State of the Union - "we want to help homeowner's refinance to a lower rate".  Reality says - If you have a FHA loan, don't hold your breath.

Because the new payment ( P & I + monthly mortgage insurance) must be at least 5% lower than the current payment, someone that would otherwise qualify for a 15 year FHA loan is prohibited from doing a Streamline refinance (without appraisal) even though they would otherwise qualify (ratio wise) if it was a new loan.  Sounds crazy that HUD would not want to permit someone to refinance into a loan that is considered a lower risk loan to HUD. 

Next, all of those higher rate FHA loans carry a monthly MIP of around 0.50%/12.  Now, if a homebuyer tries to refinance, the monthly MIP is 1.15%/12 which offsets quite a bit of the interest savings and makes the 5% payment improvement harder to meet.

So when a politician says one thing, it is save to ask.....what's the catch! 

Have a great day!

State of Union - if last night's $3000 promise to homeowners works like last fall's promise for easier HARP refinancing guidelines (which we are still waiting for),, my advice is don't spend it until the check clears. As for 18 yr olds being forced to stay in High School, does this mean that "head count reports" will no longer be needed for state aid to schools. Can you tell he is from Chicago - head count reports at least keep the schools from being paid for teaching the "dead and buried." I know I am "hoping for change". How about you?

Have a great day!

Today's release of the Federal Housing Finance Agency News Release suggests that more borrowers will have the opportunity to lower their interest rate without concern for home values.  The reuqirements include:

1) the loan is currently held by either FNMA or Freddie Mac and was purchased by them on or before May 31,2009.  you can determine if your mortgage qualifies by going to http://FannieMae.com/loanlookup  or https://www.FreddieMac.com/corporate.  If your loan closed before the cut off date, qualification will still depend on when the loan was purchased and a mortgage broker would be able to look up the actual purchase date.

2) the loan to value is over 80% - the previous cap of 125% of the appraised value has been removed for fixed rate loans.

3) fico limits still exist but the impact on the interest rate has been reduced.

4) advantages for selecting a shorter term for the new mortgage in hopes that you will eventually build equity.

The expiration of this program is now December 31, 2013.

I suggested that this program falls flat because they have excluded approximately 900,000 homeowners that have refinanced once under the old HARP program and now may still have above market interest rates and are still struggling.  The cost to include these homeowners would be minimal (by government standards) and be a way to thank those homeowners for keeping up with mortgage payments.  Instead, because you took the first offer, you miss out on the better offer.   How many potential HARP refinances will now sit back and wait for the next offer which will have to be even better?????

So what's new???

Have a great day!

Realtor calls and asks me to meet with potiential client. - OK 

Client wants to keep his current condo, rent it out and buy a larger condo for his growing family. - OK

Wife doesn't claim her waitress income. - Oops

Not much in savings. - Oops

Just qualify FHA is everything falls just right. - OK

           - property not FHA approved - Oops

Seller willing to provide info to service to obtain FHA approval - OK

           - advisor indicates that condo would be approved for FHA - GREAT BIG OK

Several weeks ago, the client made application to refinance his condo - BIG Oops - Big problem - I advised client that he should talk to his attorney. By signing a contract for purchase and stating that he is obtaining FHA financing, he is stating that he will occupy the new condo.  If he proceeds with the closing of the refinance, he is stateing to that lender that he will occupy the current condo.  His attorney needs to advise him as to the risk of completing the refinance after signing the contract to purchase. After asking questions, client understands the conflict and insists that they want to buy new condo.  - OK

Seller takes the unit off the market. - OK

Buyer's attorney calls to confirm that client will qualify with rents under FHA. - OK

Client calls - says he refinanced and was told that he cannot rent his unit.  OH REALLY!

I comment and he remembers that this is what I told him before he signed the contract to purchase and that he will not qualify without the rental income. - DAMN!

Client asks " will I get my $1000 earnest money back since I did not get a mortgage before the mortgage contingency expired?" - NOT IF I WAS THE SELLER! and you better hope that they do not come back for damages!

And then I realized it was not a dream after all and I had wasted at least $50 and 4 hours of my time.

Have a great day! 

It has been said that a smart man knows what he doesn't know.  Too bad each day brings more proof that yesterday I was not as smart as I thought I was.   Last night I attended a LinkedIn presentation in Park Ridge, IL by Kym Raya of BigShotMarketing.com and found that there is a lot more I did not know about using LinkedIn to grow my business.  I was somewhat embarassed to see that I had neglected implementing some simple (and free) LinkedIn features to grow my business.  Kym has been helping individuals including Realtors and Mortgage Professionals increase their market exposure using LinkedIn for years and I keep coming back for refreshers In addition to being expert, she has your business in mind when she stresses that until you have taken advantage of the "free" features, there is no need to upgrade your LinkedIn account.  (Music to my ears!)  

After saying all this about BigShotMarketing.com, I am sure tomorrow will be another day of facing more stuff I just don't know.  Have a great day!  

Treasury punishes top servicers for failing troubled homeowners

On June 6,  Tami Luhby of CNNMoney posted an article that announced that the US Treasury Department is withholding incentive payments to Bank of America, JP Morgan Chase, and Wells Fargo because they are not processing Mortgage Loan Modifications fast enough.  I for one am disappointed that those who should be getting a modification are waiting behind those that beat the system once and now are trying to beat the system a second time because those that make the rules don't always understand what they are doing. 

• THE FOLLOWING IS MY COMMENT WHICH I POSTED TO CNN MONEY IN RESPONSE TO THIS ARTICLE.

•  <!--<a href="#" mce_href="#" onclick="return DISQUS.dtpl.actions.fire('comments.collapse', this, 222610559);" title="Collapse thread"></a>-->I am really tired of paying for modifications when the system favors those who under report income to the IRS. Do you wonder how many borrowers are trying to modify a loan they obtained by claiming income greater than they reported to the IRS? Before they should be allowed to modify, the servicer should look at the overstated income they claimed and assume that the same percentage of income continues but is just not being reported. Now only those who really need a modification will have a chance at obtaining one.

Jumbo 30 year fixed rates are now in the low 5% area while Jumbo 7/1 & 5/1 rates are around 4%.  The recent increase in mortgage rates for conforming loans (up to $417,000 in the Chicago area) has closed the gap between Jumbo and conforming fixed rates to 1/2% or less. 

For so many that have been sitting on the sidelines, this is great news because so many of those loans have rates in the high 5% & low 6% levels.

In some cases lenders are also offering equity lines of credit to help homeowners who have seen their equity drop.  Maybe there is still a silver lining out there.

Have a great day. 

Today's news shows is another example of the FED being "out of touch" with the real world. 

By Dave Clarke 

WASHINGTON (Reuters) - Lenders would be required to make sure prospective borrowers have the ability to repay their mortgages before giving them a loan, under a proposal released by the Federal Reserve on Tuesday.

I am sure you will agree that the FED's proposal adds little to the current lending guidelines since it is telling lenders to only lend if they believe that the borrower has the ability to repay their mortgage. 

Does the FED really think that the current lending guidelines permit lending without the belief that there is "ABILITY TO REPAY?"  They must be smoking the good stuff.

They also suggest that lenders may no longer offer interest only loans, negative amortization loans, or loans with balloon payments - I guess even if the lender can verify that the borrower has the "ABILITY TO REPAY" this type of loan.

Give me a break.  Don't continue to sound like you are trying to close the barn door.  Look outside your Ivory Tower - the barn door is already closed.

Have a great day!

Underwriting nightmare for April 2011

Futures trader reports income over $500,000/year for 2008, 2009, and 2010.  Underwriter's calculation shows $200/month.

Explanation is that underwriting guidelines believe that Schedule D Gains and Losses result from asset sales for more or less than cost.  While this is correct, it presumes that the asset was being held for investment purposes.  As you probably know, a trader holds positions for time periods that are measured by seconds rather than months and years.  As I tried to explain to the underwriter, if his business was trading baseball cards, he would report his income on Schedule C and the underwriter would know how to calculate income - so open you blinders and look at his income in a way that recognizes how it is earned rather than how it is reported for the IRS. 

 It is only because the IRS requires that this (security) business's profit or loss activity is reported on Schedule D rather than on Schedule C - income from business or profession.

What ever happened to letting underwriters UNDERWRITE instead of just having them check that the "i's" are dotted and the"t's" are crossed. 

Another case where "it ain't over till I say it' over!  Follow my future blog for the "Rest of the Story."

Have a great day!

Reason exists - the April Fools Day implementation of a  Fed Rule that would hurt mortgage broker flexibility has been delayed as the Court reviews the case.  Probably the biggest surprise is that REASON prevailed at least for one weekend. 

Why did the Court wait this long?  Is this a sign that there is mounting pressure to limit government regullations?  I can dream can't I?

Have a great day!