Past News
My most recent posts (anything after 6/29/09) can be seen on my Blog. Posts are listed with the most recent on top. 06/29/2009
The over supply I have been speaking of below and on the news tab is now seeing some demand. I hope it's enough to lower mortgage rates further.
China was a big buyer of our mortgages and had lost faith in their performance for a bit. They have now come out and said they will resume buying. The reason for this is interesting. The U.S. is the #1 buyer of Chinese exports and if our dollar weakens, or their Yuan strengthens in contrast to our dollar, Chinese products in the U.S. get more expensinve. China does not want the U.S. to slow it's purchasing, so in turn it reinvests the dollars into our bonds market to help strengthen our dollar. Very smart and interesting.
06/25/2009
This week rates have been holding steady in light of the fact that the Treasury is selling off Treasury Bonds to create capital. This creates competition, as money that goes into the treasury market could have gone into bonds and helped lower rates. Perhaps the Fed has been buying mortgage bonds, or will buy the treasury bonds to help clear the supply. See my post below about supply and demand.
06/18/2009
The Senate is pushing for a $15,000 tax credit for all homebuyers in lieu of the first time buyer credit currently in action. The new credit is planned to have no income restrictions.
Out of the blue, 2-3 weeks ago rates started going up. Infact they rose a full point in about a week. What was one day 5% or slightly better, became 6% or slightly worse. Will they come back down? Why did this happen?
Let's start with the former. This week rates have attempted to go lower and did so until today. Rates came back down into the low-mid 5's and then today on the news that the Treasury will auction of millions of bonds next week to raise capital, rates got worse. This takes us to the "Why?". This is now a simple case of business 101- supply and demand. All of these mortgage bonds and treasury bonds became to much supply, with not enough demand. To create demand rates have to go up so investors find the bonds more attractive. On top of this, the news is talking about several economic experts that have said the recession is ending soon and inflation will be on the rise. All of this = higher rates.
05/19/2009
California Tax Credit
Surprisingly strong demand for a $10,000 state tax credit to help Californians buy new never-occupied homes prompted legislation Wednesday to triple the amount of funds for the buyer credit to $300 million
Federal Tax Credit
FHA has said that starting this summer, the $8,000 tax credit for first time buyers will be allowed to be used as a “bridge loan” towards buyers down payment
New Foreclosure Notices
It was announced that 1 in every 347 homes in the United States is in Foreclosure or Notice Of Default status.
HOPE for Homeowners
This program has not been very consumer friendly. Only 25 homes have been able to participate the HOPE program in all of the United States. Talk about great marketing PR at work in Washington
New Modification Programs
Since the HOPE program has been a failure, Obama is planning on unveiling a new modification plan to help those in foreclosure or just receiving NOD notices to give the banks more incentives to help keep those homeowners in their homes. This should to available by this summer, just in time for the new wave of foreclosures scheduled to be released.
04/27/2009 Mortgage backed securities trade at a new daily high! Investors flocked to the bond market today and this means lower mortgage rates. If you're still waiting to refinance or buy, your time is here.
High cost areas like many counties in CA will soon get more relief as the conforming loan limits are increased back to $729,750. Actually that happend weeks ago but it isn't until this week that lenders will start putting out pricing for these programs.
Fannie Mae sends out 200,000 foreclosure notices, but perhaps these low rates will get the inventory to move quickly.
04/02/2009
Bidding wars are BACK! That is correct we are and have been seeing over bidding on properties up to $300,000 or more. This tells us that people can afford homes in this range and find them at such a value that they will offer more than the list price.
The unemployment numbers for March came in at 742,000. This largely surpassed expectations. On a good note economists say that plans for future layoffs have slowed.
We have all heard of people that have walked away from their homes, well now even banks are walking away. At the end of the foreclosure process there have been banks that decide the process would be too costly and abandon the home as well. This is bad news for neighborhoods and cities, as it leaves the homes empty for longer periods and becomes difficult to clear up legally for disposition.
Rates for conforming loans are still in the low 5's and yes even in the high 4's. You should not be a fence sitter any longer. To reiterate what I have been saying, the CEO of Fannie Mae was quoted last Friday saying that rates are at the bottom and any reduction at this point would be minimal. If you have been waiting for the rates to hit 4 or 4.5%, this is for you. As an example, let's pretend in late December you decided to wait for the illusive 4.5% rate. Perhaps you could have saved $300 or more per month by taking 5%, but you waited. Three months later you have spent $900 or more on your current payment, since you could have had 5% and saved $300. The point is, don't listen to the press, as they are not watching the market indicators like myself and other people within the industry.
02/27/2009
Loan limits have been increased for high cost areas. If you would like to know what your areas loan limits are, please contact me. Like in 2008, the FHA loan limits have been increased to $729,750. This means that while conforming limits are up to $417,000, what is called High Balance conforming is at $729,750 in some areas. This is supposed to help bridge the gap for some of those who used to be in the Jumbo category. Jumbo rates are still very high in comparison to conforming rates.
Also raised, was the reverse mortgage limits and now that you are able to use a reverse mortgage to purchase your home this is a big deal. Seniors can now use a reverse mortgage to buy up to $625,500.
Lastly, a new website that will have information regarding the stimulus plan. www.financialstability.gov
02/19/2009
The headlines today are all about the new stimulus package and how it affects us. Below is some information related to this and as I read through more I will update this page as well. Please note I have only added content that relates to the housing industry. The package has many aspects dealing with jobs, infrastructure, education, energy and so on. The information below is taken in part from a newsletter by the California Association of Realtors.
Before you get too deep in this news I need to make you aware that lending is getting more conservative in regards to qualifying. Credit score requirements are up to 620 in most cases and higher with at least one lender. Be sure you are on the right track when it comes to your credit. Call me if you have questions on this.
President Obama unveiled the Homeowner Affordability and Stability Plan, which will offer assistance to as many as 9 million homeowners, while attempting to prevent the destructive impact of foreclosures on families and communities.
The plan contains three main components, and only applies to primary residences. The loans referenced in the plan cannot exceed Freddie Mac/Fannie Mae conforming loan limits.
The first component is directed toward homeowners suffering from falling housing prices who still have equity in their homes, but no longer have the 20 percent equity needed to refinance. Under the plan, homeowners who have conforming loans owned or guaranteed by Freddie Mac and Fannie Mae will be allowed to refinance their homes, even if they do not have 20 percent equity left in the house. The U.S. Treasury Dept. estimates that about 5 million homeowners will be helped by this portion of the program.
The second component, known as the Homeowner Stability Initiative, is designed to assist homeowners who are “underwater” on their mortgages. The $75 billion initiative will bring together lenders, servicers, and the government so that all stakeholders share in the cost of the modification. Primary mortgages would be reduced to monthly payments that do not exceed a 38 percent debt-to-income ratio, with the costs of doing so borne by the lender. The government and lender then would split the costs of further reducing the monthly payments until they were at a 31 percent debt-to income ratio. An important aspect of the initiative is that homeowners do not have to be delinquent to participate.
The Homeowner Stability Initiative also will create incentives for servicers, mortgage holders, and homeowners. Servicers would receive an up-front fee of $1,000 for every eligible modification meeting the initiative’s guidelines. Guidelines are scheduled to be released by March 4. Mortgage holders will receive an incentive payment of $1,500, and servicers $500, for modifications made on loans that are current but at risk of imminent default.
The final aspect of the Homeowner Stability Initiative is creating clear and consistent guidelines for loan modifications. The Obama Administration plans to work with federal agencies, banking and credit union regulators, and the private sector in order to develop loan modification guidelines that can be implemented across the entire mortgage market. While adoption of the guidelines will be voluntary for the private sector, all financial institutions receiving Financial Stability Plan assistance going forward will be required to implement the loan modification guidelines.
The government estimates that between 3 and 4 million homeowners will benefit from the Homeowner Stability Initiative component of the plan.
The third component of The Homeowner Affordability and Stability Plan is supporting low mortgage rates by strengthening Fannie Mae and Freddie Mac. The Treasury Dept. plans to increase their Preferred Stock Purchase Agreements with both Fannie Mae and Freddie Mac from its current $100 billion in both entities to $200 billion in each. The Treasury Dept. also will continue to purchase Fannie Mae and Freddie Mac mortgage-back securities in order to help promote stability and liquidity in the marketplace. Additionally, the Treasury Dept. will increase Fannie Mae and Freddie Mac’s portfolios by $50 billion, for a total of $900 billion. The Obama Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving home buyers, such as CalHFA. Funding for this will not come from TARP money but from the Housing and Economic Recovery Act.
While some of the details still are being developed, such as the modification guidelines, the Obama Administration plans on using programs and funding already allocated for The Homeowner Affordability and Stability Plan and will need little legislative approval for programs under the plan.
Tax Credit for Homebuyers
First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
01/26/2009
Well a lot has happened since my last update so let's begin.
The Fed has slashed the Fed Funds Rate which means your equity lines have gotten cheaper, or they
will next month. The target set for this is/will be the lowest in history. The Fed also lowered
the discount rate, which is the rate that banks use to borrow from the Fed directly.
The Fed also announced its plan to purchase $500 Billion in mortgage backed securities. Starting
in January and ending in June, this would be about $2.5 Billion per day, give or take a few million!
This is huge and should stimulate rates to go lower. One thing to remember is that when there is a
buyer there is a seller. So it's not all one sided. Mortgage Bonds are like stocks and depending
how they react to market and other news as a whole will dictate whether rates go up and down. However, on a good day when the Fed is buying and other market news falls into place, rates will go down.
On December 16th we saw the best closing perhaps in history for the bond market. One would think
rates would fall and fall quick, but in fact they went up. Some banks even closed their lock desks,
so no more rate locks could occur. Why? Because they are flooded with loan applications. After
layoffs and branch closures last year they are not prepared for this current market. Their only
way to slow the volume, is to raise rates. This also means a lot of lenders are requiring you lock in for longer than 30 days. I'll use this moment to say that we are getting approvals in 3 days and recently closed a purchase in 17 days.
We've seen some more good days since December 16th, but not what we should have seen. Rates should be lower. Another thing to mention is that lenders are learning. Over the years they have increased the
spread in rates. An example: In 1992 if the bank got money at 5% they could lend it at 5.25% with
no points. After the refi boom of 92, 98, and 2003 that spread has been increased. Today we'll say
that if the bank gets it at 5% they'll lend it at 5.5%. Of course these aren't exacts but you get
the picture.
What this means for you is that the no point loans or perhaps no cost loans you were used to are
getting harder to do. The days of getting low rates with no points seem to be coming to an end, at
least for now. So if you want the lowest rate, expect to pay a point. If you are ok with about a
1/2% higher rate, you can still do a no point loan. As for no cost loans, this is where the lender
increases the rate further to get enough rebate to credit you the costs associated with your loan.
These loans are even further spread out. Expect at least a 1 point increase over the banks par
rate.
Add in pricing premiums and you've got more price increases. It used to be 680 was a good credit
score. That was a main marker used by lenders in 2003. A month ago this marker was 720. Today
740! That is correct even those of you with a 735 fico score will be charged a premium for a
refinance at 80% loan to value. Normally premiums are attached to risky transactions, but now they
are just a way to make up lost dollars. Much like any business, lenders are looking for ways to
recoup and survive. There is a slew of pricing premiums depending on your transaction type. Be
sure you are not taking quotes from advertisements without digging deeper. There is no way to
blanket advertise any more. Almost every loan is unique in some way, and chances are, that some way
has a price to it. That said, if you qualify, rates are fantastic.
Other items of interest:
The job market has reached the unemployment levels of 1945 and the unemployment rate is expected to reach double digits.
The IRS is working on expediting the process to make a tax lien subordinate to first mortgages. This means that if you have a tax lien, and previously could not refinance or sell, you can request to have the tax lien become in second position behind a new first mortgage on a refinance, or ask that the lien be discharged, in some cases, on a purchase.
Down payment assistance is trying to make a comeback. This is where the seller donates cash to a down payment program and in turn that program gives you the down payment for you to purchase a home. This was used frequently in early 2008 but then the laws changed and made this option unusable.
The point of all of this is that your transaction(s) need proper planning. You can still get great rates and close fast, just call me to go over your details.
12/11/2008
The Initial Jobless Claims report came out with even worse numbers than expected. This should help the bond market and mortgage rates improve today. I say should, because not everything is moving as history has taught us it would. With that said rates are fantastic in the low 5's and we saw a push into the high 4's yesterday morning.
Last I heard the unemployment rate has gone up to 6.7% and some 533,000 people lost their job last month. this was the biggest loss in 35 years.
Guidelines continue to get tighter in the mortgage realm. I have read that ARMS, or adjustable rate mortgages will be pushed out of the market next year by pricing them higher than the fixed rate. This is already happening, as the 30 year fixed rate is the best priced loan in most cases. Perhaps not in the Jumbo loan market but definately in the conforming loan arena.
So be sure you are working towards having great credit as a 720 score becomes the line in the sand. Also, a stance has been made or is being made that by March of 2009 Freddie Mac will no longer purchase loans with a DTI above 45%. Debt to income ratio or DTI is the percentage of your monthly income to your monthly out go toward debt. The guidelines have always been at 45% but in the recent years the envelope was allowed to be pushed into the 50's and yes even a little into the 60% range for A paper borrowers. This leniency appears to be going away, so watch your monthly debt. This includes your mortgage, property taxes, home insurance/Home Owner's Association, and anything on your credit report.
You can check out our new Concord Branch website for Envoy Mortgage. Among other things this site shows you what states we are licensed in currently and allows you to fill out your loan application online and submit it to me.
For those of you who purchase or refinanced in 2004 and obtained a five year fixed mortgage, your fixed period is ending soon. The good news is rates are low and you may be able to refinance into a similar/lower rate. If you do not qualify for a loan for one of the many reasons like, house values or tightened guidelines, call your lender/servicer and ask if they can extend your fixed period. Of course before you do that, you may want to find out when your rate will adjust and what it will adjust to. You may find out it won't adjust higher than what current market is. If you are thinking of allowing the loan to adjust make sure you understand how often the loan will adjust. Most likely it's once a year but it may be twice. If your loan is/was an interest only five year fixed, meaning you are only required to make interest and not principle payments, you need to find out how long that interest only period was for. Chances are it was only for five years, this means once the loan adjusts you will be required to pay principle and interest. After 2005 the interest only period became 10 years on most loans, but before that it may have only been for the fixed period of your loan.
As always please call me to discuss your individual scenarios.
11/11/2008
With the unemployment rate up to 6.5%, the highest since 1994, and expected to top 7% soon, the Fed should be lowering the Fed Funds rate by another .5%. Currently that rate is at 1%, so there is not much room to lower any further. Yet with 1.18 million jobs being lost in 2008 so far the Fed is going to use it's arsenal of tools to counteract this economies downward spiral.
To see why the Fed lowering rates does not lower mortgage rates read this- Fed Rates-How it Works
The new conforming loan limits of 2008 are changing again for most areas. This time the limits are going down. While the normal conforming limit stays at $417,000 for 2009, the increased limits which were $729,750 in high cost areas like the major areas of CA will go down to $625,500 (Sacramento to $474,950) as of January 1. Some lenders have already started implementing cut off dates for the higher limits of November 30th and December 15th. If you've been waiting for something, but need the higher limits, now is the time to act. Normal Jumbo rates are significantly higher than these increased conforming loans.
With Circuit City closing down 150 stores and then filing for Chapter 11, and the Big Detroit three needing aid or bust, we can see this economic downturn still has momentum and will continue to affect us as companies of all sizes with tentacles reaching close and far struggle to make ends meat. Please stay well and tighten that spending. Cash is king and we should all prepare for hard times ahead.
Please note we have moved our offices and the best numbers to reach me. Call me if you'd like to discuss anything.
10/20/2008 Revised
Rates Drop by .625%! On a day when the stock market shows a gain of 413+ points, the bond market gained 100+ bps as well. What is going on? Normally when the stock market goes up, the bond market goes down. This in turn drives rates higher. Today both markets went up. Last week we saw both markets go down! When markets don't act normal, that means emotion is controlling the actions of investors. Fear to be exact. The lack of confidence will do it every time.
Consumer sentiment is running the show. Let's stop thinking about how we feel and look at what we know. We know we need confidence in the market place, and to feel secure about our investments. We know the government is working to bring that confidence back. Whether it be through bail outs, by investing in the still healthy companies, or any of the many ways they are trying to bring liquidity back into the financial markets. We know that in our lifetimes, any time the government backs something, it is said to be more secure. Recently PIMCO, a major buyer of mortgage bonds, after a brief hiatus came back to buying these bonds. This has made others feel comfortable and so on and so forth. It's a game of follow the leader.
In the trenches, I don't see prices falling as a whole. I see pocket areas and single homes selling for dirt cheap in great neighborhoods, but this is due to a fire sale or because the home is in such bad shape no one would pay a cent more for it. I am seeing homes being vandalized, copper pipes ripped out, windows broken, walls and doors kicked in, garbage everywhere and PLEASE do not open that refrigerator while touring a bank owned or foreclosure sale. A great home that is fixed up and cared for is still selling for more than the bank owned/foreclosures, and they are nicer to deal with, in most cases.
For the most part, as I see it, prices have been flat for the last 2 months. Yes there are exceptions, but let's be honest, cheap is cheap, and these houses are cheap. So except for the odd duck that is so badly ruined, I don't expect prices to decline as a whole. I have heard expectations of another 10% decline. I want you to think about what 10% means. Is it worth ricking missing out to save 10% on a home priced at $150,000? When you calculate a payment over 30 years, that difference is minimal. Of course it is fourth quarter and the holiday season, so I also do not expect an increase. However, flat is good. Prices that stay flat, means we have found the floor. The time for fence sitting could be over. We have witnessed a 40%-55% decline in values, in some areas of CA. I believe only Florida has us beat.
I'll give you a few examples so you can know what I am talking about. How about a condo for $50,000, or a duplex for $140,000? I see homes that were selling for $850,000, going for $400,000. I'm sure you all have seen something similar, or worse/better depending who you are. This is no different than stocks. Buy low, sell high is the mantra. If you've considered an investment or vacation home, now is the time.
As I said, rates Drop by .625%! For the third, maybe fourth time this year we are looking at a possible run into the 5 percentile for a 30 year fixed conforming loan. Mind you, conforming loans go up to $729,750 in some areas! If you have an equity line, those monthly payments are going down, down, down. As the Fed lowers the Prime rate you'll see even cheaper money available to you. Assuming the account was not frozen, use this for a down payment, it is the cheapest money available in years. If you do not want to buy an investment or vacation home, pay off your other/higher debt with it. Or perhaps help your children buy there first home. Remember it's tax deductible.
The point is, rates are low and houses are cheap. Act soon or pay more later. If you've been considering a refinance for any reason, now is the time to get things moving. If your rate adjusts any time in 2009 or even 2010, now is the time to get things moving. Too many times have I had conversations with clients who want to wait to see if rates get lower, only to watch them go higher. If you look at the markets this year, they are a roller coaster ride. You have to get it while the getting is good. The best part is, if things do get better you can always refinance again and many times I can do the 2nd refinance at no cost, or at least at a discount. Many banks allow renegotiations, if rates drop during your transaction, after you have locked in your rate. You may be able to just lower you rate on the fly. Where's the risk in that? Not on you. Of course that is not a guarantee, but I see it happening.
As always, call or email me to discuss your scenarios
Lenders Are starting to Help!
I've not heard this first hand, but I did hear that Countrywide and Wachovia have both started modifying loans for their current clients. If you have either of these two as your lender, give them a call and ask to speak to the loan modification department. If you recall, HR3221 began on October 1st. See the HR3221 tab above ( at the top of the page) for more info. Not all lenders have rolled this out, so call and keep calling until they can help.
Here are a few more links to help answer questions about saving your home. Please share these with anyone searching for helpful information.
HomePath
As mentioned previously, homeowners may also get help by calling the Homeownership Preservation Foundation at 1-888-995-HOPE or visiting HopeNow
10/06/2008
The House of Representatives followed the Senate's lead and passed the $700 Billion rescue plan.
Why was it important for the plan to pass? Simply put, the plan frees up some of the frozen credit that consumers and small businesses across the country need to survive. As examples, even auto loans were becoming harder for consumers to qualify for...and on the business side, many retail operations have had difficulty in financing their inventory. Credit issues like these are not good for the economy, confidence, and consumer spending, and the rescue plan was passed to help matters.
Here’s what the legislation does:
Helps American families keep their homes by requiring the Treasury Dept. and any federal agency that owns or controls troubled mortgages to modify those mortgages wherever possible; this may include reducing the principal or interest rate; and extends till the end of 2012 the exclusion from federal income tax of mortgage debt forgiveness.
Addresses the credit crisis by allowing financial institutions to immediately sell $250 billion in troubled assets to the U.S. Treasury Department, under the newly created Troubled Assets Relief Program (TARP). Another $100 billion would be made available upon the President’s request. Should the President deem it necessary, and with Congressional review, the Treasury Dept. may utilize the remaining $350 billion;
Protects taxpayers by allowing the Treasury Dept. to take an ownership stake in participating companies. In addition, if after five years TARP has incurred a net loss, the President must propose legislation that would force participating companies to reimburse the government to make up the difference;
Sets up an insurance program, funded by the financial industry, to guarantee companies’ troubled assets, including mortgage-backed securities purchased prior to March 14 this year;
Curbs executive pay for companies utilizing TARP;
Sets up two oversight committees, a Financial Stability Board, and a congressional oversight panel, to which the Financial Stability Board would report;
Creates renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels; as well as continuing other tax breaks that were set to expire; and extends relief from the Alternative Minimum Tax (AMT) by another year;
Allows the SEC to suspend the required mark-to-market accounting standards and orders a study to be done on the rule’s impact on financial institutions;
Shields bank deposits by temporarily raising the FDIC insurance cap to $250,000 from $100,000; and temporarily increases the federal insurance level for credit union savings to $250,000, both till the end of 2009.
For Troubled Home Owners, you may recall my posts regarding HR3221 (see tab at top of page)
The Hope for Homeowners program authorizes the Federal Housing Administration to help troubled homeowners refinance into 30-year fixed-rate mortgages.
Lenders would need to take a write down on loans to 90 percent of a property's current appraised value. The FHA would act as the mortgage guarantor, paying lenders the unpaid balance if a loan goes into foreclosure. It can insure up to $300 billion worth of such loans over the next three years. The program could help 400,000 families, according to the Congressional Budget Office.
The down fall is that it's totally up to lenders whether they want to participate in the program, although some expect banks to be willing to dispose of “bad” mortgages. Today Bank of America said it will begin to help modify loans through Countrywide.
The road block for many loan modifications will be with the bank that collects payments. It’s common these banks don't own the mortgage - it acts as a servicer on behalf of investors, who own securitized mortgages that put into packages for sale. Those investors' agreement often is needed to refinance a mortgage. It’s possible investors will not agree to do it, and that contacting them could prove to be cumbersome.
Hope for Homeowners plan
How it works
-- Lenders write down loan balance to 90% of current appraised value.
-- New loan is 30-year fixed at current rates (about 6.5%).
-- Borrowers pay 3% up-front insurance premium (can be financed as part of the loan).
-- Borrowers pay 1.5% a year as insurance premiums.
-- Housing costs can't exceed 31% of borrower's income or 38% if borrower successfully completes 3-month trial period.
-- Total debt can't exceed 43% of borrower's income or 50% after three-month trial.
-- Second mortgage holders must release their liens.
-- New loan is guaranteed by FHA.
Who qualifies
-- Owner-occupants who cannot afford their current loan and do not own a second home.
-- Borrowers must fully document their income.
-- Borrowers must agree to share future appreciation in their home.
How to participate (Please call or email me with successes or issues, so I can pass your experiences on to others in need)
Interested borrowers should contact their lender, a HUD counseling agency or the HOPE Now Alliance at (888) 995-HOPE.
Full details at the FHA website
Example
House was purchased for $450,000 and now appraises at $300,000.
New loan at 90% of value is $270,000 (lender writes off $180,000 plus the 3% insurance fee)
New monthly payments are about $2,500 (6.5% interest plus 1.5% insurance plus about $400 a month for taxes and insurance)
Income to qualify: at 31% debt-to-income: $7,740/month, or $92,900/year
At 38% DTI: $6,315/month or $75,790/year
Source: Federal Housing Administration
09/25/2008
With no warning, On September 19th FHA made a change that almost mirrors the guidelines implemented by Fannie Mae and Freddie Mac last month. The new FHA guideline says, if you own a home and plan to convert it to a rental property and go buy a new primary home, the home you are converting needs to have 25% equity and you will need a signed lease from a non family member with a copy of the deposit check along with proof it has cleared your account. If a buyer needs the rental income from the proposed rents to qualify for the new loan, you must meet these new guides. If you can qualify for both payments, then this does not affect you. A company relocation, also excludes you from this rule.
This is a deal breaker for many people who were looking to capitalize on today's low prices. I should note this is listed as a temporary guideline, while FHA researches to see the impact primary home conversions has had on their loans. The issue is the amount of people that say they will convert it to a rental and once in the new home, they simply let the old home foreclose. If FHA finds this has been an issue they will make the guideline permanent, if not they should lift the change. Let's hope for the latter. Contact me for any questions.
09/19/2008
Today we see stocks rallying, after Monday and Wednesday saw over a 400 point loss on each of those days. Normally we would expect mortgage rates to go down, with such big losses in the stock market. That is because normally when money leaves the stock market it floods the bond market and that is what helps mortgage rates (among other things). What we are seeing this week, is something called sidelining. People are taking their money out of stocks and just sitting on the sidelines, watching and deciding what to do with it. Fear and uncertainty are ruling the markets, and what we need is stability.
This leads us to the Governments actions over the last few months. The bail outs, new laws and cash infusions are all meant to bring stability and confidence back to the market. Today the Fed announced plans to help create a market place for mortgage debt and guarantee Money Market funds after $180 Billion was taken out due to lack of confidence.. Read more from Forbes here.
This means they want to install confidence in the buying and selling of mortgage debts and this was first evident with their takeover of Fannie Mae and Freddie Mac. Mortgage rates are higher than what I would say they should be, because of the uncertainty in the secondary market. Banks are not willing to take the risk of originating loans without gaining a higher premium from those loans. I am not only speaking of loans to consumers. The loans banks are giving to each other are priced higher as well. Banks don’t even trust other banks anymore, fearing that another bank may fail. As for your safety, or trust in the banks, make sure you know the rules of the FDIC. See what Suze Orman had to say about that here or check with the FDIC directly. Of course you could always call or visit your bank as well.
I would suggest calling me and getting prepared if you are in the market to buy or refinance. Conforming Rates have been dipping into the 5 percentile, but they are not staying there for very long on each occasion. Being prepared and ready to lock the next time they dip would be advantageous. Contact me for more information on this.
09/10/2008
There is a lot of press on the federal takeover of Fannie Mae and Freddie Mac. Some say we may see higher prices or more restrictions because of this. I say we may have seen this anyway. This year, prior to the takeover, we had already seen risk based pricing, adverse market adjustments and declining market restrictions. It doesn't take a Fed take over to tighten money. The take over was seemingly necessary to save the companies from having a shortage of liquidity. Having to entice the sale of mortgage bonds with higher yields, is an issue when the income streams, to pay those yields, come from previously bought loans at lower rates. The Fed puts stability in what was becoming more and more unstable and big players across the globe were begining to swear of mortgage bonds..
This where I reiterate to you that credit scores and manageable debt are very important in order to be approved for a loan, at least the best priced loan. See the forms page for credit scoring hints.
With that said we immediately saw rates for the 30 year fixed conforming drop about 1/2%. This is because the market feels more stable to investors. If you missed the boat last February when rates were in the 5's, here's a second chance. Some feel they may go lower, but my advice to you is, if it's good take it. You wouldn't want to miss it again. Of course I want to point out that rates don't go up or down in a straight line, so we may see a rate hike before the fall (assuming there is one).
It appears the ban on Down Payment assistance programs may be ending soon. If you recall, or read my past entries, FHA wanted to ban down payment assistance (DPA), saying that loans with DPA were 3 times more likely to foreclose. What you may not have known was that in July FHA also tried to put risk based pricing on their loans. This means higher rates or costs for those of you with lower fico's or perhaps less money down. This was quickly disallowed. However, since there is a large movement that supports DPA, it appears a middle ground may be found. Those loans with DPA, will have risk based pricing associated with them. This should pass the House and go on to the Senate shortly. This bill is named HR 6694. You may wish to contact your Senator to show support.
Don't forget the changes coming on October 1st as related to the HR 3221 Bill. See the HR 3221 Tab above for more, here is a synopsis.
Here are the 5 things you need to know about these changes...
1. One single down payment requirement of 3.5% for all purchases
2. Closing costs/prepaids are in addition to the 3.5% down (6% seller contribution allowed)
3. New maximum LTVs (based on lower of sales price or value) are:
• 96.50% for all purchases.
• 98.28% for all regular rate and term refinances (cash out remains at 95%).
• 98.52% for all streamline refinances.
4. These changes are effective October 1st, 2008.
5. Purchases already in the pipeline will have until December 31st to be assigned a case number. After January 1st, 2009, all purchases will require the new down payment requirements.
08/26/2008
Good credit has become more and more important within the last year, as it pertains to obtaining a home loan. Not only have lenders implemented risk based pricing, which charges premiums for lower credit scores, but now buyers with out credit or no scoreable credit are being pushed out.
At least one lender has already implemented this and normally, that means more will follow.
What does this mean? It means as a borrower you will need four open tradelines showing on your credit report, and in good standing. The lender will want to see a 12 month history on these tradelines as well. If you are planning on buying a home in a year or two and do not have four open tradelines, I would suggest opening a credit card or two. If you are thinking of buying a home sooner than that, we will target a lender that has not adopted this new policy yet. For those of you who do not trust themselves with a credit card, opening a gas card is a good idea as you would spend that money either way. You can pay it off each month or carry a small balance. Remember to try not and carry more than a 33% balance on your cards. This means, what ever your limit is, having a balance at 33% will give you the best credit rating. Of course paying them off is just fine. You should not carry a balance, just to hope for a slightly better credit score. See a cheat sheet for credit help here.
08/10/2008
Rates closed out last week looking good compared to the start of the week. The Fed left the prime rate unchanged. This means your equity lines and credit card rates will stay low for awhile longer. I know we all like that! Please note the two new tabs at the top of the screen. (Hr3221 and Tax Credit) In these pages you will find information that is a shortened version of the new housing bill/law, which is 730+ pages. Information and clarification is coming out on this daily. Please be sure I will update you as I learn more.
08/05/2008
To read HR 3221 in its entirety, click HR3221 Bill.
This page is a work in progress, but I wanted to get you what information I had. A synopsis can be found on the HR3221 tab above or here
07/31/2008 As more information comes out about the new housing bill, I will update you here. This is what we have today.
FHA foreclosure rescue – development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.
This is not mandatory and apparently it is up to the inividual lenders to decide. More to come.
07/30/2008
I wanted to make sure you are aware of some changes that have taken place, and some that are coming.
Seller Down Payment Assitsance Programs- Like the Nehemiah Program, are going away. Loans that are utilizing these programs must have approval before October 1st, 2008. After that they may no longer be used.
If you are moving out of your primary home, buying a new primary home and turning the old one into a rental... Be prepared to have an actual signed lease and the first months rent deposited in the bank and check cleared. Another item is the requirement of 30% equity in the house being made a rental.
The Housing Bill- signed into action today by the President. Items to pay attention to:
• 3.5% minimum cash investment for FHA loans, up from 3%.(gifts allowed from family members, unions, state and local bond programs,etc).
• Streamlined approval process for FHA condos.
• FHA/Fannie/Freddie loan limits to be at $625,000 starting January.
• VA should have equivalent guaranty to raise limit to $625,000
• Reverse mortgages:
-Raise the maximum loan amount to $417,000 nationwide (apparently up to $625,000 in high cost areas like most of CA)
-Allow reverse mortgages for purchase transactions
I also wanted to let you know that I am certified to originate CalPers and CalVet loans. Also available are FHA, VA, and Reverse Mortgages.
Approval Turn times are currently 72 hours from submission.
For those sellers that are not accepting pre approval letters from brokers, I have good news. We are a Mortgage Bank, with direct Endorsement from Fannie Mae and FHA. Get your buyers pre approved by me and submit those offers.
07/16/2008
While the stock market has seen it's ups and downs to the tune of a few hundred points in a single day, mortgage rates have held in the 6-7% range. Those with credit scores under 700 or higher loan to values, looking for cash out will face higher rates due to new adjustments passed on by the lenders. Yesterday the Stock Market fell below 11,000 for the first time in 2 years and you would think rates would get better from this, but today the stock market rallied huge, up 276 points. What a ride!
Guidelines have/are coming out revising the amount of time after a foreclosure (5 years) or a short sale (2 years) Fannie Mae and Freddie Mac will purchase loans. This gives a clearer understanding that a short sale is the first choice by all. Short sales typically bring down your credit less than a foreclosure as well. Bankruptcy, by the way, expect to wait 7 years.
Don't lose a loan in the middle of a transaction. Many mortgage companies and lenders have shut their doors and I'm sure there will be more. I can guide you to lenders who are financially stable, and get the job done right the first time.
FHA and VA loans are in full swing. I have done these loans and know what it takes. Give me a call to discuss your purchase, or your clients purchase.
Down Payment Assistant programs are still available, and this means you can buy a house with little to no money! Think you can't afford to buy? Check out the prices out there. I have clients buying condo's for $64,000 and homes for $150,000. Amazing!
I have merged all of my past email accounts to matt@mattsteinmetz.com, so if you would like to update your address books please use this address. Otherwise the old emails will still work and get forwarded to me at this address. We have ceased working with Vanguard M&T, which we joined just over a year ago. We recently joined forces with First Houston , and believe they are a better fit for us. With this move we are still Mortgage Bankers, which means better pricing for our clients as well as the ability to lend in many states.
06/21/08 Mortgage rates saw some improvement this week compared to last. The stock market closed out the week below 11,900. The last time it fell below 12,000 was March.
Watch for new updates to come as we are setting up to better serve our clients. Some changes will include better pricing, faster turn times and an almost paperless system. I have been quoted 48 hours from submission to docs on full packages. This means if we turn in all of the documents needed for the loan at submission we can have docs out in 48 hours, including FHA.
The FBI went on numerous raids, this week, and arrested numerous mortgage brokers for fraud and two Bear Stearns executives blaimed for the mortgage melt down.
HUD has dropped the 90 day rule on the sale of properties that will be purchased with FHA loans. This means that if the property is sold by a bank, FNMA, etc., FHA will insure the loan, even if the property has been sold/foreclosed on within 90 days of the new sale. In the past this was prohibited.
06/18/08 Rates have been on the rise this month. Although, we have seen some improvements today. We are watching patiently for those clients who are considering locking in a rate. The stock market closed down again today which is a recurring theme so far this month. Normally I would say this would lower mortgage rates as money leaves stocks and floods the bond market, however that is not the case this go around. On a good note the Fed. Chairman is not expected to raise the prime rate this month, so your equity lines and credit card rates will remain low for awhile longer.
Lenders are still backed up as they try and deal with the large amount of FHA submissions after layoffs from the housing crunch. Multiple offers are on the rise. As more and more people learn there are still loan programs and money available to buy homes, more and more offers are getting submitted. This will eventually help take some of this over supply of houses off the market and if the scale gets tipped enough... We could see our values stabilize, if you haven't already.
Previously I had mentioned the 5% reduction of loan to values. This reduction is going by the way side as values stabilize. This is good news and means we can offer more loans that could help more people.
05/22/08 May has been a good month for the new conforming limits. We have seen some pricing changes to the good. This means if you have a loan between $417,001 and up to $729,750 in some areas you can qualify for rate that is much closer to a normal confroming rate (below $417K). Just a few weeks ago the rates were about .5% higher, but have since started to come down. Call me to discuss your situation.
05/09/2008 I have received a few calls from clients telling me they have received letters from their equity line companies. The letter tells them, their equity lines are being frozen. The reasons vary, but most say it is due to their house value declining. If you have an equity line and this has not happened to you yet, it still may. CBS News has posted an article about this topic on their website. The following is an excerpt from the end of the article and tells you about your options as the consumer. I invite you to read the entire story on the CBS News website "If you have a home equity credit line and have recently received a notice that it has been frozen, here are a few actions to consider:
Challenge the AVM: Some lenders, including Countrywide, have stated that those whose credit lines were frozen due to the results of their automated valuation methods (AVMs) may challenge the value of the home they are now using. The challenge process would include obtaining an appraisal from a firm that would be accepted by the lender, and would involve additional time and expense.
Request a Refund of Fees: Since the credit line for which you have paid fees has been revoked or suspended, it is only fair that any fees you have paid for application and approval of the credit line be refunded. While this is not a requirement, some folks have reported that, when asked, their banks are agreeing to do this.
Consider Refinancing to a Fixed Rate Mortgage: It may be advisable to refinance both the first and second mortgages into a new first mortgage at a fixed rate. That would lock in the interest rate on both loans to a new, fixed rate, at current rates, which are quite low. Of course, this assumes that you will qualify for a new mortgage. But, as a result of the mortgage relief programs that are being rolled out, more people may qualify to do this."
Please don't hesitate to contact me with any questions.
05/07/2008
For those of you that did not receive my last email newsletter you can find it here. Or on the forms page. This flyer tells you about proposition 8 in CA. Prop. 8 says you can request a reduction in your property taxes if the value of the home has fallen below what you paid for it.
I'm sure you have heard that the conforming loan limits have been raised, but let me shed a little light on that topic. Pricing for the higher limits are not the same as the traditional conforming limits. If you were to pay no points, expect to have a 1/2% higher rate on any loan above $417,000 compared to a loan below that mark. While the new loan limits are not priced as well as traditional conforming loans, they are priced better than what we call jumbo loans. Jumbo loans are currently priced well into the 7 percentile. This assumes we are talking about 30 year fixed rate loans. I do expect the rates for the new limits to come down a bit once investors become more comfortable trading them. Perhaps by mid summer of this year. At this point these limits are only temporary until the end of 2008, however attempts are being made to have a permanent increase. The new limits vary by county, contact me for your counties figures.
05/01/2008 This week the fed lowered the prime rate by another .25% which means the required payments for equity lines will continue to go down next month. That is something we can all enjoy (assuming you have an equityline). Unlike the last time prime was lowered, mortgage interest rates also saw a small betterment dipping a no point 30 year fixed conforming rate back into the high 5% range. For more information on how the prime rate changes affect you see Fed Rates- How it works.
04/24/2008
As of June 1st, 2008 Fannie Mae will be requiring a minimum credit score of 580. Most lenders, who sell their loans to Fannie Mae, are already requiring a higher score of 620. Regardless of your score, if it is lower than 720 you will have an additional fee to pay to obtain a loan through these lenders. See Credit Score Help for a better understanding of credit scoring.
Freddie Mac, a competitor of Fannie Mae, has come out with amended guidelines that lower the amount of allowable financed properties from 10 to 4. This means, if you own more than 4 homes and wish to refinance or purchase a property, you will no longer qualify for a loan that will be sold to Freddie Mac.
Most lenders have reduced the loan to value limit for primary residences to 95% at best, and 85% on investment homes (expect 80% soon). Some government programs do allow for higher loan to values and some also allow for down payment assistance. These down payment assistance programs (purchase only) are true grants and are not required to be paid back. I can obtain these grants for you and combined with a seller credit and/or a gift from a family member, you can buy a primary home with very little cash out of your own pocket. (Conforming loans only)
