FHA Foreclosures Rising

Rising FHA default rate foreshadows a crush of foreclosures

David H. Stevens (Andrew Harrer - Bloomberg)

By Dina ElBoghdady and Dan Keating

Washington Post Staff Writer
Tuesday, February 2, 2010

 

Cash / Mattress Money is a Deal Killer

- Cash / Mattress Money is a Deal Killer-

AHEAD OF THE CURVE ARTICLE BELOW

Below is a list of my top programs that should be in every agents resource
folder:

-FHA closed on time: [http://www.realestateloans.com/fhadonewell.pdf]
[http://www.realestateloans.com/fhadonewell.pdf]
www.realestateloans.com/fhadonewell.pdf

-100% Rural Development: [http://www.realestateloans.com/usda.pdf]
[http://www.realestateloans.com/usda.pdf] www.realestateloans.com/usda.pdf

-$100 down for HUD owned homes:
[http://www.realestateloans.com/100hudhome.pdf]
[http://www.realestateloans.com/100hudhome.pdf]
www.realestateloans.com/100hudhome.pdf

-Deferred maintenance homes:
[http://www.realestateloans.com/uglyhomes.pdf]
[http://www.realestateloans.com/uglyhomes.pdf]
www.realestateloans.com/uglyhomes.pdf

-100% pre-approval to closing ratio:
[http://www.realestateloans.com/concierge.pdf]
[http://www.realestateloans.com/concierge.pdf]
www.realestateloans.com/concierge.pdf

-VA 100% financing:  [http://www.realestateloans.com/va.pdf]
www.realestateloans.com/va.pdf

-Home Buyer job protection mortgage:
[http://www.realestateloans.com/rainydays.pdf]
www.realestateloans.com/rainydays.pdf

CASH IS KILLING DEALS:

I recently had a borrower call me and state she deposited $6000 into her
bank account from an unsecured loan. Without telling the Realtor or myself
she used this money for the contract deposit. Some form of outside monies
has been interjected into four of the last ten deals I've done and the
borrowers did it after reading
[http://gilkerk.realestateloans.com/condominiums/2009/05/07/i-need-to-make-a-home-loan-application-help.html]
my home purchase introduction link which clearly states that cash and large
deposits should be avoided.

Why isn't cash allowed into a transaction? It's the borrowers money right?
Several obvious reasons: Patriot Act/Banking Laws, Drug Money, Cash
Laundering, Straw Buyer considerations, Under the Table Seller Concessions,
Realtor or Loan Office contribution, Unsecured/unreported loan, Gift from
an unacceptable source, etc..

Loan officers and Realtors should never allow or encourage customers to
deposit or use cash for ANY part of the transaction nor turn a blind eye if
they know a client is borrowing money from credit cards or personal loans.
This type of mistake will certainly cause problems and create needless
tension. Now more than ever, loan files are being looked at with a fine
tooth comb. More and more careful verifications are being done a day before
closing- be prepared and don't let your deal die for dumb reasons.

Remember, FHA case numbers follow these loans. If one underwriter declines
a loan, the disposition will follow that loan. Realtors and Loan Officers
must work closely to prevent problems from day one.

Please call me at (847) 873-7295 to discuss nuances. Here to help you get
homes financed.

Is your loan officer less responsive than you'd like? Cut yourself free
from bad service, poor communication and start enjoying incredible support
today.

Could your team use an updated presentation to get agents up-to-speed on
loan program changes? Lending is a huge part of transactional business,
consider  scheduling my lunch and learn for your team.

Gil Kerbashian

Mortgage Lending Since 1997

Gil's Loan Answer Hotline: (847) 873-7295

FANNIE MAE'S NEW DEBT TO INCOME RATIO'S

Fannie Mae New Debt to Income Ratio Requirement

FHA 203ks

Ahead of the Curve

For Active Real Estate Marketing Professionals...

Distressed Homes.. How do we finance these homes so that Realtors can
actually sell them?:  I'd like to offer this website if you would like to
learn more about securing financing to sell homes with difficiencies:
[http://www.203kspro.com] www.203kspro.com

Many, many, many (almost an understatement) Realtors and buyers are
contending with properties that have been damaged through the foreclosure
process or neglected due to a distressed sale situation.

FHA has introduced a safe and streamlined mortgage program that I offer
which will provide the buyer the money to purchase the home AND receive an
additional $5,000, $10,000, $20,000 up to $35,000 for upgrades and
difficiency correction. This is a very safe loan offered today with a 30
year fixed term in the mid 5% interest rate range.

I enjoy doing this loan and have done many of them in the past two years.
This is a wonderful program for Realtors to help their sellers and buyers
with. Agents use the same purchase contract and there are no additional
addendums. The process has recently been streamlined so that buyers aren't
burdened with a complicated process. Its truly a deal saver!

Please take a moment to look at the above website for more details or call
me at (847) 873-7295 to discuss nuances. Here to help you write them up.

FHA Condo Updates

Here is some insight as to what you might expect to see in the way of condo requirements. The final HUD condo requirements have not been finalized yet.

1. FHA concentration will remain at 50 percent.
a. In "well established" project, the concentration may go up to 100 percent.
b. "Well established" buildings show clear financial stability, including a minimum of 10 percent reserves, owner occupancy of 50 percent, and a transfer of title.
c. In the ML, HUD will provide an explicit definition of "established."

2. Owner Occupancy will remain at 50 percent.
a. REOs will be excluded altogether from calculation.

3. Pre-sale requirement will be 50 percent.
a. FHA will accept a spreadsheet from the developer as certification under the pre-sale requirement.
b. Additionally, FHA has created a specific document that developers must sign to certify that all of the information is accurate.

4. Temporary Certificate of Occupancies will be accepted.

5. All 40,000 + condo projects currently approved will remain approved

6. HUD Review and Approval Process (HRAP) is permissible in Florida.

7. The ML will clarify that under Direct Endorsement Lender Review and Approval Process (DELRAP), a lender is not responsible for another lender's approval process (specifically, additional project review is not required).

8. New ML will clarify that reserves should be at 10 percent, if not then a lender can request a reserve study.

9. New ML will add specific guidance on insurance (specifically, gap insurance).

10. Transfer of control requirements will be dictated by the state and local requirements.

11. New ML will clarify the definition of site condos.

12. New ML will clarify phasing requirements.

Courtesy of Stacey Sprain

F

What is a Debt To Income Ratio? Can I Afford a Home?

Ahead of the Curve

For Active Real Estate Marketing Professionals...

Debt-To-Income Ratio:  I recommend every Realtor, as a gauge, to always
ask the lender about their buyers DTI. Debt to income ratio is a
straightforward calculation that carries a lot of weight when qualifying a
borrower for a home loan. Here are the basics..

Debt-To-Income (DTI) can be quickly calculated by dividing income into
debt. Ex: $4000 monthly income divided into $2000 dollars of monthly debt
equals a 50% DTI. Simply put, 50% of the borrowers monthly income goes to
monthly debt.

Lets look at the two types of DTI calculations lenders look at when
qualifying a home buyer: 1) Housing DTI and 2) Total DTI

Housing DTI: Lenders will divide the borrowers total monthly income, lets
say $4000 a month, into the borrowers proposed housing expense, lets say
$2000. The $2000 will include: Principle and interest, taxes, homeowners
insurance, mortgage insurance, homeowners association dues, and whatever
else comes with this home (ie flood insurance). Again in this example the
DTI is 50%. $4000 divided into $2000.

Total DTI: This second DTI test would be total monthly credit debt plus
expected housing debt divided by monthly income. Credit debt includes
whatever shows up on the credit report as an obligation plus items such as
alimony or child support.

Ex: The above borrower has a monthly car payment of $500 and monthly
credit card bills of $200. Lets calculate the buyers debt using: Income:
$4000, Proposed housing: $2000, Credit debt: $700. Here's the equation:
$2700 divided by $4000 equals 67%. If Income was $5000 the Total DTI would be 54%. With FHA it is common to utilize a co-signer in order to increase loan application income*. *Note: If the co-signers income is used so must their debt. If the co-signer is debt heavy their income effect may be negated by their debt.

The above borrower has a Housing DTI of 50% and a Total DTI of 67%

FHA DTI "book" limits are: Housing 29 to 31%. Total Debt 41 to 43%. Higher
DTI ratios may be obtained with your stronger borrowers.

Fannie/Freddie DTI "book" limits are: Starting in December the two
agencies will limit a borrowers back end ratio to 45%. Anything above that
will be an exception.

Private Mortgage Insurance limits: Currently 41%. Almost no exceptions.

As you can see our borrower in the above example is in over his head. Many
buyers these days don't understand this calculation and expect "things to
work themselves out". Don't spend a whole lot of time with a buyer that
hasn't been properly pre-approved. Now more than ever its important to
secure a STRONG pre-approval based on a full tri-merge credit report.

That was a quick primer on DTI and if I've missed something, you are
always free to call me at (847) 873-7295 to discuss nuances. Here to help
close'em.

Mortgage Insurance

Ahead of the Curve

The Weekly Purchase Money Resource Letter From Gil Kerbashian

This weeks topic:

- Mortgage Insurance -

For Active Real Estate Marketing Professionals...

Mortgage Insurance:  Mortgage insurance for home loans can come in several
forms depending on the type of loan the buyer is seeking. With conventional
loans its called PMI (private mortgage insurance), with FHA its typically
referred to as FHA MI, with VA and USDA its called a guarantee fee.
Mortgage insurance is tax deductable. FHA requires mortgage insurance on
their loans for 5 years regardless of property equity. Let's look at the
various programs...

Conventional PMI. Most buyers putting less than 20% down on a home
purchase will be required to purchase some form of PMI. PMI can be a
monthly sum, a one time up front sum, can be paid through a higher interest
rate or a combination of monthly/upfront. The most popular is the monthly.
PMI typically requires a 720 credit score and PMI underwriting will limit
the homebuyers Debt-to-Income ratio to 41% (if you want PMI you can NOT
spend more than 41% of your monthly income on housing and credit debt).
Even today I can still secure a pre-approval from Fannie Mae for a buyer on
a 100% financing with a 620 credit score at a 50% Debt-to-Income BUT I can
NOT get a mortgage insurance company to issue a mortgage insurance policy
(no PMI means no loan). The barrier is not so much Fannie/Freddie as it is
the PMI companies. Some well know PMI companies are: GE, MGIC, PMI Group,
UG, TRIAD, Genworth. You can see if your transaction qualifies for PMI by
looking at [http://www.pmigroup.com/] www.pmigroup.com .

FHA Mortgage Insurance: FHA does not lend money they are a Mortgage
Insurance Entity. FHA mortgage insurance mandates both Up-Front and Monthly
premiums on FHA borrowers**. Borrowers are required to pay a monthly sum
with their mortgage payments and are also charged 1.75% which is placed on
top of their base loan amount. Ex: $100,000 base loan amount plus 1.75%
equals $101,750 total funded loan amount. Even with the two premiums the
payment is typically less than PMI. After close, the 1.75% Up-Front is sent
to HUD for operational costs and the Monthly is pooled with the lender for
default reserves. FHA allows for higher Debt-to-Income ratios which is why
many buyers still use FHA even with 10 or 15% down payments.

**Some 15 year amortizing FHA loans are excluded from Monthly but always
must pay the Up-Front.

VA and USDA loans: These loans require what is called a Guarantee fee. VA
is 2.15% (some exceptions exist) and the USDA is 2.0%. This percentage is
charged to the loan. No monthly amount. Ex: $100,000 base loan (100% of
purchase price) plus 2.0% on top of the base loan equals $102,000 total
loan amount.

That was a quick primer on mortgage insurance and if I've missed
something, you are always free to call me at (847) 873-7295 to discuss
nuances. Always here to help and earn your referrals and business.

Is the lending process burning you out? Is your loan officer slower than
you'd like? Cut yourself free from bad service, poor communication and
start enjoying incredible support today. Call if I can assist.

Could your team use an updated presentation to get agents up-to-speed on
loan program changes? Lending is a huge part of transactional business,
consider  scheduling my lunch and learn for your team.

Win over your listing presentations and let your listings professionally
present themselves with a year of free TALKING HOME TOUR TECHNOLOGY. Call
to sign up today. See the above flier for details.

Gil Kerbashian

Mortgage Lending Since 1997

Gil's Loan Answer Hotline: (847) 873-7295

Integra Mortgage Corp

Mortgage Banking and Brokering

Crystal Lake - Schaumburg - Arlington Hts

FHA 203KS FORMS

"We wrote an offer on a foreclosure and the appraiser called out repairs including a new Roof. The borrowers bank wouldn't do the loan. Another agent in the office recommended Gil Kerbashian. Gil was amazing. He returned my calls quickly, explained the loan program well, pre-approved my clients the same day and we CLOSED on a home that the bank said couldn't be done." Melissa Ross, Remax Professionals

The FHA 203K (ks) home loan program helps homebuyers finance up to an additional $35,000 (includes contingency and rehab admin fees) into their mortgage to improve or upgrade the home before move-in or refinance repairs with some of the lowest rates available.

This new home loan product helps homebuyers and homeowners quickly and easily tap into affordable mortgage money to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser during a foreclosure sale (as is so popular these days).

Don't let an old roof, mold or missing fixtures stop you from buying a home and building equity from day one.

The current market offers a lot of attractive home purchase opportunities right now considering all the tremendous bargains, but many buyers do not have the required money to fix up these homes. The FHA 203ks is the perfect loan for this purpose.

I'm here to help you obtain this loan and structure the transaction. Its not difficult and with my expertise, you'll enjoy the process of fixing up your dream home! Be detailed give yourself an extra 15 days to close and we'll get it done together.

Below you'll find all the forms that you'll need for the 203ks process. All you have to do is print and fill them out. I've done the ground work to organize them for you. Most of the forms are completed and just need you to print and fill in the blanks.

Please make sure the property is prepped for the appraiser: utilities on and property cleared of debree.

Call me if you need any assistance.

Overview about the program: http://www.203kspro.com/

A checklist of items needed from the borrower for the initial loan package: www.realestateloans.com/203ksborrowerchecklist.pdf

Contractor estimate/bid checklist (must be EXACT to these specs): www.realestateloans.com/203kschecklist.pdf

Contractor borrower agreement: www.realestateloans.com/203kscontractoragreement.pdf

Borrower lender agreement: www.realestateloans.com/203kslenderagreement.pdf

Contractor references (no less than 3): www.realestateloans.com/203ksreference.pdf

Contractor W-9: www.realestateloans.com/203ksw9.pdf

Initial draw request. Please complete this form if your contractor(s) would like to be paid for materials before the job starts: www.realestateloans.com/203ksinitialdraw.pdf

Real estate agents, please write up your contracts as any other. You don't need any special addendums or forms. Please let the sellers know that this is a 203ks loan and will require an additional 15 days to close.   

Borrowers: please submit all of the above items at one time up front. Utilize the contractor checklist to help your contractors complete the bids correctly and with detail. Any missing items will cause a delay for YOU. Work with high integrity professionals.

Thank you.

FHA FHA LOAN MORTGAGES MORTGAGE BROKERS MORTGAGE RATES REFINANCE
REFINANCING HOME LOANS MORTGAGE BROKER MORTGAGE REFINANCE MORTGAGE LOAN
INTEREST RATES HOME EQUITY LOANS  NEW HOME LOAN HOME LOAN RATES HOME MORTGAGE LOAN
LOANS COMMERCIAL LOANS LENDERS HUD FEDERAL HOUSING AGENCY FANNIE MAE FREDDIE MAC CRYSTAL LAKE SCHAUMBURG PALATINE CHICAGO ARLINGTON HEIGHTS INTEGRA MORTGAGE IAMP BANK OF AMERICA WELLS FARGO MORTGAGE DISCOUNT MORTGAGE RATES WHOLESALE LENDING LOWEST MORTGAGE RATES 60613 60013 60193 CHICAGOLAND 203KS 203K REHAB WISCONSIN REMAX COLDWELL BANKER REALTY EXECUTIVES PRUDENTIAL KELLER WILLIAMS

FHA Condo Changes Delayed

Another extension had been issued in regards to the implementation of the new condominium project approval procedures outlined in HUD's Mortgagee Letter 2009-19.

HRAP- Hud Review and Approval Process

DELRAP - Direct Endorsement Lender Review and Approval Process

The new guidelines will partially take the burden off of HUD to approve projects and place that burden on the lenders themselves if they so wish. This is a lot of risk that lenders may or may not want to take on. The new "lender approval" process is called DELRAP/HRAP and is now visible on the HUD condo site. I'm still trying to figure out exactly how the mechanics work but this is what I can tell so far.

1. DELRAP is only available to lenders with full DE designation.
2. A lender can use DELRAP to approve condo projects or it can have HUD do it (HRAP) but apparently not both.
3. Lenders who choose the DELRAP option must certify compliance with certain HUD regulations.
4. The lender are still completely responsible for certifying that the project meets all HUD requirements.
5. Lenders must certify that no greater than 30% of the project is encumbered by FHA-insured mortgages.
6. Once a DELRAP lender reviews and approved a project, they are responsible for inputting the correct project approval information.
7. DELRAP lenders are responsible for maintaining all of the condominium project document exhibits 
8. DELRAP lenders must certify that the project maintains acceptable insurance.

A great idea but there is still much ambiguity in the new system and this is probably the cause of the delayed execution. The intentions are good: Get the banks to more efficiently and quickly review condo's for approvals, but the new process is so ambiguious that it is deemed perilous for banks that don't get it right. 

Read more.

Gils Enews: Credit Scores

This weeks topic:
 
- Credit Scores -
 
(thank you to the agents that emailed topic suggestions last week)
 
Please email me your topic suggestions. Driving around dropping off fliers wastes gas, time and paper. Help me keep it Green, Clean and Current.
 
Update on current purchase transaction turn times:
FHA: 5 days to underwrite. (still time to close for the $8,000)
Conventional: 4 days to underwrite
FHA rehab: 15 days to underwrite
 
Gil's current loan closing performance stats:
100% ytd pre-approval letter to closing record
100% ytd rate quote to rate delivery accuracy record
97% ytd on-time closing record
89% ytd purchase to refinance loan ratio
Years of reliable and trusted service for purchase money financing.
 
What are some current loan process concerns right now?
1. Funds to close verification from buyers (no unsourced deposits allowed)
2. Debt to income ratios
3. Horrible loan pre-approvals on down-leg transactions
4. Low credit scores
Below is a list of my top 9 programs that should be in every agents resource folder: 
     Fast closing flyer:  www.realestateloans.com/fhadonewell.pdf  
    100% Rural Development:  www.realestateloans.com/usda.pdf  
    $100 down for HUD owned homes:  www.realestateloans.com/100hudhome.pdf  
    Deferred maintenance homes:  www.realestateloans.com/uglyhomes.pdf  
  Pre-approvals that close:  www.realestateloans.com/concierge.pdf  
  VA 100% financing:  www.realestateloans.com/va.pdf

My personal email for questions: gilkerk@yahoo.com
 
 
Ahead of the Curve
For Active Real Estate Marketing Professionals...
 
New Credit Score Requirements: Credit score requirements are now lender to lender specific. Due to default rates with certain lenders and secondary market requirements some lenders have been pushed to increase credit score requirements for their mortgages. You may want to proactively monitor your buyers to make sure they are matched with lenders that have an appetite for their credit score.
 
Recently, I've started seeing the introduction of three to four Tiers for FHA loans: 620, 640 and 660. You will see 660 minimums with a few lenders that have been hardest hit with mtg defaults and low FHA score card results. Some lenders are also overlaying the higher scores to protect their future FHA score card.
 
As most of you know, conventional lenders have already instituted risk based pricing on conventional loan programs. Risk based pricing is tiered towards both down payment and credit score. Prime rates are offered at scores starting at 720. You will see rate/fee increases when the score goes down in 20 point increments. 700-719 pricing, 680-699 pricing, 660-679 pricing, 640-659 pricing and so on down to the 620-639 floor.
 
Please take a look at the above flier on credit scoring. I'm supporting my Tier one agents and their buyers with credit score inhancement and rescoring.
 
 
Is the lending process burning you out? Is your loan officer slower than you'd like? Cut yourself free from bad service, poor communication and start enjoying incredible support today. Call if I can assist.
 
Could your team use an updated presentation to get agents up-to-speed on loan program changes? Lending is a huge part of transactional business, consider  scheduling my lunch and learn for your team.
 
Win over your listing presentations and let your listings professionally present themselves with a year of free TALKING HOME TOUR TECHNOLOGY. Call to sign up today. See the above flier for details.
 
 
 
Gil Kerbashian
Mortgage Lending Since 1997
Gil's Loan Answer Hotline: (847) 873-7295

 
 

FHA Credit Score Changes Coming

In February we were still funding loans down to a 580 credit score, now its 620 with most lenders. Some lenders are taking score requirements up to 640 and 660. The lending process is moving back to its technical book procedures. The changes are good because those that are buying now shouldn't experience defaults, and bad because many buyers aren't prepared for the rapid changes.

Regarding verifying down payment - Important: Any underwriting unit can ask for bank statements and official verification of deposits in tandem for the last 60 days up and through closing. NOTE: Any large deposits going into the account will need to be fully sourced, even if its a large deposit going into a giftors account. Cash deposits are not allowed. WHY?...

Recently there has been a slew of sellers kicking back the down payment to buyers in order to off-load properties. This has caused a tightening of down payment verification. Please take a moment to read the link at

http://gilkerk.realestateloans.com/fha-gift-letter/2009/05/07/i-need-to-make-a-home-loan-application-help.html

Flood Insurance Certs, Get Them Up-Front

Early flood certs, a Must for all Mortgage Brokers and Bankers

HUD’s letter Mortgagee Letter 2009-37 brings up the point for consideration by all mortgage brokers and bankers. It’s not smart to wait for the appraiser or end lender to make the flood determination for the subject property and ultimately the loan requirements for your borrowers. Waiting is a major disservice to your customers by not working proactively to determine the flood status of the property as soon as possible in the loan process.

There’s few things more distruptive to a borrower than learning at the last minute that the property is in a flood zone because of some small body of water that overflowed years ago and now they need to pay hundreds of dollars for a flood insurance premium and additional escrow reserves in order to close. It could blow your deal if you borrower is low on reserves (like most).

Pull your flood certs early if you live in a state that has lots of bodies of water near residential properties.

The Importance of Credit

The Importance of Credit

Mortgage Rates Now a-la-carte

Mortgage rates have gotten sliced and diced in very narrow catagories and credit score ranges. Last year we were able to pool 700 ficos with 650.. this doesn't hold true any longer. I've included the MAIN FANNIE MAE AND FREDDIE MAC matrix below for what we as mortgage lenders have to look at before we price a loan. There is also matrices for cash-out refinances, condo's, investment properties and 2nd homes.

Don't expect any of the mortgage rates you see in the paper or online to hold true. The mortgage rates you see online are "base" rates and are only offered to a very small percentage of the population with the highest credits scores and largest down payments.

With declining property values, high loan defaults and lower credit scores so common now you will be better served working with a mortgage person you can first trust and one that has access to many lenders. Access to many lenders will help you find the right rate and approval for your particular needs.

As you can see on the below matrix 720 credit scores with lots of equity home owners are getting the best rates. This matrix applies to conventional loans only not FHA or VA loans. FHA and VA loans offer there own risk based adjustments. Guideline changes have been almost non stop since the end of 2007 due to the disrupted nature of mortgage lending.

Below adjustments are strictly for addtional points added for risk based add-ons. 1 point equals 1% of the loan amount. EX: 1 point for a $100,000 loan is $1,000, 2 points for a $100,000 loan is $2,000, and so on.

A borrower that doesn't want to pay risk based 'points' can typically increase their rate to absorb points. It usually costs a .25% increase in rate to eliminate 1 point.

Example: .25% increase in rate may eliminate a 1 point charge, .50% in rate may eliminate a 2 point charge. A 5.0% rate may have a 2 point charge or the client may pay 5.5% rate with 0 points.

The below risk based point adds are national guidelines that apply to all conventional mortgage lenders. Some lenders can add on their own additional "regional" risk premiums.

Clients can choose to incur the below addtional points or a higher rate to offset any additional points that must be charged due to additional risk.