Home : Blogs : George Souto : George's Blog

My Community Loan Program Changes

Fannie Mae has just announced two program changes to the My Community Loan Program which will have significant impact on future My Community Loans.

The first change is that effective immediately Fannie Mae is requiring that 1 point be charged on all My Community Loans. Fannie Mae is calling to this cost a “Risk Adjustment”. This additional cost is across the board for ALL Lenders, they are not making any exceptions. This 1 point risk adjustment can be included in the Seller Paid Costs that Fannie Mae allows on My Community Programs, but no matter how you look at it, it is an additional cost.

This change could have a very negative impact on Buyers who might have had enough money for closing costs prior to this change, but now are not able to come up the additional money. My Community is a 100% Loan Program, so Borrowers who apply for this loan usually have very little money, this means any additional cost can have a tremendous impact, much less a full point added on to the closing costs.

The second program change that Fannie Mae recently announced was on the Expand Approval Level 2 Loans (EA-II). Effective July 22, 2007 EA-II Loans will no longer be eligible for the My Community Program. Also any Automated Underwriting (DU) approvals prior to this date must close by August 24, 2007 in order to take advantage of the prior approval.

This change will have a significant impact on the Borrowers monthly payment, because of the additional PMI costs. The PMI multiplier for a My Community Loan is .59 as opposed to a regular EA-II which has a 1.42 PMI multiplier. What this means is that a My Community Loan has a $49.17 PMI payment per every $100,000 borrowed, as opposed to an EA-II Loan which will have a $118.33 PMI payment per every $100,000 borrowed. That is a huge difference, and could be the difference between a Borrower qualifying for a loan or not.

These are the first changes that I have received to 100% Loan Programs, but we have all been expecting changes to happen. Hopefully there will not be many more, but it is very likely that others will follow in not only the 100% Loan Programs, but also in other Loan Programs. As I learn about more of these changes I will pass them on, so stay tune.

********************************************************************************************

Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Posted by George Souto on 06/20/2007 12:57 PM

Comments (61)

changes

Originally posted at: George's Blog: My Community Loan Program Changes

This post has been included in Connecticut Information Middlesex County, CT Information
Post is included in group: The Activerain Silver Star Hall of Fame
Post is included in group: Real Estate Rookie

61 Comments on My Community Loan Program Changes

JUN

2007

Thank you very much for this information George

Sandra

George... I'm either slowing down or my wife is secretly running when I'm not home because she is sneaking ahead of me...

Figures... The housing market hasn't come to a screeching halt fast enough so they'll throw a few more bumps in way.

Sandra, you are very welcomed.

Dan, looks like Sandra is keeping you on your toes.

It will be interesting to see how these changes will effect things, but it is clear that Fannie Mae is becoming more concern about the risks in this current market.

I just got the PMI off my mortgage. That made a big difference but this seems like it is really going to hit 100% financing people bad. (majority of my client's are military so that's not too bad but civilians who just relocate here don't have a bunch to put down.)

George... thanks for the update. As you stated, many of us have been waiting on these changes.

jeff belonger

Sally, there is a 100% program called Flex 100 which would have a PMI factor that is in between the two (.96), but even with that we will probably see some impact from this.

Jeff, yes we have, now lets hope that there are not to many more.

Thanks for the information George - it's great to get in in English for those of us who are a little dense in the mortgage department.

Thanks, George. Can't say I am surprised, but good to know. Hope there won't be too many other changes. I imgine we will see the impact of this soon.

Jeff

George, I guess this is part of the fallout of the subprime fiasco.

just making it harder to keep the low income home buyer. They also lowered the income limit in some of Colorado's counties

Thanks for the update George, I heard these were coming in July and I would think there will be more changes in the future.

great post - the reality is that the EA approvals have a higheer default rate.

Fannie has a mandate from Congress to serve low to mod income people, but they also have a mandate from wall street to return a profit to its share holders.

Another challenge of the split personality, is fannie a privatley held corporation with strong ties to the US Treasury Depat giving it an unfair buisiness advantage or is it a government entity masquerading as a publicly held corporation....the world may never know.

Very informative post... great job on sharing valuable information to the AR Family

Another change in in our wonderful world of mortgages, Got to go with the flow.

Thanks for the update

Tom

Not sure it helps with risk; you are the Mortgage Man George, let me ask this: if it's a 100 percent loan anyway, and the buyer is not spending the money on the extra point fees, how is this doing anything but making Fannie Mae money? I'm confused.

where did you get this information?

This is odd, I was reading last night that Fannie Mae was tasked with providing programs that would help the market not hurt it. What a strange world we live in.

George,

Thanks for this update..not sure if it will effect my clients but I am in no way a mortgage expert like you so I will leave that to the other pro's.

Ines, even though I am a Loan Officer I still need it in English myself. I am glad that I did not let the Portuguese get in the way..........LOL

Jeff D, I am hoping for the same thing.

Brain, yes Subprime has a far reaching impact.

Joe, you are right the lower income buyers are going to feel this the most.

Leo, let me know if you here of any changes before I do.

Ricardo, good question, they do seem to walk a fine line.

J.R., it is my pleasure to share what I can.

Thomas, we do not have any choice but to go with the flow and hopefully the impact will be minimal.

Carole, the Buyer could be having to spend that extra money out of their pocket if they can not get Seller Paid Costs. But you are right on Fannie Mae making more money on this because that point goes to them.

Damien, our Vice President of our Secondary Marketing Department informed us of this at our Company Monthly Meeting. She is the person in our company that is responsible for keeping up with all changes from Fannie Mae, Freddie Mac, and FHA.

Kate, these programs are still a great benefit, just not as much as they were before these changes.

Thanks for the information. I guess Fannie Mae sees a way to recoup the recent losses by punishing future borrowers?

Neal, you got in there while I was answering the other comments. Good move on your part to let the Mortgage pro's that you partner with handle this. Things get done much better and faster when we all stick to our area of expertise and let others do there job. I which more people out there would follow that.

Leigh, I had not looked at it that way, but it is a good way of putting it.

George.... even though the client is being charged another 1% now.... this even makes FHA even more attractive. If the client can come up with another 2%, they can end up with a better rate also.

jeff belonger

Jeff B, good point about FHA, and the Flex 100 also now becomes a little more appealing.

My Lender told me about this change yesterday. I had been really marketing this product but now it doesn't seem that great to me for my good credit first time homebuyers.

Has FHA gone 0 money down yet?

It appears the sub-prime slime is taking its toll. As always, thanks for bringing us these timely updates.

Endea, we have not been informed of FHA doing no money down yet. I know that FHA is working on getting approval to do that, but nothing yet.

Linda, "Sub-Prime Slime" you my friend really have a way with words.........LOL

I agree with dan....why not just tear every road up. It's crazy. Soon enough, no one will have to worry. No one will qualify!

George,

Looks like it is the sign of the times when Fannie Mae adjusts loan programs for the worse. The overall lending atmosphere is a little jittery and more risky because of the current subprime commotion. Could it be that the secondary market is really looking for higher returns to compensate for the extra risk it's assuming? Probably.

Christy, we are still a long way away from that, so lets pray that it does not come to that.

Esko, I do not have much to do with our Secondary Market Department and how they work, so I will have to let someone else answer that, but I am sure that risk is probably the reason for the higher compensation.

I'm sure I'm missing the obvious or having a blonde moment. Why are these changes happening?

George,

I haven't read all the comments, but I need to know. How is this helping the consumer? It sounds like it is just helping Fannie Mae. Am I reading this wrong?

George, Great post... As Jeff stated we all new changes where going to happen.

George, why you always do a great posts ? Very informative as always with pure quality information :) keep the good blog my friend !

Dena, this is happening because Loan Guidelines are being tightened up in order the reduce risk of those who back loans, in this case Fannie Mae. The Subprime Market has also been a reason for things tightening up. It all comes down to the amount of risk exposure.

Karen, your understanding it correctly. It isn't helping the consumer, it is compensating Fannie Mae for the risk that they are taking.

Matthew, lets hope that there are not many more to follow.

Ray, your comments are always encouraging.

JUN

2007

George,

I guess the one thing that we can always rely on......change! A flight to quality that most of us somewhat expected. Obviously these changes will disconnect some folks from the opportunity of homeownership but it still beats getting stuck into a subprime program....that's the good part!

Thanks for the update---Yikes, 1 whole point is added now?

Mortgage George...

As you probably know this change is a double whammy for us and the market that we specialize in.

Good thing we don't have all our eggs in one basket :)

TLW...ROAR!

These loans have been very aggressive for a long time.... maybe too long.

Although I hate to see the adjustments.... appropriate changes to programs should continue

Ron, I absolutely agree with you, even with these new changes and cost, this is still far better and cheaper than Subprime.

Diane, yep a full point is hard to take, but a Borrower would pay more points than that with a Subprime Loan.

TLW, if a Realtor or Loan Officer is in a market that is experiencing hard times, a change like this is going to be felt even more than in the market that I am in. The good part is that at least the Program is still available, and not discontinued like I fear might start to happen. These are still great programs for First Time Homebuyers or Buyers with very little money, because they still do not require a downpayment. But you are right not putting all your eggs in one basket is always a wise practice to follow.

Tom, this program is still pretty aggressive even with this change, it just now means that now a Borrower has to come up with this additional cost or get a Seller to pay it. Other changes are probably going to follow, I just hope that we will only be looking at changes and not the discontinuance of Loan Programs.

None of my clients have used this program yet. But the mortgage company I refer the most is Offering the program.

Thanks for to update. Great information.

George, thanks for the update on the my community program. With Bob on the road now, I haven't been made aware of these changes and I'm in the process of negotiating a purchase agreement on one of my listings. I believe that they are using this program. I will now check with the L/O to make sure they know that I know about the changes and the pre-approval letter given me better be based on these changes.

George,

Thanks for sharing this info... I can't wait to see what the next round of tightening will bring.

Danny, it is a great program. 100% financing with a low PMI factor.

Shaun, you are welcome.

Cynthia, you need to just make sure that they still have enough money to cover the 1 point that will now be added to the closing costs, everything else should remain the same.

Jason, let's hope that it will not hurt to much.

JUN

2007

Thanks for the advice George. I really appreciate it.

Lanre, you are welcome.

I also responded to you e-mail, call me if you want to talk about the further.

I guess we have to take the good with the bad. Oh well, it happens. Thank you for the input on the change. Where are you getting your information? I like to keep myself as updated as I can.

JUN

2007

Hey George,

I guess I was one of the lucky ones...I never take any loan on my own properties with PMI ,PMS LOL!

I have no prepayment penalties...nothing. My rate is adequete at this time but I have a very high credit score and have no problem getting the best deal also my equity line is -50 basis points for 25 yrs.

Neal, we would get along then because I refuse to do loans with PMS........LOL

Also a rate on your equity line of 50 basis points (one half of one percent) is one heck of a deal :)

Rick, the Vice President of our Secondary Department receives change notifications directly from Fannie Mae, Freddie Mac, and FHA and then passes it on to those who need to be informed of the changes (sales, underwriting, closing, etc.). Most of the time it is passed down to us at our monthly meetings.

JUN

2007

Well George, thank you for the response! I will have to add you to my favorite blogs. Our company is rather small and I work in a community of about 150k people or so. There really aren't any "large" corporate structured companies around here which is kind of a shame.

Rick, you are welcome. If you need any other information just let me know.

JUN

2007

Wow, higher fees across the board and elimination of one of your programs. Certainly not a good combination for borrowers...

Kaushik, I just hope that the changes that might follow are not worst than these.

JUN

2007

George,

What are the chances that the FHA will change also?

Susan I have not heard of any FHA changes recently, and we stay on top of that because we do so many FHA Loans. There are some anticipated changes that I wrote a blog about a couple of months ago "FHA Stepping Up as Subprime Steps Back" but they have not been implemented as of yet and no word on will they will happen.

JUL

2007

The winds of change had most certainly arrived. Thanks for sharing the info with everyone.

Ann, "the winds of change" I like that :)

JUL

2007

George, :)

JUL

Greeting. Lawyers spend a great deal of their time shoveling smoke. Help me! I find sites on the topic: Aurora loan services president. I found only this - 2nde grade work sites. In addition to pure transaction advisory work, redmond asset finance has the ability to provide clients with the following additional services. Apr the royal family has emerged as among the few winners from the budget after the prince of wales was granted a tax break worth hundreds of. Thanks :eek:. Maurice from Japan.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?