FHA Foreclosures Rising
Rising FHA default rate foreshadows a crush of foreclosures
David H. Stevens (Andrew Harrer - Bloomberg)
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Tuesday, February 2, 2010
The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market's recovery.
About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency's figures show.
Although the FHA's default rate has been climbing for months and eating into the agency's cash, the latest figures show that the FHA's woes are getting worse even as the housing market shows signs of improvement. The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.
If the trend continues and the FHA's cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses -- a first for the agency, which has always used the fees it charges borrowers to pay for its losses.
As these loans from 2007 and 2008 go bad and clear off of the FHA's books, agency officials said, losses are expected to taper off, aided by the housing market's anticipated recovery and an influx of more creditworthy borrowers, who have flocked to the FHA's home-buying program in the past year.
Agency officials said they have cracked down on poorly performing lenders and announced higher qualifying fees for borrowers. On Monday, the agency projected that the fees should generate $5.8 billion in fiscal 2011, up from $2 billion this year. That would fatten the FHA's cash cushion, used to cover unexpected losses.
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
Seller Closing Cost Assistance
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.
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 Home Affordable
HUD/FHA announced today that struggling FHA borrowers can now qualify for assistance through the Making Home Affordable program. The new FHA version of the Home Affordable Modification Program helps make monthly mortgage payments more affordable through the use of a HUD "claim program" which puts off the repayment of mortgage principal through an interest only second lien.
Borrowers up to 12 months in arrears may be helped with a defferment of up to 30% of the principle. Again, loan servicers will receive incentives to taking part. Possibly anothter stupid misconceived program from HUD: "we’re bringing another important tool to the table to help struggling families who are desperate to keep their homes,” said HUD Secretary Shaun Donovan.
FHA borrowers are expected to be able to apply for assistance beginning August 15 and should contact a loan counselor to determine eligibility.
Let’s hope the goofs in Washington can get it right with this new scheme. They sure blew it with the Hope for Homeowners program which literally helped NO ONE.
Northwest Young Scholars Foundation : Spelling Bee
We at the NWYSF expect to promote this not-for-profit event and its sponsors to approximately 20,000 community leaders, parents and children through internet and print. We would like your organization to become a sponsor of this very unique and worthwhile event. Families and teachers from all over the area will have an opportunity for their 7th and 8th grade student’s to compete and win an educational scholarship.
It’s for the kids but we want to bring value to our sponsors too. You, as a scholarship and event sponsor, will be highlighted on all literature and advertising for this event. But it’s more than advertising: When you attach your name to a community event such as this you will be building incredible Goodwill.
All of our staff and support personnel will be volunteering their efforts to this event so none of your sponsorship dollars will go to administration expenses. 100% of your sponsorship will be directed to the students solely.
Your contribution will positively impact our local children while promoting you as a community leader and a thoughtful advertiser. Because we are a full volunteer organization, the educational sponsorships are very affordable with three levels to choose from: Platinum sponsorship is $1000, Gold $500 and Silver $250.
Please take a moment to consider this worthwhile event and call us today to secure a level. Remember, all your dollars go to the children. We need your support today so that we can start executing the remainder of the events activities.
Gil Kerbashian and Donald Brewer
Directors
Gil Kerbashian (847) 873-7295
Don Brewer (847) 217-7126
We are currently seeking Prounouncers and other volunteers to help us with this wonderful project.
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.
The DREAM MAKER features:
• Purchase and rate/term refinance on primary residences that are 1- to 4-unit properties
• Fixed rate mortgages with 30-year term
• 1-year adjustable-rate mortgage with 30-year term (not available in high-cost areas)
• Up to 3 months for rehabilitation
• One underwriting review and one closing for rehabilitation construction and permanent financing
• Loan based on the as-completed value of a home
• Down payments as low as 3.5% are allowed — family members may pay all of the borrower’s required down payment, closing costs, prepaid expenses, and discount points
With Gil’s experience in rehabilitation lending, borrowers have a better alternative to stodgy and inconvenient conventional bank programs.
For more information, contact:
Gil Kerbashian
McNeil Financial Group
(847) 873-7295
www.gilkerk.realestateloans.com
gilkerk@yahoo.com
FHA: $8,000 Homebuyer Tax Credit
$8,000 Tax Credit
The first time homebuyers tax credit of $8,000 is now approved by HUD for FHA loans. Please read the mortgagee letter, ML 2009-15 as it states that you can't use this tax credit for the required down payment of 3.5%. After the original announcement, the new version of the $8,000 protocal was announced yesterday. Buyers can receive the first time homebuyers tax credit upfront, but not through the IRS as this would be fully illegal. Too many people are saying that you can get the money directly from the IRS prior to closing. The IRS & HUD both says no way.
The $8,000 can be given to you as a second or a silent second from any Federal, State, or local agencies, and any FHA lender or FHA approved non profit organization.
The short version of this is that you can use some of the money from the $8,000 Tax Credit as your down payment, but only after the buyer puts down the first 3.5% of that down payment.BUyers still have to come up with 3.5%. With FHA loans a downpayment can still be a gift from a relative, close relation or family member. It also can come from a nonprofit or government agencies as for the initial downpayment.
Think about using the $8,000 for a 2-1 buydown, asking the seller for the remainder of the closing costs and letting the buyer be responsible for the downpayment. A 2-1 can bring a buyers interest rate into the 3's for a fixed mortgage. Call for details. Gil Mcneil Financial Group 847-829-4249
FHA: $8,000 for Downpayment. When will they or won't they?
HUD Guidance Coming on Tax Credit 'Bridge Loans'
May 27, 2009
The Department of Housing and Urban Development soon will issue guidance enabling FHA-approved lenders to provide short-term "bridge loans" to borrowers who are eligible for a one-time $8,000 first-time homebuyer tax credit. HUD issued a mortgagee letter on May 12 outlining a program that enabled borrowers to use tax credit funds toward downpayment and closing costs. But HUD took the letter off its website a few hours later — after the Office of Management and Budget objected.
Apparently HUD had not consulted with OMB officials on the issue. Meanwhile, HUD has drafted new guidance that is expected to be posted any day now, according to sources. HUD secretary Shaun Donovan told the National Association of Realtors on May 12 that FHA approved-lenders, nonprofit housing groups, as well as state and local government entities would be permitted to "monetize the tax credit through short-term bridge loans."
HUD expects these bridge loans will help more borrowers to become homeowners. The department also wants to prevent lenders from abusing the program by charging FHA first-time homebuyers excessive fees and rates.
FHA : Cash deposits and transfers are a royal PAIN
Avoid large or undocumented deposits into your bank account before or during a loan transaction. Deposit verifications may be obtained all the way through to day of close.
During the underwriting of mortgages, underwriters look for unusual and/or inconsistently large deposits into bank accounts. This has been a problem of late with first time buyers and those looking to acquire their downpayment from undocumented sources.
Why is this such a menace? FHA requires borrowers to have a statutory investment/ committment into their transaction. This means that the borrower (or close relation) must make a worthwhile investment into the property so as to show a dedicated level of committment. The more we personally invest in something the more we stick it out when things get tough. Much of the default activity we're now experiencing across the county is due to 'easy-in or low-down' loan programs. Those that never had a personal stake are simply walking away when their property value declines.
If a borrower is borrowing their downpayment or obtaining it through another undocumented source, per FHA guidelines the deposit must be fully be investigated.
This process usually results in loan declines and high anxiety for the parties involved. Do the right thing but if there is any question, talk to your loan officer.
I need to make a home loan application - help!
** IMPORTANT **
Please print this article and use it as a checklist, note pad and also to have my contact information always at hand. Write your service provider information below:
Your Realtors Phone:________________________________________
Your Attorney's Phone:______________________________________
Gils Phone:_______(847) 873-7295____Fax: (847) 770-4850_______
In the next few days or weeks you'll be looking at a handful of homes, one will catch your eye and you'll want to be completely prepared to make a strong offer. Most sellers give the highest priority to buyers that have secured a full home loan preapproval certificate versus those that have been "prequalified" over the phone. A full preapproval certificate with asset and income verification is the highest level or preparedness. The application process below is oriented toward a successful full preapproval certification.
Regarding the home loan process: How much of a committment would you ask of someone you were lending $100,000, $200,000, $300,000 or $500,000 to? Most people would not lend that much money to anyone unless the borrower signed over Fort Knox as collateral. Why would anyone expect that a lender to handover that much money with minimul effort and documentation on the part of a borrower? The lending climate has gotten much more serious and anyone telling you different is not being honest. Yes, it's a serious and very detailed process but it doesn't have to be a difficult one. As long as we work together and commit to doing things correctly all the way through to the day of transaction closing!
Commit yourself for the next 30-60 days to being very detail oriented and supplying all the needed paperwork when requested. There is no standard loan package, different underwriters require or want different items. Some underwriters require more paperwork than others, that's the underwriters perogative and they do so to protect their license to underwrite loans. We'll work closely together to make sure your file is correctly submitted for approval.
At the bottom of this letter you'll find an internet link to a basic home loan application for you to complete. Please click on it after you read this letter. Always call if you have any questions. I enjoy helping my customers and look forward to helping you, your friends, co-workers and family. Referrals are always appreciated.
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PLEASE DO NOT MOVE ANY MONEY AROUND UNTIL YOUR LOAN CLOSES. If a bank verification shows a recent increase in your accounts an explanation of the increase will be required and may cause delays. No "cash or non-applicant money" should be introduced into any part of the transaction.
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Postpone ANY LARGE PURCHASES until after your loan closes. If a re-verification of credit shows you have recently bought a car, or your charge account balances have increased, it could jeopardize your loan approval.
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Do not quit your job. Notify me immediately in the event there is a job change.
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Don't take any Cash Advances on your credit card(s) or personal loans.
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Don't allow any additional inquiries (credit checks) on your credit.
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Do not open or close any credit or bank accounts.
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Continue to make ALL of your payments as agreed.
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Quickly return all documents from the lender or settlement company. Send them to me also for review immediately.
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Your loan will be underwritten to nationally accepted investor guidelines. The investor is lending a great deal of money, please don't "self-underwrite" your loan. Be prepared to offer all paperwork that is asked of you all the way to the day of close. A lot of money and trust is being conveyed to you- don't take the loan or process for granted. Gathering paperwork is a cheap trade for all this money.
- Once a contract has been accepted your mortgage rate and terms need to be locked. You must email or call me directly after the accepted contract to discuss where rates have settled on this day. If you don't call, I may lock your terms the day I receive the fully executed contract at then market rates.
For most borrowers the following items are redundant, but I have to mention them because occasionally people neglect the obvious and sabotage themselves: please pay all monthly bills on-time, avoid opening up new charge accounts or increasing debt (NO credit inquiries) until after close of loan, continue building savings and keep income stable. If anything changes with your personal profile or the aforementioned items, please let me know immediately.
Your rate can be locked or it can float, this is your choice. My recommendation will be to lock unless you think rates will be going down. Either way you should let me know as soon as you have an accepted purchase contract. Rates change daily and sometimes twice a day depending on the financial markets.
Be mindful that all mortgage underwriters can choose to conduct quality control measures. This could mean calling to verify your employment or savings. Please note: ALL funds to close must come from verifiable sources- always avoid cash deposits or unexplainable deposits. Due to new fraud avoidance measures industry wide, underwriters are now required to question ANYTHING that seems "out of place". ASSUME THAT EVERYTHING WILL BE CAREFULLY REVIEWED.
Closing funds required over and above any seller credits will need to be paid with a bank cashiers check drawn on a bank account listed on your loan application. Funds from outside sources MUST be reviewed and documented early on by an underwriter***.
Closing cashiers check: You'll want to obtain a cashiers check one business day prior to closing made out to yourself to be endorsed over at closing. Please bring your drivers license(s), checkbook and a second form of ID to closing.
***Are you receiving down payment assistance from an outside source? Please be prepared to document all non-payroll deposits. If the source is a gift from a close relation, you'll need: Gift letter, donors bank statement, copy of the original gift check made out to you, copy of deposit slip going into your account, bank statement to show the deposit was captured to your account and copy of the gift check post deposit front and back from donor showing it went through the bank processing center. Each underwriting entity may differ in their requests, please be prepared to fully document deposits, gifts and downpayments funds. NO cash or loans for closing funds.
Two weeks prior to closing you will want to call your insurance agent if any insurance coverage is needed and pay for a full policy and have them fax the policy to me. You will also want to call the utility, telephone and cable companies, banks, credit card companies, family, friends and postal service (usps.com) to inform them of your new address. Stay flexible in your closing timeline in case something gets delayed. Have a plan B for movers and such.
If you see any issues arising that may hinder the transaction in anyway; property difficiencies or questions, job, savings, vacations, etc.. you must call me immediately to discuss. Help me help you!
Once the purchase contract is accepted by the seller we will need to order a property appraisal. Appraisals require payment directly to the appraisal company in advance. The cost of the appraisal will be credited to you at closing. As soon as you put a deposit on the home as part of the offer, you'll need to call the bank and request a copy of the canceled purchase contract deposit check -front and back- as quickly as possible. Most, if not all lenders will want to verify that the deposit funds actually cleared the bank.
Shortly after we start processing your loan, the package will be placed with a designated mortgage underwriter matching your credit requirements. This underwriter may or may not send out their own "paper wasting" compliance disclosure package. This package is standard procedure and is usually generic in nature, which means that the information in it probably won't reflect your terms ( typically a generic loan model and numbers ). Disregard this package as it has no bearing on your loan and is only used to stay regulatory compliant.
After all that nuts and bolts boring stuff what really matters is... The season to enjoy your own home is coming and what a wonderful time to make the transition!!! Please call if you have any questions.
Your referrals are valuable, please keep me in mind to help friends, family and coworkers.
Thank you.
Cordially Yours, Gil Kerbashian
Cellular: (847) 873-7295
Fax: (847) 770-4850
Dr. Rick Thomas:
Gil was thorough and knowledgeable. He was their to answer questions whenever I needed and he never detached from the process. I was very happy with the support and service.
The loan application has a very important list of items at the bottom that I will need to gather in order to issue strong pre-approval. Again, please call if you have any questions. Once you print the application, you can complete it, fax it or we can meet quickly to go over it together and make sure you feel comfortable with the process.
Loan application: www.realestateloans.com/gilsapp.pdf
Closing cost basics: www.realestateloans.com/gfe.pdf
If you are applying for a purchase and rehab loan (203ks) to obtain money to purchase and fix up the property please click on this link also.
Please feel free to comment below about the service you've received from me. Thank you. Referrals are always appreciated!
Geithner Unveils New Troubled Mortgage Asset Program
US Treasury Secretary Timothy Geithner stated he is introducing a new plan he hopes will help remove troubled assets which are clogging the American banking and financial system. This is an effort to start clearing the toxic assets off the books of lending institutions so that funds can flow in and out of the mortgage finance markets to encourage a housing market stabilization.
The new so-called "Public-Private Investment Program" will set up funds to provide a private market for the troubled loans and securities issued by banks. The rumor is that there are a lot of funds sitting on the sideline looking to swoop in and buy at deep discounts. The program will initially provide financing for $500 billion with the opportunity to expand up to $1 trillion over time.
"The cash injection will amount to a substantial share of real-estate related assets which were handled prior to the recession".
