Webinar Invitation: Inrease Sales with Credit Restoration

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Mandatory FHA Loan Fees Increase for Some, Fall for Others

The FHA risk-based pricing matrix For the first time in its history, the FHA changed its funding fees and mortgage insurance structure this week. FHA-insured home loans are now subject to a risk-based pricing adjustment, as shown by the table above.

Because of risk-based pricing, FHA home loans are now more expensive for borrowers with less-than-ideal credit profiles, and less expensive borrowers with perfect ones.

Prior to the changes, most FHA borrowers paid an up-front fee of 1.500 percent, plus on-going annual mortgage insurance payments equal to one-half-percent on the amount borrowed.

FHA-insured mortgages have grown in popularity this year because, while the guidelines of other mortgage products have tightened, FHA program guidelines have remained loose. FHA allows 3 percent downpayments on purchases, for example, and allows "cash out" refinances to 95 percent. Fannie Mae and Freddie Mac do not.

(Image courtesy: FHA.gov)

EXTENDED THRU MARCH: $25 CASH Just for Signing Up!

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When you open an account, you will also be allowed to refer new customers. With each new referral, you get an additional $10. (up to a maximum of 50 referrals - $500)

THIS PROMOTION IS ONLY GOOD THROUGH THE END OF FEBRUARY, so if you would like some F*REE money, let me know and I will refer you. I recently opened my account (it takes just a couple of minutes) and am now referring others.

BOTTOM LINE:  You are paid $25 just for opening an account and up to $500 in direct referral commissions.

We have performed due-diligence on this program and we are satisfied that this is legitimate. To avoid spamming, the only way you can refer others is via the "Invite a Friend" link at the website. All you have to do is enter their email address. Then, the system will follow up with a message on your behalf.

But you've got to be quick about it. The promotion ends Feb 29, 2008.

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1. Send me an email.

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You've Been Pre-Approved -- Now Get RE-Approved

The mortgage industry is changing quickly; being prepared beats the alternative.

Recently, mortgage lenders have made adjustments in what they will lend, and to whom.  This shrinks the pool of eligible mortgage borrowers.

Some of these guideline changes include:

• Low or no downpayment loans may require more income and/or assets
• No income verification (i.e. stated) loans may not be available
• Higher credit scores may be necessary to qualify

In addition to tighter guidelines, many mortgage lenders are now required to pass higher fees and/or mortgage rates along to their clients as well. 

The burden of these mandatory extra costs will be the difference-maker in a mortgage approval for some mortgage applicants.

Getting re-approved can give home buyers a realistic sense of how mortgage financing may shape up in the changed mortgage environment.  It's important to make sure that the mortgage plan still fits into your short- and long-term financial goals.

But, if nothing else, getting re-approved gives you the opportunity to speak with your real estate and loan officer about changes to the industry, and how it impacts you on a personal level. 

Ilyce N. Powell is a Certified Mortgage Planning Specialist (CMPS) with the Carteret Mortgage Corporation. A member of the National Association of Responsible Loan Officers (NARLO) and the Financial Planning Association (FPA), she is also affiliated with the National Association of Mortgage Brokers (NAMB) and the National Association of College Funding Advisors (NACFA). Her goal is to educate as many consumers as possible in the hopes of stamping out financial illiteracy across the nation.

How to Squeeze Extra Tax Deductions from Your Mortgage In 2007

For most Americans (but not all), mortgage interest is tax-deductible in the year in which it was paid.

With some advance planning, therefore, a homeowner can increase his 2007 tax deductions by paying additional mortgage interest while the calendar still reads 2007. 

The key is to make the mortgage payment due January 2008 a few days early.

Because mortgage interest is paid in arrears, a mortgage payment due January 1, 2008 accounts for interest that accumulated throughout December 2007. 

Rather than make January's mortgage payment on January 1, 2008, a homeowner can send payment this week or next -- while it's still 2007 -- and increase the amount of mortgage interest paid in 2007.  This can increase 2007's tax deductions.

Tax planning can be a complicated issue and not all homeowners qualify for mortgage interest tax deductions.  Be sure to consult your tax professional before making any tax planning decisions.  If you are without a tax professional, call or email me; I would be happy to make a trusted recommendation to you.

Ilyce N. Powell is a Certified Mortgage Planning Specialist (CMPS) with the Carteret Mortgage Corporation. A member of the National Association of Responsible Loan Officers (NARLO) and the Financial Planning Association (FPA), she is also affiliated with the National Association of Mortgage Brokers (NAMB) and the National Association of College Funding Advisors (NACFA). Her goal is to educate as many consumers as possible in the hopes of stamping out financial illiteracy across the nation. 

Mortgage Rates are Going Up -- But Not for the Reason You'd Expect

Conforming mortgages are getting more expensive -- but not because of mortgage rates. 

To protect against further weakness in the housing sector, Fannie Mae and Freddie Mac are instituting "delivery fees" on all conforming mortgages, effective March 2008.

Fannie Mae's Adverse Market Delivery Charge and Freddie Mac's Market Condition Delivery Fee will add a one-time, quarter-percent fee to every home loan purchased from mortgage originators.

This means that on a $100,000 conforming mortgage, the borrower could:

1. Pay a $250 fee out-of-pocket
2. Accept a slightly higher interest rate that "finances in" the higher fee

Because the fee is in percentage terms, as the loan size increases, so does the fee.  A $300,000 mortgage will carry a $750 fee, for example.

Unfortunately, mortgage borrowers may not get to choose on how they pay the extra cost.  Many mortgage lenders are just adding it to their rate sheets. 

Be aware, the 0.25% fee does not apply to all loans -- only to loans sold to Fannie Mae and Freddie Mac.  This specifically excludes portfolio loans and sub-prime loans.

If you're not sure for what type of loan you are applying, be sure to ask.

Ilyce N. Powell is a Certified Mortgage Planning Specialist (CMPS) with the Carteret Mortgage Corporation. A member of the National Association of Responsible Loan Officers (NARLO) and the Financial Planning Association (FPA), she is also affiliated with the National Association of Mortgage Brokers (NAMB) and the National Association of College Funding Advisors (NACFA). Her goal is to educate as many consumers as possible in the hopes of stamping out financial illiteracy across the nation.

Why Credit Card Holders May Benefit from The Fed's Actions Today

The Federal Open Market Committee meets today and will release a public statement at 2:15 P.M. ET. 

It is widely expected that the FOMC will lower the Fed Funds Rate by at least 0.250%.

When the FOMC lowers the Fed Funds Rate, it is trying to "loosen" credit for American businesses and consumers.  When credit is "looser", it is cheaper, and easier to procure. 

Looser credit promotes spending and propels the U.S. economy forward.

By contrast, when the FOMC raises the Fed Funds Rate, it is trying to "tighten" credit which, in turn, slows down the U.S. economy.

The FOMC does not control mortgage rates, but it does have a direct impact on Prime Rate because (Prime Rate) = (Fed Funds Rate) + (3.000%).

Credit cards, construction loans and home equity lines of credit are all tied to Prime Rate and so interest rates are expected to fall on these loan types this afternoon.

Ilyce N. Powell is a Certified Mortgage Planning Specialist (CMPS) with the Carteret Mortgage Corporation. A member of the National Association of Responsible Loan Officers (NARLO) and the Financial Planning Association (FPA), she is also affiliated with the National Association of Mortgage Brokers (NAMB) and the National Association of College Funding Advisors (NACFA). Her goal is to educate as many consumers as possible in the hopes of stamping out financial illiteracy across the nation.

The Week in Review (December 10, 2007): What to Watch For

Among lingering doubts about housing and credit markets, and a general uncertainty about the U.S. economy, the mortgage bond market tanked towards the latter part of last week. 

As investors moved away from mortgage bonds, mortgage rates forcefully bounced off their two-year lows.

A major factor behind last week's run-up in rates is the market expectation for Tuesday's Federal Open Market Committee meeting. 

Those expectations sharply shifted after Friday's strong employment report from the Census Bureau and dragged rates along with them.

Prior to the jobs report, markets were expecting that the FOMC would lower the Fed Funds Rate by a half-percent.  After the report's data showed inflationary hints, though, that expectation changed to a quarter-percent.

This is important to mortgage rate shoppers because inflation is the enemy of mortgage bonds.  Typically, as inflation rises, so do mortgage rates.

The FOMC adjourns from its one-day meeting Tuesday and will make an announcement to the markets at 2:15 P.M. ET.  Expect volatility before and after the press release. 

Currently, the Fed Funds Rate sits at 4.500%.

Also hitting the wires this week is the Consumer Price Index (Wednesday) and the Producer Price Index (Thursday).  These two reports are closely tied to inflation, too, so if the readings come in hotter than expected, mortgage rates will move higher in response.

CPI is also known as "The Cost of Living" index.  PPI is its "business" counterpart.

Appraisals are As Much Art as Science

A simple Google search for "How much is my home worth?" shows 118,000 results and seems to get larger month after month.

For home sellers, these programs can give a false sense of security (or insecurity!) about at what price a home should be listed for sale.

Computer programs can never replace the role of licensed home appraisers and that's because valuing a home is not as simple as providing some inputs (traits) in order to get some output (value).  There is a "fuzzy logic" that computer programs just can't produce in the same way that appraisers and real estate agents can.

Even with tax records, recent sales data, and a full description of a property, valuing a home is as much "art" as "science". 

There are "human" considerations that include neighborhood quality and curb appeal that a computer can't measure.  Nor can a program take into account how a kitchen may require $20,000 worth of work to bring it "up-to-date" or inline with neighbors' homes.

Besides, the real value of a home is what somebody is willing to pay for it.  Therefore, you can never truly know what a home is worth until it has sold.

So, while automated valuation tools are a good start to finding a home's value, they're not equipped to finish the job. 

How the Stock Market is Directing Traffic for Mortgage Rates

As we talked about Monday, the stock market appears to be directing traffic for the bond market. 

Monday was a flat day for stocks, and it was a flat day for bonds, too.  Mortgage rates idled.

Tuesday, with no economic data hitting the wires, market participants looked for direction elsewhere. 

Some likely candidates include:

1. The price of oil. If oil prices continue to rise, it will place inflationary pressure on businesses and consumers.  That is bad for mortgage rates.
2. The value of the dollar.  A recent rally in the dollar should attract foreign investors to the U.S. markets.  That is good for mortgage rates.
3. Corporate earnings statements.  Apple and American Express both showed well in Q3.  A rally in the broader stock market will pull money from the bond markets.  This is bad for mortgage rates.

Mostly, markets are taking very few risks in advance of the Federal Open Market Committee meeting next week.  Momentum rules.