We have now had our first full week of a new year and I wanted to tell you "Happy New Year" and I hope that 2009 will be awesome for you.
As you are aware, there were many changes implemented in 2008 and at the beginning of 2009, and will be more forthcoming. I wanted to give you a run down on them since it affects all of us and how we can get buyers to the closing table. I feel it is a lenders' responsibility to keep you, the Realtor®, abreast of what is happening to help you to keep and grow your business and I take that responsibility extremely seriously!
If you have any questions about the following information, please do not hesitate to contact me! I am going to use bullet points for these changes but please know that there may be a lot of information in regards to each one so this may be a little lengthy. However, I feel it is so important that you should take some time and make sure you read it so that you know how your business has been or will be affected!
· USDA Rural Housing Loan - Increased Income limits/Availability of Funds: Effective January 20, 2009, the income limits for this program are being INCREASED for those persons/families that have 1-3 in the household and for those that have from 5-7 in the household. This will help a larger number of people qualify for this program! **PLEASE NOTE: MANY OF YOU ARE HEARING THAT USDA IS OUT OF MONEY - While they are not currently insuring loans (they do not EVER lend money, only insure the mortgage), we are STILL DOING THEM AND EXPECT NO INTERRUPTION OF THIS PROGRAM! I am a national trainer for this program and have been in contact with personnel at the national level of USDA and we see this continuing uninterrupted for us based on how we are set up with the USDA so please, if you have any current loans in process somewhere that were going USDA and have been told they can't do it, which IS happening, have your client call me and let's get them closed before their contract expires!
· Maximum Mortgage Amounts: FNMA has kept their conforming loan limits in our area to $417,000. FHA has DECREASED the maximum loan limit in Okaloosa, Walton, and Bay Counties as follows: Okaloosa: $271,050 (was $312,500 in 2008), Walton: $325,450 (was $362,790 in 2008), and Bay: $271,050 (was $396,250 in 2008). In Santa Rosa County, it remains in 2009 where it was in 2008, which is $271,050.
· Repairs to Properties that Are Being Purchased: Many properties being sold are short sales or foreclosures and are being sold "as is". In some cases, the condition of the property isn't such that a lender can do a mortgage secured by the property and sales are falling by the wayside. Please note that there are programs available where a buyer can finance in costs of repairs and close prior to those repairs being completed. On an FHA loan, the maximum amount of the repairs is $35,000; on a USDA Rural Housing loan, the maximum amount of the repairs is $6,650. In the case of the USDA, these most be repairs that are noted by the appraiser on the appraisal; in the case of the FHA, a buyer can purchase a home and remodel the kitchen (amongst other allowable projects) and finance the costs and they do not have to be noted in the appraisal!
· Conversion of primary residences to investment property or 2nd home: (This is used for FNMA, FHLMC, FHA, USDA, and VA currently; the only exception is if the buyer is transferring or moving a long distance.) If you have a buyer that is purchasing a new primary home but who will still own their current primary home when they go to closing, there are restrictions as far as being able to approve the new mortgage. In order for a client to rent their old home AND use the rental income to qualify, they MUST HAVE 30% equity in the old home. No ifs, ands or buts on this. If they do, and we have to verify that they do, we can use 75% of the lease amount to count against their mortgage payment. We would have to have the lease, a copy of the deposit check from the tenant, AND a copy of the receipt where the buyer deposited the security deposit into their bank account. If they don't have the 30% equity, the buyer must qualify for both payments AND have documented reserves (money in the bank) after closing of 6 full months of PITI (principle, interest, taxes and insurance) for BOTH PROPERTIES. If they are converting their current primary to a 2nd home, the same applies as far as qualifying with both payments and having the 6 months' reserves for both properties.
· Ordering of appraisals: Currently, we are able to select the appraisers from our list of approved appraisers. On May 1, 2009, there are new guidelines in place referred to as the "Home Valuation Code of Conduct", or HVCC for short. Here is a link to this code but, in essence, mortgage lenders, brokers and bankers will no longer be allowed to be involved in the selection of the appraiser, nor to have contact with them or even give them an estimated value of the property past sending them a copy of the sales contract for purchases. We are still learning about this code and how it will affect us and I will keep you abreast as I find out more. You can read the code here to see it in its entirety and how it may affect you and your clients.
· Stated Income Loans: There are many schools of thought as to what caused the mortgage meltdown last year and a lot of people feel that the stated income and no doc loans were the biggest cause. Investors, for the most part, have done away with these loans and those that still offer them require the buyer to sign a Form 4506-T. This form is the Request for Copy of Tax Forms that is sent to the IRS to determine that a borrower's income qualifies them for the loan. These are being executed prior to closing so, in essence, a stated income loan these days is ONLY FOR CONVENIENCE TO A BORROWER - their income is going to be verified before closing. The sole purpose of a stated income loan these days is so that a client doesn't have to find and send their tax returns to the lender; the lender will still be verifying their income.
· How Bankruptcy and Foreclosure (including deed in lieu and short sales) Affect the Ability to Buy a Home in the Future: In August, FNMA developed new guidelines for how long a potential buyer must wait after certain actions that are reported on their credit report. For instance: There was no existing policy on how long a person had to wait if they had multiple bankruptcy filings, except the 2-year that WAS required for a Chapter 13; now, a person with multiple bankruptcies must wait 5 years from the most recent dismissal if they have had more than one BK in the last 7 years. It used to be that they had to wait 4 years after the date the foreclosure sale was completed it is now 5 years with additional requirements that apply after 5 years and up to 7 years.
· Down Payments and FHA: The downpayment assistance program, ie: Nehemiah and Ameridream, that were used to help buyers using the FHA mortgage program have a gift of the downpayment from a charitable organization was completely done away with. Also, effective January 1, 2009, the down payment required on an FHA mortgage went from 3% to 3-1/2% in all cases.
· Condos or Attached Properties in Florida: Most investors, and certainly FNMA, FHLMC, FHA, VA, and USDA will no longer allow mortgages on properties that have one or more of the following: the word "resort" in the title of the project, the availability of nightly or weekly rentals within the project, an on-site rental desk, a large percentage of delinquent HOA dues, housekeeping services, electricity that is not on an individual meter, etc. Because of this, we are unable to offer fixed rate mortgages in projects that exhibit one or more of these traits. HOWEVER, we have found alternative lenders offering portfolio programs, which are ARMs in all cases, and CAN STILL FINANCE THESE CONDOS AND CONDOTELS! There are larger down payment requirements that in the good old days, but we are able to assist your buyers and get these units closed. These days, underwriters are googling the name of the project and if they find these traits, we are dead in the water except with these portfolio programs. Also, many investors have stopped allowing above 80% financing on attached units in Florida, and some cap that at 70%! These are townhomes, not condos, and we are able to still finance them up to 100% in many cases so please make sure to have any buyers you have that need financing call us.
· Mortgage insurance - Mortgage insurance, or PMI as many refer to it, has changed tremendously. There are currently no mortgage insurers that will insure a 2nd home or investment property in the state of Florida. This is why it has become basically impossible to find a 2nd home or investment property mortgage with less than at least 20% down, and in some cases even more.
· Maximum Number of Financed Properties: Effective in 2008, most investors have now limited the maximum number of financed properties a buyer can have to FOUR, including their primary home. This includes properties that are owned in a trust or LLC and properties that they own with someone else personally. This does not include commercial or multi-family housing properties above 4 units but does include 1, 2, 3 and 4-unit properties. **This is one of the biggest points I made during my interview with Good Morning, America - if they would allow those people who truly qualify for more than 4 to purchase, there would be a lot more sales nationally as many people would love to scoop up the great deals but are unable to secure financing. If they have good credit, good (and deep) reserves, a history of having rented property, and their debt to income ratio including all of their properties is under 45%, is, in my eyes, ridiculous to not allow them to purchase a property! They should allow this and, to insure themselves, set up a fund, much like the upfront mortgage insurance on an FHA loan, that keeps funds available should any of these buyers default!
While these do not represent all of the changes made and upcoming, these are the ones that most affect us at this time. I will make sure to keep you informed of any and all changes that come out so that you are better able to perform your job and get your buyers to closing.
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