It's been pretty common knowledge for the past 18 months that the stated income, no document, no income, and low document loans are gone. However, I think that a lot of great customers with really high credit scores- say 740 and up, don't know that in the past they probably got through the mortgage process easier because of something called alternate doc. I will list below the difference between a truly full document loan and alternate doc. (the norm of two years ago):

Full Document :

• 2 years W2s
• 2 years tax returns if you have any self employment income (even if we aren't using it b/c they want to prove you don't have a loss or anything adversely impacting your income)
• 30 days paystubs, current
• 2 months current bank statements, all pages; if your bank statements are business accounts, you will need the bank or credit union to put in writing that withdrawing the money does not adversely impact your business.
• Most recent retirement statement, all pages
• Full Verifications of Rent/Mortgage (if you do not rent from an apartment complex you will most of the time need to show cancelled checks), Deposits, and Employment. We must prove where the money came from, if gifts, that the gift giver had funds to give, and that you are employed, in writing by the employer- not just pay stubs. A verbal verification of employment will also be done right before closing to prove you did not lose your job between the time your employment was verified and closing date.

Alternate doc (no longer available):

• W2s rather than tax returns
• Paystubs rather than verification of employment
• Bank statements only rather than verification of deposit from bank
• Most often no verification of rent or mortgage per the computer approval

The all pages issue is a pretty big one- often people don't understand that if there is no significant info. on a page, we still need it! If it has a page # on it and if you exclude it because you know there's no info. on it, the underwriter doesn't know this- they will wonder what you're hiding! And you must explain all large deposits. This, too, is a pretty big one that people often don't understand. Even if you don't need the money in your account for your transaction, once it's disclosed we need to source where it came from- i.e.- even an inheritance. The banks want to know that your money is legitimate, that no one is incenting you to buy them a home, etc.

The paystubs need to be the most recent. If they aren't recent, the underwriter will NOT assume that because you're salaried your pay hasn't changed or that you still have your job. These days, good people are getting laid off left and right. They'll want the most recent paystubs, and they'll do a verbal VOE (verification of employment) right before close to make sure you're still working.

So in general, believe us that we share in the frustration. We share this information to help expedite the process as much as possible and to help set expectations from the beginning, keeping in mind that underwriters will often "condition" for information.

We know you are great borrowers, but now we have to prove it!

I recently learned that the MI congress passed a law stating that home owners who buy an owner occupied home and retain their previous primary residence while they attempt to sell can keep the homestead exemption for up to three years on both properties. This is a huge benefit to move up buyers who are having a tough time selling.

We are seeing another Fannie and Freddie change, this time when it comes to condo coverage that the condo associations and/or management companies must have. It's regarding dishonesty coverage. Fannie and Freddie used to only require $10,000 dishonesty coverage. This is related to liability insurance. Horror stories are popping up all over the county where employees of the associations or management companies were embezzling the dues that was coming in.

See a related story below about what happened near Chicago.

http://www.nbcchicago.com/news/local-beat/willow-springs-condo-van-witz-management-complaints-56662742.html

There's a lot of buzz that the first time home buyer credit of $8,000 may be extended. So far it's passed the Senate and now must pass through the House.

Some are saying it's helped the economy, some are saying it hasn't. I specialize in working with first time home buyers, and I can definitely say that business picked up for me personally all summer and this fall.

I found this  article online that spells out who the repeat homebuyer credit may work for. Basically, a repeat home owner would need to have owned their existing home for five years in order to qualify.

http://www.christianpf.com/6500-home-buyer-tax-credit-extended/

I see several pros and cons to extending this credit for repeat homebuyers.

Pros:

• May lessen the blow of the inevitable loss many homeowners are facing when selling
• Can help replenish down payment current homeowners are saving to trade up whereas repeat homeowners used to rely the proceeds from the sale of their homes to buy the next home
• Can help replenish an Emergency Fund for the repeat homeowner so that if the unexpected happens, they haven't depleted their resources to buy the next home
• Stimulates the housing economy
• With more competition for homes, hopefully values will stop falling, start to go up a little

Cons:

• Increases deficit
• Perhaps a repayable tax credit that wouldn't burden our tax payers would have the same impact?

What do you think?

Edit:

The Senate voted Thursday, November 5th to pass the legislation! 

In the Greater Grand Rapids Area we are in a very depressed area with one of the highest foreclosure rates in the country. For us, it's mostly because of manufacturing job loss rather than due to exotic loans. Regardless, there are a lot of HUD REO properties. But we also have a lot of FHA borrowers. Recently, we've seen a trend changing where HUD has priced the homes so aggressively low that it's caused a competition situation where people are over-bidding. One might think this is a good sign that the market is changing. Perhaps, but in the short-term, what is happening is this is causing a problem where FHA buyers can't typically buy the HUD homes. This is because FHA requires we use the existing appraisal from HUD when buying HUD homes. This existing appraisal is good for six months. Then HUD usually orders another one. HUD usually appraises the home right around the selling price. If someone overbids and wants to use FHA financing, HUD requires the borrower to pay the difference between the overbid price and the appraised value. Most FHA buyers aren't sitting on that kind of cash. So, the deal goes south. It creates a situation where Conventional buyers and Cash buyers are the ones usually being able to purchase HUD homes. It's a little ironic as HUD states that they try to sell first to owner occupants.

When someone is overbidding on a HUD home, we try to explore and exhaust Conventional options as much as possible. This is often not realistic for the buyer due to a lack of assets. In this case, the MSHDA 80/20 Acquisition Rehab. loan might be a great way for a first time buyer to buy with little down and still go Conventional. See my previous blog at: http://activerain.com/blogsview/1266825/new-80-20-conventional-purchase-loan-including-costs-of-repairs-

To learn more, feel free to give me a call at (616) 719-4513.

I have become increasingly frustrated when Realtors expect us to "eat" delays. I will go into detail. It's understandable for Realtors to be frustrated if no one is communicating with them and they simply don't know what is going on, but in my small shop, we are a three woman team, and between myself as the loan originator, my processor who has been in the business sixteen years, and our Assistant, we work super hard to communicate with everyone during the transaction. We communicate with buyers, the selling agent, the listing agent, title companies, etc. all to keep the transaction going as smoothly as possible.

First, let's talk about closing dates. If you call me on Thursday, the 3rd, and ask me if we can close by the 30th, and I say it's possible, but then you don't get me a PA until the following Tuesday on the 8th, don't expect us to "eat" those five days.I had a transaction recently where the Realtor was upset because we closed 30 days from the date we got the PA. If all the parties are hming and hawing for days, please realize this is time that if everyone is trying to expedite, we could have been using to order appraisal, title, VOEs, VODs, VORs, gift letters, the buyer could have been liquidating assets, etc. We can't order appraisal and title work until we know the end negotiation. We can't order those things with verbal agreements.

Next, let's talk about inspection delays. If you want to close in 30 days but dicker back and forth between the buyer and seller over inspections for 15 days, don't allow us to order appraisal until inspections are done, don't expect us to "eat" those 15 days.Once we order the appraisal, if it's Conventional, due to the new HVCC laws, please remember, we've lost control! We go online, order through some company that doesn't know us, has NO incentive to return the appraisal to us in a timely manner, and then we wait! The typical time to get the appraisal back to us is now at least one business week or more! We can't order before if the client doesn't want to risk the cost and if you don't know the final price due to repair negotiations. We can't deliver the loan to underwriters until the appraisal, title, and all verifications are in. With the banks being backed up due to the mad dash to the finish line for the 8K tax credit as well as all the refi's going on, the UW lineup is typically at least one business week right now. So, in this example, we've waited 15 days for inspections to get dickered out, the appraisal takes another five-seven calendar days minimum, the file sits in the UW traffic jam for five business days- wow! We're already at 29 days in to the 30 days. And please don't expect us to "eat" borrower caused delays. If borrowers are getting gifts, and the gift giver drags their feet on getting us the appropriate required documentation, please understand this, too, causes delays. Once it comes out of underwriting, they typically issue a "conditional" approval. We go back to the borrowers, title folks, Realtors, or whichever party we need to address and get additional minor items needed by the UW. Let's say we submit this to the bank the same day or soon as we have the info. Then it goes back in the traffic jam for two more days. Then GOD WILLING it comes back out of UW with a "clear to close", then we have to give the closing department time to prepare closing docs., and we can close two business days later. When you take a serious look at all the parties in the transaction, it's pretty easy to understand why your closing date got pushed back for reasons outside the control of the broker or lender.

I saw a tidbit on the Today Show Recently that I thought I'd share because I tried it to get my toddler and school aged kids to eat better. My hubby and I have a weakness for a local Thai food place. We love their noodles. We've gotten this quite regularly recently, and my middle daughter noticed that we get "take out" more than they do. She thought, rightfully so, that it was a little unfair. So, in an effort to stick to a budget and to waste less food, last night when I was ordering take out on the way home, I suggested to my hubby that he make up something quick for the girls and serve it in individual take out containers that we had left from previous orders. It was a win/win. We've thrown less plastic containers away or in the recycle bin- instead we reuse them, and the girls each got individual containers of chicken and white rice- a perfectly bland meal for picky little kids. They were ALL SMILES! They ate most of their meals and even tried ours. The show made a good point- everyone likes presentation. Next up- we're going to try this with lunches we send to school!

It never ceases to amaze me that every once in a while, maybe every two years or so, a customer who is paying off collections in an effort to become mortgage ready, stops paying other bills on time in order to have the funds to pay off old collections. I can't quite understand how this makes sense to the customers. At that point, I've explained that collections have had an adverse impact on credit score, so one would think that new collections, late payments on installment loans, or past due amounts on other debts, would, too, have an adverse impact on credit. But without fail, every once in a while someone says, "I did as you instructed- you told me to pay off collections, so I did". Then they proceed to tell me, "I made payment arrangements on my car loan to have the money to pay off the collections." Well, this would be fine in theory if the lender reported you on time to the credit bureau, but I've never seen this happen.  

NEVER STOP PAYING CURRENT BILLS TO PAY OFF PAST DUE BILLS. ALWAYS PAY YOUR CURRENT DEBTS ON TIME!

NEW PAST DUE AMOUNTS ARE JUST LIKE A COLLECTION!

ROLLING LATES ON CREDIT CARDS, STUDENT LOANS, AUTO LOANS, ETC. WILL HAVE AN ADVERSE/BAD IMPACT ON YOUR CREDIT.

DO NOT PUT STUDENT LOANS IN DEFERRMENT AND STOP PAYING THEM B/C A CUSTOMER SERVICE REP. GAVE YOU A VERBAL THAT YOU CAN NOW STOP PAYING. WAIT UNTIL YOU HAVE THE DEFERRMENT IN WRITING.

Listen folks, these are all RED FLAGS to underwriters that you are walking too thin a line with your current obligations to be able to afford a debt that is going to have unexpecteds- i.e.- some day as a home owner, things will come up that you didn't expect- like property maintenance, increase in taxes, increases in insurance, etc. BUYING A HOME COSTS MORE THAN JUST YOUR HOUSE PAYMENT.  Other unexpecteds could happen like job loss. An underwriter wants to know that you are resourceful. They don't want to ever think that when times get tough you'll just stop paying your debts on time.

I am so excited to report that MSHDA has rolled out a new program called the MSHDA/NSP 80/20 loan. Features of the program include:

• 80% first mortgage, no PMI
• 2nd mortgage up to $25,000 with repairs, 10K if no repairs
• Only 1% down requirement from buyer!
• Property type must be bank owned/foreclosure.
• Repairs allowed- repairs can be minor or more significant- examples of repairs that will work include but are not limited to- Appliances (except washers and dryers), roofs, furnaces, kitchen or bath remodel, carpet, deferred maintenance, air conditioning, siding, handicapped accessible ramps, alternative energy
• Max CLTV is 103%
• Seller contribution up to 6% allowed
• A HQS Quality Inspection is required- i.e.- an inspector must determine what must be repaired and estimate the cost
• Repair funds are held in escrow at MSHDA
• Lenient income guidelines- up to 120% of Area Median Income- i.e.- family of 4 can typically make up to $73,700 in outer county areas in Kent County or higher in targeted areas (like GR)
• Manual underwrite, no requirement of computer approval
• No minimum credit score technically, however, 620 is preferred. Lower than 620 requires good compensating factors.
• 30/41 debt to income ratio guidelines, 45 max on exception basis
• Two months reserves required

The target areas are broad, but the federal government requirements state that the area must have a foreclosure risk of 6 or higher. The target area maps are a bit confusing. I am happy to look up an address to determine if it qualifies. Many townships, cities, and entire counties qualify. Please call me at (616) 719-4513 directly for more information or to walk through a scenario!

I met last night with a newly married couple. They were really neat and quite entertaining. I thought the gentleman said it best when he said, "Your credit report is like your permanent record". I'd never heard it referred to that way, but I think he put it best! I have had the following happen to clients:

• They had collections that were almost seven years old. Rather than fall off, the creditor sold the debt to a new collection company, and the seven years started all over again!
• A client had a judgment that was almost ten years old. She thought it would "fall" off her credit report. Because she was of means and able to pay, she got re-sued, and the debt started all over again- she agreed to a Consent Judgment in order to get reasonable terms.

The moral of the story- don't assume a bad debt will ever go away unless you truly pay it off or settle it!