Mortgage Advice

In a housing market where tighter lending requirements have made FHA financing the only option for some buyers, this 90-day policy has prevented the quick resale of foreclosed properties, which affects the ability of communities to stabilize and rebuild. Research has shown that investors can buy, fix and resell foreclosed properties in less than 90 days. This waiver could help get things moving again!

The temporary waiver starts 2-1-2010 and will be effective for one year, unless extended or withdrawn by FHA. To read the waiver in it's entirety go to this link: 

                                             HUD Flipping Rule Waiver   
 

This is an excellent time to contact investor clients who have recently purchased a foreclosed property and those who may be on the fence about purchasing a forclosed and those who got out of the market because of the flipping rule. Add the first time homebuyer tax credit and it is a great opportunity for an early spring sales rally.

The waiver is limited to sales meeting the following conditions to insure FHA borrowers are protected: 

• All transactions must be arms-length; no identity of interest between buyer, seller or third parties.
• Sales w/ 20% increase over seller's acquisition cost will only be permitted if the lender provides documentation or 2nd appraisal which substantiates increased value.
• Waiver is limited to forward mortgages (no reverse mortgages) and cannot be used for HECM

"FHA borrowers, because of restrictions we are now lifting, have often been shut out from buying affordable properties", said FHA Commissioner David H Stevens. "This action will enable our borrowers, especially first time buyers, to take advantage of this opportunity." 

It looks like FHA has listened to all of us...for a change and has pushed the condo rule changes out until 12-7-09. In the letter we received from FHA, which follows, if you read between the lines, it also sounds like they are going to revise some of the earlier changes. The most severe change was only allowing 30% FHA loans in any one condo development. I am sure we will all be waiting on pins and needles the next 2 weeks for these changes, particularly those of you who have condo listings. Following is the letter we received from FHA. I will keep you posted of any updates.


"FHA notice on delay in FHA condominium changes:

Implementation of FHA's new policy guidance for condominium project approval and condo unit financing will be delayed until December 7^th  2009.  The new guidance, to be issued within the next two weeks, will:  1) offer additional leniencies to address the difficult market conditions and 2) augment some portions of FHA Mortgagee Letter 2009-19, providing additional information and clarification.   

Until the new guidance takes effect on December 7^th, 2009 lenders may continue to use the Spot Loan Approval guidance issued in Mortgagee Letter 1996-41.  Further, the site condo and manufactured housing condo project changes that have already been implemented are not affected by this delay. 

To read FHA Mortgagee Letters 1996-41 and 2009-19 please visit: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/ 

Buy that Rough Bank Owned Property and Change it into Your Dream Home

In this current real estate environment , don't be afraid of a home that is in rough condition. You can pick out new carpet, get new appliances, put in beautiful kitchen cabinets, upgrade the bathrooms and still only put 3.5% down! Buy it at a low price and fix it up the way you want it.  With the FHA, government backed Streamline 203k Mortgage you can finance up to $35000  in repairs into your mortgage to improve or upgrade your existing home or make repairs on a rough home you want to buy. That's right, if you find a bank owned house  that needs updated, you can finance those repairs into your mortgage and still have a downpayment of only 3.5%.

But, this is really wild, you can use this remodeling mortgage on the HUD $100 down mortgage, too. That's right, for example, buy a home for $90000 let's say, put $15000 in rehab into it and still only have a $100 down payment! Of course it would have to appraise for $105000, which isn't always easy to accomplish, but if it did, what a deal for you. And... if you are first time buyers, you can get an $8000 tax credit. What a country.

Avoid using credit cards for your home improvements. Keep your cash for furniture and decorating. Homes in all of Ohio are eligible. This Handyman mortgage can be used for owner occupied 1-4 family dwellings, town houses,row homes,HUD repos,condos or planned unit developments. Closing takes place before the repairs are done and the rehab money is placed in escrow.

Do not be afraid of those dumps out there, they may be diamonds in the rough. Keep this mortgage in the back of your mind. You could have all new carpet, new cabinets, new appliances, new everything and end up with the home of your dreams.

HUD is still offering homes in Ohio for $100 down and they will pay $2500 toward closing costs. They are listed by zip code, county, mls number,etc on a website (link below). Granted some of them are rough, but we also offer a rehab loan that allows you to finance repairs back into the mortgage and still only put $100 down. What an opportunity for a firsttime homebuyer. Buy a house for 100 bucks, make it like new with a remodeling, and get a tax credit for $8000! What a country.

I imagine that competition for these homes will increase the closer we get to November 30th, the deadline for the tax credit. We are marketing heavily to potential buyers and I imagine realtors are to. This is a real program, buyers have to have a preapproval and the realtor has to be HUD approved to submit an offer. This certainly is a great opportunity. Call the office at 614-975-5894.

Click here to connect to the website that lists the properties that are available for $100 down

The program was launched as part of the economic recovery act, and is set to expire Dec. 1. Those eligible are first-time homebuyers in primary residences.

Reid said the program has support from both Democrats and Republicans, and continuing it would be on the agenda before Congress adjourns in December.

“We are going to extend that,” Reid said during a conference call with Nevada reporters.

“It’s something we can get done,” he said. “We have to do it by the end of the year.”

The sharp downturn in home sales, especially in hard hit Nevada, has continued to be a drag on the economy. Home buying is one of the best ways to stimulate economic activity, as new homeowners seek other goods and services, he said.

Reid envisions maintaining the credit at the $8,000 level and extending it for a year. He said there has been an effort to make the credit available to those other than first-time homebuyers, but acknowledged that may be a steeper climb.

“I don’t know if we can get that done,” he said.

To find out more about this program, click here.

1 Know what you can afford.

Review your monthly spending plan to estimate what you can afford to pay for a home, including the mortgage, property taxes, insurance, and monthly maintenance and utilities. Make sure you save for emergencies. Plan ahead to be sure you will be able to afford your monthly payments for several years. Check your credit report to make sure that the information in it is accurate. A higher credit score may help you get a lower interest rate on your mortgage. 

2 Shop around–compare loans from lenders and brokers.

Shopping takes time and energy, but not shopping around can cost you thousands of dollars. You can get a mortgage loan from mortgage lenders or mortgage brokers. Brokers arrange mortgage loans with a lender rather than lend money directly; in other words, brokers sell you a loan from a lender. Neither lenders nor brokers have to find the best loan for you–to find the best loan, you have to do the shopping. For more information on mortgage shopping, see Looking for the Best Mortgage–Shop, Compare, Negotiate. 

3 Understand loan prices and fees.

Many consumers accept the first loan offered and don’t realize that they may be able to get a better loan. On any given day, lenders and brokers may offer different interest rates and fees to different consumers for the same loan, even when those consumers have the same loan qualifications. Keep in mind that lenders and brokers also consider the profit they receive if you agree to the terms of a loan with higher fees, higher points, or a higher interest rate. Shopping around is your best way to avoid more expensive loans. 

4 Know the risks and benefits of loan options.

Mortgages have many features–some have fixed interest rates and some have adjustable rates; some have payment adjustments; on some you pay only the interest on the loan for a while and then you pay down the principal (the loan amount); some charge you a penalty for paying the loan off early; and some have a large payment due at the end of the loan (a balloon payment). Consider all mortgage features, the APR (annual percentage rate), and the settlement costs. Ask your lender to calculate how much your monthly payments could be a year from now, and 5 or 10 years from now. A mortgage shopping worksheet (33 KB PDF) can help you identify the features of different loans. Mortgage calculators can help you compare payments and the equity you could build with different mortgage loans.

5 Get advice from trusted sources.

A mortgage loan is one of the most complex, most expensive financial commitments you will ever assume–it’s okay to ask for help. Talk with a trusted housing counselor or a real estate attorney that you hire to review your documents before you sign them. You can find a list of counseling resources at NeighborWorks and on the U.S. Department of Housing and Urban Development’s (HUD) website or by calling (800) 569-4287.

Click here to find out about a special government program that offers homes for $100 down.

The Mortgage Disclosure Improvement Act goes into effect on July 30, 2009. Please understand that this is federal legislation that could affect your closing date. All mortgage professionals must comply with the requirements as noted below. A loan cannot close or fund unless it has met the requirements listed below. The requirement is applicable for all mortgage loans (unless exempted as noted below). It has been implemented to protect the consumer, but it could cause delays in the closing.

On July 30, 2008, Congress enacted the Housing and Economic Recovery Act of 2008 (HERA). Within HERA, Congress included amendments to TILA which are known as the Mortgage Disclosure Improvement Act of 2008 (MDIA). On October 3, 2008 Congress further amended the Mortgage Disclosure Improvement Act as part of the enactment of the Emergency Economic Stabilization Act of 2008 (Stabilization Act). With the enactment of HERA and the Stabilization Act, the Federal Reserve Board is now amending Regulation Z with all provisions of the MDIA and making these changes effective as of July 30, 2009.

The immediate changes you need to know about MDIA requirements are as follows:

1. MDIA implements a 3-7-3 rule that creates new timing and waiting requirements with regard to the issuing of Truth-in-Lending disclosures and when closing can occur. The 3-7-3 rule requires  the lender to:

a. Upon the taking or receipt of a loan application, provide an initial Truth In Lending(TIL) to the borrower(s) within 3 business days of the application (no change to current requirement).

b. Impose a waiting period BEFORE allowing a loan to close. The waiting period requires a lender to wait until the 7th business day following the delivery or mailing of the initial TIL to the borrower(s) before a creditor may close any loan. The 7 day period may be waived only if there is a bona fide and/or extreme and/or urgent reason to do so. This would be handled in the same manner as a waiver of rescission, which is virtually impossible to achieve. Therefore, there will be virtually no waivers of the 7 day waiting period.

c. Impose an additional 3 day waiting period before a loan may close in any instance in which the Truth In Lending(TIL) is outside of regulatory tolerances (e.g., for regular or fixed rate loans more than .125% and for irregular loans more than .25%). The 3 day period begins with the mailing of the TIL. A corrected TIL is required whenever a TIL is outside of regulatory tolerances.

d. The TIL may be mailed via regular mail or overnight or by e-sign or e-mail. However the lender sends the TIL, they must still comply with the 3 day waiting period. MDIA does not assume a quicker waiting period might occur and does not allow the lender to proceed until after the 3 day waiting period has ended.

2. Lenders can under no circumstances collect any upfront fees prior to the consumer's receipt of an accurate TIL unless the fee is to cover the cost of the consumer's credit report.

a. The fee collected must be bona fide and reasonable (no padding of fees and do not collect a fee unless the consumer is actually responsive if there was no intent to charge them for the credit report).

b. A lender and third party such as a broker must adhere to the same rules regarding the collection of fees. If a third party forwards a consumer's written application to a lender, both the lender and third party do not collect any fee, other than a credit report fee if a credit report was pulled.

c. If a third party forwards a consumer's written application to a second creditor following a prior creditor/lender's denial of an application made by the same consumer (or following the consumer's withdrawal), where fees have already been assessed, the new creditor/lender or third party does not collect or impose any additional fee until the consumer receives an initial TIL from the new creditor/lender.

3. An initial Truth-in-Lending disclosure must now be issued on a closed-end principal dwelling and a second home whether transaction is a home purchase transaction, a new construction loan, or a refinance. Previously, initial TIL's were not required on refinances. The changes continue to exclude issuing an initial TIL on an investment property loan or a HELOC.

a.. For a primary residence, any non-owner occupant must also receive a copy of any TIL that is issued.

4. A new required "Notice" will be added to the TIL advising a consumer they are not obligated to proceed with the loan if they do not wish to do so.

5. No initial TIL is required if a consumer withdraws or is denied within 3 days receipt of the loan application.

6. Under the amended rules, a business day is any day other than Sunday or a legal holiday - which is the same as the current rescission day definition.

7. Any waiver of the 3 or 7 day waiting periods must be treated the same as waiving rescission. There must be a bona fide emergency before a waiver request will be considered.

a. A waiver when granted may not be a preprinted letter. The borrower(s) must handwrite a request to waive the 3 day or 7 day period and must describe the bona fide emergency.

b. Any waiver requested and granted must be signed by all parties that take part in the transaction.

For more information, Click here

I was just reviewing rates for my referral partners for this weekend, and noticed that the 3 year ARM is 3.875% with 1 point. That's right, below 4%! The 30 year fixed is at 5% with 1 point, so that is a pretty good spread. On a $200000 loan, that is a difference of $133/month, which is about $1600/year, and $4800 over the three year fixed period.

If you are not squeamish about what might happen in 3 years, the ARM is certainly worth looking at. I know you are going to say the ARMs are what got us into the current mess, but not entirely true, because there is no prepayment on this product and the margins aren't crazy. If you are buying a home, this product would give you more buying power.

Just a thought I wanted to throw out there.