FHA, VA & Conv. Texas Mortgage Home Loans- Tommy's 2 Cents

Bank of America loses $2.24B as loan losses rise- GIVE ME A BREAK!

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Fri, 16 Oct 2009 11:56:51 -0500

ARE YOU FRIKKIN’ KIDDING ME????????

They’re the damn guys that took all of our money and bought out troubled Countrywide and Merrill Lynch! I mean honestly folks- HOW IN THE HELL DO YOU GET BILLIONS OF DOLLARS FROM THE GOVERNMENT and STILL lose money????

Since the Countrywide acquisition, I personally withdrew all my money from B of A and put it elsewhere. If someone’s gonna screw me, at least pay me for it!

Oh what's that? You say you're the "Bank of Opportunity"? Who's benefiting? Ken Lewis or my old .0000345% savings account?

Read the article below for more info.

—-

By IEVA M. AUGSTUMS, AP Business Writer

CHARLOTTE, N.C. – Bank of America Corp. said Friday it lost more than $2.2 billion in the third quarter as loan losses kept rising, providing further evidence that consumers are still struggling to pay their bills.

The nation’s second-largest bank said it wrote down loans on its books by almost $10 billion during the July-September period, up almost $1 billion from the second quarter. The bank also added $2.1 billion to its reserves to cover bad loans, bringing its provision for credit losses to $11.7 billion. The bank’s total allowance for loan and lease losses now totals $35.83 billion.

Bank of America’s results were aided by profit from investment bank Merrill Lynch, including income from bond, stock and currency trading.

Its earnings follow the pattern set earlier this week by Citigroup Inc. and JPMorgan Chase & Co., which also reported more loan losses during the third quarter as consumers struggled to keep up with their credit card and mortgage payments. And on Friday, General Electric Co. reported that its GE Capital business, which includes credit cards, saw an 87 percent drop in profits, although it was also weighed down by commercial real estate losses. Together, the reports depict a financial industry that is still deeply troubled.

Banks have predicted for some time that their loan losses would keep rising. And Bank of America’s CEO Ken Lewis confirmed that this trend continues.

“Based on (the) economic scenario, results in the fourth quarter are expected to continue to be challenging as we close the year,” Lewis said on a conference call with analysts.

Bank of America said it lost $2.24 billion, or 26 cents per share, after accounting for the preferred dividends of $1.24 billion. That compared with earnings of $704 million, or 15 cents per share, a year earlier.

Revenue in the quarter increased 33 percent to $26.04 billion.

The loss was 5 cents more per share than the 21 cents forecast by analysts surveyed by Thomson Reuters Inc. Investors sent Bank of America shares down 90 cents, or 5 percent, to $17.20 in morning trading.

“Obviously, credit costs remain high, and that is our major financial challenge going forward,” Lewis said in a statement accompanying the earnings report. “However, we are heartened by early positive signs, such as the leveling of delinquencies among our credit card numbers.”

During the analyst call, Lewis said the bank believes it may have peaked in total credit losses this quarter, “although the levels going forward will continue to be elevated and certain businesses will still experience higher losses.”

Bank of America is considered particularly vulnerable to unemployment, which climbed last month to 9.8 percent in the U.S. Economists predict the jobless rate will pass 10 percent in the coming months.

The bank’s massive portfolio of credit-card loans could help investors determine where the economy is headed and how well the industry at large will fare, said Doug Dannemiller, senior analyst at Boston-based research firm Aite Group.

“As unemployment rates are in the 10 percent range, the results on consumer lending aren’t going to improve until that number gets lower,” Dannemiller said.

The bank has about 53 million consumer and small business customers, making it vulnerable to delinquencies and defaults, yet also ready to thrive when the economy recovers.

Bank of America’s global card services unit loss widened significantly to $1.04 billion from $167 million a year ago.

The loss in the bank’s home loans and insurance division grew to $1.6 billion from $54 million a year ago, as credit costs continued to rise.

The bank, which being investigated by federal authorities for its Merrill acquisition, has received $45 billion in bailout funds as part of the Treasury Departments $700 billion financial rescue package. It’s not known when it will repay the government.

Lewis, who is retiring at year’s end, has agreed to give up his salary and other compensation for 2009.

(end of article)

Tags: bank of america, countrywide, foreclosure, scam

Update to a Previous Post- "Is FHA In Trouble"

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Sat, 10 Oct 2009 13:02:29 -0500

In a previous post of mine, I outlined a problem that FHA has been currently dealing with, and yesterday, on the front page of Yahoo, I found an article from the New York Times that gives a nice little update.

I wanted to repost it so please take a moment to read this (kinda lengthy), as its VERY important.

—-

U.S. Mortgage Backer May Need Bailout
by David Streitfeld and Louise Story
Friday, October 9, 2009

A year after Fannie Mae and Freddie Mac teetered, industry executives and Washington policy makers are worrying that another government mortgage giant could be the next housing domino.

Problems at the Federal Housing Administration, which guarantees mortgages with low down payments, are becoming so acute that some experts warn the agency might need a federal bailout.

Running questions about the F.H.A.’s future — underscored by interviews with policy makers, analysts and home buyers — came to the fore on Thursday on Capitol Hill. In testimony before a House subcommittee, the F.H.A. commissioner, David H. Stevens, assured lawmakers that his agency would not need a bailout and that it was managing its risks.

But he acknowledged that some 20 percent of F.H.A. loans insured last year — and as many as 24 percent of those from 2007 — faced serious problems including foreclosure, offering a preview of a forthcoming audit of the agency’s finances.

“Let me simply state at the outset that based on current projections, absent any catastrophic home price decline, F.H.A. will not need to ask Congress and the American taxpayer for extraordinary assistance — we will not need a bailout,” Mr. Stevens said in his testimony.

But to its critics, the F.H.A. looks like another Fannie Mae. The hearings on Thursday came on the same day that the federal agency charged with overseeing Fannie Mae and Freddie Mac provided a somber assessment of those giants’ health. In the year since the government stepped in to rescue them, the companies have taken $96 billion from the Treasury, and may need more.

Since the bottom fell out of the mortgage market, the F.H.A. has assumed a crucial role in the nation’s housing market. Created in 1934 to help lower-income and first-time buyers purchase homes, the agency now insures roughly 5.4 million single-family home mortgages, with a combined value of $675 billion.

In addition, these loans are bundled into mortgage-backed securities and guaranteed through the Government National Mortgage Association, known as Ginnie Mae. That means the taxpayer is responsible for paying investors who own Ginnie Mae bonds when F.H.A.-backed mortgages hit trouble.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” Edward Pinto, a former Fannie Mae executive, said in testimony prepared for the hearing. Mr. Pinto, who was the chief credit officer from 1987 to 1989 for Fannie Mae, went further than most housing analysts and predicted that F.H.A. losses would more than wipe out the agency’s $30 billion of cash reserves.

The issue has polarized Congress. Republicans, who led efforts to rein in Fannie Mae and Freddie Mac before those companies ran into trouble, are now seeking to bridle the F.H.A. Many Democrats insist the F.H.A. is playing a vital role in the housing market, which is only just starting to stabilize.

“F.H.A. has stepped into the void left by the private market,” Representative Maxine Waters, Democrat from California, said at the hearing. “Let’s be clear; without F.H.A., there would be no mortgage market right now.”

That was the case for Bernadine Shimon. Like many Americans, Ms. Shimon has recently been through some rough times. She lost a house to foreclosure, declared bankruptcy, got divorced and is now a single mother, teaching high school English in a Denver suburb.

She wanted a house but no lender would touch her. The Federal Housing Administration was more obliging. With the F.H.A. insuring her mortgage, Ms. Shimon was able to buy a $134,000 fixer-upper in August.

“The government gave me another chance,” she said.

The government is giving as many people as it possibly can the chance to buy a house or, if they are in financial difficulty, refinance it. The F.H.A. is insuring about 6,000 loans a day, four times the amount in 2006. Its portfolio is growing so fast that even F.H.A. backers express amazement.

For decades it was an article of faith that helping people of limited means like Ms. Shimon get a house was good for the new owner, good for the neighborhood and good for American capitalism. Then came the housing bust, which demonstrated that when lenders allowed people to buy houses they ultimately could not afford, it hurt the parties — while putting the economy itself in a tailspin.

In the aftermath of the crash, there is wide divergence on how easy, or how hard, it should be to become a homeowner. Skittish lenders are asking for 20 percent down, which few prospective borrowers have to spare. As a result, private lending has dwindled.

The government has stepped into the breach, facilitating loans with down payments as low as 3.5 percent and offering other incentives to stabilize the market. Real estate agents in some hard-hit areas say every single one of their clients is using the F.H.A.

“They’re counting their pennies, scraping up that 3.5 percent,” Bonni Malone of Prudential Americana in Las Vegas said. “Mostly they’re buying foreclosed homes from banks, although I had one client who bought from a guy that was dying. It’s turning around the market.”

While the government’s actions have helped avert full-scale economic disaster, there is growing concern that it might have doled out its favors with too generous a hand.

Many of the loans the F.H.A. insured in 2007 and last year are now turning delinquent, agency officials acknowledge. The loans made in those two years are performing “far worse” than newer loans, dragging down the whole portfolio, Mr. Stevens of the F.H.A. said in an interview.

The number of F.H.A. mortgage holders in default is 410,916, up 76 percent from a year ago, when 232,864 were in default, according to agency data.

Despite the agency’s attempt to outrun its fate by insuring ever-larger amounts of new loans to such borrowers as Ms. Shimon — the current rate is over a billion dollars a day — 7.77 percent of the portfolio is in default, up from 5.6 percent a year ago.

Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that the defaults were, in essence, worth it.

“I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”

The troubled loans are nevertheless weighing on the agency’s capital reserve fund, which has fallen to below its Congressionally mandated minimum of 2 percent, from over 6 percent two years ago.

The optimism expressed by Mr. Stevens, the F.H.A. commissioner, places him at odds not only with some outside experts but with Kenneth Donohue, the inspector general of the Housing and Urban Development Department, who is also F.H.A.’s watchdog. Mr. Donohue said the drop in reserves was “a flashing red light” that the agency was not taking seriously enough.

“It might be we’ll get ourselves out of this and that everything will be fine, but I don’t paint that rosy a picture,” Mr. Donohue said. “They’re banking on the fact that the economy will continue to improve, that the housing market will begin to sustain itself.”

He noted that if private lenders had raised their down payment requirements in the last two years, it raised the question, “what does the F.H.A. think it is doing by asking only 3.5 percent?”

Any more than that and Ms. Shimon, 45, would still be a renter. As it was, she cashed in her retirement savings account to come up with the necessary funds. She did not have enough to spare for closing costs, so her mortgage broker arranged a deal where the charges were wrapped into the loan at the cost of a higher interest rate. She cried when the deal was done.

The house was empty and trashed. Slowly, she is trying to bring it back to life. She spent the first few weeks picking up garbage in the backyard.

Is Ms. Shimon a good bet? Even she has no easy answer. Her mortgage payment, $1,100, is half of what she takes home every month. It is not easy to make ends meet. Teachers can get laid off like everyone else.

“The government,” she said, “is doing what it needed to do — taking a risk on people.”

Chaz Fullenkamp, an automotive technician in Columbus, Ohio, got an F.H.A. loan even though he was living on the financial edge. “If I got unemployed, I’d be wiped out in a month or two,” he says. Thanks to the F.H.A., however, he is better off than he used to be.

Mr. Fullenkamp used F.H.A. insurance to buy a house this spring for $179,000. The eager seller paid the closing costs and also gave Mr. Fullenkamp $2,500 in cash. He immediately applied for the $8,000 tax rebate. Even taking his down payment into account, he came out ahead.

“I knew in my heart I could not really afford the house, but they gave it to me anyway,” said Mr. Fullenkamp, 22. “I thought, ‘Wow, I’m surprised I pulled that off.’ ”

As the number of loans has soared, random quality control checks have decreased sharply, F.H.A. staff members say. Mr. Donohue, the inspector general, cited numerous examples of organized fraud in testimony to Congress earlier this year.

“They need to stop taking bad loans in the door,” he said in an interview. “They’re taking on all this volume, they have to have very active underwriting standards.”

Jack Healy contributed reporting from New York.

Is FHA in Trouble?

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Tue, 08 Sep 2009 16:27:43 -0500

Just this morning, I was reading an article that I came across regarding a couple things that are going on with the Federal Housing Administration (FHA)….and it wasn’t pretty.

Basically what’s going on right now is that there are justifiable rumors that the FHA’s reserves (capital) are hovering around dangerous levels.

Congress requires that the magic number FHA needs to be at is 2%. At the moment, its speculated to be down to about 3% (down from 6.5% in 2007) and if it falls below that mark, Uncle Sam has to come in and save the day once again. (Is it just me, or is this a never-ending cycle? Has anyone seen AIG’s stock quote recently?)

At the moment, FHA’s defaults (90 days+) are nearing 8% and depleting a good portion of FHA’s reserves. While that number may not seem that HUGE, you have to see how all this links together.

Several high-cost areas in the US got hit pretty hard the past couple of years. What goes up, must come down, right?

Well because of those declining markets, FHA decided to increase their loan limits and availability to accommodate the supply/demand in those areas. Who has $140,000 stashed under their mattress in CA to buy that $700,000 home? Not too many people. Well, who has around $25,000? Get the point?

And while this WAS needed to help stimulate buyers, you have to think of what happens on the flip-side. When that $5,000 (est) payment can’t be made anymore, and its time to jump ship, and who gets stuck with the bill? FHA.

FHA then has to tap into their reserves to make good on this.

Think about this for a moment:

In Texas, about 4-5 homes have to foreclose to match that ONE home in California. The odds of 4-5 consumers simultaneously defaulting is not that likely, unless they’re Madoff’s advisors.

The point I’m trying to make is that the high-cost areas are affecting FHA a little bit more than other more stable areas. While I am not saying that FHA lending shouldn’t be available here, I think it would be a good idea (especially now) to implement some more stringent measures before approving every Tom, Dick, and Harry that apply. Last thing we ALL want is to wave bye bye to FHA.

The remainder of the year will be quite interesting. An important incentive is coming to an end ($8k Tax Credit), and as for interest rates, well, let’s just hope they keep steady. Too many good things coming to an end is not a good thing.

Tommy’s 2 Cents

I would safely venture to say that FHA credit score requirements will be going up here in the upcoming months, as well as a larger down payments later down the line. While FHA loans have been the hot product, I wouldn’t be surprised to see Conventional loans start to SLOWLY creep back in and create a “2nd hand FHA loan” if capital continues to diminish as it has.

Remember what happened with Sub-Prime loans? High Demand, High Supply, POOF- they’re gone! History always repeats itself, let’s just hope we’ve learned our lesson the first time, and we don’t screw up FHA, especially for Dawson’s sake.

My Realtor Asked Me to Post This!

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Sat, 25 Jul 2009 15:22:08 -0500

In a recent email conversation with my Realtor this morning, we were discussing a mortgage lender that was advertising using a local county program that would front the buyer the $8k tax credit so they could use as a down payment.

He asked me to post my reply on AR, and would like some feedback and your opinions.

Here is my response:

I wouldn’t really say it’s a moral issue per say- just more of being conservative to avoid any disruptions in future mortgage availability. This was one of the main reasons DPA’s got outlawed, but this is a little different because the individual is using HIS/HER money back from the IRS to use as a down payment. Even though the TDHCA is fronting it to them, it just adds a reason to discontinue something good like FHA, and if FHA goes away, the market will crumble almost immediately.

There are already rumors that minimum credit scores for FHA may be increased to 660-680, which would limit even MORE potential buyers, and it’s things like this that propel these guidelines changes because there are more defaults. Like I said, I’m COMPLETELY on board for closing more deals, but I also believe in “you have to taste the sour to appreciate the sweet.”

I can kind of see why our company has been in business for so long and is in a great financial position, as opposed to other lenders out there that are struggling. They limit their risk and have a little more conservative approach when it comes to lending.

What essentially happens in the market depends on the status of the mortgage company (if they are a BROKER or a BANKER). If they are a broker, and do things like this, the LENDER that they send (broker) the loan to then assumes responsibility/risk for the loan that funds. If that loan defaults, Fannie/Freddie/FHA/VA calls that lender and requests a buyback, which makes the lender lose TONS of money. When that lender loses money, they risk going out of business, which means "less options" to a consumer.

The loan officer makes their commission and moves onto the next. They don’t really care.

A banker that funds a loan with DPA’s goes through the same thing for the most part- if loan goes bad and has to be bought back, they lose money as well. If it happens too much, warehouse lines get cut off, which essentially limits the options to the average home buyer as well.

What is the effect? Where’s the cost get passed on and to who?

Higher rates for consumer, higher lender fees, less product availability.

Less product supply = more consumer demand = a monopoly (of some sorts) on this type of program

Ex. Out of 4,000 lenders, 15 mortgage companies offer this. Those 15 can charge up-the-butt fees, higher rates, etc to the consumer because of less/no competition. Consumer may THINK he’s getting a deal, but they may be getting hurt more than helped, and the probability of default is higher due to higher mortgage payments/higher rate. It's just something that I believe can do more harm than good.

I’m going out on a limb here because I don’t know the full story, but I’m assuming this is why this specific relationship got temporarily discontinued with our company.

As for you closing more deals, I would not be offended if you wanted to send those people w/ no down payment to this girl so that they could utilize this program, but also know that they buyer can amend their previous returns themselves, get the money, and put the money down themselves.

The psychology behind the latter is better in my opinion.

By having bills on auto-pay, you don’t really “FEEL” that $500 credit card payment, but when you go to bank, pull it out, and send it in the mail, you feel it a little bit more. I believe that someone who FEELS they are buying a home, as opposed to “breezing on in” would take their payments more seriously.

Anyways, sorry to for writing a book, but once I start, it’s hard to stop.

Tommy

Dont Get Scammed by Loan-Mod Companies

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Mon, 20 Jul 2009 14:11:33 -0500

When the unemployment rate is near 10%, it’s really not hard to see why people may have a hard time paying their mortgage on time.

What do you do if YOU are one of those people? Where do you turn? Who do you call?

The point of this brief article is to direct you to a LEGITIMATE source that may be able to help you if currently in a financial bind.

First and foremost, do NOT pay attention to the majority of all these scam-atic loan mod companies. Over 178 Loan Mod companies are having the hammer brought down on them pretty frikkin’ hard, and it’s not going to be pretty when the dust will settle.

TBWS said it best - “…most loan mod specialists out there are a little more than failed loan officers… bottom feeders, sub-prime refi guys that went looking for the next quick buck when their market dried out.”

Jerry Brown, the current CA state AG, along with the FTC and 18 other various government agencies are going to rip these guys to shreds, and I’m going to enjoy every second of it.

I’ve come across several individuals (even one of my Realtors), that were facing foreclosure, and were almost duped by some “part-time” telemarketer promising them the “solution” to keeping their home…and world hunger…and the cure for AIDS…and (get my point?).

If you get a chance, please check out http://makinghomeaffordable.gov/eligibility.html and see if you are eligible for some help.

This, in my opinion, is one of the best solutions if you are looking into your options. Chances are if you contact your current lender, they will most likely refer you to Making Home Affordable themselves. I’ve heard a hell of a lot more success stories on with this program than any other one, and personally give them my stamp of approval.

Please take a moment to look around the site. You can even find a counselor in your area and see what advice/direction they can give you as well.

Tommy’s 2 Cents:

If you’re having trouble paying your mortgage and looking for an answer, be SKEPTICAL!

To MOST of these loan mod companies, you facing foreclosure is an IDEAL chance for them to capitalize. Best bet is to get in touch with your current lender and see what options are available to you…write them down… then sleep on it… then make a decision.

Tags: loan modification

Come on 7’s! Daddy Needs a New Home!

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Tue, 23 Jun 2009 07:33:30 -0500

Here’s an excerpt from one of my favorite movies, A Bronx Tale. Please follow closely:

Sonny: Get this over with, Mush.

Mush: Come on, dice. Baby needs a new pair of shoes. Come on, seven!

Mush: Come on! Come on, dice!

Sonny: I don’t even have to look.

(Spectator) And seven!

Mush: Craps! I’m out!

Sonny: Get him out of here! Man never hit a number in his life!

As we all have been following lately, rates have been pretty damn good. I mean REALLY DAMN GOOD. That was…until a week or so ago.

I was working with one of my clients and HIGHLY advised him to lock in his rate at 4.875% on a 30 Year Fixed (yes, ridiculous), however he decided not to because he wanted to "gamble" and see if they would get even lower. I mean ARE YOU KIDDING ME????

He is NOW at a 5.75%. (crickets chirping)

Ladies and Gentlemen- DO NOT END UP LIKE EDDIE MUSH (featured above) and crap out in this market!!! I cannot stress to you enough how important it is to secure a good rate in when you see it. I am coming across several people daily that REALISTICALLY expected rates to go down to the high 3’s because the media puts their dirty little paws on it, and in the end, they lose out on something great.

Would you listen to Al Roker talking to you about mortgage rates or me about weather? I really hope not.

The loan officers that are still here (you can tell who the seasoned ones are) are here for a reason. We have overcome the bad, study the market, and have a pretty good grasp on what’s going on.

Many feel that when the loan officer says “Mrs. Jones, you need to lock in,” it is mostly viewed as a sales pitch to get your commitment rather than advice, and many clients back off.

I mean this is normal. I can understand it and would probably do the same if I was on the othe rend.

Do this. Next time your loan officer does this, ask them “Why should I secure this rate Mr. Mortgage? And don’t tell me rates are going to go up. Explain WHY” and see what they say. If studdering occurs, move on to the next mortgage guy/gal. If they CAN advise you with detailed information, they’re a keeper!

In the end, it is only YOU that will win…or lose.

Tommy’s 2 cents

DON’T BE GREEDY!

Picking the "Right" Lender

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Mon, 18 May 2009 11:51:03 -0500

So, you’ve decided to buy a house?

GREAT DECISION, especially now since rates are super low and you can walk into plenty properties with some decent equity.

Ok, step 1 complete.

Next step, picking the right lender.

I’ve written several articles on this previously, but I will summarize countless hours of explanation into ONE sentence:

YOU WILL CHOOSE WHOEVER YOU FEEL MOST COMFORTABLE WITH.

It’s not rocket science. To some consumers, rates and fees are absolutely everything, and that is OK.

To others, discussing their loan parameters and figuring out WHY they should go on a 15 year mortgage vs. a 30 year makes more sense- a financial plan if you will. Ask most people why they went on the loan program that they did, and see what their response is.

Everyone is different. Remember, you are the one hiring the loan officer to do your loan. The questions that you need to ask yourself are:

1. “Why am I hiring this person?”
2. “What has he/she done for me so far?”
3. “What do you expect from him/her, and vice versa?”
4. "Has the loan officer asked what's important to ME during the loan?"

Tommy’s 2 Cents:

Would you pay a CPA double what another CPA would charge if they saved you an additional $5,000 off your taxes?

Would you have a fresh-out-of-med school perform heart surgery on you to save a few thousand on the costs?

Would you hire ME or Johnny Cochran to represent you in a criminal trial?

Get the point?

In any profession, what you ultimately pay more for is knowledge.

Tags: austin, dallas, Houston, lender, mortgage, mortgage rates houston, san antonio, texas

Should You Use Your $8,000 Tax Credit as Your Down Payment?

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Sat, 16 May 2009 13:56:14 -0500

So there has been a lot of rumors regarding the $8000 first time home buyer tax credit and that it can be used as a down payment for a new home with an FHA loan.

At first, I thought it was just another “mortgage scam”. Trust you me, the real mortgage industry always leaves room for the next “million-dollar-idea”. If you pay close attention, you may even end up seeing your next door neighbor on the 6 o’clock news getting caught for selling “ARMS” from the back of his van in a dark alley.

After doing a little bit of research to see the legitimacy of this rumor, I ended up finding the official HUD Mortgagee Letter 2009-15.

Who Can Offer It

Let’s begin with who can offer this “loan” on a loan. (Is that a conundrum?)

According the letter, Federal, state, local governmental agencies, non-profit governmental subsidiaries, and FHA-Approved nonprofits will be able to offer this to home buyers.

How It Works?

Essentially, this is a bridge loan. You are borrowing this money for a short amount of time until you get your tax credit, and then it is paid back to these agencies.

What happens is you are taking out a second lien on your home, and that amount CANNOT be more than:

Down Payment + Closing Costs + Pre-Paid Expenses

Here is a list of some more facts on how this works:

1.) You cannot get any cash back at closing.
2.) You will have a deadline to pay this money back, and if you do not, principal and interest will begin automatically. (What a concept!)
3.) If payments are required, it will be calculated as a monthly liability when qualifying for the loan.
4.) If payments are deferred, it must be for at least 36 months and will not be used against you when qualifying.

I cannot stress to you enough -BE VERY CAUTIOUS with this type of transaction. It leaves so much room for deception, and if you end up in the wrong hands, you may kiss your $8k tax credit goodbye very fast!

While it may bring an influx of new potential buyers to Realtors and open a lot of doors to potential buyers, it is a double-edged sword and I do not particularly agree with it. In my opinion, it can do more bad than good and is basically bringing back “100% financing” and that is part of what has caused the “Mortgage Meltdown”.

I would suggest stopping and thinking as to why many down-payment assistance programs went bye-bye towards the end of 2008. It was simply because more buyers defaulted on those types of loans. The LAST THING we need is the Federal Housing Administration (FHA) getting into financial issues.

Tommy’s 2 Cents:

Use it IF you absolutely HAVE to. The $8,000 is yours one way or another.

Identity-of-Interest Transaction Down Payments

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Thu, 14 May 2009 09:24:43 -0500

An Identity-of-Interest transaction is where a sales transaction is made between parties with family/business relationships.

To break it down very simply, and this is USUALLY always the case, when a family member sells to ANOTHER family member, FHA looks at that as an Identity-of-Interest Transaction.

I get at least 1-2 calls per month with this scenario, and want to post it on my mortgage blog to educate YOU, the consumer.

So even though FHA has a minimum down payment requirement of 3.5%, in THIS case, you would have to put down 15% percent.

Here is ONE of the exceptions to this rule:

1. The family member has rented the property for at least 6 months predating the contract, in which case a rental agreement will be needed.

If you are in this type of situation and do not have the 15% to put down, feel free to contact me for more info and some other tips that may help you out!

What Happened? You Told Me I Was Approved!

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Fri, 03 Apr 2009 08:36:55 -0500

Just the other week, I had an associate tell me that he felt like jumping off a bridge!

“Why the leap of faith, ” I ask.

After 10 minutes of rambling on how he spent 3+ months working on this couple that finally saved up enough money to buy their first home and at the VERY end, had the financing entirely fall apart, he finally came clean and said, “Tommy, I didn’t look at the tax returns. I screwed up bad.”

You bet these people’s house you didn’t, my friend!!!

For all of you “soon-to-be-buyers”, you need to understand how your income is magically deciphered when looked at by mortgage underwriters. It’s not rocket science, but did you know that your Adjusted Gross Income (AGI) can quickly change if not accounted for properly?

Say you are a W-2 employee with a base salary of $65,000 a year. Well to the average mortgage guy, they take that figure, divide by 52 (weeks in year), and multiply by 4 (weeks in month) to come up with a gross monthly income ($5,000) for you to qualify off of.

Bingo, Bango, you’re APPROVED for that $150k home you fell in love with on Saturday!

Not so fast.

What is that you say? You deducted $5k in gas expenses and $1k in cell phone charges (900 numbers apply), in which your employer did not reimburse you on these business expenses? Well believe it or not, that figure is now SUBTRACTED from your AGI (Adjusted Gross Income-shown on page 1 of your IRS FORM 1040) and now the Loan Approval has to be completely reworked.

If you don’t know what a 1040 is, either you’re reading this in jail or new to the country. Welcome! Dance of Joy time!

Well what the 1040 basically shows is the amount that you made in that calendar year, however, it can be increased or decreased depending on the rest of your tax schedules.

This is where our “Mortgage Wizard” went wrong!

99% of lenders these days will order your tax returns prior to closing, and if anything like this pops up and screws up your original approval, stick a fork in the loan, you’re done with!

So what’s the moral of the story?

2 things:

Make sure to give your tax returns (last 2 years) to your loan officer and make sure you reference this article so this doesn’t happen to YOU.
If you are planning on buying a house in the near future, don’t deduct as much as you normally do tax time. While it’s a great feeling getting a nice fat check back, it’s an even better feeling owning a home.

Hitting a Home Run with the HomePath Program

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Mon, 16 Mar 2009 10:20:49 -0500

When I first read about this program, it struck me as kind of odd and out of place. It actually reminded me of those Sub Prime email blasts that many loan officers used to get. Remember those?

- 100% Financing
- NO Credit Score- OK
- NO Job- OK
- NO Heartbeat - OK!

The first sound I emitted was, “Waa Waa Wee Wah!”

Fannie Mae put into effect a new program last month, and is entirely designed for people that are buying REO’s (Real Estate Owned) from Fannie Mae directly. Simply put, when someone goes into foreclosure, many times the bank will buy back the property and are looking to sell these things as fast as they can because they don’t want their “books to get cooked.”

Couple this with a slow housing market, repeat episodes of “Flip This House”, and a dash of paprika, and you’ve got yourself the HomePath program!

So what’s in it for you? Let’s take a look.

For starters, there is NO appraisal or Mortgage Insurance is needed on these types of transactions which can definitely save you some money up front, and thousands throughout the life of the loan. How sweet is that?!

So far, so good…really good! Listen, it gets better…

The minimum down payment is only 3% which can allow several more borrowers such as yourself to get into these properties. Also, if you don’t have enough money for closing costs, HomePath will allow seller contributions up to a full 6% if needed.

Another really neat thing is that there are easier approvals on this program. What I mean by that is even though you have to meet the standard guidelines (620 score, document income, etc), approval types are usually broken up into 3-4 categories. These days, 99% of lenders are accepting only 1; with HomePath, they are accepting ALL types. Bada Bing!

Now before I get blasted in 2011 for promoting this, for the record, I hope this program stays under close watch in the beginning stages because lenders could quickly fall into the hole they are slowly digging themselves out of. Remember, loosey goosey loan programs are what got us in this mess in the first place!

If you’re interested in looking more into this, I would be happy to go over the HomePath program with you. Also, make sure and do your own due diligence with some Full-Time Realtors that specialize on REO’s.

Happy Hunting!

Mortgage Tip of the Day- Calculating Overtime and Bonus Income

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Thu, 26 Feb 2009 10:30:35 -0600

When trying to calculate OVERTIME and BONUS income, its a little confusing.

Here’s how it works:

1. You must provide a minimum of at least 24 months of overtime in order for us to count it for income.
2. If on your current paystub it shows less than the previous 2 years of overtime, we can only use the YTD (Year-to-Date) Average; the most conservative approach.

Here’s a quick example:

If you made $20,000 in overtime in 2007, $50,000 in 2008, and $800 in 2009 YTD so far, we can only use $400 (the average since we are in February).

Now listen closely. If your overtime DECLINED in the past 2 years, this will have to be reviewed and is subject to review by the underwriter.

Make sure you catch all this stuff in the beginning if it applies to you when qualifying for a home loan, because if not done correctly, it can cause some EXCRUCIATING HEADACHES later on.

J.P. Morgan and Citigroup Pause Foreclosures

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Sun, 15 Feb 2009 10:31:57 -0600

On Friday, Citigroup and J.P. Morgan Chase said that they would temporarily hit the “Pause Button” on foreclosures.

Out of the $350 billion that is left, $50 billion of the last year’s bailout plan is going to be used to buy some time for homeowners that are currently having trouble paying their mortgage payments. This is definitely good news, because even I am guilty of criticizing the disbursement of these funds. It’s kind of like the “Hunt for Osama”. It was hot for the first few months, then everyone forgot about, so I am very glad to see that FINALLY this money is being put to good use.

Personally, I have heard so many clients that are being SCREWED (Escrow money being overcharged, incorrectly calculated, double payments put into effect, no negotiation of terms available, etc) by their current mortgage, its unbelievable! Mark my words, REGULATION AND PROPER EXECUTION of this will be the ONLY way this is going to work, unlike several false promises that have been given to millions of Americans this past year.

So what Obama plans to do is make each homeowner pass an affordability test. This, to the public’s knowledge so far, is not going to be a complicated thing. As long as the homeowner shows that he/she can make enough money to afford some sort of payment plan with the mortgage company, they should be in good hands.

Barney Frank, House Financial Services Committee chairman, requested that a suspension of activity (moratorium) be set in place until the new plan is finalized in the upcoming weeks, and expects that at least 90% of banks will follow suit to help the housing crisis.

Ready? Set? CHANGE!

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Thu, 05 Feb 2009 18:52:26 -0600

It looks like 2009 has started off in a very exhilarating fashion, I’m sure you would agree.

We have our first African American president, Larry Flynt is asking for a $5 billion PORN bailout , Bernie Madoff got caught with his hand in a $15 billion cookie jar, and of course the Steelers won a very “action packed” SuperBowl.

So where does this leave us and what should you expect in ‘09?

Well, for starters, Obama’s proposed $900 billion Stimulus Plan is still being negotiated in Senate, and from the way it looks, it’s going to pass. Many are wanting to know the dynamics of what this plan is, so I wanted to outline a couple of the top points you may be interested in:

1. Instead of $7,500, a $15,000 Tax Credit to First Time Home Buyers. This is still in the works, but looks good on getting approved.

2. Tax relief to those with middle, and low incomes, in order to restore consumer spending and confidence.

3. $1,500+ tax break to car buyers to get them back in the showrooms

4. Specific measures to relieve financial institutions of their troubled assets. (Where did the “The Bailout” money go last year?)

5. Defined tax breaks for businesses, especially those which encourage them to reduce their debt.

Now I slightly recall a $700 billion Wall Street Bailout plan that passed and that did NOT go the way it was supposed to, yet we’re still paying for that tab.

So where you stand on this? Is the US just writing blank checks to solve problems, or is the “Change” we’ve been waiting for?

Very Crazy Week for Mortgage Rates

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Fri, 30 Jan 2009 12:33:27 -0600

Rates are up, rates are down… they are even going left and right. What should YOU do?

Freddie Mac VP, Frank Nothaft said that rates were holding steady.

Well Franky my man, I disagree. Yes they may have held steady considering the economic reports that were coming out, but they DEFINITELY were moving. Maybe he was talking about the Fed Funds rate that stayed 0-.25%.

2 days ago, FHA rates were at 5%, now they are creeping up to 5.75%+.

How is that steady?

Yesterday the Fed bought around $16.8 billion in mortgage backed securities. You would think this would help mortgage rates, but completely the opposite. At one point yesterday, MBS was down about 98 basis points. To all Realtors reading this, it may be a good idea to understand and explain to your clients that rates change multiple times daily. Create and propel action.

Hopefully everyone has been taking advantage of the rates while they were as low as they were, but now I’m predicting a slow, but steady increase within the next 3 months.Obama is settling in, all the hub bub has passed, and all the uncertainty dust is settling.

Now is the best time to have a mortgage consultant watching the market DAILY and letting you know whats going on. One bad decision can cost YOU thousands in the long run.

To bottom line it, just take advantage while these low rates are still here. They may be gone tomorrow.

Realtors- You need to push this to get clients off the fence!

Prospects- Don't be greedy waiting for that magical 3.5% mortgage. It's not gonna happen!

FHA Fact of the Day

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Tue, 20 Jan 2009 09:29:16 -0600

Do YOU know WHO is actually eligible for an FHA Loan?

Here’s the skinny:

1. Any U.S. Citizen with a valid U.S. Social Security Number

2. Any Permanent Resident Aliens

3. Any Non-Permanent Resident Aliens, provided they:

Have a valid SSN
Are eligible to work in the U.S.
Occupy the property as a principal residence
If temporary residency status will expire within one year and a prior history of residency status renewals exists, the lender may assume continuation will be granted.

4. Inter vivos or “living” revocable trusts, provided the individual borrower:

Remains a beneficiary of the trust
Occupies the property as a principal residence

Also, if you’re a spy or work covert operations and have diplomatic immunity, no dice OR FHA loan for you. Sorry!

Take Advantage of Your 2008 Tax Credit NOW!

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Mon, 19 Jan 2009 16:24:21 -0600

If you have bought, or are planning to buy a home, DO IT BEFORE July 1, 2009.

I have posted a previous post to this, but wanted to remind everyone in case you “forgot.” Click here to find out more.

Here’s an example of why you should take advantage of this :

Say you buy a home and take out a 30 Year Fixed Loan for $100k at 5.5%.

At year end, when you do your taxes, you’ll end up getting your tax credit of $7,500. Take that money and run… to a “non-failing” bank of course. Don’t touch it; just leave it in there. You with me so far?

Ok, so the payment on your home should be around $565. Well, take that $7,500 bucks that Uncle Sam just forked over, and use it to pay your mortgage! Easy enough, right???

Yes, you will actually have a 0% INTEREST HOME LOAN for approximately 13 months! Just like Robin Hood stole from the Rich to give to the poor, well you are essentially paying Uncle Sam back with his own money.

If you think about it, it’s an offer that you can’t refuse!

FHA Loans and Credit Counseling

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Mon, 19 Jan 2009 14:01:39 -0600

Here’s a quick guideline check for individuals that are currently in a Credit Counseling Program.

1. Must be in the plan for at LEAST 12 months

2. Must show history of payments for the 12 months, along with all creditors that are included

3. Must get permission from the counselor to enter into a new mortgage

In a way, this is much like a bankruptcy- and lenders view it as one! In my opinion, I would not enter a program such as this if it was not ABSOLUTELY NECESSARY.

SubPrime Greed or Governmental Ignorance?

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Thu, 15 Jan 2009 21:50:32 -0600

I have voluntarily stopped watching news. Seriously.

What can CNN, FOX News, or even your local news tell us that we haven’t seen, or better yet, experienced first hand in this wild real estate market the past year or so?

Absolutely nothing!

If I wanted negativity, I would ask my Uncle Frank how his prostate is holding up.

All we hear is Foreclosure this, Subprime and Predatory Lending that, and geez if I hear the word “Recession” one more time, I’m going to stop what I’m doing, catch the first canoe out, and start a fruitful career as a monk in the West Indies.

Who’s to blame? A LOT of different people in different places.

The main point of this article is to show you why we didn’t even NEED Subprime loans to begin with, and how we could have altogether avoided a good chunk of the mess we’re digging ourselves out of now by having more skilled, licensed, and knowledgeable mortgage professionals well versed with an FHA loan.

Read closely. I write “skilled, licensed, and knowledgeable.”

Millions of borrowers signed on the dotted line for a Subprime loan when in fact it wasn’t even necessary to qualify in the first place.

Here’s why.

Subprime loans were designed to qualify buyers who didn’t “traditionally” meet the standard criteria to qualify for a mortgage. Usually the ideal candidate had credit that was dinged, late pays on accounts, not a lot of money in the bank, etc.

The main one, in my opinion, was credit score. Believe it or not, I remember you could get a house if you had a 500 score, and the kicker was, you didn’t even need to PROVE income! How ridiculous is that?

So the best way to understand this is put yourself in the shoes of a Realtor, a Loan Officer, the Broker, the Banker, the Appraiser, the Title Company, Wall Street, Investors, Surveyors, Inspectors, so forth and so on.

As you can see, it’s not just a few people that were profiting from these types of loan. Why would somebody mess up a good thing? Everyone was making money!

So my next question is:

If I told you that I had $100 in one hand, but I can hand you $75 right now, what would you tell me?

“Buddy, I’m right here. Fork it over!”

Now if I told you I had $100 in the other hand, but I would agree to give you $10 a month for the next 10 months, what would you tell me then?

“Um, I’ll take option 1… and now please!”

Think about that one.

Anyone can argue that the supply/demand curve in that type of market would not sustain my 2 questions above. It’s just like poker. “Push all in when you have the best hand.”

But that is what got us in trouble.

This brings me to FHA Financing. (This isn’t NEW by the way)

We, as “mortgage professionals”, could of easily taken hand #2, slow and steady, giving our clients BETTER RATES, getting paid MORE COMMISSION, and not giving an Oak tree a $750,000 Stated Mortgage Loan.

Most took hand #1. Most of those folks are now broke, and working at a retail banking center making 20% of what they WERE making back then. Their bills are still the same.

The Federal Housing Administration (FHA) was created by Congress in 1934 when the housing industry was hurting- kind of like how it is now. The main purpose of it was to fuel the “American Dream” as back then, the US was mostly a nation of renters.

So why is it that all these mortgage brokers and bankers were originating Subprime loans this whole time when FHA was available? Was it greed or ignorance?

The answer is BOTH, but mostly IGNORANCE.

During the Subprime days, any Joe Shmoe could graduate from Jack in the Box University (nothing against Jack- I love him), easily get their loan officer’s license, get BEGGED by a mortgage company to start (if you could leave fog residue on a mirror by breathing on it, you were HIRED!), and begin originating loans with absolutely NO experience or training.

The problem was that most of these mortgage brokers weren’t any smarter either!

All the brokers knew was Subprime.

They were letting these people ADVISE CLIENTS ON THEIR BIGGEST DEBT OF THEIR LIFE!!!! Can you believe that?

They sold easy stated income loans that required less work and never did their homework on educating the clients. It was easy money and it was FAST money.

Now, I think if these guys were not ignorant to begin with, their greed would have actually BENEFITED the real estate industry.

How you ask?

Super simple.

Well during the dark age of Subprime lending, a typical Subprime loan would either be on a 30 year fixed or Adjustable Rate Mortgage (ARM) with interest rates ranging from 7.5% to 12%. Of course the higher the rate, the more commission the lender pays to the loan officer. On average, loan officers would make between 1%-2% in commission, but give rates that sucked! An FHA loan on the other hand can pay a mortgage broker/mortgage banker the same if not DOUBLE what a Subprime loan would pay, except that the rate would be in the 5%-6.25% range back then!

Lower payments, less foreclosures, DOCUMENTED income, etc. It wouldn’t SOLVE the crisis, but would have definitely cushioned the real estate fall.

So why didn’t mortgage brokers and bankers originate FHA loans?

1. Because they didn’t know about FHA or didn’t know how to originate them
2. Because most loan officers were self employed contract employees and FHA only allows for W2 employees, or
3. Because their mortgage broker or banker was not licensed to originate FHA loans.

Today’s FHA mortgages are yesterday’s Subprime mortgage. Or is it today’s FHA mortgages SHOULD have been yesterday’s FHA mortgage? With fewer options left these days, people are running in droves to FHA financing, but be careful. LEARN FROM PAST MISTAKES. The exact same can happen with FHA if not regulated properly.

The lesson learned (what I preach): Knowledge goes a long way in this industry.

For buyers reading this article, please make sure that your mortgage representative knows this business! Make sure they are not just another Joe Shmoe trying to make an extra quick buck without truly earning it.

Oh Realtor, Where Art Thou Business?

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Mon, 12 Jan 2009 18:08:57 -0600

This past weekend, I had a pretty eye-opening experience with one of my newest Realtors .

It was a nice brisk Friday evening in Houston (very rare), and we had set up a time to go grab a cup of coffee and talk about her 2009 Game Plan for adding more buyers to her pipeline. She does mostly listings, and when we were chatting a few days prior, I offered to see what I could do to help her- A robust culmination of brainstorming and recommendations if you will. :)

So... I sat there sipping on my Venti Hazelnut White Mocha Frappuccino (light ice, no whip) listening to what she was telling me and after about 20 minutes, I began to think how this woman was even in business to begin with! As I "tactfully" slid in some suitable options for her, it was so hard to believe that someone so stubborn of accepting new ideas and implementing them into a strategy to better help their own business and financial situation actually ended up insulting ME in some ways at the end of the meeting. I mean, I'M the one that took out time to help HER, and I get the sh*t end of the stick??? Come again?

After 3 hours of listening to her scattered thoughts and some slight Starbucks indigestion, I decided to call it a night, shook her hand, and said I would be in "touch". Yah right!

Now you're probably thinking I insulted the poor woman, however, it was quite the opposite. In 2008, she closed 2 buyer transactions, and had 6 listings- do YOU see any room for improvement? A thank YOU!

She claims that she has been following this "system with guaranteed results" for the past 5 years, but in researching her performance online through HAR, I know she's not a big hitter- and that's PERFECTLY fine! I'm simply here to give advice and recommendations- nothing more, nothing less.

I say spend a little bit more money advertising in the areas that will get you the most return, she claims Greensheet is the best thing since sliced bread.

But don't sit there and play the damsel in distress, have the clock strike midnight, then attack me Mrs. Jekyll!

In ANY business you are in, there are 2 main rules you should follow and this is what I teach to all the Realtors that I work with:

1. If you don't KNOW the numbers, you can't GROW the numbers, and

2. If you treat your business like a hobby, it will PAY you like a hobby

So with this being said, no harm, no foul I guess. Just a waste of a Friday night I could of REALLY used to unwind.

Sorry, just had to vent!

203(k) Q & A's Straight From HUD

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Mon, 12 Jan 2009 12:28:42 -0600

Here is a cool list of Q & A's I found on HUD. Hope it helps!

1. Is there a secondary mortgage market for Section 203(k) mortgage loans? Yes. The Government National Mortgage Association (GNMA) permits the Section 203(k) mortgage to be placed in both GNMA I and II pools with Section 203(b) mortgages. GNMA accepts the 203(k) mortgage once it has been endorsed by HUD. The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) will also purchase a Section 203(k) first mortgage.

2. Is the Section 203(k) program restricted to single-family dwellings? No. The program can be used for one-to-four unit dwellings. Maximum mortgage limitations are the same as for properties under Section 203(b).

3. Can Section 203(k) be used to improve a condominium unit? Yes, however, condominium rehabilitation is subject to the following conditions:

A. Owner/occupant and qualified non-profit borrowers only;

B. Rehabilitation is limited only to the interior of the unit. Mortgage proceeds are not to be used for the rehabilitation of exteriors or other areas which are the responsibility of the condominium association, except for the installation of firewalls in the attic for the unit;

C. Only the lesser of five units per condominium association, or 25 percent of the total number of units, can be undergoing rehabilitation at any one time;

D. The maximum mortgage amount cannot exceed 100 percent of after-improved value. After rehabilitation is complete, the individual buildings within the condominium must not contain more than four units. By law, Section 203(k) can only be used to rehabilitate units in one-to-four unit structures. However, this does not mean that the condominium project, as a whole, can only have four units or that all individual structures must be detached. Example: A project might consist of six buildings each containing four units, for a total of 24 units in the project and, thus, be eligible for Section 203(k). Likewise, a project could contain a row of more than four attached townhouses and be eligible for Section 203(k) because HUD considers each townhouse as one structure, provided each unit is separated by a 1 1/2 hour firewall (from foundation up to the roof). Similar to a project with a condominium unit with a mortgage insured under Section 234(c) of the National Housing Act, the condominium project must be approved by HUD prior to the closing of any individual mortgages on the condominium units.

4. Can Section 203(k) be used to convert a one family dwelling to a two-, three-, or four-family dwelling (or vice versa)? Yes.

5. Can Section 203(k) be used to move an existing house onto another site? Yes, however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation. At closing, funds would be released to purchase the site and the rest of the mortgage proceeds would be placed in the Rehabilitation Escrow Account. The borrower would have the site prepared to accept the dwelling. The first release would be based on the improvements made to the site, including the installation of the existing structure on the new foundation.

6. What is the minimum amount of rehabilitation required for a Section 203(k) mortgage? There is a minimum $5,000 requirement for the eligible improvements on the existing structure on the property. Minor or cosmetic repairs by themselves are unacceptable; however, they may be added to the minimum requirement.

7. What eligible improvements are acceptable under the $5,000 minimum requirement?

A. Structural alterations and reconstruction (e.g., repair or replacement of structural damage, chimney repair, additions to the structure, installation of an additional bath(s), skylights, finished attics and/or basements, repair of termite damage and the treatment against termites or other insect infestation, etc.).

B. Changes for improved functions and modernization (e.g., remodeled bathrooms and kitchens, including permanently installed appliances, i.e., built-in range and/or oven, range hood, microwave, dishwasher).

C. Elimination of health and safety hazards (including the resolution of defective paint surfaces or lead-based paint problems on homes built prior to 1978).

D. Changes for aesthetic appeal and elimination of obsolescence (e.g., new exterior siding, adding a second story to the home, covered porch, stair railings, attached carport).

E. Reconditioning or replacement of plumbing (including connecting to public water and/or sewer system), heating, air conditioning and electrical systems. Installation of new plumbing fixtures is acceptable, including interior whirlpool bathtubs.

F Installation of well and/or septic system. The well or septic system must be installed or repaired prior to beginning any other repairs to the property. A property less than 1/2 acre with a separate well or septic system is not acceptable; also, a property less than 1 acre with both a well and a septic system is unacceptable. Lots smaller than these sizes, usually have problems in the future; however, the local HUD Field Office can approve smaller lot size requirements where the local health authority can justify smaller lots. The installation of a new well or the repair of an existing well (used for the primary water source to the property) can be allowed provided there is adequate documentation to show there is reason to believe the well will produce a sufficient amount of potable water for the occupants. (A well log of surrounding properties from the local health authority is acceptable documentation.) Refer to HUD Handbook 4910.1, Appendix K, for additional information.

G. Roofing, gutters and downspouts.

H. Flooring, tiling and carpeting.

I. Energy conservation improvements (e.g., new double pane windows, steel insulated exterior doors, insulation, solar domestic hot water systems, caulking and weather stripping, etc.).

J. Major landscape work and site improvement (e.g., patios, decks and terraces that improve the value of the property equal to the dollar amount spent on the improvements or required to preserve the property from erosion). The correction of grading and drainage problems is also acceptable. Tree removal is acceptable if the tree is a safety hazard to the property. Repair of existing walks and driveway is acceptable if it may affect the safety of the property. (Fencing, new walks and driveways, and general landscape work (i.e., trees, shrubs, seeding or sodding) cannot be in the first $5000 requirement.)

K. Improvements for accessibility to a disabled person (e.g., remodeling kitchens and baths for wheelchair access, lowering kitchen cabinets, installing wider doors and exterior ramps, etc.). Related fixtures such as new cooking ranges, refrigerators, and other appurtenances, as well as general painting are also eligible; however, it must be in addition to the $5,000 requirement.

8. Can a detached garage or another dwelling be placed on the mortgaged property? Yes, however, a new unit must be attached to the existing dwelling, and must comply with HUD’s Minimum Property Standards in 24 CFR 200.926d and all local codes and ordinances.

9. Is there a time period on the rehabilitation construction period? Yes, the Rehabilitation Loan Agreement contains three provisions concerning the timeliness of the work. The work must begin within 30 days of execution of the Agreement. The work must not cease prior to completion for more than 30 consecutive days. The work is to be completed within the time period shown in the Agreement (not to exceed six months); the lender should not allow a time period longer than that required to complete the work.

10. What happens if the borrower fails to perform under the terms of the Agreement? The lender may refuse to make further releases from the Rehabilitation Escrow Account. The funds remaining in the Account can be applied to reduce the mortgage principal. Also, the lender has the option to call the mortgage loan due and payable.

11. Does the rehabilitation construction have to comply with HUD’s Minimum Property Standards? Yes. The improvements must comply with HUD’s Minimum Property Standards (24 CFR 200.926d and/or HUD Handbook 4905.1) and all local codes and ordinances.

12. Can Section 203(k) be processed under the Direct Endorsement program? Yes. Direct Endorsement Lenders are required to attend special training prior to processing 203(k) loans and they must submit test cases as determined by the local office.

13. Does HUD always require a contingency reserve to cover unexpected cost increases? Typically, yes. On properties older than 30 years and over $7,500 in rehabilitation costs, the cost estimate must include a contingency reserve. The reserve must be a minimum of ten (10) percent of the cost of rehabilitation; however, the contingency reserve may not exceed twenty (20) percent where major remodeling is contemplated. If utilities were not turned on for inspection, a minimum fifteen (15) percent is required.

14. How many draw releases can be scheduled during the rehabilitation period? As many as five releases (four plus a final) can be scheduled. The number of releases is normally dictated by the cash-flow requirements of the contractor. An inspection is always required with a scheduled release; however, inspections may be scheduled more often than releases if necessary to ensure compliance with the architectural exhibits, HUD’s Minimum Property Standards and all local codes and ordinances. If the cost of rehabilitation exceeds $ 10,000, then additional draw inspections may be authorized under certain circumstances.

15. Can the architectural exhibits, including the cost estimate, be modified after the mortgage loan is closed? Yes. The changes must be approved by HUD or a DE lender prior to beginning the work. If the change affects the health, safety or necessity of the dwelling, the contingency reserve can be used to pay for the change. However, if the health, safety or necessity of the dwelling is not affected and an increase in cost occurs, the borrower must apply monies into the contingency reserve fund to pay for the change. Should the change result in a reduced cost of rehabilitation, the difference will be placed in the contingency reserve fund; if unused, it will be applied as a mortgage prepayment after completion of construction.

16. What happens if the cost of the rehabilitation increases during the rehabilitation period? Can the 203(k) mortgage amount be increased to cover the additional expenses? No. This emphasizes the importance of carefully selecting a contractor who will accurately estimate the cost of the improvements and satisfactorily complete the rehabilitation at or below the estimate.

17. How long will it take after the sales contract is signed to go to closing? If the cost estimates are completed within two weeks of signing the sales contract, the loan should close within 60 to 90 days, assuming there are no title problems and, of course, your borrower is qualified.

18. Can a Section 203(k) mortgage be an Adjustable Rate Mortgage? Yes. An Adjustable Rate Mortgage is available to an owner-occupant only. Investors and non-profits are not eligible for an ARM.

19. Does a Direct Endorsement lender who is approved for the 203(k) program need to be approved in another HUD office? No. However, the lender needs to submit their approval to the other HUD office where they wish to originate 203(k) loans. A preclosing review in the new HUD office will not be necessary.

20. Can a DE lender sponsor a correspondent lender to originate 203(k) loans? Yes. The correspondent lender can even use the DE sponsor’s staff appraisers, inspectors and plan reviewer /consultants for processing.

21. Can an investor use the 203(k) program? No. In October, 1996, the Department placed a moratorium on investor participation in the 203(k) Rehabilitation Mortgage Program.

22. Can a local government agency or a nonprofit organization use the 203(k) program? Yes. The same qualification requirements will be used as for an owner-occupant of the property

23. Can mortgage payments (PITI) be included in the mortgage? Yes. Up to six months of payments may be included in the mortgage if the property is not occupied during the rehabilitation period.

24. Can a six (or more) unit building be done using the 203(k) program? No. However, the building could be renovated and reduced to a four unit building.

25. Can a dwelling be converted to provide access for a disabled person? Yes. A dwelling can be remodeled to improve the kitchen and bath to accommodate a wheelchair access. Wider doors and handicap ramps can also be included in the cost of rehabilitation.

26. Is a contractor required to do the work? No. However, if the borrower wants to do any work or be the general contractor, they must be qualified to do the work, and do it in a timely and workmanlike manner. It is very important that the work be done in a time frame that will assure the completion of the work that will be agreed upon in the Rehabilitation Loan Agreement (signed at closing). A borrower doing their own work can only be paid for the cost of the materials. Monies saved can be allocated to cost overruns or additional improvements.

27. If the borrower does the work, how is the cost for work estimated? The cost estimate must be the same as if a contractor is doing the work, in case the borrower cannot (for some reason) complete the work.

28. Can cost savings on the rehabilitation be given back to the borrower? No. However, the savings can be transferred to cost overruns in other work items or can be used to make additional improvements to the property If the cost savings are not used, the money must be applied to the mortgage principal, but the mortgage payments will remain the same, because the loan has already closed. To use the cost savings, it will be necessary for a Change Order to be completed and approved by the lender.

29. Can any rehabilitation money be paid upfront to offset the startup costs for the contractor? No. However, an exception can be allowed for kitchen and bath cabinetry, or floor covering, where a contract is established with the supplier and an order is placed with the manufacturer for delivery at a later date.

30. Is there anyone available who can prepare the Work Write-up and cost estimates? Yes. HUD allows fee inspectors to be an independent consultant with the borrower. This is a time saver, because it can be completed in about two weeks. After this step is completed, closing should occur within 60 to 90 days.

31. Can the borrower do their own work write up and cost estimate? Yes. However, it will take them between three to six months to complete. This slows down the process and will save only about $200, but waste a lot of valuable time. Hiring an independent consultant will help the closing occur within 60 to 90 days from completion of the Work Write-up.

32. What is the definition of a First-Time Homebuyer? A single person or an individual and his or her spouse who have not owned a home (as a tenant in common or as a joint tenant by the entirety) during the three years immediately preceding the date of application for the 203(k) loan. Any individual who is legally separated or divorced cannot be excluded from consideration, because the three-year waiting period does not apply, provided the individual no longer has an interest in the home.

33. Is there a limitation on how many properties a person or organization can have in any area of the community? Yes. A borrower can have not more than seven (7) units within a two block radius of the property they want to purchase. However, if the property is in a local community area that has been designated for redevelopment or revitalization, then this seven unit limitation does not apply.

34. Can nonresidential (storefront) property be eligible for a 203(k) insured loan? Yes. Mixed-use residential property is acceptable provided the property has no greater than 25% (for a one story building); 33% (for a three story building); and 49% (for a two story building) of its floor area used for commercial (storefront) purposes. The rehab funds can only be used for the residential functions of the dwelling and areas used to access the residential part of the property.

35. Is only one appraisal required to establish the “after-rehab” value of the property? Basically, yes, provided the lender can be assured that the contract sales price is reasonable or the existing debt on the property is low enough to assure a good equity position by the homeowner. On a HUD-owned property, the lender can use HUD’s appraisal for the after-rehab value.

36. Can HUD-owned properties be purchased using the 203(k) loan? Yes. However, the property must be advertised that it is eligible for financing with a 203(k) loan. If the HUD-owned property is purchased with other funds, a 203(k) loan can be made after the property is in the buyers name. In this case, cash back will be allowed to the borrower for a period of six months from purchasing the HUD-owned property

37. Is the borrower required to enter into a contractual agreement with the general contractor who will do the work on the property? No. However, it is strongly suggested that the lender protect their interests to assure no liens are placed on the property

38. Can an Energy Efficient Mortgage (EEM) be allowed using the 203(k) program? Yes. A borrower can finance into the mortgage 100 percent of the cost of eligible energy efficient improvements, subject to certain dollar limitations, without an appraisal of the energy improvements and without further credit qualification of the borrower.

Streamlined 203(k) Limited Repair Program

FHA’s Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this new product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.

The Streamlined 203K loan allows for simple repairs that can be easily estimated and completed. Many are considered light cosmetic repairs, but some will require hiring a licensed contractor if it falls out of the borrower’s area of expertise. Here is an approved list of repairs / improvements from HUD:

* Roofs, gutters and downspouts
* HVAC systems (heating, venting and air conditioning)
* Plumbing and electrical
* Minor kitchen and bath remodels
* Flooring: carpet, tile, wood, etc.
* Interior and exterior painting
* New windows and doors
* Weather stripping & insulation
* Improvements for persons with disabilities
* Energy efficient improvements
* Stabilizing or removing lead-based paint
* Decks, patios, porches
* Basement completion and waterproofing
* Septic or well systems
* Purchase of new kitchen appliances or washer / dryer

Source: HUD

FHA 203k Rehab Loans- Taking Advantage of Foreclosure Financing

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Sun, 11 Jan 2009 12:22:18 -0600

A heads-up to realtors and buyers: the Feds want to help you buy and fix up existing homes. FHA 203K rehab loans are for you, not for someone else.

What’s in it for them? They want foreclosure properties and long-listed homes to get into the hands of caring owners.

How do they help you?

They guarantee mortgages that cover not only the purchase price of a property - but the rehab costs as well.

Especially now, with housing prices low, mortgage lenders will only loan money on a house’s current value. If a property needs some money put into it, for rehabilitation, then you’re basically on your own for financing the improvements. In the not-so-recent past, such home buyers had to run up their credit card balances or sell their car to make a newly purchased house livable.

FHA 203K Rehab loans change all that by giving buyers the money they need in the first place - even including buyer’s living costs elsewhere for the period of renovation - up to six months.

Are there restrictions? Sure, because the Feds want to be careful with their money, but the strings attached all make good sense. You have to demonstrate that the finished property will be worth the rehab costs, you have to show the plans for improvement, and you have to show everyone that you’re making appropriate progress in your work. And you have just six months to finish it all up.

Can you use this loan guarantee program for condos and multi-unit properties? Yes, but be sure to check out the specific rules on my follow up post to this.

How do you start? Once you’ve identified a property, identify a helpful FHA lender, and begin to tackle the paperwork. The mortgage provider will be delighted to work with you - you’ll be rebuilding your community with the complete support of the FHA!

Visit my website today for more information or for more information call 832-212-6969.

Good Faith Estimate vs. Good “Bait” Estimate – The Inside Scoop

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Thu, 08 Jan 2009 14:25:16 -0600

Comparing deals for a mortgage can be a very confusing task. You can shop til you drop for mortgage rates, mortgage fees, and the best APR (Annual Percentage Rate); however do you REALLY know what to look for?

Well let’s have a look.

Just the other day, I was having coffee with a potential client that was looking to buy a home, and she pulled out 4 different GFE’s (Good Faith Estimates) for me to have a look at.

Wow, talk about diversity! While I won’t name the companies (and believe me, I would LOVE to), here were just 3 things I noticed just right off the bat:

1. Escrows reflected LESS than what the property’s tax rate really was
2. APR was very misleading, and the most important was
3. All 3rd party fees on each GFE were different

Now if you’re a seasoned home buyer or a First Time Home Buyer, things like this will definitely matter and will end up costing you a lot of wasted time, money, and effort if you aren’t careful.

My goal in this article is, in plain English and simply explained, is to:

1. Break down the GFE
2. When you should receive a GFE
3. What to compare when comparing and how
4. How to get the BEST deal

Breaking Down the GFE
So let’s begin by breaking down this thing, and trust me, this’ll be super easy.

The 800 section of the GFE is where you will see the lender, broker, and appraisal fees, respectively. No matter what the FEE is called (underwriting, application, administrative, etc), it’s being charged on the bottom line. If someone says, “We don’t have application fees!” making their offer seem more appealing, they can easily turn around and add a “Weekend Fun” fee. The rule is as long as it’s disclosed, it can be charged.

The rest of the sections (900-1300) are all 3rd party fees and cannot be controlled by the loan officer. Some of these fees are:

1. Taxes and Insurance
2. Title fees
3. Escrow Impounds

This is why asking for a GFE before you take an application and talking about your financial parameters is just plain shooting yourself in the foot guys! I’ve had people ask me for an estimate before I could even say hello at times, in which I’ve respectively had to decline because I knew we were already headed into disaster.

When Should I Get a GFE?
By law, you should receive a Good Faith Estimate within 3 days of a written and complete application for a mortgage. Does everyone do it? (Chuckles) Nope.

What and How to Compare
So now it’s game time. You’re 18 days away from closing on your house and decision day is creeping up.

“Who do I choose?”

“Why are his fees different?”

“Is this rate too good to be true?”

Totally understandable questions- I understand you don’t want to be taken advantage of. Now let me show you how to compare and what to compare.

A Good Faith Estimate shows the interest rate, term, loan amount, and all settlement costs on the mortgage you are applying for. All of the items on the GFE fall into 3 categories listed below:

1. Interest Rate
2. Lender Fees
3. Everything Else (3rd Party)

The interest rate simply depends on market conditions at the moment of locking it. Throw CNN, FOX News, and all other morning radio shows out the window when they are “predicting” where rates are going to go. I’ve had people call me up expecting a 0% (honest truth) because they heard it on the radio. People, if it’s too good to be true, it is. If you want legitimate and unbiased advice, feel free to call or email me. Following MBS (Mortgage Backed Security) trends and weekly economic reports, I have my finger on the pulse of what’s going on and have saved people tens of thousands of dollars by recommending “lock” or “float” options derived from my sources.

In regards to lender fees, they will vary just like with any product you buy. A vase at Wal-Mart will differ from a vase at Crate and Barrel. Why? Well each company has its own business model that they have to follow. That’s it- it’s not hard.

Since we’re become pretty good friends now, I’ll let you in on another little secret as well.

For the most part, Mortgage Broker fees are variable, where as Mortgage Banker fees are fixed. Brokers have to send out their loans to wholesale lenders that will fund your loan, so each lender will have different fee structures. Broker “A” can quote you $1,500 in fees, find out that same lender just went out of business, and now you’re exposing yourself to a change in charges. Mortgage Bankers will have more simplified fee structure and you should expect it to stay more constant. I am not saying one way is better than the other because the same can happen to a Banker if he has to broker out your loan, however it is just a little less likely in my opinion.

The rest of all the 3rd party charges will be determined by what other parties are involved. While you, the consumer, have the right to choose the title company, I highly suggest having your mortgage professional recommend a few that he/she uses. For some reason, realtors believe that they choose this part of the transaction (and some do a good job), however most do not. Throughout the entire finance process, the lender and title company are in constant communication to get your loan funded in the most efficient and snag-free way possible.

So, How Do I Get the BEST Deal Out There?
The easy and SIMPLE answer is…YOU!

You will ultimately determine the best deal that you get. Timing, advice, recommendations, and being a team player is needed to get the best deal.

Timing is HUGE these days! One of my current clients is taking about 2 weeks to send me his W-2’s, while his rate lock is going to expire in less than a week- Yes, that’s his bad!

And when it comes to rates guys, time is money. Rates move daily.Don’t expect last week’s rate TODAY!

Also, if you want to know what “rates are doing today”, don’t waste your time applying on a million places online, having 100 people call you and have a brilliant start to the conversation by asking “What is your rate?” Go to the local newsstand and pick up a paper, but remember, what is advertised and what you QUALIFY for are 2 totally different things.

Here are my 5 TOP TIPS I can give you:

1. NEVER SHOP ON JUST APR!
Whoever recommends this to you may actually live in a van down by the river. Each lender calculates this differently, so you won’t be comparing apples to apples. Sometimes the numbers aren’t worth the paper they are written on.

2. HAVE YOUR FACTS READY
For comparison purposes, used fixed costs for taxes and insurance with each mortgage company so estimates can remain constant.

3. BE THE BOSS
In essence, what you are doing is HIRING your loan officer to represent you. So, why don’t you go through your own little “hiring process” with them? Ask about experience, references and the big question “How Are You Different?” from others. This will be the best tool.

4. DON’T SHOP YOURSELF OUT OF THE MARKET
Don’t get greedy by waiting for that magical 0% like my friend.

5. OVER-SHOPPING
If every new phone call causes a “Send me a GFE and I’ll let you know” reply, then you have what is called “Mortgage-itis”. This is the first symptom letting you know to stop and work with what you have, OR if you want, put things on hold for a few days. It’s just like cramming for a big test. Take a break.

In the end, you will always get what you pay for. Those who are cheap will get cheap. Those who pay more for a little better service will get just that. I’m not suggesting getting slammed with pointless fees for the sake of commission, however most everyone these days wants everything for free. It’s better to pay a little more for a service or product you can rely on, rather than just getting a cheaper price for something that may cost you even more money down the line. In the mortgage industry, what you ultimately pay more for is knowledge.

Tommy Xintaris is a Senior Mortgage Banker for 360 Mortgage Group. He has over 5 years experience in finance. For a free opinion of your mortgage, you can email him at Tommy@FHALoanHouston.com .

100% FHA Financing in Houston Areas

Tommy Xintaris FHA VA & Conv. Texas Mortgage Home Loans (Envoy Mortgage) — Mon, 08 Dec 2008 19:18:41 -0600

Get Pre-Approved in Minutes

Special 100% FHA loan available for families whose homes were destroyed or damaged by Hurricane IKE!!!

• Borrower’s previous principal residence (as owner, renter, or resident household member) was located in a federally-declared disaster area (listed at www.fema.gov as eligible for individual assistance).
• Borrower’s previous principal residence was destroyed or seriously damaged, to such an extent that reconstruction or replacement is required.
• Borrower’s initial 203(h) purchase loan application must be dated within one year of the President’s declaration of the disaster,
• There are no special exceptions to the “one FHA loan” rule. If the former residence is encumbered by an FHA loan, borrower must satisfy that loan by sale or damage claim(s) prior to closing a new 203H purchase loan.
• Proof of permanent residence in the affected area before the disaster, such as a valid driver’s license, voter registration card, utility bills, etc.
• Conclusive documentation evidencing the destruction or extensive damage of the residence, such as an insurance report, or a property inspection report by an independent fee inspector, or government agency.
• Must be able to prove income

————————————–

Down Payment:
• Not required.
• DPA not allowed
• Closing costs may not be included in the loan amount.

Loan Term:
• 30 year only
Maximum Loan Amount
• 100% of the lesser of sales price or appraised value, plus UFMIP.
• If not paid by the seller, closing costs and prepaids must be paid by the borrower in cash or by the lender through premium pricing. Closing costs may not be included in the loan amount.

Seller contributions:
• Seller contributions must not exceed 6% of the sales price.
• included in the 6% limitation is the payment of the UFMIP

FHA 203(h) Eligible and Ineligible Properties

Eligible Properties:

1-unit detached primary residences, detached PUD, and FHA approved condos.

Ineligible Properties:

1-unit attached primary residence, attached PUD, 2-4 unit primary residence, second homes, investment properties, co-ops, and manufactured homes.

FHA, VA & Conv. Texas Mortgage Home Loans- Tommy's 2 Cents

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***Update to a Previous Post***- "Is FHA In Trouble"

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My Realtor Asked Me to Post This!

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Picking the "Right" Lender

Should You Use Your $8,000 Tax Credit as Your Down Payment?

Identity-of-Interest Transaction Down Payments

What Happened? You Told Me I Was Approved!

Hitting a Home Run with the HomePath Program

Mortgage Tip of the Day- Calculating Overtime and Bonus Income

J.P. Morgan and Citigroup Pause Foreclosures

Ready? Set? CHANGE!

Very Crazy Week for Mortgage Rates

FHA Fact of the Day

Take Advantage of Your 2008 Tax Credit NOW!

FHA Loans and Credit Counseling

SubPrime Greed or Governmental Ignorance?

Oh Realtor, Where Art Thou Business?

203(k) Q & A's Straight From HUD

FHA 203k Rehab Loans- Taking Advantage of Foreclosure Financing

Good Faith Estimate vs. Good “Bait” Estimate – The Inside Scoop

100% FHA Financing in Houston Areas

Update to a Previous Post- "Is FHA In Trouble"