If you're looking for the MiJoy Mortgage and/or blog from Mitch Wilcox it is now located at:
http://mitchwilcox.com/blog-2/
Thank you for your continued support!
Mitch Wilcox
Friday, November 30, 2012
Monday, July 23, 2012
Mortgage rates at new all-time lows....
How many times can we say that? I don't know but let's all take full advantage of it while it's here!
Inquire now about a refinance or new purchase loan.
Here's some brief commentary about what's up:
The European debt crisis is back with a major sell-off in US and global equity markets, and a move into US treasuries pushing the bellwether 10 yr note and mortgage rates to new historical lows. This week Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund will descend on Greece to review the debt crisis in Greece. There is now concern that Greece will fall into depression similar to the US depression in the 30s, and increasing concerns Greece will exit the EU. It shouldn’t be a shock to markets; there is little chance Greece can survive in the EU.
Nevertheless, after a couple of weeks with not much out of the region it is now back with renewed fears. The reaction is sending US interest rates to record lows and the stock market down hard this morning.
After euro finance ministers failed to staunch a decline in the
single currency with the approval of a 100 billion-euro ($122 billion) aid
package for Spanish banks last week, the 3 governing bodies will seek
to determine the fiscal state of Greece, where the crisis began almost
three years ago. The euro currency is crumbling, setting new lows against the
dollar and the Japanese yen. The euro slipped below its lifetime average
against the U.S. dollar at $1.2080. The market consensus now is that
Greece will not be able to meet the requirements set out when it got
bail-out money. Over the weekend, Germany said it will not agree to reworking
the Greek bailout plan. “If Greece doesn’t fulfill those conditions, then there
can be no more payments,” German Vice Chancellor Philipp Roesler told the media
yesterday, adding that he is “very skeptical” Greece can be rescued and that
the prospect of its exit from the monetary union “has long ago lost its
terror.”
The renewed concerns over the debt crises in Europe will support
the bond and mortgage markets this week. However, although this
morning the fear factor and concerns are at high levels, we have experienced this
many times in the last couple of years. Markets will react on any comments out
of the region. While Greece in the wider perspective is finished in the EU,
monentary comments from the IMF, the ECB or the EU that sound more optimistic
will get traders’ attention with market swings that could be severe, similar to
what we are seeing this morning. That said, technically the bond and mortgage
markets are increasing their bullish bias. Expect the possibility of volatile
markets this week.
Until next time....
Inquire now about a refinance or new purchase loan.
Here's some brief commentary about what's up:
The European debt crisis is back with a major sell-off in US and global equity markets, and a move into US treasuries pushing the bellwether 10 yr note and mortgage rates to new historical lows. This week Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund will descend on Greece to review the debt crisis in Greece. There is now concern that Greece will fall into depression similar to the US depression in the 30s, and increasing concerns Greece will exit the EU. It shouldn’t be a shock to markets; there is little chance Greece can survive in the EU.
Nevertheless, after a couple of weeks with not much out of the region it is now back with renewed fears. The reaction is sending US interest rates to record lows and the stock market down hard this morning.
Until next time....
Tuesday, July 17, 2012
Why an FHA loan?
Let us count the ways....make sure you check out the monthly payment info at the bottom of this post...and: Get more info on FHA loans.
FHA
Section 203(b) Mortgage Insurance for One-to-Four-Family Homes
Through this program, the US Dept. of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) insures mortgages made by qualified lenders to people purchasing or refinancing a home of their own. FHA does not make loans; FHA insures loans.
FHA's mortgage insurance programs help families become homeowners by providing qualifying standards that are in many cases easier to meet than for other types of mortgage loans. FHA mortgage insurance also encourages lenders to make mortgages to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, by protecting the lender against default on mortgages for properties that meet certain minimum requirements--including manufactured homes, single-family and multifamily properties, and some health-related facilities.
Section 203(b) is the centerpiece of FHA's single-family mortgage insurance programs-the successor of the program that helped save homeowners from default in the 1930s, that helped open the suburbs for returning veterans in the 1940s and 1950s, and that helped shape the modern mortgage finance system. Today, FHA One- to Four-Family Mortgage Insurance is still an important tool through which the Federal Government expands homeownership opportunities for first-time homebuyers and other borrowers who would not otherwise qualify for conventional mortgages on affordable terms, as well as for those who live in underserved areas where mortgages may be harder to get. FHA is actively involved currently to further provide assistance through programs like “FHA Secure,” a program designed to assist borrowers that can qualify to refinance out of a loan they have had trouble making payments on. These obligations are protected by FHA's Mutual Mortgage Insurance Fund, which is sustained entirely by borrower premiums. This program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified buyers. Insured mortgages may be used to finance the purchase of new or existing one- to four-family housing, as well as to refinance debt.
Why Choose FHA Section 203(b) loans?
Single family loan limits vary by county...get more info on FHA loans.
How much down payment is required?
What can sellers pay?
Is an FHA loan harder to complete than a conventional loan, as related to processing times, qualifying, documentation, appraisal, or inspections?
Contact your FHA approved and qualified lender.
As promised, here is some payment information based on a $175,000 purchase price:
Purchase Price $175,000
Minimum Down (3.5%) $ 6,125
Monthly P/I at *3.250% $ 775.00
Monthly MI $ 179.00
Taxes (Est.) $ 200.00
Insurance (Est.) $ 50.00
Total $1,204.00
Need more info? Get it here.
*3.414% APR, subject to change based on market conditions.
FHA
Section 203(b) Mortgage Insurance for One-to-Four-Family Homes
Through this program, the US Dept. of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) insures mortgages made by qualified lenders to people purchasing or refinancing a home of their own. FHA does not make loans; FHA insures loans.
FHA's mortgage insurance programs help families become homeowners by providing qualifying standards that are in many cases easier to meet than for other types of mortgage loans. FHA mortgage insurance also encourages lenders to make mortgages to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, by protecting the lender against default on mortgages for properties that meet certain minimum requirements--including manufactured homes, single-family and multifamily properties, and some health-related facilities.
Section 203(b) is the centerpiece of FHA's single-family mortgage insurance programs-the successor of the program that helped save homeowners from default in the 1930s, that helped open the suburbs for returning veterans in the 1940s and 1950s, and that helped shape the modern mortgage finance system. Today, FHA One- to Four-Family Mortgage Insurance is still an important tool through which the Federal Government expands homeownership opportunities for first-time homebuyers and other borrowers who would not otherwise qualify for conventional mortgages on affordable terms, as well as for those who live in underserved areas where mortgages may be harder to get. FHA is actively involved currently to further provide assistance through programs like “FHA Secure,” a program designed to assist borrowers that can qualify to refinance out of a loan they have had trouble making payments on. These obligations are protected by FHA's Mutual Mortgage Insurance Fund, which is sustained entirely by borrower premiums. This program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified buyers. Insured mortgages may be used to finance the purchase of new or existing one- to four-family housing, as well as to refinance debt.
Why Choose FHA Section 203(b) loans?
- Get to closing faster – easier to qualify:
- No minimum credit
score is required
- Non-traditional credit
is acceptable
- Low down payment – 3.5%
on 203(b).
- Non-occupant
co-borrower is permitted
- Expanded qualifying
ratios
- No cash reserves
required
- No sales price limits
- No income limits
- Gift down payments OK from family
- Seller paid costs allowed
- No “declining market” issues
- Compatible with industry requirements on:
- Appraisal and repair
- Closing costs
- Lender insurance
- Automated Underwriting Systems (AUS) using FHA's TOTAL Scorecard
- Protections and advantages:
- Fully assumable
- Default assistance
- Non-credit qualifying
streamlines refinances
- Competitive interest
rates and lower premiums
- Certain liens may
remain unpaid
- Now features
“risk-based-pricing”
- Similar documentation
for comparable products
- No prepayment penalties
- FHA's loan products meet your borrowers' needs:
- Flexible buy and
repair with Streamlined 203(k) mortgage
- Reverse mortgage
(HECM)
- 95% cash-out
refinances
- Manufactured homes
- Multi-unit
Single family loan limits vary by county...get more info on FHA loans.
How much down payment is required?
If you figure 3.500% of the sales price as a minimum you will be fine.
What can sellers pay?
Sellers can pay up to a maximum of 6.000% of costs based on
the sales price.
Is an FHA loan harder to complete than a conventional loan, as related to processing times, qualifying, documentation, appraisal, or inspections?
Other than the required HUD documentation, and slightly
different credit standards the process is not much different than it is for
conventional loans. For consideration:
- 18”
crawl space required.
- Process for appraisal/inspection now the same as for conventional loans.
- No
requirement for water flow test; purity only.
- Pest & Dry Rot inspection is
not a requirement.
Contact your FHA approved and qualified lender.
As promised, here is some payment information based on a $175,000 purchase price:
Purchase Price $175,000
Minimum Down (3.5%) $ 6,125
Monthly P/I at *3.250% $ 775.00
Monthly MI $ 179.00
Taxes (Est.) $ 200.00
Insurance (Est.) $ 50.00
Total $1,204.00
Need more info? Get it here.
*3.414% APR, subject to change based on market conditions.
Why a VA Loan?
Why indeed!
How about the lowest rates in history?
For our Veterans, rates are as low, comparatively, as they are for other programs. Here's an approximate payment breakdown for a $175,000 home purchase:
Down payment -0- (Yes, you saw this correctly...ZERO down for VA loans)
Monthly principal & interest at 3.250% (Yes, 3.250%, 3.412% APR): $ 762
Estimated monthly property taxes: $ 208
Estimated monthly homeowners insurance: $ 50
Total monthly payment: $1,020.
Can you say "Cheaper Than Rent?" I think that you can!
Get more info on VA loans.
Here's some VA stuff to ponder:
Why VA?
-100% financing up to the County loan limits established by the FHFA (Federal Housing Finance Agency).
-No bottom line credit score.
-Streamline refinance interest rate reduction loan.
-Fully assumable by any qualified person (does not have to be a Veteran).
-Fixed and adjustable rate mortgages.
-VA funding fee can be added to 100% financing.
-Seller can assist with closing costs.
Breaking
it down
Allowable
vs. Unallowable Costs
VA
ALLOWABLE FEES
UNALLOWABLE
FEES
If
you figure about $2500 for a purchase price/loan in the $175-200K range you
will be close on what the Veteran cannot pay. Any interested party, other than
the Vet, can pay the unallowable fees.
How about the lowest rates in history?
For our Veterans, rates are as low, comparatively, as they are for other programs. Here's an approximate payment breakdown for a $175,000 home purchase:
Down payment -0- (Yes, you saw this correctly...ZERO down for VA loans)
Monthly principal & interest at 3.250% (Yes, 3.250%, 3.412% APR): $ 762
Estimated monthly property taxes: $ 208
Estimated monthly homeowners insurance: $ 50
Total monthly payment: $1,020.
Can you say "Cheaper Than Rent?" I think that you can!
Get more info on VA loans.
Here's some VA stuff to ponder:
Why VA?
-100% financing up to the County loan limits established by the FHFA (Federal Housing Finance Agency).
-No bottom line credit score.
-Streamline refinance interest rate reduction loan.
-Fully assumable by any qualified person (does not have to be a Veteran).
-Fixed and adjustable rate mortgages.
-VA funding fee can be added to 100% financing.
-Seller can assist with closing costs.
PURCHASE
TRANSACTIONS / REFINANCE TRANSACTIONS
·
Loan Origination Fee (not to exceed 1% of the loan
amount)
·
Loan
Discount (reasonable - not to exceed 2% financed)
·
Appraisal
Fee
·
Credit Report
·
VA Funding Fee (See Chart below)
·
Flood Certificate Fee
·
VA Compliance Inspection
·
Title Examination/Search
·
Title Insurance
·
Title Endorsement (environmental protection)
·
Recording Fees
·
Recording of Warranty Deed
·
Tax Stamps
·
Release Fees
·
Tax Stamps
·
Survey
·
The portion of taxes, assessments &
similar items for the current year chargeable to borrower & initial deposit
for tax & insurance
·
Escrow account
·
Pest Inspection
·
Overnight Delivery Fee
·
Subordinate/Demand/Reconveyance Fees
·
Taxes
·
Hazard Insurance
·
The borrower must either:
o Pay the VA
Funding Fee in cash at closing, or
o Include
the entire VA Funding Fee in the loan amount.
The
Veteran cannot pay these:
·
Lender fees such as Document preparation,
processing fees, administration fees, application fee, etc.
·
Escrow or Set-Up fee
·
HOA transfer fee
·
Pre-paid interest on a new loan
·
Title endorsements exceeding $50
·
Early Issue title insurance
·
Compliance Inspections in excess of one
Friday, June 1, 2012
Historical Lows Again for Mortgage Rates
I'm not sure how often that headline will be repeated, but interested consumers would be wise to get a loan application on file right now to take advantage of rates.
The thing is, once rates drop, those with applications already on file will benefit. Those who don't may not.
It takes much longer these days to prepare a loan file so a loan rate can be locked in. Lenders get backed up very quickly and you must get in line behind those who responded or are better prepared.
First come, first served is the mantra here. It could be hours, days, or weeks before your lender can get your file ready to lock.
Doing business with me, I have significant support staff and I work long hours....I'm just saying....
Honestly, your best bet is to get an application on file so I can contact you and review the sensibility of a refinance for you with some solid info to go on. Fill in everything you can and send it...I'll find you!
Go here and get started: https://0990471896.secure-loancenter.com/WebApp/Start.aspx.
Who can benefit? Anyone with a mortgage should be looking at the potential of lowering their rate. If you have an FHA or VA loan, in particular, it's very unlikely there will be a better time for you to do this.
Got a conventional loan? We have historically low fixed rates right now for 10, 15, 20, and 30 year terms. It may be a great time to reduce the term of your loan.
Why are rates so low? Take your pick: trouble in Europe (yes, we are in a global economy now), poor domestic jobs report, investors fleeing to the safety of mortgage backed securities, and general economic conditions. The fact is that rates are low and we don't know how long they will stay there.
Need to know what you will need for documentation? What the process is? Here's some general info (keep in mind that your situation will be unique to you): http://www.mijoymortgage.com/Loan_20_Process1.html
Again, your best bet is to get an application on file ASAP:
https://0990471896.secure-loancenter.com/WebApp/Start.aspx.
Until next time...
The thing is, once rates drop, those with applications already on file will benefit. Those who don't may not.
It takes much longer these days to prepare a loan file so a loan rate can be locked in. Lenders get backed up very quickly and you must get in line behind those who responded or are better prepared.
First come, first served is the mantra here. It could be hours, days, or weeks before your lender can get your file ready to lock.
Doing business with me, I have significant support staff and I work long hours....I'm just saying....
Honestly, your best bet is to get an application on file so I can contact you and review the sensibility of a refinance for you with some solid info to go on. Fill in everything you can and send it...I'll find you!
Go here and get started: https://0990471896.secure-loancenter.com/WebApp/Start.aspx.
Who can benefit? Anyone with a mortgage should be looking at the potential of lowering their rate. If you have an FHA or VA loan, in particular, it's very unlikely there will be a better time for you to do this.
Got a conventional loan? We have historically low fixed rates right now for 10, 15, 20, and 30 year terms. It may be a great time to reduce the term of your loan.
Why are rates so low? Take your pick: trouble in Europe (yes, we are in a global economy now), poor domestic jobs report, investors fleeing to the safety of mortgage backed securities, and general economic conditions. The fact is that rates are low and we don't know how long they will stay there.
Need to know what you will need for documentation? What the process is? Here's some general info (keep in mind that your situation will be unique to you): http://www.mijoymortgage.com/Loan_20_Process1.html
Again, your best bet is to get an application on file ASAP:
https://0990471896.secure-loancenter.com/WebApp/Start.aspx.
Until next time...
Thursday, May 17, 2012
Mortgage Rates Officially Hit New All-Time Lows
Mortgage
Rates hit new all-time lows today.
In most cases, lenders' offerings are just slightly better across the board than they were in late January, the last time the market's officially noted "new all-time lows," though some lenders are not quite back to their previous best levels.
So, what's going on? A few things...
A much weaker-than-expected reading on a widely followed report on business conditions in the mid-Atlantic region gave rates markets a bit of an early jolt lower. From there, an absence of additional data gave way to technical momentum, helping rates even lower.
Markets are facing tremendous uncertainty over the eventual outcome of Greek elections in June, as well as the fate of the Spanish banking sector. Today, Spain saw their own version of the "run on banks" that occurred in Greece yesterday, reminding traders that, even if Greece makes it out of this mess still in the Euro-zone, that there are bigger fish to fry.
All that uncertainty has investors piling into safe-haven assets. In a global economy where a currency as massive as the Euro is in serious trouble due to problems in one small Euro-zone country, investors are just looking for a safe place to park their assets. US Treasuries have been one such place and their recent rally benefits other products in that same medicine cabinet, such as MBS (the "mortgage backed securities" that most directly influence mortgage rates).
Apart from Europe, there's also the consideration of Fed policy in the US. Whether or not the Fed extends recent quantitative easing measures or embarks on new ones is a matter of great concern to bond markets. At the last policy announcement, the door was left open for additional easing as-needed, and yesterday's "minutes" from that policy meeting essentially confirmed that open door. Markets perceive that "as needed" is becoming more and more "needed" if the Fed sees signs in the domestic economy like the one seen in this morning's weak data.
When investors think the Fed is more likely to buy more fixed-income investments, rates stay low or move lower, all other things being equal.
Any way you account for the causes, the bottom line is that mortgage rates are lower. Keep in mind, of course, that while the European credit theater will likely continue to weigh on markets, keeping rates fairly contained in this new, low range, that "cement" can always be broken if sufficient force is applied.
While fond of mentioning the increasing barriers to improvement at current levels, it's not that I think rates can't improve, it just feels that it will be slow going, and with risks of periodic bounce back. The wisdom of locking or floating slightly favors locking at this point, in my opinion.
Until next time...
In most cases, lenders' offerings are just slightly better across the board than they were in late January, the last time the market's officially noted "new all-time lows," though some lenders are not quite back to their previous best levels.
So, what's going on? A few things...
A much weaker-than-expected reading on a widely followed report on business conditions in the mid-Atlantic region gave rates markets a bit of an early jolt lower. From there, an absence of additional data gave way to technical momentum, helping rates even lower.
Markets are facing tremendous uncertainty over the eventual outcome of Greek elections in June, as well as the fate of the Spanish banking sector. Today, Spain saw their own version of the "run on banks" that occurred in Greece yesterday, reminding traders that, even if Greece makes it out of this mess still in the Euro-zone, that there are bigger fish to fry.
All that uncertainty has investors piling into safe-haven assets. In a global economy where a currency as massive as the Euro is in serious trouble due to problems in one small Euro-zone country, investors are just looking for a safe place to park their assets. US Treasuries have been one such place and their recent rally benefits other products in that same medicine cabinet, such as MBS (the "mortgage backed securities" that most directly influence mortgage rates).
Apart from Europe, there's also the consideration of Fed policy in the US. Whether or not the Fed extends recent quantitative easing measures or embarks on new ones is a matter of great concern to bond markets. At the last policy announcement, the door was left open for additional easing as-needed, and yesterday's "minutes" from that policy meeting essentially confirmed that open door. Markets perceive that "as needed" is becoming more and more "needed" if the Fed sees signs in the domestic economy like the one seen in this morning's weak data.
When investors think the Fed is more likely to buy more fixed-income investments, rates stay low or move lower, all other things being equal.
Any way you account for the causes, the bottom line is that mortgage rates are lower. Keep in mind, of course, that while the European credit theater will likely continue to weigh on markets, keeping rates fairly contained in this new, low range, that "cement" can always be broken if sufficient force is applied.
While fond of mentioning the increasing barriers to improvement at current levels, it's not that I think rates can't improve, it just feels that it will be slow going, and with risks of periodic bounce back. The wisdom of locking or floating slightly favors locking at this point, in my opinion.
Until next time...
Wednesday, May 9, 2012
Are We There Yet? Housing and Lending Temperatures
It seems every time I turn around we have new data to digest. The fact is that actual results often speak louder than data. The human equation always makes things interesting, and can be one of the biggest factors in determining economic direction.
We are what we think. So, what do we think, and what are the actual results in the real estate and lending world right now?
The fact is we are transacting home loans; more than we've done in the last 4 years or so. There is plenty of money out there for good credit borrowers. Yes, underwriting requirements continue to be tight, but get past that and you're good to go.
Underwater? HARP 2 contunues to be a viable option for many.
Wells Fargo's economic team suggests that early reports indicate that the critical spring home buying season has gotten off to its best start in five years. "Sales of new single-family homes totaled 83,000 units during the first quarter, up 16 percent from a year ago, while sales of existing single-family homes rose 7.2 percent, marking the best combined pace for first quarter home sales since 2007. The rise in existing home sales has generated a little excitement, as news is spreading that homes sold outside the foreclosure process are often receiving multiple bids and selling above the asking price."
Wells suggests that "the sudden prevalence of multiple bids around the country appears to be the result of unseasonably mild winter weather, which brought buyers back into the market to a much greater degree than sellers. The first quarter is typically the slowest quarter of the year, with March being the only busy month. Inventories of existing homes have fallen to just a 6.3-months' supply, and the inventory of unsold vacant homes has fallen by 353,000 units over the past year. Inventories of new homes continue to decline and are now at a paltry 144,000 units nationwide. Only about one-third of those homes are actually completed. With inventories dwindling, home prices have improved a bit."
Of course Realtors and Lenders can tell you that the better news on sales and prices, along with near record high affordability and near record low mortgage rates, has encouraged builders to move forward with a few more projects. Starts of new single-family homes rose 16.7 percent during the first quarter, for a total of 104,600 units.
But the Jefferies Monthly Housing Monitor took somewhat of the opposite tack: On the surface it appears that momentum is building towards favoring a near-bottom in U.S. housing. Small positives have emerged, as they have in the past, but the data is "still inconsistent enough to keep us concerned about such a fragile sector. Nonetheless, it is easy to agree that mixed is certainly better than down and the recent stronger-than-expected pending homes sales report adds support. The positive spin is that we haven't seen material drops in recent months in most housing data, and in some cases we have seen actual improvements. The negative spin is simply that the market remains saturated with inventory (lots in the "shadows") and that lending activity for home purchases remains exceptionally tight in the face of record low costs of home ownership."
Practically everyone agrees that if affordability is at record levels, the government continues to try and prop up housing markets, so why are we still mired in such a soft housing sector? On the lending side, loan officer's and underwriters can tell you that access to, and the securing of, mortgage capital is still a challenge for many borrowers. Loan origination is economically very lucrative for lenders, but lack of clarity on future regulatory fronts and the costs of compliance weigh heavily on the sector: simply put, lack of clarity results in lack of funding.
See: http://mijoymortgage55.blogspot.com/2012/04/taming-underwriting-beast.html
Politicians and others have floated ideas regarding housing recovery related to negative equity and/or shared appreciation loan modification plans that address homeowner/lender responsibility.
See: http://mijoymortgage55.blogspot.com/2012/02/menendez-introduces-bill-to-keep-people.html.
Here's a "piggy-back" idea that seems to be gaining momentum in some circles:
Steve Kaye with Catalyst Funding says: "A little over 2 years ago I went to see my Congressman, Darrel Issa (R-US Rep, CA); since January 2011, Rep. Issa has served as Chairman of the House Oversight and Government Reform Committee.
I wished to share a plan that stressed a more aggressive approach to the housing crisis was necessary; one that extended beyond simple loan modification.
The problem with a straight modification-only plan is that it only provides a temporary solution - at best - and only addresses the mortgage payment - which is no longer the only issue or concern. The homeowner who is $150K or more upside down on his mortgage would absolutely benefit from saving $500 a month or more on his mortgage payment. However, when he wakes up the next morning, he is still going to be $150K upside down on his mortgage and looking at a minimum of 8-10 years at normal appreciation to climb out of that hole. No...This is merely a band aide that would only extend our housing woes."
He continued, "I lobbied for historic reform that would require, in conjunction with the modification, a principal reduction plan that would put home values at 100% of current market value --- a 'clean start", so to speak. It would not give the gift of equity, but would provide some optimism and hope for the future. And if the owner sold in the following 5 years, 50% of any equity gained would have to be paid to the existing lender who provided the modification/reduction. Other portions of the Plan addressed additional ways to stimulate the market in regard to expanding home ownership and purchasing power without compromising normal loan qualifying. Clearly, we cannot stimulate the housing market by only providing opportunity for 1st time home buyers. Yes, there would be losses absorbed by lenders and financial institutions However, the revitalization and stabilization of the housing industry would stimulate the economy and provide additional earnings through more home lending, more use of credit, etc. Homeowners who are not upside down will also gain as equity - lost during these past years - will return and provide value. The more I have read over the past year, the more I am convinced that these 'simplistic' ideas will, in some manner, be put into play at some point --- they have to.
Some excerpts are from Mortgage Daily, 5-9-12
Certainly, any successful loan modification or refinance must address not just monthly payment savings; negative equity will continue to be a drag on housing and full economic recovery. While saving on the payment is better than not....it would be great if, while saving on the payment, negative equity issues could be addressed at the same time in a modification or refinance.
Your ideas or comments are appreciated!
Until next time...
We are what we think. So, what do we think, and what are the actual results in the real estate and lending world right now?
The fact is we are transacting home loans; more than we've done in the last 4 years or so. There is plenty of money out there for good credit borrowers. Yes, underwriting requirements continue to be tight, but get past that and you're good to go.
Underwater? HARP 2 contunues to be a viable option for many.
Wells Fargo's economic team suggests that early reports indicate that the critical spring home buying season has gotten off to its best start in five years. "Sales of new single-family homes totaled 83,000 units during the first quarter, up 16 percent from a year ago, while sales of existing single-family homes rose 7.2 percent, marking the best combined pace for first quarter home sales since 2007. The rise in existing home sales has generated a little excitement, as news is spreading that homes sold outside the foreclosure process are often receiving multiple bids and selling above the asking price."
Wells suggests that "the sudden prevalence of multiple bids around the country appears to be the result of unseasonably mild winter weather, which brought buyers back into the market to a much greater degree than sellers. The first quarter is typically the slowest quarter of the year, with March being the only busy month. Inventories of existing homes have fallen to just a 6.3-months' supply, and the inventory of unsold vacant homes has fallen by 353,000 units over the past year. Inventories of new homes continue to decline and are now at a paltry 144,000 units nationwide. Only about one-third of those homes are actually completed. With inventories dwindling, home prices have improved a bit."
Of course Realtors and Lenders can tell you that the better news on sales and prices, along with near record high affordability and near record low mortgage rates, has encouraged builders to move forward with a few more projects. Starts of new single-family homes rose 16.7 percent during the first quarter, for a total of 104,600 units.
But the Jefferies Monthly Housing Monitor took somewhat of the opposite tack: On the surface it appears that momentum is building towards favoring a near-bottom in U.S. housing. Small positives have emerged, as they have in the past, but the data is "still inconsistent enough to keep us concerned about such a fragile sector. Nonetheless, it is easy to agree that mixed is certainly better than down and the recent stronger-than-expected pending homes sales report adds support. The positive spin is that we haven't seen material drops in recent months in most housing data, and in some cases we have seen actual improvements. The negative spin is simply that the market remains saturated with inventory (lots in the "shadows") and that lending activity for home purchases remains exceptionally tight in the face of record low costs of home ownership."
Practically everyone agrees that if affordability is at record levels, the government continues to try and prop up housing markets, so why are we still mired in such a soft housing sector? On the lending side, loan officer's and underwriters can tell you that access to, and the securing of, mortgage capital is still a challenge for many borrowers. Loan origination is economically very lucrative for lenders, but lack of clarity on future regulatory fronts and the costs of compliance weigh heavily on the sector: simply put, lack of clarity results in lack of funding.
See: http://mijoymortgage55.blogspot.com/2012/04/taming-underwriting-beast.html
Politicians and others have floated ideas regarding housing recovery related to negative equity and/or shared appreciation loan modification plans that address homeowner/lender responsibility.
See: http://mijoymortgage55.blogspot.com/2012/02/menendez-introduces-bill-to-keep-people.html.
Here's a "piggy-back" idea that seems to be gaining momentum in some circles:
Steve Kaye with Catalyst Funding says: "A little over 2 years ago I went to see my Congressman, Darrel Issa (R-US Rep, CA); since January 2011, Rep. Issa has served as Chairman of the House Oversight and Government Reform Committee.
I wished to share a plan that stressed a more aggressive approach to the housing crisis was necessary; one that extended beyond simple loan modification.
The problem with a straight modification-only plan is that it only provides a temporary solution - at best - and only addresses the mortgage payment - which is no longer the only issue or concern. The homeowner who is $150K or more upside down on his mortgage would absolutely benefit from saving $500 a month or more on his mortgage payment. However, when he wakes up the next morning, he is still going to be $150K upside down on his mortgage and looking at a minimum of 8-10 years at normal appreciation to climb out of that hole. No...This is merely a band aide that would only extend our housing woes."
He continued, "I lobbied for historic reform that would require, in conjunction with the modification, a principal reduction plan that would put home values at 100% of current market value --- a 'clean start", so to speak. It would not give the gift of equity, but would provide some optimism and hope for the future. And if the owner sold in the following 5 years, 50% of any equity gained would have to be paid to the existing lender who provided the modification/reduction. Other portions of the Plan addressed additional ways to stimulate the market in regard to expanding home ownership and purchasing power without compromising normal loan qualifying. Clearly, we cannot stimulate the housing market by only providing opportunity for 1st time home buyers. Yes, there would be losses absorbed by lenders and financial institutions However, the revitalization and stabilization of the housing industry would stimulate the economy and provide additional earnings through more home lending, more use of credit, etc. Homeowners who are not upside down will also gain as equity - lost during these past years - will return and provide value. The more I have read over the past year, the more I am convinced that these 'simplistic' ideas will, in some manner, be put into play at some point --- they have to.
Some excerpts are from Mortgage Daily, 5-9-12
Certainly, any successful loan modification or refinance must address not just monthly payment savings; negative equity will continue to be a drag on housing and full economic recovery. While saving on the payment is better than not....it would be great if, while saving on the payment, negative equity issues could be addressed at the same time in a modification or refinance.
Your ideas or comments are appreciated!
Until next time...
Tuesday, May 8, 2012
HARP 3? It's All The Rage
What? HARP 3? Didn't we just start HARP 2?
Yes, we did. Follow the bouncing ball....
While it may be to your advantage to refinance now on HARP 2, let's make sure it's a good idea...start here: http://www.mijoymortgage.com/UNDERWATER_HARP_2.0.html.
OK, onto the latest news of the day.....will there be a HARP 3? Following is a pretty detailed look at the questions of "if" and "why." The fact is HARP 2 has not been an effective across-the-board remedy for everyone.
To make all of this easy, contact me for an evaluation after you visit: http://www.mijoymortgage.com/UNDERWATER_HARP_2.0.html.
I am evaluating individual scenarios on a case-by-case basis. Some HARP 2 refinances make really good sense and some don't. For certain you will get honest answers. Check out my testimonials: http://www.mijoymortgage.com/Testimonials.html.
HARP…HARP 2.0…HARP 3.0…HARP 4.0... will the industry have trouble keeping track of which borrower refinanced under which HARP? The Home Affordable Refinance Program certainly has its proponents, and its critics, along with a fair number of LOs/lenders who are on the fence about it, warily watching what happens.
While the HARP 2.0 program is not even 6 months old, there is already chatter about a “new and improved” policy that could represent a new phase of refinancing-related policy risk. There have been critics from the start, of course, and this is giving them fodder to ask, “Why didn’t they do it right the first time? What makes us think that this will be the last HARP?” And borrowers, faced with rumors of kinder, gentler HARP, are wondering what is in store for them.
A big factor in the whole process, of course, are the overlays that have been put in place by the aggregators. We know that neither President Obama nor Congress set underwriting guidelines. And FHFA’s Freddie Mac and Fannie Mae may give a program to our lenders, but if the aggregators put on overlays then those lenders who can will go directly to Fannie Mae.
Recently the Senate Banking Committee held a hearing about some of the initiatives highlighted in President Obama’s plan to “Help Responsible Homeowners and Heal the Housing Market.” While there are many facets to the plan, the most recent substantive discussion focused on initiatives to help agency borrowers refinance. Some find it fascinating that, in spite of the government’s apparent desire to extricate itself from supporting the mortgage market, proposals continue to pop up suggesting the exact opposite.
A key part of the discussion focused on examining the Menendez-Boxer discussion draft of the “Responsible Homeowner Refinancing Act of 2012”. What are the HARP enhancements that are being contemplated? Well, the discussion draft has a host of recommended changes to the HARP platform. Generally, they fall along the lines outlined under President Obama’s plan to “Help Responsible Homeowners and Heal the Housing Market.”
On the agency side (Fannie/Freddie, the "GSE's"), the key principals of the plan threefold: to eliminate appraisal costs for all borrowers, increase competition so borrowers get the best possible deal, and extend streamlined refinancing for all GSE borrowers. The Menendez-Boxer discussion draft details how the administration is planning to achieve these aims.
Experts suggest that there are two significant issues that the politicians are looking to address. One is to introduce measures to facilitate cross-servicer refinancing ( a new loan being done by a lender who does not currently service the existing loan), and the other is to increase the amount of borrowers eligible for the program by reducing eligibility criteria. As best anyone can tell, the key focus seems to be in encouraging cross servicer refinancing – something that the big aggregators have discouraged using LTV overlays and other restrictions to accomplish. As one senior executive at a Top 5 aggregator told me, “None of us want to be financially or legally responsible for someone else’s junk.”
The biggest push seems to be reducing barriers for cross-servicer refinancing to promote competition and lower mortgage rates. There are a couple key ways that the bill proposes to accomplish this. First, Fannie Mae and Freddie Mac would be prohibited from disqualifying or varying borrower eligibility requirements based on LTV, CLTV, employment status, or income. (Currently, borrowers under the manual - same servicer - process qualify for HARP based exclusively on payment history, borrower benefit provisions, and verbal verification of employment. The threshold for cross-servicer refinancing is much higher under the automated underwriting systems.) Lenders using AUS for a cross-servicer HARP refinance are required to collect documentation and borrower credit, are subject to debt-to-income limits within DU/LP (Fannie & Freddie's underwriting systems), and are subject to different pay history requirements across FNMA (Fannie) and FHLMC (Freddie).
Effectively, as any loan officer or underwriter can tell us, the cross-servicer refinance is much closer to a full underwrite of the loan, while the manual HARP process is closer to a no-underwriting process. Disallowing any variance across same- and cross-servicer refinances in employment status and income eligibility, could ease borrower qualification for cross-servicer refinances and promote competition.
Second, the reps and warrants for cross-servicer refinances would be eased to match those of same-servicer refinancing. Under HARP 2.0, lenders under the manual process are relieved of most reps and warranties on the old and new loan provided that borrowers satisfy payment history requirements and borrower benefit provisions, and have their employment verified verbally. For cross-servicer refinancing, lenders retain significant rep and warranty risk on the new loan. They are responsible for the loan case file being complete, accurate, and not fraudulent. Furthermore, they must comply with the underwriting documentation requirements regarding income, employment, asset, and property fieldwork. If any of these are incomplete, the lenders could be on the hook for reps and warrants on the new loan. And, as mentioned above, who wants to deal with another lender’s junk?
While these rep and warrant issues may sound somewhat mild, those for cross-servicer refinancing under DU and LP are very similar to what existed before HARP 2.0. Generally, there have only been changes to the reps and warrants on property valuation when an AVM is used. It’s important to note that these issues do present a significant issue for qualifying for loan from a new lender.
Until next time...
Yes, we did. Follow the bouncing ball....
While it may be to your advantage to refinance now on HARP 2, let's make sure it's a good idea...start here: http://www.mijoymortgage.com/UNDERWATER_HARP_2.0.html.
OK, onto the latest news of the day.....will there be a HARP 3? Following is a pretty detailed look at the questions of "if" and "why." The fact is HARP 2 has not been an effective across-the-board remedy for everyone.
To make all of this easy, contact me for an evaluation after you visit: http://www.mijoymortgage.com/UNDERWATER_HARP_2.0.html.
I am evaluating individual scenarios on a case-by-case basis. Some HARP 2 refinances make really good sense and some don't. For certain you will get honest answers. Check out my testimonials: http://www.mijoymortgage.com/Testimonials.html.
HARP…HARP 2.0…HARP 3.0…HARP 4.0... will the industry have trouble keeping track of which borrower refinanced under which HARP? The Home Affordable Refinance Program certainly has its proponents, and its critics, along with a fair number of LOs/lenders who are on the fence about it, warily watching what happens.
While the HARP 2.0 program is not even 6 months old, there is already chatter about a “new and improved” policy that could represent a new phase of refinancing-related policy risk. There have been critics from the start, of course, and this is giving them fodder to ask, “Why didn’t they do it right the first time? What makes us think that this will be the last HARP?” And borrowers, faced with rumors of kinder, gentler HARP, are wondering what is in store for them.
A big factor in the whole process, of course, are the overlays that have been put in place by the aggregators. We know that neither President Obama nor Congress set underwriting guidelines. And FHFA’s Freddie Mac and Fannie Mae may give a program to our lenders, but if the aggregators put on overlays then those lenders who can will go directly to Fannie Mae.
Recently the Senate Banking Committee held a hearing about some of the initiatives highlighted in President Obama’s plan to “Help Responsible Homeowners and Heal the Housing Market.” While there are many facets to the plan, the most recent substantive discussion focused on initiatives to help agency borrowers refinance. Some find it fascinating that, in spite of the government’s apparent desire to extricate itself from supporting the mortgage market, proposals continue to pop up suggesting the exact opposite.
A key part of the discussion focused on examining the Menendez-Boxer discussion draft of the “Responsible Homeowner Refinancing Act of 2012”. What are the HARP enhancements that are being contemplated? Well, the discussion draft has a host of recommended changes to the HARP platform. Generally, they fall along the lines outlined under President Obama’s plan to “Help Responsible Homeowners and Heal the Housing Market.”
On the agency side (Fannie/Freddie, the "GSE's"), the key principals of the plan threefold: to eliminate appraisal costs for all borrowers, increase competition so borrowers get the best possible deal, and extend streamlined refinancing for all GSE borrowers. The Menendez-Boxer discussion draft details how the administration is planning to achieve these aims.
Experts suggest that there are two significant issues that the politicians are looking to address. One is to introduce measures to facilitate cross-servicer refinancing ( a new loan being done by a lender who does not currently service the existing loan), and the other is to increase the amount of borrowers eligible for the program by reducing eligibility criteria. As best anyone can tell, the key focus seems to be in encouraging cross servicer refinancing – something that the big aggregators have discouraged using LTV overlays and other restrictions to accomplish. As one senior executive at a Top 5 aggregator told me, “None of us want to be financially or legally responsible for someone else’s junk.”
The biggest push seems to be reducing barriers for cross-servicer refinancing to promote competition and lower mortgage rates. There are a couple key ways that the bill proposes to accomplish this. First, Fannie Mae and Freddie Mac would be prohibited from disqualifying or varying borrower eligibility requirements based on LTV, CLTV, employment status, or income. (Currently, borrowers under the manual - same servicer - process qualify for HARP based exclusively on payment history, borrower benefit provisions, and verbal verification of employment. The threshold for cross-servicer refinancing is much higher under the automated underwriting systems.) Lenders using AUS for a cross-servicer HARP refinance are required to collect documentation and borrower credit, are subject to debt-to-income limits within DU/LP (Fannie & Freddie's underwriting systems), and are subject to different pay history requirements across FNMA (Fannie) and FHLMC (Freddie).
Effectively, as any loan officer or underwriter can tell us, the cross-servicer refinance is much closer to a full underwrite of the loan, while the manual HARP process is closer to a no-underwriting process. Disallowing any variance across same- and cross-servicer refinances in employment status and income eligibility, could ease borrower qualification for cross-servicer refinances and promote competition.
Second, the reps and warrants for cross-servicer refinances would be eased to match those of same-servicer refinancing. Under HARP 2.0, lenders under the manual process are relieved of most reps and warranties on the old and new loan provided that borrowers satisfy payment history requirements and borrower benefit provisions, and have their employment verified verbally. For cross-servicer refinancing, lenders retain significant rep and warranty risk on the new loan. They are responsible for the loan case file being complete, accurate, and not fraudulent. Furthermore, they must comply with the underwriting documentation requirements regarding income, employment, asset, and property fieldwork. If any of these are incomplete, the lenders could be on the hook for reps and warrants on the new loan. And, as mentioned above, who wants to deal with another lender’s junk?
While these rep and warrant issues may sound somewhat mild, those for cross-servicer refinancing under DU and LP are very similar to what existed before HARP 2.0. Generally, there have only been changes to the reps and warrants on property valuation when an AVM is used. It’s important to note that these issues do present a significant issue for qualifying for loan from a new lender.
Until next time...
Monday, April 23, 2012
Dodd-Frank...can we ever get enough?
Can we really ever have too much Dodd Frank news?
The House Financial Services Committee has unveiled the Dodd-Frank Burden Tracker, an online resource to help the public keep track of all the new government rules and red tape required by the Dodd-Frank Act. Check it out if you dare.
The Dodd-Frank Act mandates that government regulators write more than 400 new rules and requirements that will be imposed on the private sector. Since the law was passed by Congress and signed by the President Obama in July 2010, the Tracker reveals that regulators have written only 185 of the 400 rules, these 185 rules consume 5,320 pages, and it will take private sector job-creators 24,035,801 hours every year to comply with these first 185 Dodd-Frank rules.
Really….you read that right. So far, about 46% of the new rules have been written. Not implemented…just written. And yes, you also read that over 24 million hours per year are required to comply with only the 185 rules written so far.
Could I be the only one who thinks this is just plain crazy? There’s no doubt in my mind that we must have effective, well-written laws on the books. The question on the mind of many of us in the mortgage business is: Didn’t we, and don’t we already have laws on the books addressing mortgage fraud? Yes, we did and yes we do. Before Dodd-Frank was ever conceived, those laws were on the books.
All the more reason for more laws, you say. Tougher ones. Ones that work, by George! It's Vern & Jimmy time...
Jimmy, did you know that mortgage fraud is more prevalent now than before this here Dodd-Frank thing came a-rollin’ down the pike?
Well now, how can that be Vern? Wasn’t this jewel of post-apocalyptic mortgage mayhem supposed to stop Wall St and every lovin cotton pickin fraudulent mortgage person in their tracks?
Now Jimmy, you and I both know that no matter how many laws you got out there, you just ain’t gonna stop them-there folks whose goal in life is to do things in a crooked manner. And you and I both know that it’s always that one bad apple that spoils the barrel and starts the downward trail to sour the cider.
So what you’re tellin me Vern is that we made a whole new set of laws to address one bad apple? Here I thought there was a passel of bad apples in this mess.
There was Jimmy, there was. A whole lot of bad apples. But, this time the bad apples came from every nook and cranny of the entire system, not just one part of it.
Well then, Vern, why aren’t we fixing the system? Wouldn’t that make more sense?
That’s a great idea Jimmy! What do you suppose would get us going in that direction?
Vern, I’m thinkin if we all give our 2 cents worth to Congress, and we vote for the folks that do what we ask them to…maybe that’d be a start?
Hmm…
We did receive an extension/clarification of the Volcker Rule, part of Dodd Frank.
The Volcker Rule bans banks from trading with their own funds and greatly limits their ability to invest in hedge and private equity funds. It seeks to limit risk-taking by banks that have government backstops like federal deposit insurance. Some of that sounds okay, but it also eliminates banks' ability to use MBS's and other instruments to hedge their locked residential pipelines - and does that really help borrowers and the public?
Anyone hedging borrower rate locks breathed a sigh of relief when the Federal Reserve clarified that U.S. banks will have at least until July 21, 2014 to ease into the Volcker rule's trading and investing crackdown. The Fed also said it has the ability to extend the compliance period for the yet-to-be-finalized rule (sound familiar?) beyond that date if needed.
I wonder if Congress and others are listening to the Jimmy’s and Vern’s out there, and truly understand we all want sensible system-wide solutions that truly work, without spending an arm and a leg to get there.
The fact is we have more than enough laws on the books; we have compliance and rules coming out our ears. It's nearly put an end to sensible lending practices. How about enforcing these laws without all of the deal-making back-room shenanigans? It’s pretty simple; put people in jail who break the law. Hand out sentences with meaning. No second chances for someone who steals our money.
And finally, how about we work on a long-term fix instead of spending more and more money on poorly crafted, expensive, and what is proving to be a boondoggle piece of legislation that will likely never be fully implemented, let alone interpreted correctly by the courts, once the lawsuits begin.
I’ve said it before and I’ll say it again. Dodd-Frank was bad legislation to begin with and it still is. No amount of dressing is gonna turn this into a tossed salad of any flavor. Consumers are writing big checks for this and we’ve only just begun.
Make your feelings known to your legislators; let them know you will be speaking with how you vote.
Don’t agree with this post? That’s OK…just don’t get mad when your mortgage lender drives you crazy with rules, regulations, underwriting and appraisal requirements that, at best, represent a major challenge and disruption in your life. And, at worst…. a loan denial.
Until next time...
The House Financial Services Committee has unveiled the Dodd-Frank Burden Tracker, an online resource to help the public keep track of all the new government rules and red tape required by the Dodd-Frank Act. Check it out if you dare.
The Dodd-Frank Act mandates that government regulators write more than 400 new rules and requirements that will be imposed on the private sector. Since the law was passed by Congress and signed by the President Obama in July 2010, the Tracker reveals that regulators have written only 185 of the 400 rules, these 185 rules consume 5,320 pages, and it will take private sector job-creators 24,035,801 hours every year to comply with these first 185 Dodd-Frank rules.
Really….you read that right. So far, about 46% of the new rules have been written. Not implemented…just written. And yes, you also read that over 24 million hours per year are required to comply with only the 185 rules written so far.
Could I be the only one who thinks this is just plain crazy? There’s no doubt in my mind that we must have effective, well-written laws on the books. The question on the mind of many of us in the mortgage business is: Didn’t we, and don’t we already have laws on the books addressing mortgage fraud? Yes, we did and yes we do. Before Dodd-Frank was ever conceived, those laws were on the books.
All the more reason for more laws, you say. Tougher ones. Ones that work, by George! It's Vern & Jimmy time...
Jimmy, did you know that mortgage fraud is more prevalent now than before this here Dodd-Frank thing came a-rollin’ down the pike?
Well now, how can that be Vern? Wasn’t this jewel of post-apocalyptic mortgage mayhem supposed to stop Wall St and every lovin cotton pickin fraudulent mortgage person in their tracks?
Now Jimmy, you and I both know that no matter how many laws you got out there, you just ain’t gonna stop them-there folks whose goal in life is to do things in a crooked manner. And you and I both know that it’s always that one bad apple that spoils the barrel and starts the downward trail to sour the cider.
So what you’re tellin me Vern is that we made a whole new set of laws to address one bad apple? Here I thought there was a passel of bad apples in this mess.
There was Jimmy, there was. A whole lot of bad apples. But, this time the bad apples came from every nook and cranny of the entire system, not just one part of it.
Well then, Vern, why aren’t we fixing the system? Wouldn’t that make more sense?
That’s a great idea Jimmy! What do you suppose would get us going in that direction?
Vern, I’m thinkin if we all give our 2 cents worth to Congress, and we vote for the folks that do what we ask them to…maybe that’d be a start?
Hmm…
We did receive an extension/clarification of the Volcker Rule, part of Dodd Frank.
The Volcker Rule bans banks from trading with their own funds and greatly limits their ability to invest in hedge and private equity funds. It seeks to limit risk-taking by banks that have government backstops like federal deposit insurance. Some of that sounds okay, but it also eliminates banks' ability to use MBS's and other instruments to hedge their locked residential pipelines - and does that really help borrowers and the public?
Anyone hedging borrower rate locks breathed a sigh of relief when the Federal Reserve clarified that U.S. banks will have at least until July 21, 2014 to ease into the Volcker rule's trading and investing crackdown. The Fed also said it has the ability to extend the compliance period for the yet-to-be-finalized rule (sound familiar?) beyond that date if needed.
I wonder if Congress and others are listening to the Jimmy’s and Vern’s out there, and truly understand we all want sensible system-wide solutions that truly work, without spending an arm and a leg to get there.
The fact is we have more than enough laws on the books; we have compliance and rules coming out our ears. It's nearly put an end to sensible lending practices. How about enforcing these laws without all of the deal-making back-room shenanigans? It’s pretty simple; put people in jail who break the law. Hand out sentences with meaning. No second chances for someone who steals our money.
And finally, how about we work on a long-term fix instead of spending more and more money on poorly crafted, expensive, and what is proving to be a boondoggle piece of legislation that will likely never be fully implemented, let alone interpreted correctly by the courts, once the lawsuits begin.
I’ve said it before and I’ll say it again. Dodd-Frank was bad legislation to begin with and it still is. No amount of dressing is gonna turn this into a tossed salad of any flavor. Consumers are writing big checks for this and we’ve only just begun.
Make your feelings known to your legislators; let them know you will be speaking with how you vote.
Don’t agree with this post? That’s OK…just don’t get mad when your mortgage lender drives you crazy with rules, regulations, underwriting and appraisal requirements that, at best, represent a major challenge and disruption in your life. And, at worst…. a loan denial.
Until next time...
Monday, April 16, 2012
Taming the Underwriting Beast
“The Perfect
Loan File”
We’re
in a whole new world in mortgage loan underwriting. There really is no such
thing as “The Perfect File.” In over 35 years of personal experience, I don’t
recall a time when lender underwriting requirements have been as strict as they
are now.
It would be laughable if it wasn’t so serious.
I am seeing underwriting requirements that on the surface seem ridiculous.
Why
is this happening? The following Forbes article does a good job explaining why
we have underwriting requirements that are tighter than a double kinked garden
hose (and that’s pretty darn tight). And, what steps to take to get the water
flowing…
Forbes
The media has it all wrong – securing
mortgage approval and satisfying credit underwriting guidelines are not the
difficulties plaguing mortgage consumers. It’s in meeting the rigorous
documentation requirements that most people fall flat. The good news is, the fix is simple. Just scan, photocopy, fax, and
deliver every aspect of your financial life. Then, shortly before closing,
check everything again.
Mortgage consumers who enter the mortgage
approval process ready to battle their chosen mortgage lender will come out
with a nightmare story to tell. As the process, requirements, and guidelines
are the same for everybody, your mindset is the game-changer. Accepting
the redundant documentation necessary for lender approval will make everyone’s
life easier.
When I was a kid, my father occasionally
issued directives that I naturally thought were superfluous, and when asked why
I needed to do whatever it was he wanted me to do, his answer was often:
“Because I said so.” This never seemed to address my query but always left me
without a retort, and I would usually comply. This is exactly what consumers
should do during the mortgage approval process. When your lender requests what
seems to be over-documentation and you wonder why you need it, accept the
simple edict – “because I said so.” You will find the mortgage approval process
much less frustrating.
So, what’s the perfect loan? Well, it’s one
that (a) pays back the lender and (b) pays back the lender on time.
Underwriting the perfect loan is not the goal that mortgage lenders aspire to
today.
The real goal is the perfect loan file.
Mortgage lenders have
suffered staggering losses and gone out of business because of the dreaded loan
repurchase.
As mortgage delinquencies increased, Fannie Mae and Freddie Mac began to audit
mortgage loans they had purchased and discovered substandard and fraudulent
underwriting practices that violated representations and warranties made,
stating these were high quality loans. Fannie and Freddie began forcing the
originating lenders of these “bad” loans to buy them back. So a small
correspondent mortgage lender is forced to buy back a single mortgage loan in
the amount of $250,000. This becomes a $250,000 loss to a small mortgage
business for a single loan, because it will never be repaid.
It doesn’t take many of these bad loan
buybacks to close the doors on many small mortgage operations. The lending
houses suffered billions of dollars of losses repurchasing loans from Fannie
and Freddie, and began to do the same thing for loans they had purchased from
smaller originators.
The small and medium sized mortgage
originators that survived created underwriting guidelines and procedures to eliminate
the threat of future loan repurchase losses. The answer? The perfect loan file.
It’s no longer necessary to have excellent
credit, a big down payment and stable employment with income sufficient to
support your debt service to guarantee your loan approval. However, you must
have a borrower profile that meets the credit underwriting guidelines for the
loan you are requesting. And, more importantly, you have to be able to
hard-copy-guideline-document your profile.
Every nook and cranny of your financial
life has to be corroborated, double- and triple-checked, and reviewed again
before closing. This way, if the originating lender has created a loan file
that is exactly consistent with published underwriting guidelines and has
documented while adhering to those guidelines, the chances are that your loan
will not be subject to repurchase.
Borrowers also need to prepare for
processing and underwriting. Processors and underwriters are the people trained
and charged with gathering (processors), all of your required-for-approval
financial documents, and then approving (underwriters), your loan. You can
assume these people are well trained and very experienced, as they are tasked
with assembling and approving a high-quality-these-people-will-pay-us-back loan
file. But just how do they go about that?
The process begins with the filter – the
loan originator (a.k.a loan officer, mortgage consultant, mortgage adviser,
etc.) – tasked to match the qualifications of a particular mortgage deal to the
appropriate underwriting guidelines. It is the filter’s job to determine if a
loan scenario is approvable and to gather the documentation to support that
determination. It is here, at the
beginning of the approval process, where the deal is made or broken.
The rest of the approval process is just papering the file.
The filter determines whether the
information provided by the borrower can be validated and documented. This is
simple, since most mortgages are approved by automated underwriting engines
such as Desktop Underwriter, and the automated approval generates a list of the
documents needed to paper the loan file. An underwriter can, at this stage,
request additional supporting documentation evidence at their discretion, as
not all circumstances neatly fit into the prescribed underwriting box. If
the filter creates a loan file with accurate information, then secures the
documentation resulting from the automated underwriting findings, the loan will
close uneventfully.
So, let’s begin with the pre-approval call.
Mortgage pre-approval is typically accomplished with a telephone interview. A
prospective borrower calls a mortgage rep (filter), and the questions begin.
There will be lots of questions as this critical phase of the process is akin
to the discovery period in a trial – you’ll need to disclose everything. Expect
to answer queries on what you do for a living, how long you’ve been employed in
your current field, and what your salary is. If there is a co-borrower, they
will have to answer the same questions.
Every
dollar in checking, savings, investments and retirement accounts, also known as
assets to close, as well as gifts from relatives and non-profit grants, has to
be accounted for. Essentially everything appearing on a borrower’s
asset-radar-screen has to be documented and explained.
If you were previously a homeowner and sold
your home in a short sale, or if you own a home now and plan to keep it as an
investment or rental property, there are new and specific underwriting
guidelines created just for you. In these cases, full disclosure of your credit
and homeownership past can potentially eliminate unforeseen mortgage approval
woes. For instance, Fannie Mae has a new underwriting guideline called
“Buy-and-Bail,” for current homeowners’ planning on keeping their existing home
as an investment/rental property. Properties not meeting the 30% equity test
for “Buy-and-Bail” result in additional asset requirements to purchase a new
home. Buyers with a short sale history may have to wait two to three years before
they are eligible for mortgage financing again. Full vetting of your previous
mortgage life will save you the dreaded we-have-a-problem call from your
mortgage lender.
It
all comes down to your proof. If the lender asks for a specific document, give them
exactly what they are asking for, not what “should be OK,” – because it won’t
be. This is where the approval process tends to go off the rails, when the
lender asks for specific documentation and the borrower supplies something
else. Here, too, is where both sides get frustrated. So if the lender asks for
a bank statement and there are 5 pages for that bank statement, send them all 5
pages, and not just the summary. If you send them the summary page and they ask
again, don’t complain that the lender keeps asking for the same thing when you
never sent it in the first place. This may sound elementary, but the vast
majority of mortgage approval process woes stem from scenarios just like this.
The reason the mortgage
approval process is now so rigorous is simple. Avoiding defaults and loan
buybacks has become the primary goal of mortgage lenders.
Higher standards are reducing loan defaults, which should mean fewer
foreclosures in the future. Government data shows that less than 2% of loans
originated in 2009, that were resold to Freddie Mac and Fannie Mae went into default after 18 months, down
from more than 22% default rates for 2007 loans.
So when your lender requests specific
documents from you, you may want to give it to them, just “because they said so.”
You can thank my dad for that.
Until next time…
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