FHA, VA, CONVENTIONAL, USDA, JUMBO MORTGAGES

FHA 203ks Purchase or Refinance with Additional Money to Rehab the Home

FHA program provides a single-close loan that enables a qualified borrower to purchase a home that may need repairs or to refinance an existing home for the purpose of remodeling. This outstanding program allows the borrower to finance a maximum of $35,000 to make improvements.

Fidelity Insurance for Mortgage Originators a Better Way to Regulate Quality Production

Homeowners and mortgage investors won't be the only ones with skin in the game if U.S. Housing Secretary Shaun Donovan's plan for revising the nation's consumer protection laws passes.

The HUD secretary states that fairness would be a fundamental principle that the Consumer Financial Protection Agency proposed by the Obama Administration would follow. This is the same visionary man that made an inappropriate statement on May 12th that the $8,000 Federal tax credit would be allowed to be used for home purchase downpayments, and the same person that was forced to retract the statement the next day.

HUD is also the thinktank that created the reverse mortgage program which will drain tax payers for decades to come and possible cripple the FHA program. These were the same people that locked out thousands of qualified brokers from the FHA forward home loan program- the impetus for investors to create private label mortgages such as Subprime loans so that Non-FHA approved brokers could compete with FHA lenders (limited participation sanctioned by HUD).

For each of HUD's actions there is a greater perverse reaction by the markets.

After the many years of destructive practices from all levels of the mortgage origination channel: Bank to broker to borrower including government sponsored entities Fannie Mae and Freddie Mac (which bought and sold 60% of the toxic mortgages in the nation from 2003-2008), HUD now scapegoats the small business segment of the industry- mortgage brokers. Hud now, in order to look potent, states the obvious, that brokers are owing a duty of best execution to avoid conflicts of interest between themselves and their borrower clients. How outrageous! There were consumer protection advocates inside and outside the broker community screaming for improved oversight for a decade and a half. What a bunch of bastards !!! See the realestateloans.com greenlining mortgages article as an example.

The government agencies create the loan programs, they create the regulatory environment, they oversee the SEC which totally dropped the ball on CDS's (the primary culprit of the financial crisis) and now they are blaming mortgage brokers?

Brokers don't underwrite, they don't approve, they don't set guidelines, they don't create rate sheets, their sole purpose is to pre-underwrite borrowers and secure a loan approval, not a possible loan approval and not a loan decline- AN APPROVAL for their borrowers looking at all loan programs available.

Anyone that has been through the loan process realises how unrealistic lenders can be, and how easily they can find fault with even the best borrowers. Bank underwriters break loans down, brokers build them up.

True example: An 800 plus fico borrower was putting down $100,000 on a $245,000 single family home purchase closing May 2009 to live in. The borrower was fully employed as a city librarian. This was a spotless borrower and transaction. The customer will tell you that the banks documentation inquiries and funding delays made them feel like second class citizens. Ask around and you'll find that this nonsense is not uncommon.

Here is a list of the top 25 most toxic lenders. Look at the names, most if not all national bankers NOT brokers.

If the government sanctions these loan programs AND BORROWERS WANT THEM, OF COURSE MORTGAGE PEOPLE WILL OFFER THEM.

Bankers will be able to earn yield and service release premiums but Donovan states that yield spread premiums would be banned outright for mortgage brokers. Unlike banks, brokers would be paid "over time" based on the continued performance of the loans they originate rather than at the closing table. Likewise, I'm going to ask my mechanic if he would take payments on my car repairs as long as the car continues to operate property but if I sell the car the payments will stop. I'm also thinking about asking my roofer to take 360 small monthly payments on the 30 year roof he is going to install.

I believe all originators should take resonsibility in the loans they originate and buybacks of faulty loans should be commonplace. Actually brokers must sign buyback agreements but the lenders have done such a poor job of quality control that they rarely activate those buybacks. 

Compelling all originators to purchase an insurance policy somewhat to malpractice insurance that covers a 5% interest in the loans they originate would be brilliant. It could be also be a fund somewhat like the FDIC. Nah, too sensible for the government and it wouldn't create another "department". I'm trapped by unwise big government lunatics on the left and selfish greedy pigs on the right.

I'm mad as hell at both sides.

Is Anyone at the Fed or Treasury Listening? Mortgage Rate Buydowns for a Quicker Housing Recovery

The Treasury and Fed created a program in January 2009 to purchase Mortgage Backed Securities directly from Fannie Mae and Freddie Mac. These MBS purchases by the Fed are being conducted in order to maintain capital flow into the housing mortgage market. The move was necessary and very well intentioned after the credit markets froze up in late '08.

Another goal of the Fed was to also maintain low mortgage rates in the hopes that the lower rates would stimulate home purchases.

An effective way to reach the Treasury and Fed's proposed goal of "low" rates for 30 year fixed mortgages would be through a temporary mortgage rate buydown program. Temporary mortgage rate buydowns were used regularly for years with FHA and conventioanl loans but went out of favor over the last fifteen years due to market conditions. These buydown programs are still available through mortgage lenders and are fairly simple to apply.

Why would they work so well?

Loan servicers, retail mortgage lenders, mortgage brokers, title insurance companies and closing entities all understand how to create and fund these mortgage interest rate buydown transactions on the retail side and can seamlessly package them for smooth transition to Wall Street. The concept is very straightforward:

A buyer buys a home for $300,000 and the current note rate is 6.0% on a 30 year fixed mortgage. The home buyer would be qualified at the 6.0% rate but would receive a “bought down” rate to 4.0%.

We are fairly certain the buyer could make the payments because their income and assets must qualify at the 6.0% note rate. The mortgage borrower would pay 4.0% the first year, 5.0% the second year and then adjust to the full note rate of 6.0% remaining at 6.0% until the note was paid off. This is not an adjustable mortgage, its completely fixed and qualified at 6.0%. The borrower is given a short two year term incentive to buy using the buydown program.

This program also makes practical sense because most home buyers experience added homeownership costs (paint, furniture, appliances, etc.) in the first two years which typically only start to settle down after the second year.

The typical cost for the above mortgage rate buydown example would be about $9,000. The above program would be a whole lot more broad based, quicker to execute and much less expensive for the taxpayer than the current Fed/Treasury idea of a tax refund that buyers must apply for.

Currently, the government is offering an $8,000 dollar tax credit for most first time buyers that buy on or before November 30th, 2009.  The taxpayer, the government, the economy and the consumer would be better served by directing this tax credit to a buydown program.

The above buydown program offer would expire within one year so that home buyers would be forced to get into the market NOW. Buydowns would be focused towards housing sales and not refinances.

By stimulating home sales, those homeowners currently in default would be able to sell and downsize rather than work through complicated and uncertain mortgage modifications. The housing industry and derived demand segments of the economy would also benefit greatly.

I initiated a small campaign in 2008 to encourage the use of these buydowns rather than creating new unproven tactics: letter. The letter was sent to then Senator Obama, Senators McCain and Durbin. This letter was also sent out to 2000 real estate agents and mortgage professionals to sign and fax to these Senators.

Using tools that are currently available is a less expensive and more practical approach. 

Gil Kerbashian

$8,000 Tax Credit Applied in Illinois

I just wanted to take a minute to clarify things with respect to the “monetization” of the first time homebuyer tax credit in Illinois

There may be the impression by Realtors, mortgage professionals and buyers that HUD’s recent mortgagee letter that a program is now available to lend home buyers/borrowers their tax credit money so that they could be used for downpayment and closing costs. Simply not true.

The HUD mortgagee letter indicates that the monies acquired through a loan program to “monetize” the tax credit qualify for use in conjunction with FHA loan products.  Don’t expect that an FHA borrower in Illinois today can apply for a short-term tax credit loan in conjunction with their FHA mortgage.  We’re not aware of any FHA lenders in Illinois that are doing that right now.  Most states that have established a monetization program have done so through their state housing authority.  IAR has been in discussions with IHDA for some time to explore the possibilities, challenges and resources available to establish such a program, but, again, there is not currently a program available in Illinois.

Also, please keep in mind that this discussion only relates to monetization for downpayment purposes, the tax credit is still in place for income tax filing purposes.

We should ask our Illinois state representatives why they haven't created a mechanism to create silent seconds for the purchase process.