We all deserve good news now and again --- So for this week, take the new 95% Conventional Program to the Bank.

In light of FHA raising their Upfront MIP to 2.25% this week, there is now another option for those willing to put an extra 1.5% down in cash on a new home. 

Here are the details on the 95% Conventional Program: 

• Primary Residence only
• 1^st Time Home Buyers and Move Up Buyers
• Monthly Multiple as high as .94% ($195K loan the monthly mortgage insurance is $151 est.)
• Credit Score above 720
• DTI Ratio at 45% or less

Good information to have just in case you find any buyers that want to put less than 10% down but not go through FHA.

Hope this works for you.

A story on the news ran last week regarding the ability for homeowners to short sale and then finance a new home almost immediately.  Although this may be in the case in certain circumstances, if the borrower were to finance the new home through Conventional Financing then certain rules still apply.

For example:

• Borrower is Ineligible if:
  • 30 Day late is reported on their previous mortgage
  • Short Sale on previous home was completed for advantageous reasons to the borrower not due to hardship

FHA Insured Financing is available, in some cases, in a shorter term than the standard minimum of 2 years for Conventional Financing but the following conditions must be met.

• All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale
• All installment debt payments for the same time period were also made within the month due
• Borrowers in default on their mortgage at the time of the short sale are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure

Exceptions can be made if:

• Default was due to circumstances beyond the borrower's control (such as death of primary wage earner, long term un-insured illness, etc.) and/or
• The review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower's control that caused the default.

FHA may also allow refinancing on Short Payoffs if:

• The existing note holders agree to write off the indebtedness that cannot be refinanced due to value
• There is insufficient equity in the home based on current appraised value and/or
• The borrower has experienced a hardship.

All of the above information can be found in HUD Mortgage Letter 09-52, 4-155.1.

In summary, there are cases where a borrower could immediately buy a new home following a short sale, but it will be in the rarest of occasions.  Most short sales will not occur without a borrower "stopping performance" on the loan (meaning they miss a payment).  I believe it will be up to the short sale negotiator/realtor to make the short sale happen without the borrower missing a payment, but it will take an extenuating circumstance and some honest to goodness hard work to get a lender to agree to the short sale if the loan is still performing.

Hopefully the above will help to dispel any questions regarding the story that ran on the news last week. 

An article on MSN.com today captured the essence of the problems that FHA has been dealing with over the recent months.  FHA has been struggling to keep foreclosures from piling up, they are paying for 1 of every 4 loans that were made since 2007, and there willingness to insure loans with lower down payment are all reasons for the increase of foreclosures that is on the horizon.

These foreclosures are different, in that they are economically driven.  They are due to unemployment, furlows, and tanking retirement accounts.  These new foreclosures aren't just for people that couldn't afford the loan and were taken advantage of by a Predatory Lender.  No, these loans that are now in foreclosure, are from people that got the right loans and worked hard to keep the house but now can no longer afford to do so.

There are always competing arguments as to whether requiring only 3.5% down is really enough for a person to buy a home.  My opinion is that with the right person(s) as the owner of the home, then yes it is a good product.  It does lend for people to "justify" abandoning a home because they didn't have to give a lot to get into the home, but it also gives people that would otherwise be unable to own a home the security of having a place to call their own.

With the news about FHA facing difficulties with rising foreclosures, it is no wonder that they are raising the Upfront Mortgage Insurance Premium from 1.75% to 2.25% and requiring 10% down for people with lower than 580 credit scores (even though most lenders won't underwrite an FHA file with less than 620 credit score).

FHA is a viable product with the right people and the right loan officer educating them about the process of obtaining a mortgage and what it means.  Without the FHA making an effort to help people get into homes, there would be a lot less movement in the housing market.  It is still just a matter of selectively choosing (with proper documentation, income, etc.) the qualifications people must meet in order to obtain FHA insurance on their new home purchase.

Do you think that FHA should change their qualifications and requirements or do you believe the product is great for people who understand what they are doing and manage their finances in the best way possible.

I read an article this morning regarding Lenders coming up with new ways to "Guess Your Income".

The article made some interesting points regarding how lenders make decisions based on a person's credit and income.

In mortgages, Income, Assets, and Debts all play a major factor in determining who will qualify to purchase a new home.  As a loan originator we ask for these details and require verification that the information provided is accurate.  By asking and obtaining the income and asset information, mortgage lenders can use ratios of debt to income, amount of assets, and the credit score together to make the proper determination.

Seeing the information and analyzing it is the best way to make a credit decision.  Of course, unforseen circumstances can always change a person's ability to repay the mortgage but diligence up front will hopefully eliminate many of the "problem" mortgages that came about in the last few years.

So what does the above article have to do with mortgages?  I think it has a lot to do with mortgages.  For example, if a person is unable to obtain a small credit card due to these income estimators, it may affect their ability to establish solid trade lines and credit history that will help them obtain a mortgage in the future. 

With lenders tightening up their restrictions on who is issued a credit card, it makes it very difficult for young people to demonstrate responsibility with credit, which is a key determinent in mortgage guideline qualification.

So, should lenders be allowed to "Guess Your Income"?  Is it okay for them to use past history and other variables, that you as the consumer, may not even know they are checking, to make the decision on your credit worthiness?

In a time when the credit crunch is still occurring and the mortgage market remains selectively restrictive, are the decision by these lenders today going to impact the future ability of first time home buyers to obtain a mortgage?

All questions that should be considered, especially if they are guessing your income to make a determination on whether you are credit worth or not. 

Here is some great information regarding applications received and interest rates for purchase and refinance transactions.

Below is excerpt from the Mortgage Bankers Association

"Refinance activity fell substantially last week," said Michael Fratantoni, MBA's Vice President of Research and Economics.  "Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today's rates."

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.02 percent from 5.00 percent, with points decreasing to 1 from 1.05 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 4.34 percent from 4.33 percent, with points decreasing to 1.14 from 1.19 (including the origination fee) for 80 percent LTV loans.

As you can see rates moved up a bit but the cost of getting those rates decreased, which in some cases is a benefit to the borrower.  I think we are likely to see a jump in applications for this week as compared to last week.  Rates were mixed this week as early on there were indications of the market in a friendly position due to sales of 5 - Year Notes going well on Wednesday. However, the money left the market and pushed back on rates.  This morning we had some more "unfriendly" market news, but rates pushed back for a slight improvement.  Overall, rates were up about .125% on the 30 YR Fixed rate note but held constant for most other programs.

I still think we are in hold pattern to see where the overall trend goes. 

The FHA Insured 30 YR. Fixed program is still an excellent option for first time home buyers.  The rates are in the low 5% range and the changes for MIP and Upfront MIP haven't been put into effect keeping the overall costs of the loan lower than where they may go.  Homeowner affordability is the key here. 

Don't forget about the tax credit up to $8K for first time home buyers or up to $6500 for "move-up" buyers that have owned their home for at least the past 5 of 8 years.

That is a ton of mortgage market news for the week.  As always, should you have any questions or concerns for you or your clients, please don't hesitate to contact me.

My goal will always be to make the loan financing process as worry free as possible.

Licensing for Mortgage Loan Originators is here!!!  I spent a few days last week in classes, brushing up on Federal and State Law and sharpening my skills as a Mortgage Consultant/Loan Originator.  It may be easy to complain about the licensing requirements, but in reality, it will help to make better "professional loan officers".  I learned every day that while in class and I am excited to take the test (early next Tuesday for the federal test) and to be able to call myself "licensed".  Even if the only thing passing the test will lend me (no pun intended) is a bit of credibility with my peers and in the community that will be entirely worth it.  I am for learning and growing in all aspects of life, and by passing National and State tests that is definitely one way to prove that you are worth what you say you are worth in the marketplace.

Week In Review:

• The verdict on the new GFE is still out  -- I find the new form even more confusing to borrowers because of it's lack of "cost breakdown".  The generalization and lump sum numbers doesn't really lend to transparency.  The idea behind the GFE was to find a way to keep Loan Officer's from changing fees at the last minute and to make transparent what the Loan Officer/Broker was making on the loan.  These concepts are accomplished but at the expense of keeping the form straightforward and understandable to the borrower.  The general rule I live by for customers still applies to the mortgage process.  If you educate the borrower by taking the time to answer their questions and are transparent with them, not because of some form, but because it lends to better communication, then the borrower will find the loan process an enjoyable experience.  If, instead, the loan officer doesn't teach but is only concerned with his money on the deal or whatever it may be, then the borrower may suffer because they aren't given the necessary tools by the loan officer to help them understand the financing process. 

Overall I think the new GFE is fine and it's really just another new item to implement to our stacks of ever changing guidelines and regulations.

• High number of I/O Mortgages to Reset this year - While in class for the National Licensing Exam, the discussion turned to the high number of 5/1 ARMS that are set to adjust this year from the peak purchase season in 2005.  Unfortunately we aren't "out of the woods" yet.  As 2005 and 2006 was heating up in the Real Estate market, many buyers turned to I/O financing on ARMS because they believed they would be able to just refinance down the line.  Of course, that is an unlikely possibility with the housing market decline of 2008 - Present.  It is, however, an opportunity for 2 things:

1.       Refinances - Those don't benefit agents directly but if you were in the real estate market in 2005, it may be time to contact your old database and put them in touch with a reputable Loan Officer that will take care of their needs and discuss their options with them.  It will be a great value add for you in case they need help selling or buying their next home.

2.       Short Sales - The dreaded word in Real Estate, even worse than Foreclosure, is SHORT.  The process is arduous and seemingly never ends.  However, the rise of Short Sales will continue for sometime as people seek to be out from under the large amount of debt they face due to purchasing homes in 2005-2008 (yes even people who bought in 2008 are hurting, some in 2009 as well).  If you have an old contact that can't refinance and is need to get out from the debt, perhaps it's an opportunity to assist them in the sale of their current home.  So pull out those old contact sheets and get after it!!!

• Selling to Make a Living - I read a blog article this week from a fellow mortgage professional that touched on the topic of "selling" to real estate agents.  The premise of the blog was that if he was "selling" his services to realtors could they at least be courteous seeing as though Realtors, by very nature, are in the sales business as well.  I can empathize with his points and I also empathize with the many agents that don't want to be "cold-called" and offered products by random companies.  I also certainly empathize with the comments many made regarding the "badgering" that often occurs from "sales professionals".  But in truth we all know that in order to be successful we have to sell.  Name any company or position within a company and they all relate in some way selling.  It is why we are different from other countries, the right to capitalism where we can sell something that we perceive as worth value and others can choose to purchase or use what we are selling.  I can't say that selling is the easiest thing to do, in fact, most of the time I feel as thought I am "badgering" or even bothering Agents when I call them.  But in truth, I believe in what I am doing.  I believe I am an efficient loan officer that can take the stress away from you and your clients by being thorough and diligent throughout the process.  I also believe I am one of the best mortgage professionals remaining in the industry today.  What will it take to prove to the masses that I am, only selling!  It is what we do, realtors and lenders, to make a living and if you believe in what you do and are passionate about it you will find success by selling.  Let's just hope that along the way those you sell to will be courteous and have empathy for the work that you are doing to be the best.

A little over two weeks remain as we close out 2009 and brazenly embrace 2010.  The rates that were down in the 4% range have shot back to a more expected level to where rates have been throughout the year.  If the theory holds true though, we may see a small dip in rates come the end of December and into early January so be ready with those buyers to snag the best and most affordable rates.

It has been a while since I posted because of the Thanksgiving Holiday and then my first real vacation (one where the cell phone was left at the condo when we left to do exploring) since I was married in 2006.  Lucky for me, the vacation to Maui was just what I needed to recharge the batteries and to attack 2010 with a vengeance.  I have been researching a few different items related to the mortgage market that I am sure is great information for you and your clients.  So without further adieu:

Week in Review:

• Fannie Mae 8.0 and new Freddie Mac LP - In the world of loan originators, Fannie Mae and Freddie Mac LP, are the lifeline through which we can approve and not approve deals prior to underwriting.  Basically, an approve/eligible rating with Fannie Mae or an Accept rating from Freddie Mac LP, means that the loan does meet minimum guidelines if the Assets, Income, Credit, etc. can be supported through verification.  Why is this important?  Well, both are undergoing upgrades to their Desktop Underwriting system that is going to change the guidelines for borrowers.  For the past two years a decent credit rating and a DTI (debt to income) ratio of less than 57% was enough to get people qualified.  THE NEW MINIMUM STANDARD FOR DTI RATIO IS 45%.  Read it again!  And again!  The guidelines just got tighter, which means we have to be even more diligent to ensure that the borrower are qualified upfront.  It can be said for sure the effect that the new DU system will have on borrowers but it does mean we are back to the underwriting of the mid 90's.  Time to buckle down for 2010.

• Financially - Does walking away make more sense? - An article by a lawyer, Brent White, from the University of Arizona discusses the stigma associated with walking away from your home.  He makes some compelling arguments for people to walk away, because if the numbers work in their favor, they can save tens of thousands of dollars.  An article, written by Liz Pulliam Westin, gives her take on the subject matter.  It is interesting that people are making a moral decision when it comes to their homes not a financial or numbers decision.  Brent White, discusses how the trends of foreclosures closely follows the trend of unemployment and further that people, instead of thinking logically, use emotion to deter them from foreclosing on their home.  However, Liz Pulliam Westin does disagree with White as he speaks nonchalantly about the difficulties associated with credit after a foreclosure. (Of which I agree!)  The most profound comments though came from White when he discussed the general public/society and their decision to keep the house being a moral decision. He believes that the lending industry and bankers don't make moral decisions, they make numbers decisions, and because of that the general public has that right.  

•  
  • When faced with difficult decisions, are we hurting the economy by making a financial decision that will keep ourselves protected or should we, as Liz Pulliam suggests, continue to put our financial well being in the hands of banks and lenders who are unwilling to help?  (Ms. Pulliam does suggest that banks and lending institutions improve their moral position to help but the truth is that won't happen!

• PMI increases DTI Ratio -  For those borrowers that couldn't get PMI because their DTI was over 41%...Congratulations, the new percentage is now 45% to match that of the Fannie Mae and LP changes above.  Remember, to always find the good in any news. 

Lastly, remember that the new changes always make it more difficult to close loans without underwriting asking questions or wanting more information.  Sure, it can be tiring and grating, but my motto is that the Underwriters are my friends, not my enemy, and if I work with them and don't fight them the chance for overall success is greater.  I will always fight for what the customer needs, but the goal is to win the war and if there are times when we must retreat and not fight small battles to ultimately win the war, then that is what I will do. 

Consistent, Disciplined and Persistent Lending practices will lead to successful closings.  You have all contributed in a positive way I am sure for your clients and for that they will be forever grateful. 

With a little bit of elbow grease, 2010 looks to be even more promising.

Interesting how perspective can change in just one quick second.  As soon as news that the tax credit extension had been approved (see attached document), it seemed people weren't quite as pressured to buy a home, "right now".  That isn't at all a scientific observation, but perhaps just a feeling since there were a lot of people, realtors and lenders included, who breathed a sigh of relief.  As a result of the extension, a few borrowers that were concerned about the deadline can now take a bit more time to find the home that works the best for them without feeling rushed.  Not to mention the added benefit of continuing to help first time home buyers with a lasting benefit in the form of cash back from the government (even if it sets the deficit nationally further in the red - yes the statement is too political for this email so no further mention will be made of it, excuse the lapse in judgement...HAHA).  Again, it's that whole perspective thing.

Nevertheless, rates held steady through the week and at this point on Friday, the market is saying to "bail out", which just means to be patient to see how the market moves.  Again, there isn't a better time to buy a home then when you are ready.  And if you are ready when rates are historically low and the government is giving you money, then by all means...buy a home.

Besides the most important news (see above) there were some other interesting items:

•·         Consumer Credit Fell - AGAIN! - For the eighth straight month consumer credit fell and people were borrowing money at a slower pace than in the past.  It seems we are moving toward cash and away from credit.  But if it is any indication on the upcoming Holiday season, many retailers may be in for some hard times.  In some cases, there are stories of retailers beginning their "Black Friday" sales this weekend.  Retailers such as Walmart (no surprise there J ), Sears, JC Penney, etc. are having blowout sales every weekend leading up to "Black Friday", all in the hopes of capturing some of that consumer spending which may be very muted this year.  It will be an opportunity for many to find great deals throughout the end of the year and leading all the way up to Christmas.

•·         Credit Policies continue to tighten -  The question always looms: when will the easing on the credit markets occur?  When will it not be a battle to the finish line, with the Loan Officer asking for the borrowers' blood to get the deals done???  It seems that in some areas changes are taking place, but not always for the good.  For example, trailing secondary wage earner income is no longer eligible income for any conventional loan transaction.  (Trailing Secondary income - if a borrower is relocating and the old job will end before the new job begins, the old income cannot be used to qualify). Investors are now asking for three months bank statements for retirement/pension income.  There are more guideline changes and credit policy changes that will increase the paperwork needed for many borrowers.  Surely one would think these are not standard with every investor, however, they are derived from Fannie Mae and Freddie Mac and will become commonplace as we move forward.

•·        Phoenix Coyotes are 10-6, Phoenix Polar Bears work to raise money for Breast Cancer - If you are a hockey fan, which I am, then you will be pleased with the new brand of hockey the Coyotes are playing.  They compete and battle all over the ice, it isn't always flashy but they seem committed to defense and playing the game with intelligence which has led to a decent start.  Sure, it will still be a long shot to make the playoffs, but at least they are enjoyable to watch.  So long Gretzky!  If you are interested in continuing the donations for Breast Cancer, the Junior team that I am involved with is hosting a walk tomorrow morning.  You can read more about it at the website: Making Strides for Breast Cancer.  You can also check out the webpage at www.phoenixpolarbears.com to see our website and its facelift to commemorate Breast Cancer Awareness. 

(P.S.  We carry Breast Cancer awareness into November due to our season schedule - but, hey shouldn't we be aware of dangers to our loved ones at all times)

With the passing of Summer and the arrival of Fall; the Holiday season begins to quickly approach.  There were a couple items of note this week within the mortgage market and within the real estate market.  So let's get right to it.

• Government to continue buying Mortgage Backed Securities - The government stated earlier this week that they plan on tapering back the buying but will continue to buy Mortgage Backed Securities until March of 2010.  This may not seem like much on the surface but if the government stops buying these Mortgage Backed Securities, we are most definitely in for an increase in mortgage rates.  As such, the announcement they would continue to buy them and extend it out past the original October deadline had rates dropping at the end of the week.  Again, another positive sign as people search for those affordable homes and secure low mortgage rates that will keep their home affordable for years to come.

• Housing re-sales were down 2.7% - In news that brought everyone back to reality a bit, the number of re-sale homes sold in August was down 2.7% though the projected number was for the re-sales to be up 2.1%.  The reasoning behind the decrease in sales is partly due to the amount of foreclosures coming back on the market.  If you will recall, I mentioned that this may happen back in May or June when discussing the market.  Mostly this decline is due to increase in foreclosures back on the market and the slow-down as families move back to their normal routine of school, etc.

Of Note:  the numbers may go back up as the end of the tax credit for FTHB's looms large.

• For Real or Just Pretending - That's right are the Cardinals for real or are they just pretending to be a good team.  I guess in hindsight we can feel a bit better about the loss to the 49ers based on their performance against the Seahawks last week, but still, we should have at least won the game.  I think this week against Peyton Manning and the Colts, though the season is only 3 weeks old, will be a nice test.  We are definitely the beneficiary (or at least could be) of a tired Colts defense that played for 45 minutes on Monday night and had 80+ plays against them.  Hopefully we can let it fly and end up with a nice win.

Lastly, as part of my work in the Ice Hockey community, I am the co-Chairman for our upcoming Golf Tournament to raise money for players within our organization who need scholarships.  It is a great event and I have attached the flier for you to see.  I would love to have some of you join me as we raise money for these kids and help them reach their dreams of playing competitive youth hockey and one day, for some, college hockey. 

Rates improved slightly this week as we have seen swings of about .125% in either direction of the 5.5% mark over the last couple of weeks.  These rates do help keep home owner affordability up, which in general is a good thing.  As far as market news, check this out:

1.       Housing Market set to enter new stage??? - I am not a person that entertains bad news easily.  However, I do like to read different perspectives on the market so that I can be well versed in potential trends.  For example, in this article, "Housing Crises set to enter new stage.", the author explores some very interesting statistics that might make some hold still before jumping into the market.  The analysis was on how buying trends are not following a normal pattern, foreclosures are beginning to affect even prime borrowers, and the multitude of ARM loans set to readjust.  Those three points could definitely have a drag affect on the market, and by drag I mean drag down affect.  Nothing is certain but we have to definitely keep our eyes on the overall picture and not just a short snapshot of the last couple of months.  It is the prudent thing to do.

2.       Extend and EXPAND the tax credit?  Are they crazy or smart? - That is right, apparently major lobbying is taking place to extend the tax credit and to even EXPAND it by way of the amount of tax credit and to more buyers (i.e. not just FTHB).  Over the last week I have begun to see more and more of these articles/blogs discussing the possibility of extending the tax credit.  I don't know if it is a right or wrong question as to whether or not we should take action to extend the credit, there is simply too much gray?  We do know that it has helped many FTHB in getting a break for buying the home, but it hasn't had as much of an impact as say, Cash for Clunkers program.  Namely because obtaining a mortgage is a bit more stringent than obtaining a car loan.  Regardless, I believe an extension could help, but I believe expanding it will not help the market.  Further, if the expansion of the credit is tied to the extension of the credit, it might be rejected all together.  Just food for thought.

3.       Ways to Beat the Slow Down - That's right, as football season begins and the holiday months roll in, typically the housing market slows down.  So, in order to keep from letting the slow down affect you, here are some tips:

                    a.      Revisit old contacts - There are a ton of people in our lives that may be able to help our business succeed and in turn you may be able to help their business succeed.  Reach out to old contacts, past clients, etc. and get them excited about homeownership opportunities. 

                    b.      Amp up Marketing ­- That's right before you are slow, see it in front of you and be determined to keep it from happening.  Come up with a seasonal slogan or something exciting that you can talk with people about so that instead of missing the boat, you find yourself on a cruise ship of opportunity.

                   c.       Grind it out - There is something to be said for plain old grit.  Understand that with the holidays and family pulling people in different directions it may be difficult but it isn't impossible.  Be determined to keep business going strong and make it fun through competition or other means.  Remember, sometimes a bit of elbow grease will get the job done.  Nothing takes the place of old fashioned hard work.

As always, my number is 602-670-3272.  Your referrals and business always makes me smile.