Posts Tagged ‘loans’

FHA Annual Mortgage Insurance Premiums Reduced

Wednesday, January 11th, 2017

By Elvin J. Wesley, President and Broker of Ranch and Coast Mortgage Group

What a great way to start the week and 2017!!!

Monday morning HUD announced that it had achieved the balance of its statutory operational goals and as a result of that it requires a reduction of the Annual MIP charged. This exciting announcement from HUD yesterday morning that represents a 25 basis points improvement on most FHA Loans (not to interest rate, but to the Annual Mortgage Insurance Premium charged by HUD on FHA loans)

The Revised MIP schedule is effective for Endorsements of Mortgages with a Closing / Disbursement date on or after January 27, 2017. Closing / Disbursement date is defined as the later of the date of the signing of the Mortgage or the Disbursement of the Loan Proceeds as is entered in FHA Connection. Unlike changes in the past the change is effective based on the closing date and not the case number assignment date!
The Revisions applies to all FHA Title II Forward Programs excluding Mortgages insured under the National Housing Act section 247 (Hawaiian Homelands).

Here is a Summary of the changes

What does this mean in regards to $$…payment reduction when a buyer/borrower is purchasing a home?

Example:

Old – $550K base loan amount based on 0.85% MIP = $389.58 per month

NEW  – $550K base loan amount based on 0.60% MIP = $275.00 per month

That’s a $114.58 reduction in MIP payment, which means lower overall payment for buyers/borrowers and more BUYING power!

ALSO…..

On November 23rd the Federal Housing Finance Agency (FHFA) announced that the maximum conforming loan limits for Fannie Mae and Freddie Mac in 2017 will increase, which of cources has now taken place. This will be the first increase in the baseline loan limit since 2006.  In higher-cost areas, higher loan limits will be in effect as shown below.

This change has already taken place for FHA and VA loans limits as well.

2017 Conforming and High Balance Loan Limits-

SAN DIEGO NEW LIMITS $424,100 Conforming and $612,500 High Balance

LOS ANGELES NEW LIMITS $424,100 Conforming and $636,150 High Balance

ORANGE COUNTY NEW LIMITS $424,100 Conforming and $636,150 High Balance

*See attached spreadsheet for more counties and limits for 2-4 unit properties

Conforming:

 

Number of Units Maximum base conforming loan limits for properties NOT in Alaska, Hawaii, Guam & U.S. Virgin Islands Maximum base conforming loan limits for properties in Alaska, Hawaii, Guam & U.S. Virgin Islands
  2017 2016 2017 2016
1 $424,100 $417,000 $636,150 $625,500
2 $543,000 $533,850 $814,500 $800,775
3 $656,350 $645,300 $984,525 $967,950
4 $815,650 $801,950 $1,223,475 $1,202,925

 

High Balance/Super Conforming:

 

Number of Units Minimum/Maximum Original Loan Amount Properties in Alaska, Hawaii, Guam & U.S. Virgin Islands
  Minimum Maximum Minimum Maximum
1 >$424,100 $636,150 >$636,150 $954,225
2 >$543,000 $814,500 >$814,500 $1,221,750
3 >$656350 $984,525 >$984,525 $1,476,775
4 >$815,650 $1,223,475 >$1,223,475 $1,835,200

 

Please refer to the full County Loan Limits list attached or just contact Elvin Wesley at Ranch and Coast Mortgage

(CA DRE license: 01316249, NMLS: 234795):

c 760.580.1733

760.230.2042

760.487.1295

f 866.683.5399 toll free

www.rcmloan.com

ewesley@rcmloan.com

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Buying After a Past Short Sale? You May Soon be Out of Luck

Friday, July 11th, 2014

If you are thinking of buying a home  with a conventional loan, and you had a short sale, deed-in-lieu of foreclosure or mortgage loan write-off less than 4 years ago, you better be aware of some changes that will take effect in August (yes, next month). What this may mean is that you have to get into contract within the next few weeks or may risk having to possibly wait another year or two to make a home purchase.house_question

Fannie Mae and Freddie Mac, the largest financers for the majority of loans in the U.S., announced earlier this week that they are extending guidelines for purchases after short sales, deeds-in-lieu or mortgage write offs. Starting August 16, 2014, a buyer with a past short sale (or the others) must have closed escrow on that sale 4 years before the date of purchase of a new home. The current rule is two years if the borrower is putting 20% down – see below). If there are extenuating circumstances (a death in the family or accident that affected the ability to pay the mortgage – divorce or job loss do not count as extenuating circumstances, and each lender may have different rules as to what does qualify so make sure to check), then the time period could be lessened to three years upon approval.

This rule, which has surprised many mortgage and real estate professionals, could create problems for those currently looking for homes in a market with low inventory. Note that the new purchase does not have to close by August 16, but the must be fully approved by that time. So long as you get into contract with a few weeks to spare for approval you should be fine.

Here is how the current seasoning requirements look:

  • 7 years with less than 10% down
  • 4 years with 10% – 19.99% down
  • 2 Years with 20%+ down

Here is how the new requirements will look:

  • 7 years with less than 10% down (no extenuating circumstances allowed for this program)
  • 4 years with 10% down or more (2 year seasoning requirement is allowed if we can document extenuating circumstances that caused the short sale. Taking advantage of a declining market is an unacceptable hardship. I’ve written more about this subject below.)

Personally I have clients who will be affected by this new change if they do not find a home very soon. I am surprised that such a rule would be instituted in the middle of the housing recovery, when there is little inventory and the market is turning from a seller’s market to a buyer’s market. I feel this is a very bad call and that it will have negative effects on the housing market.

If you are in the process of looking for a new home and had a short sale within the last 4 years, you need to discuss this with your mortgage professional and your real estate agent.

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Beware the Dangers of Reverse Mortgages

Friday, March 28th, 2014

Reverse mortgages have been a popular retirement option amongst those over the age of 62. They allow homeowners to convert the equity in their homes to cash, so they can live with no mortgage payments or other debt, fund home improvements and repairs,  and have cash reserves on hand. The home is like a bank and the borrowers have zero payments but get “paid” from the equity in the home on a monthly basis.dreamstime_6887078

It is  important to understand that what may seem like a great idea is really just a deferment of payment. The reverse mortgage allows the homeowners to postpone payments on the loan (yes, it is a loan) until death, a move, or sale of the home.

The tricky part of reverse mortgages is understanding how they effect the heirs of the homeowners. If you are considering a reverse mortgage, or if you have parents who may be, you need to fully understand the legalities before making any decisions. Customarily once the borrowers die the heirs are supposed to have the opportunity to pay off the loan for a percentage of the full amount. But there have been many reports that the reverse mortgage companies have been demanding the heirs pay off the mortgages in full, or else face foreclosure of the property.

The big problem for heirs is that many of the properties have risen in value since the time the reverse mortgage was obtained. Thus even if they are offered to pay only a percentage of the loan amount (usually 95%), the payment is based on the current fair market value of the home. Many heirs do not know their rights and the lenders are not telling them either, according to articles and lawsuits.

The key with reverse mortgages is to understand what will happen to the home if the borrowers die. Borrowers need to be aware of the rules that govern how their heirs will have to handle the property in order to avoid foreclosure, and they need to make sure to discuss this with their heirs. Those who are in the heir position should know their rights before the time comes to exercise them, because time limits could play against them if they sit and wait.

If you are considering a reverse mortgage it is important to discuss your options with your accountant or financial planner, and I definitely recommend a visit to your attorney as well. If your parents are reverse mortgage borrowers it is imperative to understand their loan and your rights as an heir before it is too late.

 

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Will the Government Shut Down Affect the Real Estate Market?

Tuesday, October 1st, 2013

Many people are concerned that the government shut down that took effect at midnight will affect various markets and industries in this country. Government-run parks and industries are shut down, over 800,000 people are on furlough, there will be an interruption in many services. But will the real estate market be affected? images

Loan problems: if you are in the middle of obtaining financing via an FHA single family housing loan, you may be in a difficult situation. HUD initially announced that the FHA will not be able to fund, underwrite or approve any new loans during a shut down. Considering the FHA represents 80% of new loans this could be a problem in the real estate market. Luckily, HUD since amended that statement to say that FHA loans will be funded and approved during a shut down, albeit with a limited staff. In other words, the FHA will be able to underwrite and approve new loans, but it may take longer to do so. If you are in the process of obtaining a loan, waiting for a loan to fund or waiting for loan approval and are on a deadline to close escrow, be sure to speak with your mortgage professional immediately to see if you will be affected.

Government backed loans that are purchased by Freddie Mac and Fannie Mae are apparently not affected by the shut down. VA loans will also be unaffected, as they are funded by user fees charged to lenders (much like Fannie and Freddie).

If loans take longer to close due to the shut down it could become more of a buyers’ market once again. Those who have loans that do not need government underwriting or insurance may be in a better position to bargain. However, this will also depend on what happens to mortgage rates – an unknown scenario should the market be affected by a lengthy shutdown. Everything will depend on how long the shutdown lasts – if it is brief the housing market will not be overtly affected; but if it goes on for some time we could face problems. Hopefully Congress can find a resolution quickly.

 

 

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Can Shorter Term Loans Save You Money?

Tuesday, March 26th, 2013

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Thinking of Buying Property? You’d Better Hurry!

Tuesday, February 5th, 2013

If you have been contemplating purchasing a home, whether it be a starter home, your dream home, investment property, or any other type of property, you may want to get serious now before it’s too late. Here are some reasons why it’s better to jump off that fence now rather than wait:

1. It is cheaper to buy rather than rent. The last time this was the cast was 1973.

2. Home affordability is better now than it has been in a long time. Prices now are discounted 61.5% from 1981, the last time they were at an all-time low.

3. New home inventory has hit a 50 year low, contributing to very low inventory levels, which are not expected to improve for 3-6 years. Between 1968 and 2008 there were at least 1 million homes built per year. With the new home inventory at such a low, we have a deficit of 900,000 homes a year (homes that are not being built), thus making inventory even lower.

4. One third of all closed escrows in 2011 were cash transactions (2012 numbers are likely higher). There is a lot of competition out there, and will continue to be as inventory and rates remain low.

5. Recent changes to lending laws will likely make getting a loan much harder. While the new laws afford protections to consumers, lenders will scrutinize applicants even more so now. Click here to read more about this.

6. Interest rates will rise. With low inventory and high demand, and with an improving economy, it is only a matter of time until the rates are raised. (In fact, they just went up slightly last week).

7. Foreclosures are decreasing. Lenders are vying away from foreclosures, opting for short sales – which are being appraised closer to comparative market value nowadays, making the chance of getting a “great deal” lower. Many federal and state programs are also helping underwater owners to refinance and stay in their homes, meaning less distressed inventory.

(Information compiled from the Charfen Institute and Data Quick)

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Can New Short Sale Program Help YOU?

Friday, November 16th, 2012

Short sales have become part of the real estate landscape, and as one in four homeowners are underwater nationwide, they will likely continue to stay there for some time. Lenders have finally accepted this and have been trying to implement new programs to make them a better choice than foreclosures. For the most part, they are on the right track, but we are still seeing resistance and lots of snares in the road. The new Fannie Mae/Freddie Mac short sale program offers something big to struggling homeowners: the chance to short sale their homes even if they are current on their mortgage payments.

Normally, in order to short sale your home you have to be delinquent on your mortgage payments. Some lenders say they will consider short sales for those not yet delinquent, but the reality is that until you are late with your payments they don’t have the time to tango. Now, if your loan is securitized by Fannie or Freddie, you could be eligible for a short sale even if you are not delinquent, but can prove a hardship.

If you are in this situation you will need to contact your mortgage servicer and ask them to participate in the Fannie/Freddie non-delinquent short sale program. You will want to find a qualified area real estate agent who is experienced in selling short sales, and get your home listed on the market. Once you find a qualified buyer, you will present the contract to your servicer, along with proof of hardship (there is a packet of information you will have to provide – whether your servicer wants it up front or at the time you have an accepted offer will be up to the servicer).

Hardships: There are multiple kinds of hardship that could be acceptable. These may include job loss, injury or disability, major illness, job transfer (there are usually mileage requirements), pay cuts, divorce, and death of a borrower or wage earner, to name a few. If you think you have a hardship, contact your servicer to find out whether you qualify.

Caveats: There are a few things you want to watch out for if you are able to go through a short sale under this new program.

1. Credit implications: As with every short sale, you will need to be aware of potential credit hits. There is no lesser effect for these types of short sales, however, apparently it is in the works. Typically with a short sale you can expect your credit score to drop up to 150 points, but that really depends on where it was before you were approved for a short sale. I have seen some sellers take a big hit, and others barely see any negative effects. If you keep in mind the 150 number, that is most likely the worst case scenario. Hopefully soon there will be an exception with the credit bureaus for these types of short sales.

2. Second liens are another potential snake in the grass with the new program. First lienholders have agreed to pay only up to $6000 to second lienholders upon a successful short sale closing under the program. If you have a large outstanding second lien balance, there is a chance that lienholder may refuse to accept this sum (which is ridiculous, as they would likely get nothing if the home went to foreclosure, but such is the case). Make sure you know exactly how much you owe and what the second lienholder’s policy is – a savvy short sale agent/negotiator will know how to help in this regard.

3. Deficiency states: if you live in a deficiency state (where the state can go after you for the difference between the short sale price and what you owed on your mortgage), you need to beware. The lender may require a cash contribution to cover the difference on the loan balance, or possibly have you sign a promissory note. California is NOT a deficiency state, so selling your home via short sale requires NO contribution from the borrower, and there is no state tax liability on the sale.

As always, I recommend really understanding all the implications of a short sale before embarking on one. Make sure you hire an agent who really knows how to negotiate, as well as all the steps involved throughout the short sale process. If you are informed you will make the best decisions for you and your family. To find out whether your loan(s) is owned by Fannie Mae, visit https://www.knowyouroptions.com/loanlookup. For Freddie Mac loans, go to https://ww3.freddiemac.com/corporate/.

Images courtesy of Dreamstime.

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A History of Interest Rates

Wednesday, October 24th, 2012

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A New Problem Surfaces in Getting a Loan

Wednesday, November 16th, 2011

Just when you think you’ve heard it all, something happens that makes you realize you should never close your mind to how far out of left field the ball might fly (a little baseball analogy for those sports fans to appreciate). It seems that is definitely the case with banks, and wait until you hear what the latest hurdle is…unfortunately I know from personal experience that this in fact is happening.

Last week my investor client, who was getting a loan to purchase a property, was told we were ready to draw docs on a Bank of America funded loan. We had been given the thumbs up from the lender, the appointment was set for the buyers to sign at the escrow office that afternoon, and we were just awaiting docs to arrive at escrow. Then my clients’ mortgage professional received the phone call from the lender: there are no funds currently available to fund this loan. He was told they would be available in approximately 5 business days.

Now, had this transaction been a traditional sale this may not have made any difference. But being a short sale, with a deadline established by the short sale lender by which we needed to close (or risk the home going to foreclosure), we didn’t have 5 business days. My buyers had to close with cash at the last minute. Luckily, they were able to do so, but my buyers were not happy about this.

Is this crazy or what? Those of you who know me know that I have been singing Bank of America’s praises for the past few months – I have blogged about how they really seem to be helping close short sales faster. But this – this is a big step backwards for the lender. Last minute bombs like this could decimate the ability and desire to buy property.

The inside scoop. Here is how it happened. B of A decided to shut down lending channels to mortgage servicers who sold their products, deciding that only B of A would be able to sell B of A loans. How many loans were effected is unknown to me, but I bet there have been some serious situations lately that could lead to lawsuits.

Realistically, this could lead to a slew of litigation. It could put buyers in breach of their real estate contracts if they are not able to close on time. They risk losing their initial deposits, and the monies they paid for home inspections, appraisals and other expenses. In the case of short sales, as mentioned above, if the short sale lender did not extend the deadline last minute due to such an issue, the home would go to foreclosure. Bad for sellers, bad for buyers, bad for the market.

For an in depth understanding of what happened I suggest you read this blog from my colleague Michael Mekler. This has been a fine example of another blow to the housing market, brought to you courtesy of our nation’s lenders. Hopefully they will reverse their decisions and we can get back to the business of selling real estate via cooperation and a common goal to heal the market and help people purchase real estate.

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Conforming Loan Limits to Get the Ax

Sunday, September 18th, 2011

On Friday the House of Representatives failed to extend the current conforming loan limits, which are set to expire on September 30. This was a big blow to the real estate market and to buyers and sellers. But does this mean the fight for extension is over?

Let’s take a look at the situation so that you can understand the problem. Current conforming loan limits are set at $729,750. They were raised to that number in 2008, to allow buyers to obtain financing for larger mortgages. This was a great help to buyers in ares where housing is higher, like here in San Diego county. If the limits do not get extended they will drop down to $625,500 in some areas, lower in others. Again, this really effects higher priced areas, such as along the west and east coasts.

Some argue that dropping the limits will actually be good for housing, as it will assure that only qualified buyers will get loans. However, in the higher priced areas it will force buyers to have larger down payments, or to buy homes priced lower. This will effect the higher end market, and in pricier areas this will effect the market, period. This is not good news for those who need to sell, and the long-term effect is that it will likely bring down prices substantially, or stagnate markets further…neither of which are positive options in this economy.

The Obama administration says that allowing the limits to expire will cause more private money to flow back into the housing markets. I am not a mortgage expert, but wouldn’t these have much higher interest rates? Allowing these limits to expire is going to effect an already fragile housing market.

The next opportunity to reverse the loan limit reduction will be at the end of the year. Let’s hope we get there, as now is NOT the time to distress the housing market any further.

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