FEDERAL GOVERNMENT AND STATE ATTORNEYS GENERAL REACH $25 BILLION AGREEMENT WITH FIVE LARGEST MORTGAGE SERVICERS TO ADDRESS MORTGAGE LOAN SERVICING AND FORECLOSURE ABUSES

$25 billion agreement provides homeowner relief & new protections, stops abuses

WASHINGTON–U.S. Attorney General Eric Holder, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, Iowa Attorney General Tom Miller and Colorado Attorney General John W. Suthers announced on 02/09/12 that the federal government and 49 state attorneys general have reached a landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses. The agreement provides substantial financial relief to homeowners and establishes significant new homeowner protections for the future…

To read this press release in its entirety, look below:

The Real Story behind the story

Foreclosure abuses? This is a complete overstep of the government, a very bad precedent, and a major reason why this country is going down hill fast.

Whatever the reason, I’m sorry you lost your home to foreclosure.  I really am. But the bottom line is simply this.  You signed a promissory note. You promised to pay back the home loan. Period.  It didn’t say you promised to pay back unless...   Unless, you lost a job, unless the house lost value, etc. Nowhere in the documents did it say the bank was required to write down your mortgage balance, nor agree to any sort of loan modification.  The bank is a business.  They took a financial risk giving you a loan because of your promise to pay it back.

The abuse?  First a little background. When a lender forecloses on someone, they have to meet certain protection guidelines, including things as timely notice of impending action, etc. Ultimately, an officer of the company must sign off on the final foreclosure action, certifying the company has followed all required guidelines.

With the overwhelming new rush of foreclosures, the banks couldn’t keep up. So did they make a error. Yes. The banks did make a mistake. No doubt about it.  But what they simply did is rubber stamp the foreclosure certification, and used people other than an officer of the company to sign the document.

The government, after receiving a lot of pressure from consumer groups, and people desperate to save their home, ended up forcing the banks to this $25 BILLION agreement. The agreement will PAY, YES PAY people who were foreclosed on $2000. Many of those still in their home will have their balance written down by an average of $20,000.

Really? Should maybe the banks get their hand slapped.  Sure.  But to the tune of $25 Billion?  Of course not.  The underlying issue shouldn’t be that banks had someone not authorized sign a document, it should be the fact that people (on average) were over two years behind on the payments, and we are now rewarding them.

Bad precedent…  really bad!

——————- Read the Full Press Release ——————-

Can you get a VA Jumbo loan?

Yes, the Department of Veterans Affairs has allowed Jumbo VA loans for years.  The basic VA rule is their loan limit follows the Fannie Mae conforming loan limit, which is currently $417,000 in most of the country.

VA Loans also allows for higher loan limits in certain higher cost counties in states like Hawaii, California, and Florida. Conforming loan limits in some of those area can be more than $417,000.  You can check VA loan limits in your area here, (select the Fannie Mae option) but generally speaking, the bulk of the country is at $417,000.

Normally a VA Home Loan requires NO DOWN PAYMENT. But if you are looking for a VA loan in Minnesota, a $417,000 limit area, can you buy a more expensive home with a VA loan?  Yes, but the general rule is that if someone borrows more than the conforming limit, a down payment is required. A down payment for a Jumbo loan is based on what the VA will guaranty, or in other words -- ENTITLEMENT.

For instance, if living in a county where the loan limit is $417,000, but a consumer wants to borrow more than that, he or she would generally need to come up with a down payment equal to 25% of the amount needed over $417,000. Let's say you are buying a home for $700,000 where the loan limit is $417,000. The difference is $283,000. VA requires you put down 25% of the difference. 25% in this example is $70,750 - which would be the required down payment. Therefore the maximum actual loan amount would be $629,250. This works out to be 89.89% loan-to-value.

A second example is a home that sells for $650,000. Now subtract the maximum "zero down" VA loan amount of $417,000 to get $233,000. Twenty-five percent of $233,000 is $58,250. That's the down payment needed from the veteran. That works out to about 9 percent down payment on a $650,000 home!

When compared to down payments required for conventional loans, the VA Program is difficult to beat, especially as there is NO Mortgage Insurance, which is a HUGE advantage over other loans with less than 20% down. For VA-eligible borrows, the VA Home Loan Guaranty Program is one of the best, no money down home financing options out there. And, Jumbo VA loans, while needing a down payment, are no exception.

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With millions of web sites to look at for home for sale listing, it is becoming more and more common for people to feel they don’t need the help of a licensed Real Estate Agent.

More specifically, people seem to ONLY be calling listing agents for the properties you want to see. The thought behind this I suppose is “I can get a better deal if I don’t involve another agent and contact the listing agent directly.”

While the listing agent loves you only calling them, here is why is is usually a costly mistake for home buyers.

Myth # 1- I will get a better deal if I call the listing agent directly.

That listing agent is contractually bound to do what is in the best interest of the seller, and that means getting the highest dollar amount for the sale of the home. NEVER disclose your top dollar or financial ability to get a bigger mortgage loan to them because they have to go back to the seller with this information.

Remember…your goal is to pay as little as possible, while the seller’s agent’s goal is to get as much as possible for the seller. No matter what a Real Estate agent claims, this is a clear conflict of interest.

Myth # 2- I can find more homes for sale by calling more than one agent, or looking at multiple web sites.

The days of each real estate office having big books of only their companies listing are long gone. It is mutually beneficial for all Real Estate Agents to have all properties in the same database (call the MLS – or Multiple Listing Service)

All Real Estate Agents in the same area therefore pull the same list of homes available  for sale from the same multiple listing service database. Local agent sites typically interface with the local MLS site a minimum of once per day. If a new house for sale gets added today, EVERYONE local should have it listed tomorrow.

If you saw a home on Zillow, or some other national site, but that particular home didn’t come up in the local agent’s site, remember sites like Zillow & Trulia are NOT updated as often as the local MLS database real estate agents can pull from are. If it is not on the local MLS…  chances are the house that you saw has already been sold or is already under contract.

More importantly, the opposite is more often true. You find a home on a local real estate web site but NOT on the national sites. This is because some local companies do NOT report to the national systems. In my area (Minneapolis / St Paul, MN), the biggest player in the market (Edina Realty) recently stated they will no longer let their listing be show on the big national sites.  This means if you are looking at home for sale here, but on a national site versus a local site, you a NOT seeing over 20% of this areas listing!

The bottom line is the smart move for home buyers, and especially first time home buyers in MN and WI, is to use the services of a good, licensed local real estate agent in any home purchase transaction, and save yourself a lot of time by only looking at one LOCAL REALTOR web site.

I constantly receive requests for a No Cost loan. Sadly there is no such thing.

All loans have closing costs associated with putting the loan together.

Just like you, participants in the mortgage loan process don't work for free. The Appraiser, Title Officer, Title Insurance, County Recording Fees, Minnesota Mortgage Registration Tax, as well as your lender all need to get paid as part of the process.

Each of these parties charge fees for their service in processing and funding your loan. The Lender's responsibility is to explain to you what the services and costs are, and to give you an estimate of the total costs when you apply for a loan. This estimate comes in the form of a document titled Good Faith Estimate of Closing Costs. It is only an estimate, but it should be very close to your actual costs. Lenders are not allowed to pad, or add onto the costs charged by these other parties, but rather simply pass on what they charge. The vast majority of closing costs go to third parties, not your actual lender.

The real question is: How do I get a loan so I don't have to pay for these required services? The simple answer is you can't. What you can do is determine how they get paid.

Purchasing or refinancing, it basically works the same way. All of the costs associated with transaction are paid in one of four ways: By you in cash, by the Seller (in a purchase), by rolling it into the new loan amount (refinance), by the Lender, or a combination thereof.  The most common way in a refinance is by rolling the closing costs into the new loan amount.

Now you may be saying "Wooh-Hooh, let the lender pay", but you need to know how the lender can do this, and why it may not always be such a smart move.

To have the lender pay your closing costs, you agree to accept an interest rate that is higher than what is considered a "Market Rate." In doing this, the lender receives more cash than just the face amount of the mortgage loan when they sell it to an investor on the secondary market. This excess cash is what the lender uses to pay some or all of your closing costs. This means that over the life of the loan, you will be paying more interest to the lender than you otherwise could have.

Does this strategy make sense for you? Maybe. It depends on several factors. How much higher is the mortgage rate and what is the monthly cost to you in increased payment? How big or small is the loan? How long do you plan to stay in this loan? Do I have the cash to pay the costs out of pocket?

This is where it becomes important to work with a Licensed Mortgage Originator and not a bank employee. As I have said many times, A Mortgage Banker / Broker is required to be Trained, Tested and Licensed in all aspects of Mortgage Origination. A bank employee is usually just registered, not tested, not licensed, and not required to be educated, tested, or licensed.

A local licensed Loan Officer will do the math with you, and take the time to show you the pros and cons of each method of paying closing costs so you can choose the best option in your particular situation.

A NO COST loan is not automatically good or bad, and I do both on a regular basis. But my advice. Beware of any mortgage lender screaming the benefits of a no closing cost loan!

Homeownership Is Possible With Minnesota Housing Finance Agencies First Time Home Buyer Mortgage Programs

Benefits of MHFA Mortgage Loans

• Below-market interest rates
• Interest-free loans to help for with down payment and closing costs (up to $8500)

Minnesota Housing Mortgage Loan Program Eligibility
To be eligible for a Minnesota Housing First-Time Homebuyer Loan, you must meet these requirements:

• Be a first-time homebuyer (meaning you have not owned a home in the past three years).
• Have acceptable credit (640+ middle credit score)
• Meet the requirements for income limits (listed below)
• Have federal income tax return copies for the last 3 years.
• Have an income at or below prescribed MHFA limits and want to buy a qualifying home. Limits are linked below.

MHFA Income Limits

Level 1 = $3,000 in down payment assistance.  Level 2 = $4,500.  Level 3 = $8,500 (under Home Help program)

MHFA Minnesota Down Payment Assistance Loans
(Homeownership Assistance Fund HAF)

The Homeownership Assistance Fund (HAF) is available only to borrowers participating in one of MHFA’s mortgage loan programs. The program provides Entry Cost Assistance to help borrowers with their down payment and closing costs.

Borrowers qualify for HAF down payment assistance is they meet one of the following criteria;

• Eligible for CASA program
• Single headed household
• Household of color or Hispanic ethnicity
• Household contain person(s) with disabilities
• Borrowing purchasing in a low income tract
• Household earns less than 60% of medium income

Interest free down payment assistance loans (HAF) loans are paid back when the homeowner sells, refinances, no longer occupies the home or pays off the first mortgage.

Can you qualify for a home mortgage loan with bad credit?

What’s Your Credit Score?
Lenders rely heavily on credit scores as a major determining factor for getting a home mortgage loan. I hate to be so blunt, but lenders DO NOT give home loans to those with bad credit anymore. If you are denied by one lender, contacting 10 more probably won't result in success.

What credit score do I need for a home loan?
Generally speaking, in today's mortgage world, if your middle credit score is below 640, it is very unlikely that you will qualify for home loan financing no matter what anyone tells you, or what you see posted elsewhere on the internet. With a score below this level, you really should save yourself the hassle. Stop attempting to find mortgage loans, and work on improving your scores instead.

Review your credit score?
If you know your score is below 640, or if you know you have major issues. Don't bother applying. It just isn't going to happen! You are wasting your time, the lenders time, and the Real Estate agents time.

On the other hand, if you are not sure what your credit score is, and you think you have OK or better credit, you should officially find out. Apply for the mortgage loan, and let the mortgage lender review your exact situation. DON'T ASSUME YOU CAN'T QUALIFY!

CREDIT PROBLEMS & ANSWERS

Late Payments
If your credit has multiple RECENT 30, 60, or 90 plus day late payments, you probably won't qualify. Especially if those late payments occurred LESS THAN than two years ago. Lenders want a clean recent payment history.

Collections, Judgements, Tax Liens
If your credit history indicates unpaid collection accounts, most "A" grade loan lenders will require these amounts to be paid off before the loan is funded. FHA typically will ignore them if they are under $500, and more than 2 years old. Medical collection "usually" are ignored. Judgments' (you got taken to court & lost), are almost always REQUIRED to be paid off before approval.

Bankruptcy & Foreclosures

• If your bankruptcy is more than two year old, you can usually be approved for an FHA loan with as little as 3.5% down.
• If your foreclosure was recorded is OVER least three old, you may qualify for an FHA loan with as little as 3.5% down payment.
• If your bankruptcy is older that 4 years, and you have good re-established credit, you may now qualify for an standard conforming loan.

High Debt Ratios
If your income-to-debt ratios are too high, you can either reduce your personal debt (i.e., pay down your debt), obtain a debt consolidation loan, pay down your debt with funds from the sale of personal assets (boat, camper, etc.), select a lower interest rate ARM loan, or add a co-mortgagor. 

Is a debt consolidation loan for you?
If you have any late payments on your record, part of the reason may be because of high credit card debt. If you qualify, you can pay off all of your high-interest credit cards into a low debt reduction refinance loan which may be tax deductible (unlike credit cards, which are NOT tax deductible).

In MN and WI ONLY, call us at (651) 552-3681. Speak to a mortgage professional who can help determine your credit status - its a FREE service!

What's the estimated value of your home?

Many homeowners are curious about the appraised value of their home. An actual appraisal is expensive, and county tax records do NOT always reflect true market value. As you may be aware, home values are constantly fluctuating, and with the decline in average values, it is important to have an accurate idea of what your home is worth.

There are many sites that claim to give you are idea, including Zillow, Trulia, and more. It is also a well known fact those sites have very questionable data, giving values that range from close, to crazy far off. The big problem is, where is the data they use coming from and how accurate is it?

There is a better free tool to answer the estimated appraised value of your home question. This system uses the Freddie Mac Home Price Index ( FMHPI ). FMHPI is calculated using a repeat-transactions methodology. Repeat transactions indexes measure price appreciation while holding constant property type and location, by comparing the price of the same property over two or more transactions. The change in price of a given property measures the underlying rate of appreciation because basic factors such as physical location, climate, housing type, etc., are constant between transactions. Averages of appreciation rates for different geographic areas and time periods are calculated using statistical regressions and the index values are derived from these averages

While the estimate may not be the actual or appraised value of your property, it can be a much more accurate than Zillow to gauge fluctuations and trends in your market which affect your home's value.

CLICK HERE FOR A FREE HOME VALUE ESTIMATE (MN and WI properties only)

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HARP 2 - Not ready until March 15th, 2012

Minneapolis, MN: There is a lot of consumers interested in a HARP refinance in MN and WI. The Home Affordable Refinance program allows home owners who have lost value to still refinance their homes are today's low HARP  refinance rates.  HARP has been available since mid 2009.  HARP 2, which was announced in November 2011 removes some restrictions, and should help many more home owners refinance their home loans.

Officially, the enhanced HARP 2 program started December 1. Unofficially, most lenders won't be offering it until after March 15th, 2012. Let's explore and understand why?

The original HARP program, which allows a home owner to be underwater on their home mortgage loan up to 125% loan-to-value is available today.

THE BIGGEST DELAY: Simple. Software. When a lender "underwrites" a loan, they actually do so through an AUS, which stands for Automated Underwriting Systems. The computer software evaluates the application, and gives an answer. The underwriter then verifies the computers decision. For example, the software may give a YES answer, then ask for pay stubs to verify income. The underwriters job is to then review the pay stubs to make sure the submitted income is the actual income.

Both Fannie Mae and Freddie Mac need to reprogram their computers, and they've indicated this will become effective March 15th.

BENEFITS TO LENDERS OF AUS: Can a lender "manually" underwrite a file?  Sure, but the biggest benefit of submitting a file through the automated systems is all about liability. Contracts with Fannie Mae and Freddie Mac protect a lender against liability for underwriting mistakes made by the lender of the original mortgage if the software said YES. Therefore smart lenders are not likely to take on the additional risk of a manual underwritten file.

THE RULES: Another major issue is simply getting the rules written, and distributed up and down all the lender channels. While Fannie Mae and Freddie Mac have indicated what their rules are, remember that they don't actually lender to consumers. Lenders lend. Fannie Mae and Freddie Mac simply buy loans from lenders. Therefore there is still a large amount of risk to lenders. Each individual lender needs to review new rules, consider the risk, decide if they even want to participate in the enhanced HARP 2 program, then write their rules and push them out to the Loan Officers on the street.

ST PAUL, MN: As the new year begins, there are no shortage of so called “experts” telling us what to expect for mortgage interest rates in 2012.  Mortgage interest rates closed out 2011 at some of the the lowest rates of all time. Some expect those interest rate trends to continue through the first quarter and beyond. Others expect a rapid increase in mortgage rates.

Who’s right and who’s wrong? A quick look through the newspapers, websites and business television programs reveals “experts” with opposing, well-delivered views. It’s tough to know who to believe.

For example, here are some predictions for 2012 :

• Home prices will rise in 2012 (Freddie Mac)
• Home prices will fall in 2012 (CBS News)
• Mortgage rates will rise in 2012 (American Banker)
• Mortgage rates will fall in 2012 (LA Times)

The issue for buyers, seller, and those wishing to refinance their existing mortgage loans in Minnesota and nationwide is that for many people, it can be a challenge to separate a prediction from fact.

When an argument is made on the pages of a respected newspaper or website, or is presented on some financial cable show by a well-dressed, well-spoken talking head, we’re inclined to believe what we read and hear. This is human nature. However, we must force ourselves to remember that any analysis about the future — whether it’s housing-related, mortgage-related, or something else — are based on a combination of past events and personal opinion.

Remember, predictions are simply guesses about what might come next, nothing more.

I am constantly amazed to hear politians, reporters, and other “so called experts” who have never written a mortgage loan ever in their life tell me how things work in the mortgage business. More annoying yet, is that are a lot these are the same people who makes the laws!

DON’T HOLD OFF buying a new home or refinancing your existing home because some “expert” says interest rates may drop sometime in the future. Mortgage interest rates are CURRENTLY at all time historic lows. Forget the experts! Jump in today, take the deal, and smile!