifications of employment), pay stubs, play with assets for a borrower etc. If someone does this; it should be report to the lender and to the State and Federal Government. This is not acceptable behavior for any mortgage professional. Again, there are bad apples in every basket but that does not mean that all loan professionals have the same intent nor do they want to give someone a loan who cannot afford one. The latter should be the main focus.

The agencies are coming down hard on lenders who are not paying attention to making sure that all loans which are being made are made with honest, accurate and credible documentation.

Types of Fraud

Misrepresentation of income or employment

Misrepresentation of credit

Misrepresentation of assets

Misrepresentation of occupancy

Undisclosed liabilities/debts

Identity theft or Social Security numbers

Misrepresentation of property values/appraised value

Mishandling of escrow funds

Misrepresentation of closing funds being distributed to persons other than whom applicable

Undisclosed title issues and the list could go on......

Who can participate in these types of Mortgage Fraud? The borrower, the lender's representatives, the appraiser, the real estate agent, the closing attorneys, builders, lenders and title companies. There is a difference in mistakes and Mortgage Fraud. This does not mean that one should be suspicious of everyone they meet within the mortgage process. The duty is for the Mortgage Banker, Lenders and Mortgage Companies to ensure the people they are working with are legitimate professions who take their work seriously and pick up on anything that is not within the guidelines and regulations. This is where quality control comes in.

The above may not be all inclusive, but this gives you some idea as to what the auditors are looking at when a loan goes to quality control, state or government auditing.

Not any consumer should allow themselves to get caught up on a process that could eventually hurt you and these kinds of acts can come back to haunt you. Mortgage Fraud is preventable. It is preventable for the lender by hiring qualified, experienced personnel. The new Mortgage Licensing Requirements is working to present qualified mortgage professionals; with loan qualifying procedures that can prevent Mortgage Fraud.

Mortgage Underwriter and Processor

2010-11-09T21:28:00.000-08:00

What You As the Applicant Should Understand About Mortgage Underwriting and Processing

Having seen so much of the changes that have occurred in the last couple of years, and especially just recently, I thought I would give you some heads up on why the Mortgage Underwriter and Processor keep asking for more documentation. It seems like a mountain of information that is needed to get a loan to approval these days and we all know why. Let me remind you, yet again, though it seems excessive, it is necessary to fully implement due diligence and determine whether someone really does qualify for a loan. The underwriter usually gets blamed for declining a loan, regardless of what the issues are and just recently something was written online about Real Estate Agencies requesting less strict underwriting guidelines. After all we have been through as a Nation, let alone the many homeowners who could face never owning another home, how could anyone request something like this?

It has been stated that the Agency Underwriting and Processing guidelines are going backward to some degree, toward the manual underwriting process, one small effort at a time and the rules and regulations are being made to ensure that an applicant can carry the increased debt they are about to embark upon. Fannie, Freddie, and FHA are all emphasizing that it is the lenders responsibility to verify anything that is questionable with regard to the mortgage applicant's application. Anything that might prevent the performance of a loan must be questioned and documented. They are being upfront with the fact that there are instances when there must be additional information verified to make certain loan applicants have the willingness, capability and capacity to pay back the mortgage loan.

The agencies both have automated underwriting systems and these systems are initially run by the processor to see what the minimum documentation is and then anything questionable must be documented also. The underwriter then uses their expertise to further analyze the file, the documentation and the overall risk factor that may exist. The automated underwriting systems spit out minimum documentation requirements from what has been entered into the system. It is a machine so it cannot see with the human eye and only uses information it has been given by the human; therefore, there is room for error. When something changes after it is documented; (income, assets, liabilities, after being verified) the automated underwriting system must be changed along with the new information and new underwriting requirements review yet again. As with any process; sometimes this has not been done properly; therefore, underwriting decisions can be made that are not actually the true story as it has been verified. These systems are governed by humans and as we all know humans make mistakes and even though there are explicit guidelines that should be followed; there are still errors made that can change the approved status to a declined status. Mortgage Underwriters and Processors have decided that it is best to fully document a file and then there are less risk and more prudent analysis done.

These are some facts about processing and underwriting a loan that any Mortgage Underwriter or Processor must consider:

large deposits on bank statements

small deposits on a regular basis which are not income related

reserves and the ability to accumulate savings is evaluated, does the borrower have sufficient income and assets to afford the payment that might be increasing from the rent he/she now pays or mortgage payment

bank statements are evaluated for balance versus previous balance

savings ability and liquid funds after closing plays a role as a risk factor and these accounts; 401K accounts, CDs, Stock, Mutual funds, IRAs, Money Market etc. are evaluated. Usually someone who has a proven ability to accumulate savings will demonstrate less risk and has the ability to continue the payments as agreed or pay off the debt should there be a loss of job, illness or extenuating circumstances

money for down payment and closing cost must be the borrowers own funds unless the product allows for gifts such as FNMA Flex 97 or Community Home Buyer and for FHA. Most products call for a 5% down payment from own funds (conventional)

deductions on pay stubs

a person who just gotten a recent raise and the income must be calculated in a consistent way

verification of employment forms completed by someone other than the human resources department

a verification of employment that is not consistent with pay stub or W-2

year to date lower earnings versus the hourly rate or salary (it can mean a borrower has been off work for some reason)

earnings that increased drastically from previous years which have not been explained as a salary increase or if in self employed gross sales increased. The latter will be present in the schedule C.

bonus income must be analyzed and must be averaged over the past 24 months as a general rule but, *sometimes last 12 mos history is used

commission income must be an average of the past 24 months but *sometimes last 12 mos.

tip income must be averaged over the past 12 to 24 months and should be consistent with the job

any discrepancies in a pay stub from W-2 earnings must be analyzed

child support payments as income must be documented for consistency and length of time and alimony payments

credit reports must be analyzed for the frequency of late or delinquent accounts, the number, how recent, excessive or infrequent, what type of accounts

excessive inquiries on the credit report must be analyzed for the past 6 months for new loans if current that might not showing on the credit report and previous for excessive credit searches

a person who has multi revolving charges with their current balance as high or near the high balance or maximum balance is considered as not conservative spender and a higher risk

a person who has any history of public records such as, bankruptcy, foreclosures, collections, judgments, tax liens, or deed in lieu is considered a higher risk and extra precautions, rule, guidelines and evaluation with documentation must be performed

a person without credit must be evaluated for non-traditional credit such as phone bills, car insurance, utilities and any debt that can be verified for the past 12 to 24 months

research has shown that a person who has never had a mortgage loan presents a higher credit risk per the agencies than some who has a proven track record of paying a mortgage payment

rental history must be verified and have no late rental payments; these are analyzed just like a mortgage history

when tax returns are required; the income is average over that past 24 months as a general rule, all schedules must be present. If a person who is self employed writes everything off (expenses) and there is little or no income to be utilized it is not within the Mortgage Underwriters ability to use anything but the bottom line real income. The net income plus depreciation may be added back and then is averaged over the 24 months.

a sole proprietor is responsible for the entire debts/liabilities of the company

self employment less than 12 months is usually not allowed

self employment income must be analyzed for consistency over a period of time; the income and the company must be evaluated for indication that it is a reliable business that will be in operation for the foreseeable future

an applicant who works 2 jobs; must have a history of working 2 jobs, usually at least 12 months and the income must be consistent and likely it will continue

the applicant's debt to income ratio is analyzed to make sure that the new mortgage payment does not overload the borrower's ability to pay their obligations in a timely manner, usually anywhere from 36 to 45% as long as there are sufficient reserves and assets to allow for the higher 45%

the loan type plays a role in the risk factors of a loan approval

down payment amount (equity after the loan closes) plays a role in risk factors

The above is not conclusive but represents why so much is at stack in the evaluation of a mortgage loan and the analysis which must occur before an approval is rendered. There are and has always been many aspects to the approval of a mortgage loan. It is a very detailed process and many concerns sometimes arrives after the application is submitted and must be address. It is imperative that any applicant should tell the Mortgage Processor everything that is relevant in their financial or credit history, upfront.

Some call for more common sense underwriting, but common sense means that you make sure what you see in front of you is the real deal and not something concocted up for the loan that is being pursued. This is of great importance to the Mortgage Underwriter and Processor and everyone should respect their role in complying with quality standards and regulations; yet they do not.

Mortgage Facts Nationwide Licensing System for Professionals

2010-10-26T19:20:00.000-07:00

Just read something interesting, the article was obviously written by a mortgage professional and the title was "Mortgage Professionals Still Considered Scum," and my thoughts went to another new article that announces that all states have joined in the Nationwide Licensing System. I thought and simply just shook my head and understood the person's feelings but knew why this is such a touchy subject.

Before we get into the Nationwide Licensing System, let me say that all mortgage professionals are not the "bad" guys. As I have written other places and possibly here also; there are bad apples in every basket. The blame game doesn't resolve the issues. It started with the signing of the purchase agreement and flowed downward or should I say upward. There were rules and regulations in place, there were quality control measure in place but hey the state and federal government made the laws so why not charge the 6% closing cost? It boils down to ethics and the fact that so many people were willing to pay these prices to just have a home. Sometimes it was due the lack of education of by the homeowners because I have known of individuals who got up and left the closing table because the fees had changed drastically and outrageously.

Still, this was allowed because it was within the limits as specified by each state and local government and the federal government said; everybody deserved a home. Well, that is true but I will say this for the umpteenth time; everybody cannot afford a home. Now, that is Mortgage Facts right on the nose, even though it may sound harsh.

Now to the news of Nationwide Licensing System....

It has been reported from Washing, D. C. that Hawaii became the last state to join the Nationwide Mortgage Licensing System. This is to ensure improved supervision of non-depository mortgage lenders, brokers and mortgage loan originators maintaining licensing through a single system shared by all state mortgage regulators as reported by the Mortgage News Daily.

In simple terms; all loan officers must be licensed if the institution is not a bank that is governed by FDIC. More specifically it means that in each state they must comply with certain test, evaluations and experience in order to have licensing to become a mortgage loan officer, broker or mortgage representative. The institutions have further standards all on their own and this does not include become a broker or mortgage company; it is the person who originates the mortgage and takes takes the applicant and receives compensation.

Further clarification on a loan officer who is an employees of a federal insured depository institutions or an owned and controlled subsidiary of such depository institution that is federally regulated does not have to comply with licensing laws. This has been in effect and has not actually changed but the final rule indicated that the Agency-regulated institutions must require their employees who work as mortgage loan originators to comply with the S.A.F.E. Act's requirements to register and obtain a unique identifier. This means they will comply with the written policies and procedures to ascertain compliance with these requirements. It is said that these loan originators will be required to obtain a unique identifier (specific job title and position) and maintain a register on the National Mortgage Licensing System in early 2011.

Now, let's discuss what the S.A.F.E. Mortgage Licensing Act is. This act specifies what education a MLO (mortgage loan officer) must have. This applies to both the non-federal regulated mortgage company loan officers and as stated above for the federally regulated loan officers.

20 hours of NMLS (National Mortgage Licensing System) approved pre-licensing education to must be completed. This requirement is in force regardless of the number of states in which one is licensed. Each agency may required more than the designated 20 hours.

Certification: the employer must certify that the loan officer has completed the required, acceptable pre-licensing education program that is in forced by the state and complies with the SAFE act.

Continued education annually; the act requires at a minimum of 8 hours of continuing educated to be completed each year. The states may require more but this is the minimum for SAFE Act.

SAFE MLO Test: This act requires licensees to pass both a National and State components of the SAFE MLO test. The National component, passed once satisfies all state requirements. The state component must be passed for each state that the originator plans to originate loans in .

A criminal background check: this means that the loan officer must be fingerprinted and those prints checked by the FBI.

A credit report must be pulled through NMLS. The credit report will be available only to regulators.

**this information source is from National Mortgage Licensing System and the PDF is found there.

Most of these guidelines and requirements; some of us have done previously. In fact I have been licensed, and fingerprinted more than once. I have taken test and had the necessary hours of continued education; even with my 30+ years in mortgage lending; so not all of this is new and in fact I don't see anything that is really new as I have done all of these. In saying that; this will in fact weed out those who are not willing to put in the 20 hours pre-licensing education. In the past; some states have allowed experience as the pre-education requirement but still tested.

Mortgage Facts U Need Before Buying

2010-10-23T11:43:00.000-07:00

No one can express enough the importance of consumers knowing the Mortgage Facts U Need Before Buying or purchasing a home. It is singularly the most important fact and this is because the more you know the less you are likely to get a product, closing cost or anything that inappropriate for your needs.

Since the meltdown of the mortgage industry, FHA (Federal Housing Association) changed of lot their Mortgage Loan guidelines to accommodate the borrowers who need a higher loan amount. Since HUD allows a higher loan to value and they had less money to put into the transaction (conventional lending requirements are 5% from own funds) and a few other non conventional requirements which these borrower needed to qualify for a home loan; they have made substantially more loans during this time.  Just recently FHA has changed the seller concessions to make it a industry standard of 3% instead of the 6% that was so lucrative for buyers. FHA has insurance a total of 37 million plus loans since 1934.  That is a lot of loans and this is made up with single family and multi-family dwellings. Understand FHA's role and Fannie Mae/Freddie Mac as well is also part of the Mortgage Facts U Need Before Buying.

Why:

Understanding why you need a FHA loan over a conventional loan is necessary. Fannie Mae has a program for lender that allows for 3% downpayment and flexible source of funds for down payment and closing cost.  This program is for first time homebuyers and there is an income limitation but it is called The Community Homebuyer Program. With this program you do not have a upfront MIP that is added into the loan and the annual/monthly premium also. With this program you have monthly MI in your loan only. FHA"s annual MIP premiums have changed and it will initiate higher mortgage payments to some extent and the loan amount is already higher due to the upfront MIP being added into the loan.

Conventional Lenders have changed also and it is not as easy as it was prior to the meltdown to get approved for a mortgage loan but it is still imperative that everyone knows the Mortgage Facts U Need Before Buying. Lenders still need to make mortgage loans but they must have prudent lending practices and that is why the guidelines are changing to more strict criteria. In fact is has been said that the Quality Control starts prior to the loan being closed. Meaning, just before closing another VVOE (verbal verification of employment) is completed. This is necessary and let me tell you why.  It has been know that applicants have lost their job before loan closing. This is serious business for the first months of any mortgage loan. This is to keep clients from making a mistake of getting a house they cannot pay for and the mortgage company getting a loan that cannot perform. Guidelines are tougher and stronger and it is for the benefit of all America and the world as a whole. Steps to improve and help you know Mortgage Facts U Need before buying a home.

Let me start out with Steps you need to take if pursuing a Mortgage Loan:

1. How much house can you afford?

This will depend upon your income, credit rating, current monthly expenses, down payment and the interest rate. The Calculator above will help but you will need to verify your calculations with your lender to be on the safe side before going to look for a home.

How much $ amount of payment can your afford; this includes: Taxes and Insurance, so this amounts to principal and Interest payment + taxes + insurance. An example is:

$250,000 loan amount

360 (30) year term

5.750 interest rate = a Principal & Interest Payment of $1458.93

416 mo taxes (e)

100 mo hazard insurance(e)

Total payment $1974.93

The above taxes and insurance amounts are estimates only and you will need to go online or call the tax assessors office to get the tax rate for where you live.

You can also call a Real Estate Agent

You can call a Hazard Insurance Company to get insurance quotes for the amount of coverage you need

Things that affect your Insurance Premium: Credit is pulled now for insurance purposes also; where you live, what kind of coverage you get. You must carry the amount of the mortgage loan without exception or full replacement coverage.

Everybody does not tell you this but I am going to add my two cents worth and this is from having been a Mortgage Loan Officer, Mortgage Loan Underwriter, Operations Manager and a Loan Processor. To me this is one important part of a person knowing what they can and cannot afford:

People sometimes forget that even though you do not count things like child care, car insurance, utilities, phone bills, out of pocket expenses that occur each and every month in your debt to income ratio; they should consider "all" of their monthly expenses when trying to decide what they can afford. These can be large expenses and should not be forgotten by the home applicant because this could get you off to a bad start right up front.

2. Know your rights

ECOA (Equal Opportunity for all) -Brochure

Real Estate Settlement Procedures Act (RESPA)

Understand Predatory Lending

3. Shop for a loan

Do not just take the first come, first serve lender's quotes. When you are given a GFE, (Good Faith Estimate) remember that RESPA laws have changed and know what all your fees consist of. Get a breakdown and do not be afraid to ask for one.

Shop around and ask about different loan types. Read up on the type of loan you are offered and ask for explanations of what words mean that you do not understand.

Conventional

FHA

VA (if you are a Veteran)

Do not let anyone convenience you that an interest only or Adjustable Rate Mortgage is best for you, unless of course; it is. You should do your own homework for these two types of loans especially and know before you go, what you desire in a mortgage loan. Be informed and the best is seeking information about types of mortgage loans. **at this writing; interest only loans are not as plentiful as they were and especially for first time homebuyers.

4. Learn about First Time Homebuyer Programs and Down Payment Assistant Programs

Your state will have help for home buyer programs but make sure still that you are getting the right deal

5. When you shop for a home, have a list of what you want in a home but be reasonable and know what you can afford.

Get a home inspection before you close any loan

Well, this is something to start with. Hopefully it will help you know some things you need to be aware of upfront before you even call a Realtor. It is always good to use a Realtor because they are experts in home inspections, market analysis, and anything to do with getting the right house.

*Important: You do not have to use a Lender of the Realtor's choice and they cannot make you do so. This does not fit into RESPA safe practices and is against the law. If you are told that you will get this or that and even better service.....you still have the right to use your choice of lender. All of the above are steps and knowledge about Mortgage Facts U Need Before Buying and the more you know, the better chances you have of getting the right mortgage for your needs.

Mortgage-Appraisal Reform Bill Signed

2010-10-21T11:31:00.000-07:00

The Dodd Frank Wall Street Reform and Consumer Protection Act which includes the Mortgage-Appraisal Reform is now in force. On October 19, 2010; this bill was signed into law, by the President. It consist of some 2,300 pages and it contains major changes to financial issues and appraisal guidelines; which everyone in the mortgage industry and real estate (mortgage bankers, lenders, loan processors, underwriters, appraisers and real estate agents) must adhere to. All of the agencies will conform including HUD as their guidelines are changing with almost every aspect of evaluating prospective home buyers anyway.

This new overhaul of the Mortgage - Appraisal Reform Bill includes major changes for lenders and a complete new set of rules for residential appraisers. This new law is to give more restrictions and standards for lenders to comply with in generating a more balanced system of managing appraisers and their evaluation process.

The new law which is referred to sometimes as the Appraiser Independence Reform; will be stricter than the Home Value Code of Conduct (HVCC) that has previously been in force and the violations will be subject to much stiffer penalties of up to 20k per person per day. This one will indeed keep everyone on their toes; we hope. There has always been rules and regulations within evaluation of the property appraisals but this new Mortgage Appraisal Reform Bill will actually be supervised more strictly and with high cost if not adhered to.

Per information that has been given the bill will provide lenders with three ways to manage their appraisal process. 1) Outsource- this may be done with one or multiple appraisal management companies 2) self-management of an appraiser panels from ordering to delivery of appraisals or 3) chose a hybrid model which consist of a combination of self-management and appraisal management companies outsourcing where a lender manages its own appraiser panel in the key markets but outsource the out-of-market business and the high volume amount to AMCs. (Appraisal Management Companies).

The Appraiser Independence Requirements

These Mortgage Appraisal Reform Bill, guidelines have been developed to replace the now code of conduct and here are some of the appraiser requirements: As publish by FNMA

Protect the independence of appraisers and the integrity of their appraisals.

Extend these important protections for home buyers, mortgage investors, and the housing market.

Reinforce the agencies commitments to responsible lending and mortgage quality standards.

The detailed requirement which will alter how appraisers must be treated and respected can be found at Fannie Mae.com. Will this put a stop to the bullying that sometimes occurs? I am doubtful but it has never been suitable for a loan originator or real estate agent to ask the appraiser to provide a certain appraised value and if they did not they would not use them any more.

These new guidelines spell out exactly what will not be allowed that did occur during the past....Sorry, but there have been issues which resulted in the appraiser being scared to death that they would not get enough business to pay the bills, if they did not give the lenders, loan officers, and real estate agents what they wanted. This is exactly why we are now seeing many properties which are "underwater"; and/or declining in value. I am not ratting on anyone.....just the gospel and if the shoe fits; one must wear it.

It has never been acceptable for anyone involved in a mortgage transaction to suggest to the appraiser a market value. We have all done it.....because we all wanted to close the loan and get paid and if the loan officer did not close the loan; the real estate agent would stop using them because they did not know how to get loans closed. Therefore, the company felt the same way.....The story goes on and on....and if everyone would be totally honest they would say; amen.

It really doesn't matter what the old rules were nor how the cards were play during the times that has cost America a fortune. What matter is that there are new ways, rules and regulations to implement so that everyone can feel more confident that their best interest is taken seriously without a personal interest to get the loans closed regardless. Will all of it stop? Why, heavens no; the same way that the new RESPA guidelines/new good faith estimate; did not cure the need for better explanations to consumers regarding their cost of obtaining financing.

With that said, it is at least an effort to clean up the mess that has generated people losing their home and it will give explicit instructions with repercussions for Mortgage Bankers , Lenders, Mortgage Correspondents and Brokers who still decide to deviate from the rules being set out. This new Mortgage -Appraisal Reform Bill is the one of the best ideas that Dodd-Frank has voted on and every consumer should be giving cheers.

Mortgage Banking News Flash

2010-10-13T09:33:00.000-07:00

It is the news again and it isn't pretty for Mortgage Banking/Lending. Please remember that a Mortgage Banker/Lender/Correspondent/Broker all have different roles in most cases. I am for this purpose adding lending on the words; Mortgage Banker. Supposedly the MBA (Mortgage Bankers Association) is having a very important meeting soon that will determine some new rules and regulations within Mortgage Banking/Lending. As if, of course; things have not already changed enough. This is news that all of the mortgage industry doesn't want to hear probably or enforce but, will be something they have no choice in. It may not be too bad for the banks but it will for sure affect some of the mortgage companies who do not have sufficient assets/capital, net worth and do not take deposits.

The news is flowing that the Mortgage Bankers/Lenders must retain 5% of each loan closed (6% for Ginnie Mae). It will be much more difficult for the independently owned mortgage lender, than for the depository institutions. There will be a requirement for the independent mortgage lender to raise capital to support their portfolio or take on the new role of a mortgage broker. This would mean as a broker; they put the client and the lender together and the loan is transferred to the Mortgage Banker when it closes; the Mortgage Banker taking the responsibility for what might go wrong with the loan.. This also means that the Mortgage Banking/Lending industry must have substantial capital positions just to make mortgage loans. It appears from all aspects that the Bank part of Mortgage Banker/Lender is going to be the prime lender of the future; as these requirements will weed out those who do not have sufficient capital or the ability to raise it.

The above equations are not the only part that is changing in the Mortgage Industry. There is said to be an increased minimum net worth requirement to maintain Ginnie Mae issuer qualifications (this is the insurer of FHA/VA loans). This requirement will be $2.5 M with $500K minimum of liquid reserves available for a buyback request. **A buyback is a loan that the insurer request the originator (the institution, who closed the loan in their name) of the loan to buy back due to either; underwriting guides not followed, poor performance and/or anything which does not meet their guidelines which the originator should have paid attention to or didn't do. It is also stated that the institutions must have an additional 1% additional new worth for the MBS (Mortgage Backed Securities) closed above $5 M to $20M and then 20 basis point for anything over $20M. From all accounts these policies and regulations will start being phased in over the next three years. Well, who will be closing their doors is the next question; I think.

Of course we know now that everyone is saying; why were these precautions not in place prior to the Subprime mess anyway? There should have been more oversight and congress can't yell too loud (this is all coming to fruition, due to the Barney/Dodd's new proposal) as they were the ones who suggested and make allowable the loans that made America cave.

This is short is what should have already been in place and would have saved us a lot of problems and our economy might not have fallen to the state it is in. Who knows; and it really doesn't matter now. Someone asked the question if this would hurt the credit supply of our country. It may but with the capital strength of the lenders who can adjust to the new rules and have the capital and net worth requirements; it will provide a more stable lending practices. The Mortgage Bankers (the Banks) are already highly regulated and this will enhance their lending authority and will in the end give consumers the best place to go for obtaining a loan.

Every type lender/broker should follow the same rules and regulations and this will put a damper on those who have not been playing the game correctly. It is hard to govern people who are paid on commissions to not let the ball drop occasionally. It happens but, that does not make the whole basket rotten. There are good guys in all areas of lending but again; Mortgage Banking will have far less loopholes with these new implementations for the consumer.

Mortgage Loans - The Foreclosure Crisis

2010-10-09T18:05:00.000-07:00

This is never an esay process....

We all know that the Mortgage Loan Foreclosure Crisis has hit us and hit us hard. It has not affected just one city; it has affected the entire Country. It has in a sense given us fear, misguided faith in our financial institutions and thrown us and our financial positions for a loop. We are all affected even if we are not in foreclosure proceedings or about to be and here is why....

The housing industry has broken America and most everyone will or can identify with this statement. The stability of the housing industry is the core of the economy become stable again. Too many people have lost their home already and yes, while some should never have taken out the mortgage they had; they did and now we are here. Millions are losing their home each day that goes by and how will the financial institutions ever gain back the stability they once had? We know that there are many refinances that are taking place due to the lowest interests that most of us can ever remember; but, will this bring back the stability we had before the Subprime meltdown? Especially with the current news flowing.

I am not sure that anyone knows with a certainty and most of it is all speculation and now with the news that broke last week; only time will tell how this will end.

The News:

This past week the big news is that Bank of America, JP Morgan Chase, and GMAC,........ three of the largest lenders; have stopped all foreclosure proceeding until further investigations are made concerning foreclosure documentation and who really has the authority to foreclose on property. Usually it is the owner of the mortgage; that is, if the chain of title has occurred. It could mean that there has been some very sloppy acquisitions of mortgages from the "failed" companies that has not been completed correctly. That is what it sounds like from reading here and there.....just speculation and it must be a great concern for the largest mortgage lender to halt their evictions and foreclosure proceedings. This was brought about with the officials questioning how some of the documentation reads, who really owns the mortgage and who really has the true right to accelerate the mortgage.

This has already stopped some purchase transactions per The Mortgage News Daily report. Meaning that a borrower who was ready to close on a bank owned property that was foreclosed on two years ago; didn't close and the loan transaction west sour as JP Morgan Chase was the owner and servicer of the loan. So, we can only imagine what the halt of selling all bank owned properties and foreclosed homes mean for the financial institutions of America, as more is sure to follow suite.

The Associated Press quoted an attorney who sued Bank of America as saying that there could be hundreds of thousands of foreclosures across the country by entities that had no right to foreclose. With that said, that could be a problem that may be part of why we have seen the many wild number of foreclosures. Some representative of lenders have admitted to signing thousands of foreclosure documents without reading them. It was disclosed also by some news agencies that one Bank of America attorney stated that she estimates she signed 8,000 to 10,000 foreclosure documents each month. That is a lot of foreclosures and only determines one institution. What is going to end this mess?

Broken down in layman's terms; this is part of what seems to be some of the problem with the documents:

With so many mortgages being transferred from one lender to another lender and banks/mortgage companies closing because of default and the larger banks, like B of A and others mentioned buying these mortgages;

there may not be acceptable transfers completed. In short; some of these notes and mortgage may not have been assigned to the new lenders properly. There should be an endorsement and assignment from one lender to the other lender. It has reportedly been said that some of these notes for loans that were acquired by acquisition may still be in the originator's warehouse (the mortgage company that went under if you follow me).

Oops....sounds like a big thing to me. Having worked extensively in the secondary market due diligence area; I have audited notes and mortgages for a variety of banking financial institutions over the country. When a loan is transferred; there must be a chain of title from one lender to the other and if there is none.....and the original lender has gone under...???? How will this be resolved?

I am sure Bank of America and all involved will find out and in the mean time.....a lot of foreclosed properties are sitting empty and many Americans still in limbo waiting until this mess is resolved. It is reported that this could take some time to resolve.

Shall we all cross our fingers and hope for a speedy recovery????

Resources: The Mortgage News Daily

FHA Changes Mortgage Insurance Factors

2010-10-05T08:43:00.000-07:00

Yesterday, October 4th, FHA changes for MIP (mortgage insurance) changed according to schedule. The premiums are as follows:

Upfront MIP - for 30 yr term =1.000%

Monthly/Annual premium - 30yr term with loan to value & gt;95% = .90%

Monthly/Annual premium - 30 yr term with loan to value & lt;95% = .85%

Upfront MIP - for 15 yr term = 1.000%

Monthly/Annual premium - 15 yr term with loan to value & gt; 90% = .25%

Monthly/Annual premium -15 yr term with loan to value & lt; 90% = n/a

The upfront MIP is added into the loan amount and amortized in your payment. You are paying interest on the entire amount of the base loan amount and the MIP.

The annual/monthly amount is calculated on the base loan amount and is in your payment each month. This amount is what has risen and will make your payment more than it was. It has been said that this amount to about $40 monthly, give or take at little.

FHA is getting to be more in line with Conventional lending as the days go by. They still allow 3.5% down payment with credit score above 580. Anything below 580 a 10% down payment is required. Coming

As stated earlier what this means for FHA is that this will give them added dollars to build back their reserves which they hold to keep them in short terms, from going in the red with all of the mortgage delinquencies that have occurred.

More changes on the way; keep informed.

Today in Mortgage News

2010-10-01T12:20:00.000-07:00

The Rumor....

It seems that Barney Frank and Chris Dodd, (D) have come up with a plan for the homeowners who are in steep trouble and cannot get a modification or refinance. It is called the Dodd-Frank Bill and has been submitted to Congress. This may or many not occur but, here is what is supposed to happen; my version, that is:

If you have a government backed loan; you could possible be allowed to refinance to a low rate, regardless of your the items listed below and it is classified as a Rapid Refi-

credit,

debt to income ratio,

funds available

loan to value

fixed rate

There are no restrictions that have been published at this time but there may be some documentation. The MBS people who have pools of these loans; over 1 Trillion....are not all that happy and do not want this to happen AND it hasn't as of yet.

With all honesty, I do not see this as being something that will happen. I cannot imagine with all of the delinquency; the government allowing someone who is so far behind that it would take a 50 year mortgage term to amortize the loan; do this. Of course with the government anythings is possible now. Today someone put something a report that indicates that the United States is one of the few countries where the government assist with mortgage loans. This report indicated that offering these fixed rate mortgages might not be a benefit to our future in mortgage lending as the US has always offered so many other product within the industry. There is more about the Rapid Refinance you need to read if you are one of these people who needs a refinance and wants to stay in your home. Remember it is not approved as of yet and may not be when the people who already own these loans express their dislike for this process.

As with all things mortgage; it changes everyday. The rate are still very low and it would benefit anyone who could get their troubled mortgage done but my advice is to not get your hopes up.....we will continue to watch this RUMOR.

Mortgage- Fannie Mae Flexible 97 Loan

2010-09-21T11:08:00.000-07:00

**THIS PRODUCT WILL NO LONGER AVAILABLE AND BEING RETIRED BY FANNIE MAE. THERE WILL BE CHANGES TO THE STANDARD FUNDS REQUIREMENTS FOR ALL PRODUCTS. SEE NEW POST ABOUT FUNDS FOR CLOSING WITH LOAN TO VALUE REQUIREMENTS ETC. DATE 11/26/10.

Having read something recently about maximum financing being almost non-existant; I thought it appropriate to give you some insight into a program that Fannie Mae has for lenders. This product is not new and in fact has been existant for many years. This program is comparable to maximum financing. It is indeed their maximum financing product. With the Fannie Mae Flexible 97% loan financing you can find loan parameters suitable for first time homebuyer loans. The guidelines are flexible and doable for those who have little funds on hand. Surprising since most of Fannie and Freddie's guidelines have restricted criteria for risky loans.

~~The Key Features for this product are:~~

~~flexible source of funds toward the down payment and/or closing cost of 3%~~

~~the flexible funds may be gifts, grants, unsecured loans from relatives, employers, public agencies, and nonprofits, or secured borrowed funds can be used for the down payment and/or closing cost~~

~~the parameters for loan type are: standard fixed rates, 40 year and ARM products; these flexible loans are available for Refi Plus or DU (desk top underwriter) Plus~~

~~the property type is 1-unit primary residence only, includes condos~~

~~maximum financing is 97%~~

~~cash out refinances are not allowed~~

~~contributions from interested parties may be no more than 3%~~

~~mortgage insurance is required for this loan~~

~~standard credit requirements must be met regarding credit history and credit scoring~~

The above summarizes the guidelines for this Flex 97 loan from Fannie. As stated above normal credit standards will be part of the qualifying process to include; debt to income ratios within approvable guidelines.

~~As always the appraisal of the property must constitute standard property guidelines.~~

It is always to any borrower's benefit to pay equity into the loan; as much as possible. The more equity you have in your loan the better off you are, should you need to sell or if you plan on paying for your loan earlier. That is why saving for down payment is beneficial before applying for a mortgage loan. But there is hope for those who do not have sufficient funds to pay a down payment of 5 to 20%; so there does exist this product which allows for Fannie's maximum loan.

Self Employment Income Borrowers

2010-09-08T14:12:00.000-07:00

Self Employment means there may be risk!

Self Employed Borrowers

Let us get into the difference in self employed borrowers (conforming loans and jumbo loans) and the salaried borrower; the risk involved. Self employment is a risk within itself and here is why. In most cases if the company or business fails; the borrower is stuck with the debts of the business and without a job. The company must be stable to make a sound underwriting decision with regard to a self employed borrower.

For a borrower to be considered as self employed, they own at least 25% of the company. This and this alone determines if the applicant is self employed. This can be gathered from the client's personal tax returns. As always within most any business; some things stay the same, recently there have been many mortgage changes.

Factors that are considered are the following: (these are no more stringent than the salaried borrower)

The stability of the self employed income; has this client been self employed for at least 2 years and if less than 2 years, is there a profit and loss statement which indicates that the sales and/or services have increased from the previous year. Does the client have a history of being employed at some prior date in this field of work? Does the client have a history in other self employment?

Is there a demand for this type of business in the area/city, in which the business is located?

The area in general and nature of the borrower's business

The financial stability and strength of the business

Does there appear to be an ability of the business to generate sufficient income in the future to enable the borrower to make the payments on the loan amount applied for

Is there marketability of the property which is security for the mortgage as a private residence; since this property could need to be the source of repayment for the mortgage should the business fail

Length of Self Employment

As stated in previous articles; as a rule of thumb; a borrower is consider successful if he/she has been self employed for the most recent 2 year period. This in itself concluded that the business is stable and there is a likelihood of continuation if the earning are increasing and the business show stable and profitable sales and services.

However, there are circumstances when the investors will allow less than a 2 year history of self employment, meaning 12 to 24 months when the borrower's tax returns indicate the borrower has received such income at the same or greater level in a field that provides the same products or services as the current business or in an occupation in which he/she had similar responsibilities that are applicable to the current business. This again is analyzed with careful consideration and the borrower's level of experience, along with the amount of debts the business has obtained since inception.

The basic documentation required for a self employed borrower and the focus of the underwriter on the loan is the following:

• 2 years of signed and dated 1040 (personal tax returns) and business tax returns, which include 1020-Corporation Returns, 1065 -Partnership returns, 1120S- S Corporation returns with all schedules including K1's. 1040's may contain Schedule B ( Interest and Ordinary Dividends) C (Profit or Loss from Business; Sole Proprietor), D (Capital Gains and Losses), E (Supplemental Income and Loss) and F (Profit or Loss from Farming).

• a year to date profit and loss statement

• balance sheet

• signed 4506T

The underwriter is looking for at least a 2 year history of self employment. If self employed for at least 2 years; there is somewhat a sign of stability within the company. If the applicant has been employed for less than 2 years; it is very hard to consider the fact that the company is stable and profitable. **Normally less than 2 years is only considered when the loan is put into the DU/LP automated underwriting systems of Fannie and Freddie Mac and the system generates the loan is acceptable with certain parameters. These parameters may be cash reserves, loan to value and possibly an audited profit and loss statement which indicates that the income is consistently increasing over and above the prior year with sales and/or services.

If the applicant has been employed for more than 2 years, has sufficient reserves and assets; the automated system; which is relied upon at this time in underwriting, will sometimes only require 1 year 1040's. The credit and credit score, of course plays a roll in these documentation requirements. Normally, manual underwriting required the standard documentation which meet the rules of Fannie and Freddie as specified above.

Types of Self Employment and returns:

Sole Proprietorship - Schedule C income with 1040s

U. S. Corporation - 1120

U. S. -S Corporation - 1120S with K1's -shareholders share of income, deductions and credits

U. S. Partnership - 1065 with K1's which gives the Partner's Share of Income, Deductions, and Credits, etc.

There are additional schedules and forms to include 2106 employee business expenses, 4797- sale of business property, 6252- installment sale income, 8821-tax information authorization, 990- return of organization exempt from Income Tax Form and W-4 - employees withholding allowance certificate. Form 4506 -T is a request form for transcript of Tax Returns. 4506 - is a request for copy of tax returns.

The underwriter must evaluate each type of business a little differently and here is why:

The Sole Proprietorship: is unincorporated and is individually owned, managed and the owner has full responsibility and unlimited personal liability for the debts of the business. He/she is responsible for the entire operations and if the business fails, the borrower must replace his/her lost income and repay the business debts. Creditors have the ability to take any and all assets for debts owed by the business, as there is no distinction between the owner's personal assets and business assets.

The success of the business depends solely upon the owner's access of capital and to manage the aspects of the business, including how the business is run. If there is negligent management skills and the inability to obtain capital to keep the business going; there exist a possibility of failure and loss.

Partnership: This kind of business includes two or more individuals who take their assets and abilities to form a business. They share the profits and losses per the predetermined proportions that are planned out in the partnership agreement. There are two types of partnerships, a general partnership and a limited partnership.

General Partnership- Each partner within this kind of partnership has the responsibility for the managing of the business and its affairs. Each partner is also liable for the debts of the entire business and is responsible for the actions of all partners. (this is not true if it is spelled out otherwise within the partnership agreement). Upon the death, withdrawal or insolvency of any of the partners; this partnership is automatically dissolved. The assets are automatically first applied to the creditors of the business and the partner's personal assets will be first applied to their personal creditors, with any remaining assets being applied to business creditors.

Limited Partnership- This of course mean limited liability based upon the amount he/she has invested in the partnership. They are not usually involved or participate in the management and/or operations of the business and they may have limited decision making ability. Normally a limited partnership usually has one general partner who manages the day to day business and is personally liable for the debts of the entire business. If one partner dies within a limited partnership; it does not dissolve the partnership. Many times these kinds of partnerships are formed for a tax shelter and in these cases the K-1 will indicate a loss instead of income. The loss will give the person only the ability to deduct based upon the at risk amount of his/her interest in the partnership.

In mortgage lending, the lender's underwriter must evaluate the borrower's financial risk by:

evaluating if the applicant received any distributions from the partnership

evaluate if the applicant has guaranteed loans made by the partnership outside of those considered as non recourse debts

evaluate the applicant's share of non-cash expenses can be added back to the cash flow of the business

Limited Liability Companies (LLC)

The LLC is a hybrid business structure that is made to offer its member-owners the tax efficiencies of a partnership and the limited liability advantages of a corporation. The owners of the LLC or their manager may sign contracts, sell assets and make other important business decisions. The operating agreement usually sets out specific divisions of power of the member-owners or managers. Sometimes the owners or member may have instances in which it is necessary for one to personally guarantee some of the loans that the LLC obtains; even though the member usually have limited liability. The profits from the operations of the business of the LLC is sometimes distributed beyond the members and offered to the managers.

The LLC pays not taxes on its income. Each owner or member of the LLC uses the Schedule K-1 to report his/her share of the LLC's net profit or loss along with special deductions and credits on his/her individual 1040. Each member or owner of the LLC will pay taxes based upon their proportionate share of the LLC's net income at their individual tax rate.

The Underwriter must evaluate the following for the LLC borrower:

has the borrower received a cash distribution from the LLC

has the borrower guaranteed any loans obtained by the LLC

S Corporation

This is the legal entity which has a limited number of stockholders and elects not to be taxed as a regular corporation. The business gains and losses are passed to the stockholders. This business entity has many similarities as the partnership. The stockholders are taxed at their individual tax rates for their share of ordinary income, capital gains and other taxable elements.

The ordinary income is passed to the individual on the K-1 of the 1120S. The cash flow is evaluated very similar to the corporation.

Corporation

This kind of self employment is a state-chartered legal entity that exists separately and distinctly from its owners. These owners are called stockholders or shareholders. The corporation is the most flexible from of business organization for purposes of obtaining capital or resources for operations. The corporation can sue; be sued; hold, covey, or receive property. They can enter into contract under its own name and will not dissolve when the owner change.

Two types of Corporations exist: Publicly owned and privately owned. Publicly owned is widely held corporations and closely held is the privately owned. Why the latter? More than 50% of the outstanding stock of a privately owned corporation is owned directly or indirectly by no more than five members, this type of corporation has little or possibly no access to public funds and must raise capital through institutional financing.

The stockholders are not usually responsible for the day to day operations of the business even thought they have legal control of the corporation. There exist a board of directors and the distributions of the profits earned by the business is determined by this board. These profits normally flow down to the owners in the form of dividends. The stockholders are not personally liable for the debts and the losses are limited to his/her individual investment in the corporations stock.

Some owner's are paid a salary from the corporation and it is reported on the form W-2. Like any other borrower the underwriter is evaluating this income by analyzing the past 2 years W-2 earnings with year to date pay stub earnings. The corporations returns are evaluated to see if the company's stability is there by review the past 2 years which will indicate either a profit or loss for the corporation and the distributions to its members. The corporation will pay taxes on its net income.

Summary: This should make it obvious that mortgage underwriting (if done accurately) is not as simple as falling off of a log. As I have stated in many of my articles; this is a complicated process, it is in depth and it is thought through with much attention given. When there are guidelines set aside, rules and regulations; they must be adhered to or someone will eventually come up lacking and this is part of what we have seen since 2007.

Risk Assessment Underwriting - For All Borrowers

2010-09-08T11:05:00.000-07:00

Having read some post online; it is clear that not everyone understands that all borrowers must be evaluated for their ability, capacity and willingness to repay the mortgage debt without default. Frankly, I do not see that it is more difficult for one borrower than it is another to get financing as each applicant has to face the same rules and regulations which are specific to their personal financial situation and employment status. Every person does not have the financial capacity for obtaining finance but they are given the same benefit by evaluating what their situation is. Each individual makes up their own financial situation by how work, live and prepare for their desires. This means that if they are salaried, self employed, applying for a jumbo loan (loan amount greater than 417,000) or commission borrower etc. There is a process of evaluating the risk factors for each specific borrower based upon their circumstances.

The lender's underwriter is looking for consistency, stability, and willingness to repay this large amount of money and it rest upon their decision. They are looking at the history of employment, income calculations, the ability to save their income, and their credit history. Has the applicant always paid their obligations in a timely manner? If so, have they managed to save their income so that they can afford to buy this home? Has the client experience a stability of employment without job hopping or if they have; did their earning increase? It is not all cut and dried but there are parameters which are used in the assessment of approving a mortgage loan. This is to prevent a homeowner form loosing their home and the embarrassment at a later date. Sometimes clients have a tendency to view today only and do not realize that the payment do not stop for even emergencies.

There is a process for all applicants who are considered for home loan financing:

Risk Assessment for all borrowers:

In manual underwriting there are guidelines which specific Risk Assessment criteria which must be adhered to in the underwriting process. They are:

Primary Risk Assessment

Contributory Risk Assessment

Comprehensive Risk Assessment

Lenders who are conservative and prefer to underwrite their loans manually, are required to follow these assessments before approval of a loan.

Primary Risk Assessment:

the mortgage application is reviewed to determine the borrowers equity investment compared to the loan to value, combined loan to value or the HCLT.

the credit history of all applicants on the application compared to representative.

In other words the prospective borrower (s) credit history and investment (down payment) should be analyzed. If this loan is with minimal down payment and has a representative credit score (middle score of the three major credit bureaus) (the lower of the two if there is more than one borrower) that represents the inability to pay their obligations in an adequate manner; the loan is considered a high risk.

Contributory Risk Assessment:

debt to income ratio

liquid assets

term of mortgage

previous mortgage loan history or rental history

previous derogatory credit - bankruptcy and/or foreclosure

and the number of borrowers

The contributory risk assessment is stated by the investors as being a insufficient risk factor alone, but when combined with the primary risk factors; it concludes a high risk assessment.

Comprehensive Risk Assessment

In combining the layers of the risk factors; such as low down payment, lower representative score, with prior credit issues with no reserves after closing, and a high loan to value indicate a high risk is involved for mortgage default.

When a lender decides to make a loan and deliver that loan to the investors such as FNMA/FHLMC; they have to provide some evidence to off set the risk factors before these loans are eligible to deliver to them. For instance if you have a middle representative score which is 650, (older credit issues which are isolated) and your loan to value if 90% but the borrower will have 50k in savings after closing which can be liquidated; this is considered an offset for approving the 650 score.

Layered risk factors include but are not limited to:

a high loan to value (95%)

middle credit score below 660

no reserves after closing or minimal

no prior mortgage history or rental (they have lived with parents or someone else and their contribution cannot be documented) and

minimal credit to begin with

self employment for less than 2 years

These factor when analyzed indicate that the loan is considered a high risk for default.

Risk Assessment for Self Employed Borrowers:

Any person who has been self employed know that the first two years of the business is the most important. Even when the applicant has been in the same line of business; they do not know that they will do as well as the person with whom they have gained the experience has done. It takes time to build a business because normally there are start up cost, which includes loans which have to be paid back. Profitability does not occur overnight.

If a new business can make through the first two years and have a substantial increase in earnings from the prior year; this is one way to know if the company or schedule C person is on the road to a profitable new year. If there are declining earnings; this indicates that the company may not be doing as well as expected and presents a risk of lending money to this applicant.

Summary

Hopefully you can see that the mortgage lending process is not as indulgent (at least conforming conventional loans) as you might think. Yes, the risk assessment has always been in place and probably sometimes ignored in some cases. This was of course during the lenient subprime area which brought on the devastating results we now see.

Getting a mortgage is not like going out and buying a new coat. You look at the coat, it feels good when you try it on and the decision is made to buy it. The department store has no risk; if you don't like it....most of the time it is your regardless. Buying a house is the biggest investment an individual will make and it is something that should be permanent; unless selling and buying again etc. Certain risk are there for any applicant as the future is not know by anyone. What tomorrow brings we do not know until it is here but lender must do the right thing and evaluate each applicant by the book; using common sense where applicable.

If the latter is done...there will definitely be less defaults in our Country..

FHA Changing Yet Again

2010-09-07T17:22:00.000-07:00

Just when we think it might be possible to sit back and relax awhile; here comes another change from FHA. Of course let's remind ourselves that FHA (Federal Housing Administration) only insures the loan and does not provide the financing but the lender of choice does.

The recent changes included, but are not limited to:

FHA will no longer allow 6% seller contributions, they will now allow 3%, which is the industry standard.

Down payment requirements stayed the same for credit score of 580 and above at 3.5%. For credit scores below 580; the down payment is 10%.

Upfront MIP (mortgage insurance premium) changed to 2.25% *will change again

These are a short list of recent changes....

Future Changes for October 2010

Monthly MIP (mortgage insurance) is changing from .55% to .90% (I have seen this figure as 1.00%, but we will apply what appears to the normal for FHA which is not a whole number) of the loan amount.

Upfront MIP will change, from 2.25% to 1.00%.

FHA has made approximately 30% + of all mortgage loans within the industry since the mortgage meltdown. They also have significant defaulted loans which have basically used up some of the reserves which they keep on hand per a report by the Wall Street Journal. The basis for the latter changes is to bump up the reserves as this will generate hundreds of thousands more in reserves. What this means is that FHA does not want to see the figures go in the red like the Banks and mortgage companies have previously done. The above scenario is not all bad but may not be exactly all good either. This means that you will be adding less MIP over the life of the loan into your loan amount but your monthly payments will rise anywhere from $40 to $44.

Having read some blogs and articles that FHA is the place to go for bad credit credit and easy loans; it strikes me as someone who has no idea what they are talking about. Why? FHA does not make bad credit loans and they never did. Yes, they did make less than perfect credit loans but if it was bad???? The loan was declined. The credit, underwriting rules and regulations are "not easy." In fact they are sometimes complicated because it might work if 10 things meet the standards of the approval. I do believe other UNDERWRITERS would agree with me on this one. Also, they are much more cumbersome than getting a conventional/FNMA/FHLMC loan to approval. A lot more documentation is required in most cases and it varies from conventional lending to FHA. The appraisals require a much more extensive review and never would I say that FHA loans are easier.

FHA was originated to serve the moderate to lower income individuals who do not have the necessary means for the standard down payment requirements of conventional lending. This has changed in a big way since the mortgage meltdown and FHA raised the maximum loan amounts so that more borrowers were able to get this financing. All borrowers now want less down payment, more flexible seller contributions (which has recently change to be like conventional) and flexible sources of funds for down payment and reserves. This came about due to the economy and the conventional fall out for the past three years and this is now why FHA is starting to change the rules and regulations as they have default rates to consider also.

FHA does have rules that are not applicable within conventional lending. Such as a student who has no income or minimal income, being the borrower on the loan with a parent who does not live in the property but use their income alone. The name used to be called "kiddy condo loan." There is still certain criteria that applies and must be adhered to. Both FHA and Conventional lending will allow non-traditional credit but again, certain criteria applies. The credit standards have become more restrictive for all loan types and that includes Conventional, FHA/VA, Rural Housing and even the simple "bank" loan.

The Best Bank to Get Your Home Mortgage From

2010-08-25T12:58:00.000-07:00

This article is not about how banks, credit unions, or lending institutions stack up. It is about a paradigm shift that is taking place with or without you.

Can you imagine what it would be like to not have to provide all of your information to a bank loan officer only to have them ask you for more paperwork? It has been said that a traditional bank will lend you money if you can prove you don't need it. So, why not put yourself in a position where you really don't need it? Think it's impossible? Think again.

There is a financial strategy that you may or may not have heard of called the Infinite Banking Concept. Through the Infinite Banking Concept, you actually learn how to become your own banker and solve your need for financing - no matter what the need is - and that includes your mortgage.

I strongly advise you to take some time and learn about this financial strategy by visiting the Infinite Banking Concept website. You will be glad you did as you will be on your way to becoming your own banker. I am and I am loving it!

Ways to Save Money on a Mortgage After You Retire

2010-08-01T13:34:00.000-07:00

For many seniors it’s essential to save money wherever they can after retiring, especially on a mortgage. Once you’ve decided to retire, you need to be certain that you have enough income and have reduced your expenses enough to live as comfortably as you wish. Now for most families, their mortgage is probably their biggest monthly expense.

When you actually retire, unless you have a side business that generates income, your income will come from your pension (if you have one, and it’s increasingly rare commodity these days), your Social Security check (that is if there’s any money left in the Social Security system when you retire, which is another unknown), and then of course, whatever savings and investments you have, including rental properties.

So, unless you have unlimited savings or a substantial income from your investments, it’s of paramount importance to lower your monthly expenses.

One way you can get your expenses down is by paying off your mortgage before you retire. If you can do that, you have lightened your monthly burden by hundreds, maybe even thousands of dollars every month. Depending upon how large your mortgage is, it may seem like an almost insurmountable task to pay it off early. But, there are a few tricks you can try to get your mortgage paid off before you retire.

For one thing, you can make at least one extra mortgage payment a year to pay down your principal. The lower the principal, the less interest you’ll have to pay on it.

Another way to lower your mortgage payment is to look at the rates you’re currently paying. If you got your mortgage a decade or more ago and you’ve been making your payments steadily ever since, then it’s probably a good idea to check out refinancing your mortgage now since mortgage rates are lower than they have been in a long, long time. Once you’ve gotten your monthly mortgage payment down lower you can look at either making an extra mortgage payment every year or making slightly larger mortgage payments every month to pay it off faster. Every little bit helps.

If you’re nearing retirement and it’s just you and your spouse living in a four bedroom house, think about how much house you really need. Perhaps you should sell your house, pay off your mortgage, and relocate to a smaller place that’s more in tune with your current housing needs, and perhaps still have some money left for a down payment. You may still have a mortgage to pay off, but housing prices have really dropped in the last three years, and mortgage rates are lower than ever. If you can lower your monthly outflow of cash, that’s more money in your pockets for investments, travel, or that big-screen TV you’ve been lusting after.

One thing you shouldn’t do, however, is to dip into your 401K account or IRA to pay off your mortgage early. It would be nice to get rid of your mortgage payment entirely, but you need to keep a balance between owning a home, having investments, and having enough cash on hand for emergencies.

The thing is, everyone’s situation is unique, so tailor your approach to your needs and your current situation. The longer you can put off retirement and dipping into your savings, the more money you’ll have in the future. The way the economy is going now, you should probably work as long as possible and work on paying off that mortgage while you still have a monthly paycheck to count on.

About the Author:

Vern is a student learning about all aspects of finance to pass his New York mortgage test this fall.

Mortgage Loans - Bad Loans Still?

2010-07-17T13:55:00.000-07:00

I am not here to criticize anyone, especially someone trying to make a living in mortgage lending, but I can't get over the fact that there are Mortgage Loans - Bad Loans Still; being originated. These types of loans CAN be destructive to someone's financial capacity; and to the citizens of America who help pay the bailout funds. Or, should I say, especially our government and since we have government programs; that have been made to help Americans who are in trouble with their mortgage now. We have also bailed out WallStreet, AIG, Lehman Brothers, Wells Fargo, Bank of America, who bought Countrywide and how many others? All because they invested in SubPrime loans, either making the loans to practically unqualified applicants or the MBS pools they were holding where the loans became seriously delinquent and were not salable due to the aforementioned. America is in debt over their heads from all of this so called rescue for those too big, to go down!!!!

There is not a pretty format of words to use when asking the questions: Why do Mortgage Loans - "Bad Loans Still" exist? I for one, know exactly how and why all of this mortgage trouble helped bankrupt American, so to speak. Yes, fraud was committed, issues overlooked, heads turned and loans closed that should never have been made. Why, because everyone deserves a chance to own a home. The latter is true but the fact remains that a home must be paid for and those come once a month every month. No skipping and picking up latter when the money is there to make the payment.

Having said the above, let me tell you what I just came across about the loans still being made.

One company's guidelines for "Bad" loans:

Credit Score Loan To Value Down-payment

620+ 100% 100% financing

560-580 90-95% 5-10%

550-560 85-90% 10-15%

535-550 80-85% 15-20%

500-535 80% 20%

Now I will tell you what is wrong with this picture. The 620 score with 100% financing indicates no equity in the loan and more than likely the closing cost is being paid by the seller which has been added to the sale price. There will be escrow that the borrower will probably have to pay...but...not a lot of money in the transaction (if any). On top of that, there is probably no reserve requirement, meaning if the borrower has not reserves, he/she is living from pay check to pay check. If their new mortgage payment is greater than their current rental or mortgage payment; how are they going to manage a higher payments? If this 620 score borrower hits a jam like loosing his/her job or reduction in salary; what is going to go first? The house payment can't be made and more than likely it will go back to the lender. Now, first of all the company offering this loan, does not service the loan. They are a Broker, they originate the loan for someone else. They make the "A" paper loans and they also make the "D" paper loans. This company originates out of a city with one of the highest fraud rates and foreclosures.

As we go down the above the list of credit score and loan to values; it only gets worse in most cases. The next credit score of 560-580, they must have a five (5)% to ten (10)% down payment. This can come from a gift OR have the seller carry a 2nd mortgage payment or improve the credit score??? The gift and the 2nd mortgage applied to all the down payments listed above AND ......

They are allowed to have a bankruptcy within the past 12 months....but the minimum score is 500....

Disaster waiting to happen. Having underwritten all kinds of loans; sometimes very successful business men will be so busy, they do not pay their debt when they should....believe it or not, I have seen this happen. They have the funds to pay the 10 - 20% down payment but their score is low....still if these kinds of borrowers have neglected paying their obligations in a timely manner; what is going to change? Nothing!

From where I sit, our economy is not stable enough to still be making these kinds of loans. If the borrower gets a second mortgage; they get sick, loose their job, what is going to happen to the mortgage payments? They are not going to be paid. We do not wish anyone bad luck and hopefully no one will loose their job but if someone has credit score as low as most of those above; something has caused their score to be this low already. If there is a pattern of slow payments; what is going to change the pattern? More income, less debt, a new house? What caused the lower credit score to begin with and how will these score become better. I would say that before anyone with these scores needed to buy a new home; they would work on their credit to better their scores and here is why...

Any loan with these score will have an interest rate that is much higher than a credit score of 700 - 800. Even a score of 680 - 700 should give anyone a decent rate of interest with all other criteria met that is needed to be approved for a mortgage loan. The lower the credit score the higher the rate of interest is going to be. What this means....

It means that you will be paying more interest on the mortgage loan than you will principal. For instance:

Mortgage amount: $300,000 @9.00% rate of interest

$2,413.87 principal & interest payment

2,250.00 = interest

163.10 = principal

The next month: 2248.77 = interest

165.10 = principal

The same terms @ 4.650% = $1,546.91 principal & interest payment

1,162.50 = interest

384.41 = principal

As you can see the principal payment changes only minimal each month and you are paying interest far more than principal in the beginning years of your mortgage, but with the higher interest rate your principal reductions is very minimal compared the the lower interest rate loan. As you pay the term down the principal increases. If you pay a principal curtailment; it will decrease the amount of the interest you are paying on the loan because the interest is based upon the principal balance.

Your score is not the only benchmark for approval of a loan but; you score will determine your interest rate among other things. If your score is 500; you interest rate is going to be what is called outrageous with the current going rates for a 30 year mortgage of 4.600 +-. I know of someone who got a 4.00% quote for a 20 year loan.

My advise to anyone is work on your credit score so that you do not have to get a "Bad Credit Loan" with a much higher interest rate. There are ways to build your credit if you make the choice to do so. Pay off credit that has the lowest balances first. Then start paying down your higher balances. Pay off collections, judgments, tax liens, and charge offs. Do not charge consistently. In fact, it is best to only charge and pay off the accounts monthly. If you can't pay cash; more than likely; you don't need it anyway in so many cases I have seen. Charging can be a habit. You are not going to die if you can't keep up with your best friend who buys new clothes for every season. You probably look as good or better anyway.

In closing; in my opinion (which may be worthless to you) these types of loan should go away forever. My reasoning is because having spent years evaluating individuals credit reports and their ability to repay a debt; it is not uncommon to see those who have had consistent delinquent issues clean up their act just because they are allowed to buy a home. If anyone wants to own a home, they should clean up their credit, get a second job (if they must), save their down payment so that they will possess equity in their home and so that buying a home does not present a financial hardship. If you don't have money to pay the first payment already saved; you could be headed down the wrong path already.

Anything financial takes a plan and hard work to pull it off; whether it is saving a thousand dollars, buying a new car or a new home. I can't understand for the life of me why there are Mortgage loans - Bad Loans Still!!!

Home Affordable Modification - My Story

2010-07-15T15:46:00.000-07:00

I wrote an article on Hubpages today that needs to be read by everyone who might have the same issues. The Obama Administration needs to know about the issues which exist for the borrowers who are not getting the right attention and help for modifications.

You can find this articles Home Affordable Modification and let me know what your problems are. I have sent a copy of the article to the White House. Maybe someone can lend a hand and change some of the issues which are preventing homeowners from getting mods and refinancing.

Mortgage Meltdown - New Predictions

2010-07-13T11:02:00.000-07:00

It never makes me smile to read something as disturbing as "another mortgage meltdown." Nevertheless, I have and when thinking logically, it could be true. Please note that I have not made this prediction and never would, but after reading the article from the NY Post; it put me to thinking. Why is that you say? We know that the SubPrime market started the flow of the first one....with the help of Wall Street and the SubPrime Investors who bought all of the mortgages which should not have been made to begin with. Now, our government; the Federal Government is guaranteeing just about all of the mortgages being made. Again, you say; how so?

Washington has made many efforts to keep the housing market from hitting rock bottom for some times now. They have constantly implemented new programs to fit the need of almost all troubled situations out there for the borrowers who are struggling to keep their home. Now, with the lowest rates in 20 + years, at about 4.600% for a 30 year mortgage; eventually these low price mortgages just might come back to bite us. Not them but us!

With the new lower rate the Investors, according to the Post; (those who buy the MBA pools) are buying up these pools of loans which started the mortgage dilemma to begin with. Doesn't sound very encouraging.

The Federal Reserve has bought the MBS (Mortgage Backed Securities) Pools until April 1; which amounts to about $1.25 trillion. It was said by the central bankers that if this had not occurred; the housing market would have gone under with no recovery. When the Federal Reserve stopped investing in the MBS pools, the investors, some of whom we have bailed out already; jumped back in to buy up as many as possible.

It seems that the Investors see something some of us normal people do not. It is their business to see what is going on in the world as a whole. It seems they are watching other countries debt crisis, and know what the risk levels are and therefore believe that the MBS Pools give them a chance to earn more than the Treasury bonds pay.....and no added risk...

It is estimated that Washington now insures about 97% of all mortgages made. So...having said that if the government guarantees all of these loans, sure the rates are low. So, as stated if the housing market fails again; who is going to get hit the hardest? You guessed it.... The United States Government!!!! Why? Because most of the government loans have a small percentage of downpayment structures and these borrowers have little or no equity. If housing prices fall; borrowers are going to default; just like they are doing now.

As the rate keep getting lower and lower; homeowners keep refinancing. There is nothing glorious about refinancing if a borrower cannot drop the interest rate by at least two (2) percentage points. Why? I have explained this in other articles....but will state again. If you are adding back closing cost to your paid down principal balance and cannot recover this add back for approximately 2 to 3 years....you are only making more debt for yourself in the long run. Sorry, but that is how I see it. Of course if you can pay the closing cost out of pocket; it is worth you lowering the rate. I still say by at least two (2) percent.

Some say that even though Washington is guaranteeing the mortgages; it does not wipe out disaster yet again as some of the reworks (modifications), refinances and even purchases will still go into default and the government will wind up borrowing more and more money to salvage FHA insured mortgages. All of the refinancing of the troubled loans is allowing the fuzzy dealings in the mortgage market of (MBS Pools buying etc.); and when it is all said and done it is only setting up or prolonging the inevitable for so many of these loans and they will at some point fall delinquent again if the economy doesn't change.

Who is going to get hit with this next crisis? You, me and thee!!!

Mortgage Appraisal Report

2010-07-12T11:42:00.000-07:00

This is about the Mortgage Appraisal Report; to help you better understand how your home and property is evaluated for the purchase price and/or the value of your home....

The evaluation process is somewhat complicated at times....just like all things mortgage can be. This is not to scare you but to make you aware that there are a lot of processes that have to take place in any purchase or sale of a home. Not only must a person get qualified and approved with the verification of their financial position, but the home being purchased and the land/lot the home is on; must be evaluated and pass the necessary test also.

Normally you, the borrower must become qualified first but the process does not end there. The lender/broker/mortgage company must hire a qualified appraiser of real estate who holds license to evaluate the house and property. The large investors such as Fannie Mae, Freddie Mac and FHA have rules and regulations which must be adhered to and complied with. They set the guidelines for appraisers to use and spell out the full evaluation process. Appraisers must have formal education and be approved with the lenders and agencies to be selected to give a property evaluation/appraisal on mortgage loans.

What does the Appraiser do?

The appraiser gets a purchase contract and legal description (if a purchase), legal description (if a refinance) to the property and the details of the pending purchase or refinance. He/she will then call the homeowner and set up a time to visit the property to do the inspection of the home and land/lot.

A majority of appraisals ordered through the lender require an interior and exterior inspection. Meaning the appraiser must measure the inside of the dwelling, reviewing the workmanship of the homes structure both inside and out. He/she will evaluate the condition of the home. This means that they will review the entire house including the attic and basement (if applicable) and determine the material which has been used to build the home also; both inside and out. The material and condition of the walls for instance sheetrock, paneling, floors, ceilings etc. The grades of material used will also determine the cost per foot as some grades are more durable than others. For instance, if the floors are ceramic, hardwood or just plain tile floors; the ceramic and hardwood flowing, of course are more expensive,will last longer and are more valuable than tile floors.

The features and amenities of the home also help determine the value it will be to a new customer. For instance if there are custom blinds, appliances, hardwood floors, the number of bedrooms, a separate dining room, the light fixtures, the number of baths, the amenities in the bath (whirlpool/separate showers/tub) are also important to the evaluation process. The outside features to include but not limited to; a deck, double garage or carport and a paved drive will also be included in the final analysis.

With the current declining values and with so many homes in foreclosure; the appraiser must look very close at the condition of the dwelling, the marketing data; meaning how long the house has been on the market and the trends within the neighborhood. If the house within the subjects market area are in poor condition and there are several houses which have been foreclosed on; then it is more than likely your value may have declined from when you purchased the home. If you are buying at a lower than normal sales priced home, because it is a bank owned property; it is always good to check out the neighborhood to make sure there are not conditions which could further lower the value on your home. You do not want a home that is in a steadily declining market; if you lose value, should you have to sell you could not get what you possibly owe on the property.

The appraiser gathers comparable homes that have sold within the past 3 to 6 months (preferably, not more than 12 months) that are closest to the subject (the home you are buying or selling). He/she must give at a minimum three (3) comps. These comparable must be within the same square footage, within close approximates to all features such as bedrooms and baths. The square footage for a 2100 sq ft home should have comps which are within close range of 2100 sq ft. If they are not close; the appraiser must have an upward if higher or downward adjustment within the appraisal grid. For any item which is not similar to the subject property; there must be an adjustment. If the subject property has more amenities; such as ceramic in the kitchen and one comp has plain tile; an adjustment should be made. If the subject is in average condition and the comps are superior; an adjustment should be made. For instance; if one of the comps has a swimming pool and the subject does not; if at all possible the comp should not be used or otherwise an adjustment must be taken into consideration.

Some times an appraiser has difficulty in using comps within the subject's immediate area. There are instances when he can only find one comparable located in the subdivision or within a mile of the subject. Rural properties are much harder than urban and suburban properties to evaluate. This is because sometimes the houses which have sold recently are 10 to 15 miles away. In these instances; this is acceptable to the investors such as Fannie Mae; as long as it is reasonable and explained. It depends upon the trends and what is considered normal in the area.

The appraiser has guidelines that he can only use homes from a certain distance from the subject property in the evaluation. Sometimes, if there are no comps, they have been know to give the home that is farther away to at least indicate the value it should generate according to the amenities of the home. Sometimes the appraiser must go into another subdivision to get comps that support the sales price that is given. Sometimes, the seller must come down from the initial listing price if the value does not support it. There are instances where the buyer has been willing to pay over and above the value, but usually it is rare and not an option for many as they do not have sufficient funds on hand to pay the dollars down to the sale price listed. The loan amount is based upon the lower of the sale price or value.

At the present time Fannie Mae and Freddie Mac are looking very close to the trend in the neighborhood concerning the stability of sales within the area of the subject. The appraiser must disclose if the trend is stable, increasing or declining. Meaning are the values steadily going lower; are they stable or are they increasing. There does not appear to be a large amount of increasing value at this economic time. It will more than likely be state or declining. The investors are looking for stability. They also want to know the average number of days on the market within the neighborhood. This tells how slow or average the sell of property is within the area of the home.

There are many other details of the appraisal process that is voluntarily omitted in this article so that you are not left with information that is not professionally understood as a layman. I will elaborate on other appraisal issues at a later time.

Mortgage- Home Affordable Foreclosure Alternative

2010-06-10T13:21:00.000-07:00

This program will be implemented on August 01/2010 per FNMA

Fannie Mae has issued a new Home Affordable Foreclosure Alternative (HAFA) to the mortgage servicers to help them with the sale of a pre-foreclosure home; which will reduced the deterioration and possible vandalism of the property. These are for those borrower's who qualify for short sale and deed-in-lieu sales.

Please remember this is a Fannie Mae program....if your loan is not a Fannie Mae loan; you will need to ask your Servicer, if they have a similar program (and they may) to this FNMA product....

This program is being implemented to enhance homeowners and the Home Affordable Modification Program and those who may have tried to use the FNMA Modification options but were unsuccessful.

How this program will be utilized for the benefit of the borrower now facing foreclosure:

It is to provide alternatives for borrowers who are HAMP eligible (including the borrowers who are facing imminent default)

The servicer will need to verify financials and hardship information collected with the HAMP, eliminating the need for additional paperwork from the borrower * they might need an update

This will allow the borrower to receive pre-approved short sale terms prior to the property listing

Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement

RELEASES the successful HAFA borrower from FUTURE LIABILITY FOR THE DEBT.....This is a very big thing...see my Short Sale Articles.

This will provide financial incentives to borrowers as well as the servicers

Short Sale or DIL Incentive ---------- $3000 to assist with moving and finding a place to live. The short sale funds will be disbursed at closing and the Deed-in-lieu funds with in a 5 day period.

Things to remember.....

As with anything there are certain guidelines and procedure that must be followed and you must go by the lender/servicers guidelines; as they will be based on FNMA's directions. There are certain forms that must be executed by the borrower and the final value or amount that must be used in a short sale will be analyzed by the servicer as permitted by FNMA from certain vendors. This will be a step where you cannot say; okay I want to see this house for this amount. It will be based upon certain parameters after an evaluation by a qualified company who are approved through FNMA.

How you may qualify

If you were qualified for a HAMP modification, based on verified income, but was not offered a trial modification due to inability to meet HAMP qualifications. (example: did not meet the target monthly mortgage payment ratio)

Failed to complete the trail period successfully or

Became 2 consecutive payments (31 or more days) delinquent on the modified loan: or

Requests a short sale or deed-in-lieu

Note: They are placing one exception to the property occupancy. Meaning you must live in the property unless, you had to relocate to a new job or was transferred by an existing employer more than 100 miles from the property and have not purchased a one to four-unit property within 90 days prior to the HAFA Agreement date.

You the borrower must have been considered for all other home retention options as per FNMA loan workout plans

Your financing evaluation must have determined that your financial condition does not allow you to have the ability to contribute to reducing the potential loss on the balance of your loan

There will be certain guideline parameters for the lender/servicer regarding the processing time of these options; Short Sale and Deed -in -lien. There will be certain forms that must be signed and submitted by you. YOU have the option to request a short sale but your financial criteria must indicate that you are eligible.

This new program being offer by lender/servicers per Fannie Mae; can help the borrowers who have been struggling but cannot get back to a paid as agreed status. Be it the loss of income, job, illness or any other extenuating circumstance. This of course has been handed down as one of the methods that the White House Administration has been working on to help the homeowners who are struggling the most.

Notice: As always I am giving you some updated information I have learned; it is true information and written in my own words, but this comes from the most reliable source; Fannie Mae guidelines. The information given here does not entail every guideline or qualification as they would be too many to list here. So be aware this may not be conclusive and you will have to meet all applicable guidelines. If for some reason you need further guidance; you may contact me and I will do my best to find out more information. Remember your lender should provide you with the qualifications and give you adequate reasons why you do not qualify; if that occurs.

Mortgage Quality Control Before Closing

2010-06-02T13:27:00.000-07:00

Changes, changes and more changes....

There are yet again more mortgage changes within the industry and this upfront Mortgage Quality Control. Some all it due diligence. Yes, this is good news and it is to protect you the consumer. We are sometimes hurt by our own ignorance and that is why I started this blog to help all who are unfamiliar with the mortgage application process; become more knowledgeable.

As you may be reading here and there online that mortgage guidelines and rules for the industry; are changing daily. As of recently FHA made distinctive changes with regard to down payment structure, seller contributions, upfront mortgage insurance (MIP) calculations and annual mortgage insurance (MIP) and more.

Fannie, Freddie, and FHA are frequently coming up with something else to help prevent another disaster within mortgage lending by enforcing more Mortgage Quality Control/Due Diligence upfront during the loan application process. This is actually all for the good of the consumer. There are always places to make errors within a mortgage application process but with as much scrutiny as there is now; hopefully the errors will be only minimal and not affect the country as a whole.

Latest bit of information I have...

Recently Fannie Mae has taken yet other measures to ensure that the new mortgage applicant has the capacity to repay the loan. The following has been put into place for the application process...Quality Control/Due Diligence before the loan closes.

a verbal VOE (verification of employment) will be required 10 calendar days prior to closing for salaried applicants and within 30 days for self-employed

an updated credit report; credit report number two; within 24 hours of closing

Verbal VOE: Why? There are many thing that can occur with the unstable economic status of our country. The verbal employment verification can let the underwriter of the loan for the lender know that the applicant/borrower is still employed when the file gets to closing and ensure compliance to guidelines. This verification should be done exclusively with the human resources department within the main office of the company or as close to this as possible. People are losing their jobs everyday and a loan cannot close with the borrower unemployed. The approval is based upon the borrower's ability and capacity to repay the loan. If there is no job; there is no loan.

Credit Report: Some times people who are somewhat unaware of how they need to proceed or not proceed with things during the application process, can make mistakes which can now cost them the closing of their loan. They will buy new furniture, and sometimes a new car for the new garage, make additional debts. This is unacceptable because it can cause the debt to income ratio to be out of line and therefore the borrower cannot afford the payment of their potential new home. People have been known to make a loan for closing cost which means that somewhere; something as been misrepresented on the loan application. These kinds of actions will no longer be tolerated and the updated credit report within 24 hours of application will eliminate these actions. The loan will not close if you have obtained more debt than you can qualify for and the new debts will be added in your debt to income ratio. It may cause the loan to either be delayed or not close, the latter if you are not approved with the higher income ratio. The new credit report will indicate any new credit inquiries which must be explained.

Funds to close can only be borrowed if they are collateralized with a marketable asset. This is should be known from the beginning of the application, not after the preliminary approval, because it can kill the loan. You must qualify for the loan with this debt and it should be disclosed initially.

Also please read and review these changes about RESPA, Credit Analysis and Mortgage Refi Home Affordable.

The more you know; the smoother your loan application will go!

Mortgage Short Sale

2010-05-31T11:56:00.000-07:00

What you need to know

Just so you will know; nothing is ever as easy as it may sound and especially Mortgage Short Sale. Let me expound on this just a little so that you fully understand the full context of how it all works.

Short Sale definition is: the sale of a home by the owner (seller) for a sales price (or value amount) that is lower than the pay off amount (or principal balance + fees etc.) of the existing mortgage. Meaning that the lender is not getting the total mortgage loan amount due them; because the value of the home has declined.

We are all aware that there have been lots of articles online and in the news; about homeowners that are "underwater" with their property value being less than the mortgage owed the lender. This is also known as declining market values.

It is very important that no one believes that you just decide to sell your home below market value or what is owed on it; find a buyer and then you are done. Not so fast. It is important that you know the guidelines that your mortgage company or the bank, has in place and request that this information be sent to you in writing. You may not get it and probably will not until there is a firm deal in place, but it is imperative that you talk to someone who has authority and know what the guidelines for the company are. Do not assume anything because you will more than likely be told that you will have a debt for the amount that is not paid by the Short Sale and still be in debt with the lender.

Some institutions will either try to tell you one thing and yet something else be what is actually in their guidelines. At least this is what I understand has happened to many. Remember they are not in business to take a loss. Know your options before you begin. The lender is not going to take the write off without a struggle to get their money; that is the bottom-line. They want all of the money; not just three-fourths of it or 90% of it; they want it all. It is not impossible that they write it all off but more than likely you will have something to pay; at some point.

Here is how they may try to get it:

They may say okay; yes, you can sell this house at $315,000 as that is what it is worth today, but we will make you a promissory note for the additional funds that are due to the bank in the amount of $30,000; which would be the full payoff. Of course you do not have to agree to this. It is up to you to read and educate yourself so that you know your options. I keep saying that over and over again; know your options. Get it in writing; if possible, get a realtor or attorney if possible. You may qualify for a bankruptcy and need to know this. If you can tell the lender/bank they would be better off to forgive the debt and allow you do a sale without a note for the remaining balance; rather than you having to complete a bankruptcy (if you qualified). They may chance their policy on the spot. This might change their mind but never think that you will get out of this easy. The other issue is this; the lender also has the ability to show this as income to you and send you a 1099; which indicates this was a profit for you and you must pay taxes on the $30,000. They can also file a judgment and not show as paid and your future wages may be at garnished.

It is important not to agree to the first option they give you. Never sign anything until you are sure you are protected and you know what is taking place. Never assume the debt is written off completely until you have an executed; recorded release of lien/deed of trust; stating no further collection will be attempted by the lender. In the long run you are better to try to find a way to convince the lender to write off the final amount owed but I dare think they will not send you a 1099 indicating you have income which only means you must pay taxes on that amount.

Mortgage Fact - How to Prepare for Application

2010-04-30T12:34:00.000-07:00

If you are thinking about applying for a mortgage loan and you have not taken the time to look at your financial situation; then the time to do so is before you go to the Bank or Mortgage Company. Preparing yourself will definitely keep you from the hassels that can occur if you are not prepared. Know if you can qualify before you go. It is not that hard really, if you want to make sure you are ready for a home loan.

Be Informed and be wise! Other important information: RESPA Final Rule, Home Affordable

Some Things to Consider:

First you should know what your credit looks like:

Depending upon the type of mortgage loan you are considering, you need a credit score at a minimum of approximately 660 or higher for conventional loans and approximately 620 for Government insured loans; FHA/VA. This should be your middle score, meaning the mortgage company will pull a tri-merged credit report and your middle score is the qualifying score. If there are two borrowers; the lowest tri-merged score is used of the two. The three major bureaus are; TransUnion, Equifax and Experian.

The higher your score, the better off you are. There is actually no way to say definitely what score the AUS (automated underwriting system) will take, because your approval is based upon other factors as well as your credit. The loan to value plays a part, funds for closing and reserves after closing also play a roll in whether you loan will be approved or not.

It is best to have minimal other obligations. Know what you owe, how much you owe and when you will have your accounts paid off. The less debt you have, the better off you are as long as you have a credit history of at least 24 months. Again, this may vary depending upon the type loan, FHA, VA or Conventional. Sometimes non-traditional credit may be verified for further evaluation if you do not have sufficient tradelines as well. There should be at least four tradelines on your credit report. If you currently rent, your rental may be verified manually or obtained by the bureau.

The company will use your installment accounts, revolving accounts, child support, alimony payments, and any debt on your credit report to include student loans; if applicable. You are obligated to tell the Loan Officer about any other debt you have. Recently opened accounts should be disclosed even if they do not show up on your credit report. Recently opened account can mean that you have borrowed money for closing which is only allowed if the loan is secured with a marketable asset. Your asset.

Debt to Income:

You debt to income is important. This is figured by taking your total debts that are extending beyond 10 months, include the pending housing payment plus taxes, insurance, mortgage insurance and HOA fee (homeowners association fee, if applicable). The total debts plus housing expenses should be 36% +- as a standard rule. This can change with added reserves, excellent credit lower loan to values etc.

Gross Monthly Income 6,666

Housing Expense 2,000

Total Debts 2,750

Housing expense                         30%

Total DTI (debt to income)          41%

This calculation is based upon annual income of $80,000; PITI, (principal, interest, taxes and insurance) payment of $2,000 and other debt of only $750. I have estimated taxes and insurance etc. as there are so many factors to take into consideration depending upon the location of the property. Taxes are very high in some cities and your hazard insurance may be depending upon your credit also. See this calculator. for housing payment.

The above is only a scenerio and a lot of people have other debts greater than $750 monthly. This gives you an idea of where you might need to stand. As I have stated, if the credit is good, money for downpayment is saved and there are reserves; these debt ratios could be approved in certain circumstances. It depends upon factors about your financial situation and the loan to value. The lower the loan to value the greater possibility the ratios above will be suitable.

Funds for closing and Reserves:

Funds needed to close will of course depend upon the loan to value. If you are applying for a Conventional loan and you are getting maximum financing, normally this means a 95% loan to value and funds would be five (5) % downpayment plus closing cost and prepaid items.

The five (5)% downpayment must be from the applicant's own funds. These funds cannot be gifted. This means that you should have these funds in your bank account at least for the past 60 days. Of course if you are saving these funds from you income and this can be documented; this is acceptable. You must also have the closing cost plus prepaids which are usually at a minimum of three (3)% of the loan.  The closing cost and prepaid items (insurance premium for at least the first year is usually paid at closing); again it depends upon the lender.  Prepaids include; hazard insurance, interest from the date of closing until the last day of the month the loan closes, tax reserves.

Closing cost includes but are not limited to: attorney's fees (closing agent), which includes title search and preparation of the paper work. Title Insurance premiums, tax service fees, processing fee, origination fee, discount fee (if applicable), underwriting, flood determinatin fee. A discount fee should only be charged if you have to pay a fee to get a certain rate.

Know what fees are applicable in your area...some states have a state tax fee, some do not. Shop around for the best Closing Agent (Attorney). If you do not have hazard insurance already; get a quote. You may want to shop for your hazard. Never take the first quote, you can always go back to the lower quote if the others are higher.

Summary:

Know what your credit score is. Know what your debt to income ratio is. Know what you should have in funds (liquid assets) for downpayment and closing cost. If you are looking at an FHA loan, some of these funds can be gifted. The guidelines have changed for FHA you can find these here. Know what your estimated hazard insurance premium will be. Know what the estimated taxes will run for the price house you are looking for.

Mortgage News - What you need to know

2010-03-28T10:43:00.000-07:00

The President is making headway for new guidelines to help the borrowers who are underwater with declining values on their homes. They are seeking to aid the mortgage holders with funds to help lower their principal balances. This will apply to those who have a mortgage loan that is more than the appraised value.

The Home Affordable Refinance and Home Affordable Modification programs have been extended until the end of 2012. This is significant good news for those borrower's who cannot make their mortgage payments as they once did. This will specifically help the borrowers who have struggled with their mortgage payments and interest rates, that are well above the rates that we are now seeing. A vast majority of the struggling borrower's are those who received SubPrime loans during the years prior to the meltdown. Some interest rates were higher than 10 percent. A lot of borrower's also received the Option ARM loans and Interest Only loans and in many cases have negative amortization as their payments did not include principal and interest.

Fannie Mae has also released the notification that they will allow under certain circumstances the borrower's who went through the trial period of the modification but were declined for one reason or the other; the ability to possibly still get qualified for the modification.

Alternative Modification

If you are one of those borrower's who applied for a modification and was declined for it after you went through the trial period, contact your lender and make an inquiry about this. You have a right under the guidelines to this possible turn around of your modification. Be informed and do not let anyone tell you it can't be done. Search for answers and do not be intimidated by the lender. You have rights and the guidelines are available. You can go to efanniemae and find this information. I will give you some highlights of the rules:

the loan must have been considered eligible previously for the Home Affordable Modification Program.

the trial period of your loan must have been initiated prior to March 1, 2010

the property must be a one-to-four until owner-occupied property

the payment must have been paid during the trial period as agreed and any months after that when the servicer was attempting to convert the loan to a permanent modification

any subsequent trial period payment (s) must be submitted prior to execution of a permanent modification agreement.

The above requirements are not conclusive but this will give you the standard qualification and let you have a knowledge of what you should look into to get the permanent modification. Documentation required will depend upon certain circumstances and will apply to the loan to value and certain other criteria. Certain restriction may apply but again, it is up to you to make yourself knowledgeable of what is out there for your benefit. This applies to Fannie Mae loans only at the present time.

Ask your lender about these options...you have a right to know what is available to you.

Mortgage- The Latest Emphasis

2010-03-25T15:56:00.000-07:00

The mortgage world is ever changing and it is frightening to listen to these changes, in some ways and then again, it will eventually benefit the consumer not just the mortgage industry. The forecast for our ecomony is not that good either and of course the mortgage meltdown is a big portion of that crisis and not one but many are to blame to put it mildly. There have been tons of refinances and major Mortgage Bankers have reported hugh profits. Still for the moderate to low income borrowers it is still a struggle to reach homeownership with the guidelines becoming more strict as the days go by.

A report has confirmed that Bank of America will attemp to make principal reductions to their stressed borrowers first and before the interest rate reduction. Along with this comes confirmation from the White House that the Obama Administration is working also to perfect a plan to alter the debt owed for borrowers who have loss their jobs nad those who owe more on their home that it is worth. This will be a lot of homes due the lower declinning values in our country.

Please see other information here for FHA changes. You can also see here for more mortgage updated information.

More news is that the Treasury Secretary has issed results of modifications and they are:

As of February, permanent modifications have been made to 170,000 homeowners and an additional 198,000 have been approved waiting on borrower acceptance only. Which means this is an increase of 45 percent of modifications. At the end of February the Administration has said that more than one million borrowers were receiving a median savings of $500 each month - a 36 percent median monthly payment decrease. My question are most of these through simple forbearance which gives them a period to pay a lesser payment and adds back the unpaid principal of the payments and interest not paid up until the forbearance time to the principal. This makes the principal balance higher and has only given them a lesser payment but in the long run the mortgage may still be over and above what the value of the home is depending upon the initial loan to value.

The above sounds promising and more news is: for those who have had a trial period for modification, yet were declined for the final modification due to certain ineligible information at that time; Fannie Mae has issued a mortgagee letter which determines that you may still be eligible for the modification under certain other specific circumstances. The letter indicates that all approved FNMA Servicers must offer the alternative modification before foreclosure proceeds are considered. The loan must have been evaluated and considered HAMP...Home Affordable Modification Program and have successfully finished the three month trail payment period.

These are only a few things that is going on in the market at this time but most significant. Guidelines are changing for all Investor products...they are becoming more restrictive and with more aggressive due diligence to prevent another bad mortgage loan from being originated.

Step To Refinance a Mortgage -The Best Deal

2010-03-22T09:24:00.000-07:00

* Article Contributed by Neil Williams

Is it becoming difficult for you to pay for your monthly mortgage payments? – Then, you can opt for a refinance. Once you are aware of the steps to refinancing a mortgage, you will be able to get out of your trouble.

1. Know your purpose: You should know the exact reason why you want to go for mortgage refinance. You can go for refinancing mortgage for any one of the following reasons:

 You want to reduce your monthly mortgage payments

 You want to reduce the amount of interest over a loan term

 You want to get a lump sum of equity as cash

 You want to make early repayment of the loan

2. Find your eligibility: It is one of the most important steps to refinancing a mortgage. To qualify for mortgage refinance, the current loan-to-value ratio (It is the ratio of your current mortgage amount to the appraised value of your property) of your property should be 80%. For this, you need to get your home appraised. You also need to have a good credit score.

3. Prepare your documents: You need to submit some documents to refinance your mortgage. You need to have:

 Your income proof

 Statements from your bank and brokerage

 Income tax returns, W-2 forms

 Credit score and credit report

 Proof of your monthly debt amount (current mortgage, auto loan, credit card, home equity loan etc.)

4. Have closing cost ready: Refinancing a mortgage means you are taking a new loan. So, you have to pay the closing cost to get the loan. You should keep the money towards closing costs at your hand.

5. Choose the type of loan: You have to decide the type of loan, which would be best for you. It could be an ARM, a fixed-rate, or a combination of both.

Once you know the steps to refinancing a mortgage, you can decide your loan specifics. The lenders also will not be able to take undue advantage of your ignorance and you will be able to get the best deal.

Mortgage- Extension of Home Affordable

2010-03-09T09:05:00.000-08:00

**March 28, 2010 Revised Home Affordable Product Extension date.

**see below

Note: Please note that the information given in this blog if for informational purposes only. The guidelines listed are the basic guidelines from The President's office for the Making Home Affordable loan product.

This applies to Conventional and FHA products. The specific guidelines for these products can be obtained from your lender of choice. There are certain loan parameters that must be taken into consideration and applied along with the particulars listed below. More information about RESPA Changes and other mortgage information.

Announcement:

The United States Department of Housing and Urban Development has issued a statement that the Home Affordable Programs will extended until ~~06/30/2011~~. **Update..Washington has announced an extension to the end of 2012 for the Home Affordable Modification and FHA program to help stressed borrowers who have previously applied for the modification but was denied for one reason or the other. Please see here for additional information and extended guidelines.

This is great news for those who are still needing help with getting their mortgage; either refinanced or modified to a lower interest rate or either from an Adjustable Rate Loan to a Fixed Rate Loan. I have already given the guidelines for both of these products in a prior post but here is also a list of what it takes to qualify:

Home Affordable Refinance Basic Guidelines

must be a 1-4 family residence

the loan must a Fannie Mae or Freddie Mac owned loan

you must be current with your mortgage payment

you may be eligible if your mortgage loan balance is no more than 125% of the market value

Home Affordable Modification Basic Guidelines

the home must be your primary residence

the amount you owe can be no more than $729750

you must be having problems making your mortgage payment *something relevant, loss of a job, illness, decreased income, loss of one income provider in the family, extra expenses

you must have closed your mortgage loan prior to January 1, 2009

your housing expense must be more than 31% of your gross income

Keeping you mortgage payment current:

Here are some ideas for you to consider if you are having problems. Remember that your mortgage payment is by far the most important payment to keep current. Why, if you get behind with a mortgage payment of $1000.00 usually there is not likely that you will have $2000.00 next month to get it current. With that said, with my experience it would be more profitable for you to think about the other things you are paying that you might could do without to pay your mortgage.

cable television

cell phone * or home phone * why do you need both?

spending money to eat out

spending money for entertainment such as renting movies

buying name brand item *whatever it is that you think you have to have the name brand; food, clothing, toiletry items,etc.

cut back on your total spending by making yourself a budget and do not spend outside of the budget

make sure you are buying necessities not wants

There are many other things that could be mentioned but having audited a lot of mortgage loan files when asked for a budget of household expenses; this is some of the information that was included. If you cannot deny yourself something until your income increases or you obtain a refinance or modification, you might better rethink your priorities.

My suggestions are blunt and to the point but if you think back to when you purchased your home; how adamant you were at doing whatever necessary to get your mortgage loan closed. Now you should do the same thing to pay the payment so that you do not lose the equity you have built up. If you live in the city, I know that you can get the regular channels and no it might not have all the movies you want, but how much time do you have for movies anyway? Why do you need the home phone if you have the cell phone and vice versa. No, I do not like traveling without my cell phone but I do not have a home phone as of this date and haven't for a long time. There are many ways to cut corners if one desires. It is so important to keep your credit in tact because it is one of the hardest areas in your life to overcome if you fall behind with your mortgag payments. They are more than any other debt you have...and if it is not, then shame on you.

How about the best name brands...yes it makes one feel good when we think we are buying something that everybody else is buying and the off brand might not taste exactly like the name brand...but what had you rather have; your home or a name brand hotdog?

Consider this; if you don't pay your mortgage payment and you can't give up anything, do you really deserve your home? Another thought is this; when you are about to loose your home, you will have the expense of moving. How will you move if you do not funds to pay your mortgage?

I am the first to realize that some have mortgage payment they cannot afford, bottom line. If you are in foreclosure please be aware that there are people out there who might not be ligimate, trying to get your house or trying to make some money one way or the other. Please go to a reputable, Bank or Mortgage Lending Institution. Everything you see on the web is not what it appears. Check out your options and keep your chin up. Could be the Administration comes up with something else to help those who need it the most.

Mortgage Rules Change

2010-03-03T17:54:00.000-08:00

As always things are ever changing within the Mortgage Loan Industry. It means that as I write this update; there are probably more in the making. Please note that usually an announcement is made by Fannie Mae or Freddie Mac and the implementation may not be for several months.

One of the change that took place earlier is the FNMA has retired its Bi-weekly mortgage loan product.

There are changes to minimum credit score, foreclosure rules, deed-on-lieu, and bankruptcy minimum length of time from discharge. Please view these newer changes @

Mortgage Rules Update

I will keep you posted with new information just as quickly as I learn of it. I work occassionally contract so I do keep up with it..

Mortgage Pools- FHA-VA

2010-01-31T13:39:00.000-08:00

How your loans are packages, securiterized and made into bonds and sold....this post is mostly about FHA/VA.

Ginnie Mae- Who they are and what they do in the Mortgage Industry....Something similar to Fannie Mae and Freddie Mac

You have excessive talk about Fannie Mae, Freddie Mac, FHA and VA, but I'll just bet you haven't head much about "Ginnie Mae", unless you work in the mortgage business.. It will be good for you to know who they are and what they do...

"Ginnie Mae" was the only mortgage-backed security that enjoyed the full faith and credit of the United States Government; of course we know now that in September 2008, the federal government had a takeover of government sponsored enterprises FNMA and FHLMC. This resulted from, among other things, the ongoing subprime mortgage crisis.

Actually Ginnie Mae is behind these guys and make it possible for them to insure loans and participate with lenders: Federal Housing Administration (FHA), Department of Veterans Affairs (VA), Department of Agriculture (Rural Housing Service and the Department of Housing and Urban Development (office of Public and Indian Housing).

What they do to make homeownership possible for the above:

Ginnie Mae guaranty allows mortgage lenders to obtain a better price for their mortgage loans in the secondary market. The lender can then use the proceeds to make new mortgage loans available.

Ginnie Mae does not buy, or sell loans or issue mortgage-backed securities (MBS pools you have read about in the secondary market). Ginnie Mae does not use derivities to hedge or carry long term debt.

Actually what Ginnie Mae does is guarantee investors the timely payment of principal and interest on MBS (mortgage backed securities) backed by federally insured or guaranteed loans to the above agencies mentioned above.

I would like to help you understand how your mortgages are sold and put into these MBS pools.

What are Mortgage-Backed Securities?

Pools of loans...yours, mine and others used as collateral for the issuance of securities in the secondary market. FHA, VA, RHS etc. These pools (MBS) can be referred to as "pass-through" certificates as the principal and interest of the loans is "passed through" to the investors. The security interest rate is lower than the interest rate of the loan to allow for payment of servicing and guaranty fees. Ginnie Mae's MBS securities are fully guaranteed by the United States Government.

The loans in some of these pools will have the same issuer, nature of terms, interest rate, fixed rate loans, loan amounts etc. This makes the pool more valuable and the credit rating is normally pretty much the same so that the loans will perform in the same manner. Other pools may have a wide variety of interest rates, and can include more than one issuer. The GNMA "REMIC" (Real Estate Mortgage Investment Conduit) known as CMO also, is another level of securitization. This kind of pool does not consist of mortgages, but of mortgage-backed securities (different type pools of loans). *note this is something similiar to AIG, Lehman Brothers and others who invested in (securities and bonds) to help generate more income to their associations by investing in the Subprime arena and got into trouble...their pools were not backed by Ginnie Mae but by Fannie and Freddie and others.

The Subprime mortgage crisis was triggered by a dramatic rise in mortgage delinquencies and foreclosures in the United State which caused major averse conquencies for banks and financail markets around the globe. One of the main reasons for this downfall was the making of adjustable-rate mortgages which amounted to about 80% of loans made. I have never recommended ARM loans, unless a borrower is only going to live in the house for a short period of time...2 to 5 years. I have underwritten these loans and I understand what the risk level can be and especially the Option ARM's there were made during the Subprime feast....they were bad news....Here you can find some information about ARM's.

These pools are made up by the "lender" who has originated the mortgage loans for FHA, VA etc. and will then be packages and be sold to investors. GNMA (Ginnie Mae) securities provides a connection between the capital markets and mortgage loan borrowers as investors purchase MBS pools and borrowers gain access to the investor funds. Capital Markets funding through MBS is much more efficient and provides a larger funding base than other traditional deposit-funding. (for instance when the Saving and Loans got into trouble in 1989). Ginnie Mae helps provide the ability to efficiently pool mortgage into bonds to be sold to a bond dealer in the from of a GNMA certificate from pre-approved lenders.

Conventional loan pools are very similar to this and are called FNMA and FHLMC pools but we will not discuss in full detail in this post.

FHA Default Options

2010-01-31T10:49:00.000-08:00

Know Your Options- Imminent Default

I am going to try and keep everyone informed of the many blessings that are being initiated to help borrowers prevent deep default and foreclosure if possible and one of these things is FHA- Imminent Default program. If I miss something please forgive, but I have decided this a step in the right direction as those who are working and have insufficient time to hear and see everything that changes in Mortgage Lending, follow up on these issues and know what their options are....I want to be here to help..

What is FHA- Imminent Default:

FHA defines an "FHA borrower facing imminent default" to be a borrower that is current or less than 30 days past due on the mortgage obligation and is experiencing a signficant reducetion in income or some other hardship that will prevent him/her from making the next months payment due. The FHA borrower must be able to produce documentation to prove the cause of imminent default.

Examples:

Reduction in Income: unemployment, reduced job hours, reduced pay, or a decline in self-employment earnings. FYI: a temporary shut down of the employer (such as a scheduled vacation) would not by itself be adequate to support an imminent default.

Death in a family, serious or chronic illness, permanent or short-term disability; which constitutes a change in household financial circumstances.

The lender for FHA must document all circumstances and determine that a payment default is imminent and how they base their final conclusion of such.

Options you may have-

Forebearance Agreement

A forebearance agreement is when the Servicer of your loan agrees to postpone, reduce or suspend the payment (s) due on the loan for a limited and specified time.

Two types of forebearance: 1) Informal forbearance is a verbal agreement between the Servicer and borrower. The period allocated for the informal forbearance must abe three (3) months or less.

2) Formal forebearance is an agreement in writing between the Servicer and borrower. The durations of this formal agreement will be more than three(3) months. It must be in writing.

As always there must be a financial analysis to determine the borrower's current and future ability to meet the monthly mortgage obligation. Restrictions may apply and certain criteria must be provided and reviewed meeting FHA's guidelines. It is worth a try in these circumstance to say the least.

Know your options before you call your lender and what documentation is needed. FHA documentation is pretty much the same as Conventional. Standard information to prove your lack of income or job loss. The latter you would need evidence that you have been laid off, terminated, dismissed, etc. If you are drawing unemployment benefits you would need to provide this documentation evidence.

FHA- Home Affordable Modification Program

In case you don't know about this program; it was introduced in late July, 2009 and called "Making Home Affordable Program". This program was able to provide homeowners in default a greater opportunity to reduce their mortgage payments to a level they could pay. You Servicer may be able to offer you this program as well. Ask, you have nothing to lose and a lot to gain, there questions you ask...the more you may be able to fine adequate help. The imminent default borrower may be eligible for this program.

How to qualify:

You, the borrower must first successfully participate in a four-month trial modification period. Called the trial period and the following plus other conditions may apply.

It must be your primary residence

You must be having a hardship in paying your loan payments; reduction in income, payment too high, increase in expenses that have made it impossible for you to make the required payment (proof is required)

You payment including principal, interest, taxes, insurance and homeowner's association dues, if applicable MUST BE greater than 31 % of your current gross monthly income. (This your housing expense only...it does not include your other debt). They will gross up any non-taxable income such as Social Security Benefits or Veterans Income, child support, alimony, retirement not taxes etc.

Your mortgage amoung cannot be greater than $729,750

You must have obtained you mortgage loan prior to January 1, 2009

This information as usual is to help you determine if you are eligible to be considered for these type programs. As always, these are options you might be able to consider. Certain guidelines, restrictions and conditions may apply that are not mentioned here in the article. You must contact your Servicer of the loan you have with further qualification guidelines. I hope if you do not know about these...you find the help you need...

For those who have Conventinal Financing and need to "refinance", Good News- Home Affordable Refinance. See if you qualify.

Good Luck!!!

FHA-Policy Changes

2010-01-28T15:37:00.000-08:00

FHA (Federal Housing Association) who insurances loans through lenders/banks/mortgage companies/brokers, which ever applies has issued an announcement from Washington and the following entails the changes and why these changes have occurred.

Federal Housing Commissioner David Stevens announced on January 20, 2010 that the set of policy changes were being made to strengthen FHA's capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. He said that these changes are to better position FHA to manage its risk while continuing to support the nation's housing market recovery.

FHA's Role

As you know, FHA does not actually make the mortgage loans. Their role is like a partnerhip with the lender which allows the lender to use their (FHA's) guidelines and they insurance part of the loan in case of default. They are an what we in the mortgage industry call "the Investor" just like "Freddie" and "Fannie" do conventional and some FHA loans as well. They have policies and procedures which dictate how the loans are structured, with the programs and all stipulations for the property as well.

Lender's must be approved to work with FHA and meet certain criteria to do so. FHA has specific guidelines for originations, underwriting and property. There is nothing really simple but this is due the government playing this role in creating a housing market for those within the low to moderate income bracket.

FHA was developed to help those individuals who could not afford Conventional lending and serve as a source for those who otherwise would not know homeownership. Very similar to when the Subprime loan industry came into place. The difference in FHA and Subprime is staggering as FHA has long since had stricter guidelines than Subprime ever did and rightly so since it is a government agency. Mortgage insurance has always been a requirement but the down payment was lower and seller paid items was higher than for Conventional financing. The credit was a bit more flexible as well as the possibility of certain young applicants who had no credit period or minimum, could have a parent qualify with them and obtain a home.

What has change about FHA

With all of the Subprime mess which also filtered over the FNMA (Fannie Mae) and FHLMC (Freddie Mac), FHA changed their maximum loan amount to include those borrower who needed financing for higher loan amount but did not have the five (5) percent down payment and needed the seller concession of six (6%). This helped them pick up a lot more borrower's who were not necessarily a credit risk but upped their volume and their default level also went up.

FHA also changed their guidelines to get some of the so-called Subprime market which meant they allowed loans to close with outstanding collections not paid and many other things. So....here we are with changes which will probably not allow as many people who in the past could afford FHA financing prior to this time.

FHA's Newest Policy Changes

These policies and procedures will take place, partially in the spring and summer.

1. Mortgage Insurance premiums (MIP) will be increased to build up capital reserves and bring back private lending

the rate will increase from 1.75 percent to 2.25 percent. It is calculated like this: for a loan amount of $200,000 MIP = $4500; this added to you base loan amount after the calculation for the maximum financing will give you a total mortgage of $204,500. This is a .50 basis points/percentage difference which will amount to about $6 a month for this loan amount.

FHA will update requirements for FICO credit scores and will change some aspects of down payment policy. FHA will continue to allow 3.5 percent down payment for those individuals with a credit score above 580, but those with poorer scores would be required to put down 10 percent for down payment. **please note that some lenders have their own guidelines regarding the lowest credit score they will allow, some will not allow a credit score below 600-620 and what is written above in the guidelines is not written in stone as certain standards apply not only with the credit on the credit report, how much credit there is etc., but with down payment, closing cost needed, income stability and the entire ability to repay the mortgage loan. One cannot take one issue and determine if they will be eligible; it is a multiple effort of many processes of the loan application.

Reduce the allowable seller concessions from 6 percent to 3 percent. Per FHA the current level exposes FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standard on seller concessions.

With the above said, when you apply for a FHA loan, your entire financial status is evaluated in an automated underwriting system just like it is done with Conventional loans. Thereby all of you credit, assets, employment and income is evaluated by the system and the documented gathered and reviewed by an underwriter who is approved to underwrite loans for FHA. One factor does not determine approval or denial normally- unless of course, the credit is totally unacceptable.

Mortgage RESPA Final Rule

2010-01-28T11:22:00.000-08:00

Real Estate Safe Practice Act (RESPA)

Change for Mortgage Lending

New forms- GFE and HUD1

RESPA protects "you" the consumer during any loan process with certain rules and regulations, that Banks, Mortgage Companies and any financial institution who lends money has to follow.

RESPA, is about closing cost and settlement procedures. RESPA has certain disclosures that consumers are to receive at the origination of a loan and various time through out a transaction.

HUD (United States Department of Urban Development) regulates and enforces these rules and regulations and has made some very important change to the beginning of mortgage lending transactions and the settlement procedures.

Important Regulations

Information Booklet: The lender is required to provide a copy of the special information booklet to a person from whom the lender receives, or for whom the lender prepares, a written application for a federally related mortgage loan. This is for a purchase transation and especially for a first time homebuyer. This booklet may be given face to face or mailed within three (3) business days of application.

Good Faith Estimate (GFE) and Changes

The GFE is the document which discloses your cost of the transaction with lender fees, attorney fees, title fees and any fee that is being charged to you within the process of the loan. This form must be given to you face to face or mailed to you within three (3) business days of application for the loan...no exceptions, unless your loan is denied within the three day period.

Changes: Tolerances for amounts included on GFE - The actual charges at the closing or settlement of the loan may not exceed the amounts included on the FGE for the following:

the origination charges

the charge for the interest rate chosen *provided the rate is locked in, if the interest rate has not been locked by you, the borrower, or a locked interest rate has expired, the charge or credit for the interest rate chosen, the adjusted origination charges, per diem interest, and the loan terms related to the interest rate may change. If you, the borrower later locks the interest rate, a NEW GFE must be provided showing the revised interest rate-dependent charges and terms. ALL other charges and terms remain the same as on the original GFE.

transfer taxes *tolerance- the sum at closing may not be greater than 10 percent above the sum of the amount included on the GFE

lender -required settlement services and required title insurance, and owner's title insurance, when the borrower uses a settlement service (attorney/title agent) provider identified by the loan originator

government recording fees/charges

The amount charged for all other settlement services included on the GFE may be changed at settlement. You should be aware that if there are changed circumstances resulting in increased costs for any settlement services such that the charge at settlement (closing) would exceed the tolerances for those charges, you may be given a revised GFE. You must be given this "revised" GFE within three (3) business days of the changes.

Special Note-Expiration of GFE

If you the borrower do not take action on the initial GFE within ten (10)business days after the GFE is provided, or such longer time specified by the loan originator, the loan originator is no longer bound by the GFE.

New Home Purchases

When you are purchasing a new home where the settlement/closing is anticipated to occur more than 60 calendar days from the time a GFE is provided, the loan originator may provide the GFE to you with a

clear and conspicuous disclosure stating that at any time up until 60 days prior to closing, he/she may issue a revised GFE.

GFE is not a loan commitment and there is no regulation which means that the loan originator is required to make a loan to a particular borrower. The loan originator IS NOT required to provide a GFE if the he/she does not have available a loan for which the applicant is eligible.

Below I have indicated where you can review this new document.

HUD1- Settlement Statement - This is your final settlement that you receive at closing. This form is prepared by the closing agent/attorney/title company which ever is applicable.

1. For transactions where there is no seller- refinances loans or subordinate financing (second mortgage), the HUD1 is completed with only the borrower's side of information. The cost of to complete the transaction. The HUD1A may also be used for these transaction.

2. The settlement agent/attorney/closing agent shall complete the form, in accordance to rules and regulation. The closing agent must state the actual charges paid by you, the borrower and seller (if a purchase). The closing agent must separately itemize each third party charges paid by the borrower and seller.

3. The settlement agent will close your loan and normally your loan originator may be present also. You should ask any questions about any fees which have changed from the last GFE that has been provided to you. These new GFE and HUD1 changes have been made to protect you the customer.

How these change affect you and what you should look for:

On the New GFE: In block 1 on the GFE- "Our origination charge", cannot increase unless there is a "changed circumstance".

The GFE Form

Block 1- Page 2: all of the origination charges will be added in this one fee. This will include all applicable fee such as: origination fee, underwriting fee, processing fee, administration fee, application fee, credit report fee, flood determination fee. All of these charges always charged but are charge which can occur. Normally an administration fee and the application fee is not charged together.

Block 2-Page 2 - The charges (if applicable) for the interest rate you have chosen will be in this area. This is where the Points-percentage for instance (.275%) if you chose a rate that was lower than the going rate for that day or you have a loan with certina parameters which includes a discount charge. OR if you choose a rate that is higher than the going rate; there could be a credit in the area in the form of a percentage as well and the GFE indicates if such you will receive a credit.

Page 2 also includes other settlement charges to include but not limited to; settlement agent fees, owners title insurance charge, title charges, government recording fees, transfer tax, amounts of proposed escrow funds, daily interest charges will apply from when you close your loan until the end of the month and homeowner's insurance cost.

These are only a mention of the main items for which are listed and their placement on the form. There are pages that explain the type loan you are receiving and other important information too numerous to explain here so your may check out the new GFE for your review and study so that you can know what to expect at application time.

At origination you should also receive a Truth-in-Lending disclosure and Servicing Disclosure within three (3) business days also.

What is a Mortgage Principal Reduction?

2010-01-27T05:32:00.000-08:00

You may have heard this term recently and not be fully aware of what it is. First, it is not a loan modification. In a loan modification, you have to meet certain criteria and negotiate with the stubborn banks and hopefully in the end get some relief in the form of a lower payment or forgiveness for some of your outstanding mortgage. Second, it is not a short sale. In a short sale, you have to sell your home (with the banks approval), move and and start the process of finding a new home. Who wants to do that?

A mortgage principal reduction is a new form of relief for homeowners who owe more than 25% of their homes current value. In states such as Arizona, California, Florida, and Nevada, this represents a significant population.

This new service is made possible due to the negotiating power that institutional investors have with the banks. It is far more than what you could do or your real estate agent by him or herself for that matter. In the end, you will have a principal reduction that gives you 10% equity in your home, which for some is something they thought they would never see after the market dropped as it did.

Qualifying is even simpler than qualifying for a loan modification or a short sale which is even better news. The basics are that you need to owe at least 25% more than the homes current value, and not have a debt load of greater than 50% with the new lower mortgage payment.

My advice is to be very cautious of paying high fees to have someone help you with a principal reduction. For a while it seemed to be a solution, but one trusted advisor that I spoke with said that the banks are not as excited about doing these as folks had initially thought.

In the end, you might be better off trying to do your own loan modification.

Get a Home Loan and Get Paid for it?

2010-01-22T14:06:00.000-08:00

Yes, as odd as it seems, one company has put together an amazing model that allows customers to get paid for referring home mortgage customers - including themselves. This means you can get paid for your own loan! Loan Home, Inc. is the company and all you have to do is register as a free affiliate then submit your loan; it's that simple. The company provides you with a link to share with others as well so you can profit from their loans as well.

The company even serves businesses by allowing employers to offer this amazing service as a company benefit and serves non-profit organizations, allowing the non-profit to generate much needed revenues by sharing a great service with their constituents.

To learn more, visit www.theloanthatpays.com Today!

FTC Disclosure - This post was written by an affiliate of Loan Home, Inc who is compensated for successful referrals.

Mortgage Calculator

2010-01-02T17:35:00.000-08:00

This is a Mortgage Calculator for you to figure your principal and interest Mortgage Loan payments before shopping for your mortgage loan. This will give you the principal and interest for you payment. You will of course need to add in your hazard insurance monthly payment portion and your monthly taxes portion. You may get these from the Real Estate Agent or if you already own a home, you will know what these are.

This calculator was generously shared by http://mortgageloan.com/

Pay Mortgage off Early

2009-12-01T12:32:00.000-08:00

Pay Mortgage off Early

Mortgage Loan Modification

2009-10-08T09:40:00.000-07:00

If you are already a homeowner, PLEASE ask questions about your ability to obtain a modification before you refinance. If you have a higher interest rate on your mortgage loan, than what the going rate is now, you may request a modification. There are exceptions; since most big Mortgage Lenders sell their loans in the Secondary Market, (FNMA/FHLMC/GNMA) not every loan can be modified. If your loan, for some reason has not been sold to the Agencies, you may be in a position to request a modification instead of refinance.

A Lender, can review your current status, how you have paid your payment, the interest rate you now have, your current financial ability (not as detailed as the initial process), and make a decision. If your Mortgage loan has Mortgage Insurance, (Loan to value>80%), you may request a new appraisal to see if your value has increased and if your LTV is < 80%, then MI can be dropped. This alone can lower your payment. In fact very little work to be done. Even with the current sales up in real estate and refinance transactions; "best mortgage practice" would be to modify your loan rather than refinance, if possible. Most homeowners do not know they may have this option (as stated above, if your loan has not been sold to the "Big Guys). Most Lenders do not realize that their customers do not know that they can modify their loan; (if you qualify, I must stress) with certain terms and conditions.

A modification save you money, time and frustration. I am not talking about the "Obama" modification, I am talking about any modification. The "Obama" modification that is being discussed so much in the Mortgage Industry now, is targeting the homeowners who have been bitten with the Sub-Prime loans with higher interest rates (above the normal), 100% LTV etc.

Another option is, if your loan is with FNMA/FHLMC/FHA/VA, you may be eligible for a "Streamline Refinance" which saves some paperwork and time also. You do have more fees with this type of refinance than you would if you qualified for a modification. Sometimes these can be done without a new appraisal, unless you need one to drop MI (FNMA/FHLMC). FHA has upfront MI and monthly; VA has a funding fee. These are only waived under certain circumstance. The VA interest rate reduction loan is ever so simple; ask your Lender and get going.

Let me give some addition insight regarding modifications. The Lender will take your principal balance, new interest rate and re-amortize the loan over the remaining term of the loan. Simple! No new closing cost, you pay a small fee.

I want to remind you when you refinance your mortgage loan, that normally you should be decreasing your interest rate at least by 2% points, for it to be in you best interest. An exception would be if you can pay the closing cost out of pocket, instead of adding it in with your loan balance. I don't think many homeowners would take on a refinance for 1% difference but just wanted to remind you. Do not and I mean, do not let anyone convenience you otherwise.

I am skipping around with my information here, but the reason is that I do not want you to get bored with the same old hum drum!!! I want you to know your options and right now the "refinance" and "modifications" are hot.

See ya next time!!

Privacy Policy

Some Mortgage Loan"INSIDE" Stuff

2009-10-07T14:58:00.000-07:00

October 7, 2009

Today we will discuss some things which are not so popular. I am not going to tell you anything about Mortgage Loans/Lending that you do not need to know, I promise!! Please, I want to make it clear: I am a firm believer that “YOU” should know what to look for when applying for a mortgage loan that will put you in DEBT for 30 years. There is no need to be afraid, just request answers and solutions that come with integrity.

What you “don’t” know can hurt you! I am here to give you honest, down to earth information about mortgage loans and Lending, to help you protect yourself from fraud. Yes, that word is “fraud”! It seems no one wants to talk about the “bad” stuff that has gone on in the past; that “nobody” found out about (during the sub-prime days). I am going to talk about this and I want you to make sure if you come across a Mortgage Associate of any institution that starts telling you NOT TO “disclose” something. You get up and leave their office immediately. Having said that, let’s talk about fraud. It comes in many sizes, shapes and forms. Of course, it takes 2 to play. Integrity is most essential and you should never be a part of fraud in any form. Sometimes when an issue seems so insufficient, one can let it pass and concentrate more on the bigger issues. Trusting a Loan Representative is of utmost importance and I am not telling you to be suspicious of everyone you meet; I am saying that sometimes we must make sure the trust we have, is warrantied. Fraud within Mortgage Lending can be anywhere from obtaining verified information, from a source who not only is not your employer but someone who will fill out the form to suite the representative of the Lender. *I need to stress, normally; you do not see this in the Mortgage Banking Institutions. I really hate to call names, but I, for one have known of this to happen on the other side of lending. There have been some who have been motivated to make the loan work, at all cost. The $ signs came before integrity. This should have never happened and if the loan does not work, you are better off without it.

I know that you may be wondering what the positive side of Mortgage Loan applications and Lending is. I will tell you:

A complete loan application taken by your representative

Verification of accurate financial information, per your provided info

Disclosure of all debts you have, whether on credit report or not, to include child support or alimony

Explanation for all pertinent information that is not consistent with your file

Clear, exact, and precise answers to all questions you may have regarding your application

Receipt of all preliminary disclosures within (3) business days of making a loan application *Good Faith Estimate *Truth In Lending. This is required by law

Timely response to you regarding your preliminary approval with “ALL” conditions

Follow up with you regarding any issues that may delay your closing

IF AT ALL POSSIBLE: Close your loan within 30 days

These are only “some” of the pertinent qualities for a great mortgage loan application process!

More to come later.

Mortgage Loan Documentation Needed

2009-10-06T20:14:00.000-07:00

October 6, 2009

Mortgage loan documentation may vary when the Lender uses the Agency "automated underwriting system", which Mortgage Lenders, who submit loans to FNMA (Fannie Mae) or FHLMC (Freddie Mac) are required to use. If your loan has issues or concerns, such as insufficient credit, employment history or funds issues, (to name a few); it cannot be evaluated with Desk Top Underwriter *FNMA or Loan Prospector *FHLMC, then your loan will require a "Manuel Underwrite" and then your documentation will be considered "full doc". This is also true for FHA/VA loans. If you take all of this information up front; the Lender will have it on file and will not have come back to you for additional information should they need it.

This is a list of what loan documentation you need to take to the Lender of your choice:

Paystubs – most recent (2) if paid bi-weekly or bi-monthly (4) if paid weekly (1)

W-2 for (2) years – most recent (2)

2 months bank statements (all pages) (3)

Most recent retirement statement

Most recent investment account statements (mutual funds, annuities, stock)

2 years of 1040’s (if self employed) most recent years (4)

Know your employer’s address, phone number of human resources

Know your banking institutions, address, phone number

About the above:

Paystubs: your paystub is reviewed for year to date earnings, hourly rate, bi-weekly rate or bi-monthly rate or sometimes you annual salary (if stated), your deductions, and (yes) if you have a child support deduction or garnishments ( the latter is viewed as negative and *explanations warranted).

The employer name and your name must be on the paystub and it must be computer generated. If it is not, then the Lender will have to get a Verification of Employment (VOE) directly from the Human Resources department. If your paystub is inconsistent with verbal information; earnings, what your position is or how many hours you work, to mention a few, this must be verified.

W-2: must be consistent with verbal information and if necessary verified information from Verification of Employment.

Bank statements: Your name must be on the bank statements. If any large deposits exist, you must explain and if you have recently made a new loan, this must be disclosed with the terms of the loan. (if recently and not on the credit report). If your parents have given you a gift, then you must have a gift letter, (these should be obtained at the Lender office which will list all of the pertinent information needed) and actually if you are getting a gift, you must give a paper trail of the funds. The donor must be a relative and you must be able to document the transfer of the funds from the donor to you. It cannot be a loan that must be repaid. *this can get quite sticky sometimes if the funds have already been transferred. The Lender must make sure that you have not made yet another loan you will have to pay back. ANY loan you have made must be secure with a marketable asset if it is to be used as closing cost.

1040’s for self employment. If you are self employed you may need more than just (2) years of tax returns. You may need a year to date P & L Statement (profit and loss) income statement to include balance sheet. Normally it does not have to be audited, but there are occasions when it does. Sometimes, if you are not “schedule C”, you may have to provide Business Tax Returns for the (2) most recent years.

Mortgage Lending is detailed. The above short list could get longer if you have different criteria which may need to be verified. If you for instance, will be getting a gift of equity, certain guidelines and loan documentation are required. We shall have more information about the mortgage loan facts you need as we progress.

Mortgage Loan-Credit

2009-10-06T16:24:00.000-07:00

October 6, 2009

Today, I plan to give you some information on what is expected from you when you apply for a mortgage loan. Credit is the first part we will discuss. The mess that got us where we are, was not just the fact that it was “bad mortgages”, it was to some extent “uneducated (meaning about mortgage lending) buyers. Therefore, so that we never get in this mortgage loan meltdown situation ever again, I hope if nothing else, I can at least give you one point of interest that will help you in the future should you shop for a mortgage loan.

When I started this blog, I mentioned the importance of you knowing and understanding, what to expect, about the process of making a mortgage loan application. I believe I mentioned that first, your credit is the most important factor. A guide to go by is simply that your credit score for a Conventional, FHA and VA loans should be within the mid-600 range.. Guidelines have become stricter, not more complicated, but a demand for better quality does exist. Sometimes this varies per product and other criteria. This does not mean that a mortgage loan is NEVER made with a score less than 680. This is only a guide depending upon other factors such as, employment history, income history, funds for closing and reserves, while come into play when a mortgage loan is evaluated by an underwriter. It must all fit together like a puzzle but the one most important part of this is in the mortgage loan process; *is credit.

Good credit is one of the most important factors in mortgage loan application and in our life as a whole. Don’t play around with your credit if you are young and certainly you should know better, if you are not young. Paying your bills on time, every time, is a crucial necessity, whether you are applying for a mortgage loan or any loan.Too many loans, credit cards, and applying for credit can hurt your score also. When you don’t have “any” credit, (usually occurs with first time homebuyer), it is not what we call “bad”, and does not necessarily mean that you cannot get qualified for a mortgage loan, but if you have “no credit” on your credit report, there is no way to determine your experience with consistently paying your obligations in a timely manner, therefore, you will not have a credit score. Take note, there is an alternative to this issue as your credit history may be developed with the following: (includes all mortgage types, Conventional, FHA & VA). Most lenders will follow the agency guidelines regarding the use of NON-TRADITIONAL CREDIT and this is how it works:

The credit bureau will obtain information from you regarding what other non-traditional credit you have.

This can include: rent (if you do not still live with parents),car insurance, cell phone accounts, utilities, car payment from small company who does not report to the bureau, ANY account that you might have that you have some history on. Preferably a 12 month history on at least (3) of these accounts.

The information is compiled and listed on the credit report in the same manner as traditional credit.

Credit history is used not only for appling for a mortgage loan or consumer loan but also when you apply for car insurance, home insurance and when you apply for employment. This is why it is so important that you maintain your credit and guard it as if it were “your life”. It really is because, without it, your quality of life can very well change. This cannot be stressed enough when applying for a mortgage loan.

The Mortgage Loan Mess, how we got here!

2009-10-05T15:44:00.000-07:00

It all started when the Sub-Prime Mortgage Loan was born! No, actually we could say that the guidelines started to deteriorate and the "Mortgage Loan Mess" began when the government said the Banks needed to comply and start making marginal loans with the Community Reinvestment Act (CRA loans). The Banks had to make so many of these loans in certain neighborhoods etc. Going from there…..it got easier to apply for a home loan day, by day, by day.

If we were still going strong in this market….probably by now, one could walk in a Mortgage Loan Company and say; “I’m George, I’m fixing to buy the house down the street. It’s falling down but I can fix it, a little at a time. I got fired from my job yesterday, I ain’t got any money to put down, and in fact, I can’t buy groceries. I have 10 people who live with me and they need a place to stay, because they are sleeping on the floor. Let’s close tomorrow! (I AM NOT CATEGORIZING ANYONE, JUST USING SLANG!) Sounds funny huh! IT REALLY IS NOT FUNNY AT ALL. YES, the "Mortgage Mess" started and the risky loan applicants paid the price with high interest rates and sometimes closing cost added into the sales price of 5 percent +, BECAUSE the seller paid the closing cost but he didn’t take it out of his profit, he added it into the Sales Price, PLUS, 6 TO 7 % REALTOR FEE. It is really very sad that so many people have been hurt by losing their home, their faith in the system and the people who helped them get the so called “good deal”. NO ONE IS BEING A HERO when they GIVE SOMEONE SOMETHING, THEY SIMPLY CANNOT AFFORD. IT WAS AND IS AN INJUSTICE. The consequences will live on and we will always remember the loss in our Nation. Loosing a home is a terrifying experience. No one should have to deal with that.

I do realize what the goal was. The goal was to make sure every citizen would have the opportunity to qualify for a mortgage home loan and experience home-ownership. The goal got out of hand, the mortgage mess started and I just can’t see that anyone should be playing the BLAME GAME. It started when the applicant came into the office to be pre-qualified for the loan. The Loan Officer hunted and hunted, scratched and finagled until he/she found a program that the borrower fit in (one way or the other). Borrow from Peter to pay Paul, situations. Instead of placing the applicant in a loan, their financial status dictated or, simply stating they could not purchase a home with their current financial situation. Kind of simple, don’t you think? There were so many 100% mortgage loans made, with the Seller paying all the closing cost and the applicants had “0” funds saved to pay the first payment. RED FLAG! NO RESERVES, (NONE). House Payment $200+ over and above what their housing expense currently was, without any idea when they would have an increase in income. No thoughts about what would happen if someone became ill, the car broke down and how they were going to by good.

Sounds pretty grim, doesn’t it? It was and is. Sounds negative, "the mortgage loan meltdown" was a mortgage lending mess when companies started to fail, jobs were lost and people started losing their home, but one must know the negative to FULLY understand one of the reasons why AMERICA IS SUFFERING.

We will recover from the mortgage loan mess, it will not happen overnight and, it will not be the same mortgage loan process that was prominent during the time before the crisis, it will be BEST for all who seek homeownership.

Mortgage Loan *Conventional Loan

2009-10-05T11:42:00.000-07:00

A Conventional Mortgage Loan type is not a loan that is partly insured by the Government, like FHA or VA. Most Conventional loans, which are sold to the Agencies; FNMA /FHLMC (Secondary Market) are underwritten to their criteria; the loan must meet specific guidelines. These are good guidelines (NOW)!!! Yes, as you know, HOW COULD YOU NOT KNOW??? "FANNIE" AND "FREDDIE" are now fully backed by the government. I want to elaborate just a little about how the Banks were blamed for making ALL THESE BAD LOANS which exist. LET'S GET THE STRAIGHT NOW! The Banks most of the time use FNMA/FHLMC guidelines, because they sell their loans in pools to these Agencies. The guidelines must meet their approval when pooled for sale. So, don't blame the Banks entirely (even though they had the choice not to lower their standards, should they have chosen to do so). Why would anyone not make a loan that the Agencies will approve? The million $ question! FNMA and FHLMC guidelines have always been geared toward sound lending practices; even though they decided to get some of the EXTRA CASH that came with selling the "RISKY STUFF". A little human, don't you think? Something that brings in MORE money than what we are already making, is always attractive. PLEASE KNOW THAT THE AGENCIES HAVE TIGHTENED THEIR GUIDELINES, and it will not be the same-old, same-old, ANYMORE!!! Conventional loan parameters: FNMA/FHLMC (The Agencies) What to expect:

Standard Loan to value of 95% with 5% downpayment from own fund

There is a product over 95% with special guidelines, such as income limit * we will discuss later

Mortgage Insurance required for all loans with LTV over 80%

Payment must include taxes and insurance, including MI with loan to value gt 80%

If you can't qualify for your home loan by yourself then FHA is better choice

If you have a 20% down payment, the entire funds may be from a gift

Please be aware this list is not all inclusive. There is no way I could give you every detail within the mortgage loan process in one article or two, but there is information available everywhere to review prior to making your choices.

As we go forward, we will discuss more details, more guidelines, documentation, and why they have to know so much about "your" business and financial status.

HAVE A GREAT DAY!

Mortgage Loan *ARM Loan Features

2009-10-05T09:13:00.000-07:00

Something positive about ARM mortgage loans is the fact that some ARM Products carry a "Conversion Option". This usually can occur between the 1st - 5th adjustment period. This varies by the ARM Product. You can within this time frame convert to a fixed rate loan (if you can afford the possible higher payment). It happens all the time...but make sure you have a conversion option in your note. An ARM loan can get you into a home, with a payment you can afford now possibly, and if this is what you need, then by all means, do what is best for you. "IF" you are expecting a substantial salary increase, this may be the best option for you, especially if you have a CONVERTIBLE ARM LOAN. Please know that I am aware that all Products are made with different situations and individuals in mind and we all have different, unique situations. My thoughts are, under very normal circumstance, with the economy as it is now and the average Joe; if you can't afford a payment $100 +- over what it is now, you may not later. What you don't know, can hurt you! I just want to make everyone looks at the whole picture and that when you decide to make a mortgage application; you take charge and be a smart homebuyer as it is your loan, you financial status, your credit; therefore ASK QUESTIONS FOR EVERY DETAIL POSSIBLE. UNDERSTAND WHAT YOU ARE GETTING. YOU CAN NOT ASK TOO MANY QUESTIONS when applying for a mortgage loan and you should know the facts.

Mortgage Loan *ARM versus Fixed Rate Loans

2009-10-05T08:55:00.000-07:00

I read recently that FHA Mortgage Loan interest rates are up just a little, but do not be dismayed, they are still viewed as low. I do remember when rates were less than the are at the present; that is if you were looking at obtaining an ARM (Adjustable Rate Mortgage). I do not recommend an ARM loan for many reasons but if you understand the product and what you are getting in to, it is an option. The negative about ARM loans: the interest rate WILL NOT stay the same for the life of the loan. I am very adamant about this due to the following: I have seen borrowers get loans with interest rates in the 3% range. But, guess what; their rate changed every 6 months. Some of these were called the Libor ARM. There was also an ARM Product that allowed a very low initial rate of interest, as above and the borrower could pay a minimum payment, a fully amortized payment or an interest payment, called the Option ARM. These loans I am sure, probably do not exist any longer….this is one of the MELTDOWN PROBLEMS. The problem was, if you do not pay a fully amortized payment, you are not making principal payments (balance stays the same) and you could have negative amortization if you paid only the minimum payment or interest only payments without touching the principal; then when the loan was modified; the balance was greater than the original loan amount. During the Subprime high a lot of ARM mortgage loans were made (not just the Option ARM I have mentioned, but most ARM loans with lower rates) to HELP EVERYONE OBTAIN HOMEOWNERSHIP, about 4 years ago now....these loans have started to adjust and guess what; the payments increased over and above the homeowner's budget. Most people do not stop eating to pay their mortgage payment. I am not being funny, just truthful. ARM loans may be helpful for someone who is transferred with their employer on a regular basis, every 3 to 5 to 10 year period; therefore you have the advantage of the lower rate until you pay off the loan when selling. ARM loans always adjust from that initial rate. FHA 1 & 3 year hybrid ARM loans have an adjustment of 1% after the first change date and a 5% life of loan cap. The 5, 7, & 10 year hybrid ARM has a 2% initial rate adjustment, after the first change date, with a 6% life of loan cap. FNMA ARM Products are 1 yr adjustable, 3, 5, 7 & 10 year adjustable loans. These ARM loans are with 1% to 2% after the initial adjustment period and life caps from 5 to 6%. The 7 year (fixed for 7 years) & 10 year (fixed for 10 years) ARM loan can have an initial rate increase up to 5%. STAY CLEAR OF THESE LOANS UNLESS YOU ARE SELLING AND MOVING WITHIN THE INITIAL FIXED RATE PERIOD. THAT’S JUST MY ADVICE! Take it or leave it; 5% would really make a big difference in your payment!!!! As I have stated, each situation is different, therefore this might be a product you could afford, if you know your earnings will increase to afford the much higher payment. Remember the loan will adjust every year after. I do not want to get more involved with details (and believe me, there is more detail, too much to mention) with ARM loans at this time. You may be saying you have just flipped me out and leaving me stranded. I certainly do not want you to be confused, and ARM loans have a purpose, but for “specific applicants”.

I believe the FIXED RATE mortgage loan is best practice. Why? You have your rate over the life of the loan and if you qualify for this rate, unless your earnings go down or you loose your job, with careful financial planning, you are set with the fixed rate mortgage loan. Now is the time for fixed rate loans if there has ever been one due to the lower interest rate. Why obtain an adjustable rate loan when the fixed rate loans are so low? Some of the reason that so many people obtained ARMs during the Subprime high was so that they could qualify (the debt to income ratio needed to be a certian figure) for the house that they wanted. Normally the sale price was higher than the one they could qualify for if they chose a FIXED RATE product. I am not slamming the market; these are just facts that happened and many borrowers will tell you now that this is true. They had the lower rates and sometimes interest only and did not put money into the principal and did not understand what could happen when the loans began to adjust. This was great for the mortgage company but bad for the consumer.

A fixed rate product gives one an interest rate for the live of the loan. It stay firm and will not adjust unlike the ARM loan product.

Mortgage Loan Facts *My Mortgage Career

2009-10-04T19:23:00.000-07:00

Let’s talk a little about how much fun it has been learning this business, meeting a lot of good people and helping so many people become a homeowner. There are so many aspects of making mortgage loans. So much of mortgage lending is on the inside and no one hears about it, for instance: Servicing Loans, Selling Loans, (well, I guess we have heard a lot about all the AIG, Lehman Brothers, WALL STREET, etc….haven’t we? That’s what they did…buy and sale some of the good old-“NOT SO GOOD STUFF”. As a matter of fact, we didn’t read about much of it either or discuss it unless we worked in the Industry….but NOW…is there anything else going on? I remember the days when I worked for “Freddie”, I was visiting my hometown and a friend in our Community asked me if “Freddie Mac” was a “Trucking Company”. That was really....really funny! We will get back to loan types, products and the list goes on and on, later.

I have so much to share. I started out in this business as an Office Assistant; Processor they are now called, for The Federal Land Bank, who did Rural Mortgage Home Loans in my hometown. I never even imagined leaving my little rural town and going to Atlanta to live and work for FHLMC (“Freddie Mac”). It was just the normal thing to do at that time and I learned so much and met a lot of wonderful people. This was in the “good old days”, may I add. Working at “Freddie” is really what started my career off on the right foot, even though I worked for the Land Bank for 7 years. When I left “Freddie” and Atlanta, I moved closer to home…Memphis. I began another phase of what we call the Secondary Market. This was traveling to different Financial Institutions, reviewing their “closed” loan portfolio. We gather the files information to package the deal and sell the loans to “Freddie” or “Fannie”. This was fun because I got to see different parts of this great United States of America and found that, believe it or not, we are all just good old, hard working Americans, trying to make life better!!!! We had several deals that took us to New York, California and all in between, AND let me tell you, it does rain everyday in Portland. Boy, was that a lot of traveling but I was young…..YOUNGER….and had a lot more energy that I do now…DID I JUST SAY THAT? It didn’t take me many years to find out that I wanted to stop traveling, have a job that I could go to work and come home everyday, like the rest of the world….So, guess what? I became a Mortgage Loan Underwriter. Well, yes I went by the book initially until I learned that every loan is not cut and dried, nor is every borrower’s situation. Rules are made to follow and they are made to bend when there is room to bend, still having a sound, saleable loan. I became a DE Underwriter in 1992, (Direct Endorsement with FHA) and VA Lapp Underwriter in 1999. Since then I have been a Loan Officer, processing my own loans, Manager, Operations Manager, Compliance Officer and just a jack of all trades, when necessary. I have now returned to my old ways and work some Contract Underwriting/Due Diligence for various companies. It has been a whirlwind but I have loved every minute of it even with, all of the ups and downs through the years.

Mortgage Loan Fact About *Type of Loans

2009-10-04T13:15:00.000-07:00

Today, let's talk about mortgage loan types. Mainly FHA in this article. I am going to give you information which I know. Please remember that mortgage loan requirements change almost daily. What I tell you today, could change tomorrow or could be changing as I write this. It is true for all mortgage loans and for almost any guideline or regulation regarding FHA, (Federal Housing Administration) VA (Veterans Administration) or Conventional loans. ** A Conventional loan is a loan that usually meets FNMA(Federal National Mortgage Association)/FHLMC (Federal Home Loan Mortgage Corporation) guidelines. **These are the BIG GUYS who started buying some of the not so good stuff, and decided they would get a piece of the pie during the Sub-Prime reign. Well, it has cost all of us. The more you know, the better off you are! I will keep saying this over and over. Changes are always in process because as with anything in life, we learn by trial and error. We do not want to experience the past 2 years again and I am sure we will not. Don't you agree? It would be nice to tell you that; hey, this is all you need. Good credit; let's just say credit score between 680 and 800, 5% down payment (from your own funds), you have been on your job for 2 years with very little debt and your DTI (debt to income ratio) is 28/36% (housing expense = 28/total debt = 36). One, two, three, your mortgage loan is approved! Well, it isn't quite that simple. I am not trying to discourage you and I certainly do not want to paint a grim picture about the loan process, but with the mortgage mess (I am not kidding you) we have seen. What you don't know, can hurt you; sooner or later!!! The type of mortgage loan you need will be based upon several factors, and here a few:

Are you a first time home buyer seeking a mortgage loan?

How much money do you have for down payment?

Will you need gift funds, if you have not saved your down payment?

Do you have sufficient funds for 5% investment from your own funds for a Conventional loan, with a LTV (loan to value) greater than 80%?

Can you qualify for loan without a parent as a co-signer/co-applicant?

Are you a Veteran?

Are you going to occupy the property?

Do you already have a FHA mortgage loan?

What is your Sales Price/Purchase Price

FHA Mortgage Loan Facts: What to expect:

3.5% investment in loan *gift is allowed * changed from 3%.

Parents or any person related by blood, marriage or law, are allowed to be co-applicants and not live in the property that is being secure with the mortgage loan you are applying for.

A parent or other blood relative may qualify for the loan without any emphasis on the borrower's financial position other than credit must be acceptable.

MIP *mortgage insurance premium is added in the loan and you also will have a monthly MIP amount in your payment. **DEFAULT INSURANCE which is equal to 1.75% x Base loan amount for a purchase transaction. A Streamline Refinance will allow 1.5% MIP. This does not have to be considered in the maximum mortgage amount for whatever State you live in. This may be added into the loan or paid at closing. This is over and above the 3.5% investment.

Let's digest the above and get back to this a little later. Too much at one time can make us feel overwhelmed and unsure that we are ready for the quest.

This information is being given to you to make you more knowledgeable about mortgage loan facts and what you may encounter. As stated, all Lender guidelines may vary to some degree. There are Investor guidelines and then the Lending Institution may have internal guidelines or policies to insure protection and guidelines may vary accordingly, per State. PLEASE believe me when I say, buying a home can be a wonderful experience, especially if you know the ropes when applying for a mortgage loan and I am not trying to discourage anyone. WHAT YOU DON'T KNOW, CAN HURT YOU!

See ya next time!

Mortgage Loan- The Lender *Choosing The Right One

2009-10-04T05:47:00.000-07:00

Let not your heart be troubled!!!! All Mortgage Loan Lenders are not alike!!!! Here is the truth…..we do have freedom of speech!!!! I have worked in Banking and Brokering, and I have learned that for “you” and “I” to get the best rate, the best closing cost and the most expertise; a Mortgage Banking Institution will meet those needs. Please do not quote me as saying the Broker is a no/no for every situation. Not true, every individual need varies and you may have a friend, family or foe who is working in a Broker office, but I will give you important factors.

Mortgage Banker: A Mortgage Loan Officer (Account Executive, Loan Specialist, etc. within a Bank) can offer you a loan with the best rate and without as much closing cost due to the following:

1. Most Banks who have a mortgage loan department, quote their own rates, originate, process, underwrite, close, fund and service the loans. They do not have to pay anyone else to do these functions; therefore they can charge you less. They make their money when this loan is sold to FNMA (“Fannie Mae”) or FHLMC (“Freddie Mac”), after the loan is funded. These are the guys whom you have heard so much about lately. Believe me when I say, in spite of their fall, their guidelines are the best. They only made the mistake of trying to compete with Sub-Prime.

2. Not always, but usually, you may not have to pay an origination fee or discount fee. They can absorb this.

3. They are called a direct lender and have direct access to the Secondary Mortgage Agencies mentioned above and this is where their guidelines are focused. They are calling the shots. Please note, as I have stated this may vary to some degree with each institution as some Mortgage Banking Institutions do not service their loans, they sell the loan immediately to other larger institutions.

Mortgage Broker: A Mortgage Loan Officer with a Broker Office usually can offer the following:

1. They are not a direct lender and do not have direct access to FNMA/FHLMC. They normally work through a Direct Lender (Banking Institution) and sell the loan to them, who probably sells the loan to someone else.

2. They DO NOT underwrite the mortgage loan, fund the loan or service the loan. They originate the loan only. The underwriting and closing is done by the Lender who is buying the loan; therefore you sometimes have more closing cost. The Lender’s name is on the mortgage note, not the Broker. This may vary with a Correspondent Lender. “Another subject”.

3. You may have these fees: origination, discount, underwriting, processing, and application and administration.

These are examples of what the difference is over and above the normal charges in a mortgage loan, such as appraisal fee, flood cert fee, credit report fee, etc. of which the “Bank” will charge, if they originate the loan directly. The Broker must make their income from the upfront fees and by increasing your rate of interest they can also make a percentage on what we call the back end. *A Lender does this, but not as frequent. This is the fee you never see! The Broker cannot survive financially if they charge no fees…..bottom line. To make it simple as possible, here is a sample of what you “might see”. Lender: 0 origination, 0 discount, underwriting fee **over and above the normal, *sometimes if you are making yet a different type loan, let’s say an investment property….you may see discount points. They may range higher than 1%. Broker: 1% origination, 1% discount (meaning 1% of the loan balance). Underwriting fee (varies, usually around $400), processing fee (varies, $250 +-), and administration fee (varies about $150). This clarified some of the difference in a Mortgage Loan Banker and a Mortgage Loan Broker and the fees they charge. MORE NEXT TIME!!!!

Mortgage Loan Facts-U-Need

2009-10-01T15:11:00.000-07:00

Mortgage Facts

Welcome to my blog about Mortgage Loan Facts-U- Need. I hope you can go away from this reading and the upcoming post with some added knowledge of what sound lending practices really are. I can't say this too many times; "What you don't know can hurt you".

Applying for a mortgage loan can sometimes be complex, confusing and actually annoying for some. Let me explain; if you already own a home, you understand the process, but there are a lot of people out there who do not like the fact that a Mortgage Lending Institution must evaluate your entire financial history, prior to approval for your loan. You may be saying, if you have not previously had this experience; why do they need to know so much about me? This part of mortgage lending has not changed much with, “THE MORTGAGE MELTDOWN”. This has always been in existence but less paperwork existed during the period that got our Nation into trouble. Mortgage Lending has changed in many aspects forever. It was stated in Congress prior to the Sub Prime Mortgage Market (which allowed those individuals with less than perfect credit and no money in the transaction) existing. “Everyone” deserves a home! Well, yes they/you/we do deserve a home! But, the big question is this: Are you sure you can afford a home loan and what comes with it? This is why I am writing about Mortgage Loan Facts - U- Need.

When considering what you know about the process, and before you even get into applying for a mortgage loan or what the mortgage company will need to know about you, let me give you some more information that I feel can help you decide if buying is right for you, whether you are an oldie or newbie considering that new home. Since I have worked within the Industry for so many years, and having seen the good, the bad and yes, the ugly, I believe I can help you see the inside of making a mortgage loan.

Credit: It is an important mortgage loan fact to first consider, before applying for a mortgage loan or before you even visit a Mortgage Lender; you should know if your credit meets the standard required to apply for a loan. You can check that by applying for your “free annual credit report”. First things first, credit scores are important. These scores are derived from: how many accounts you have on you report, the high balance, the current balance with regard to the high balance, the type of account, (revolving, installment or open), the duration of the accounts and how you have paid your accounts. The latter is very important. If you have been 30/60/90 days past due on any account, you score will be affected. The longer past due, the more you are penalized and your score drops. It is very important that all of your accounts are paid within the month they are due. Most of us know this and know that it is essential to have good credit to apply for any loan , whether it is consumer or mortgage. If you have excellent, good or minor issues, then you will probably not have a credit issue to deal with. BUT, there are times when something is on your report you do not know about, therefore it is a good idea to check your report at least annually.

Current housing expense: If your credit meets the standard, then how much mortgage loan payment can you afford, over and above your current rent or housing expense? Remember this, you not only have to pay the house payment, you will have to get homeowners insurance, called Hazard Insurance (fire, windstorm, flood, etc.), and pay the taxes on your property. All of this is called your PITI (principle, interest, taxes and insurance). With a loan to value greater than 80%, (loan balance divided by the lower of the sales price or appraised value on a purchase), you will also have Mortgage Insurance which insures your loan against default and these are paid added in your payment to the mortgage company.

Down Payment: How much money have you saved to the purchase of your new home loan? Very important! Even if you are selling your current residence and will have equity, the more money you have in your mortgage loan transaction, the better off you are. Why? If you put 20% down payment, you do not have to carry mortgage insurance (default insurance). You can also pay your taxes and hazard insurance outside of your mortgage loan, if the company does not have a guideline stating you can’t and they should comply with the agency guidelines. Remember that each mortgage company, whether they are a banking institution or just a mortgage loan company outside of a Bank, will have their own guidelines you will have to follow, but with most conforming loans, this is standard rule. If you don’t have 20% down, the loan is definitely not dead. That just means you will have MI in your payment. The rate of mortgage insurance is calculated by the loan to value. If your loan to value is 90%, it will be higher rate than 85% etc. Down payments are considered at 5%, 10%, and 15% etc. with 5% being the lowest unless you apply for the “First Time Homebuyer Loan” which most companies have. These loans have different and stricter guidelines in some aspects due to the higher risk involved with less down payment.

If you have considered the above mortgage loan facts, and you are thinking about getting a mortgage loan, you are probably ready to choose your Mortgage Lender which we will discuss next time.

See here for great information about mortgage loans. Enjoy!