Your Mortgage Planner 2.0 Blog» Your Mortgage Planner 2.0 Blog

How To Refinance When Your Home Is Underwater

yourmortgageplanner — Fri, 12 Mar 2010 19:55:09 +0000

The Federal Housing Finance Agency has extended the government’s Home Affordable Refinance Program by 12 months.

HARP’s new end date is June 30, 2011.

Originally known as Making Home Affordable, HARP aims to help homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.

There are 4 basic HARP criteria every borrower must meet:

The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
Your home must be a 1- to 4-unit property
You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
Your first mortgage balance must be 125% or less of your home’s market value

If you’re not sure whether Fannie Mae or Freddie Mac back your mortgage, you can look it up. Fannie’s website is http://www.fanniemae.com/loanlookup; Freddie’s is http://freddiemac.com/mymortgage. If you don’t locate your loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.

For homeowners that meet HARP’s criteria, there are some underwriting details of which to be aware.

First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either — regardless of your new loan-to-value.

Second, all HARP refinances require income verification. It doesn’t matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.

And, lastly, second (and third) mortgages may not be “rolled in” to a new first mortgage loan balance. Junior lien holders must agree to remain in a junior lien position, regardless of combined loan-to-value.

There is a thorough HARP FAQ section on the government’s website, but it’s for general questions only. For specific Home Affordable Refinance Program information, first make sure you’re program-eligible, then pick up the phone to call your loan officer.

HARP is complex enough that you’ll want to talk with a human before taking a proper next step.

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2010 FHA Loan Limits Released

yourmortgageplanner — Sat, 09 Jan 2010 07:59:57 +0000

FHA home loans are federal assistance mortgages made by lenders, and backed by the government. The FHA doesn’t make loans to homeowners — it insures loans made to homeowners by federally-qualified lenders.

By all accounts, FHA home loans are surging in popularity.

2006, FHA insured 3.3% of all mortgages made
Q2 2009, FHA insured 19.2% of all mortgages made

A major reason for the increase can be tied to guidelines.

As compared to its conforming mortgage cousins Fannie Mae and Freddie Mac, FHA home loans have lower downpayment requirements and looser credit standards. The FHA allows downpayments of 3.5 percent and Fannie Mae and Freddie Mac do not, as an example.

Another reason is that FHA home loans aren’t subject to credit score fees the way that conforming mortgages are. Through Fannie or Freddie, a home buyer with a 650 FICO and 20% down is subject to 3% in risk fees. Via the FHA, the fee is zero, making FHA the better “deal”.

The FHA published its 2010 loan limits. There’s no change from 2009.

The base 2010 FHA loan limits are:

1-unit : $271,050
2-unit : $347,000
3-unit : $419,400
4-unit : $521,250

We say “base” because these loan limits don’t apply to all areas equally. Higher-cost regions get higher loan limits, based on typical home values. Homes in Los Angeles County, for example, can be FHA-insured up to $729,750 in 2010, and there are special exceptions made for Alaska and Hawaii.

The official FHA announcement included a complete, county-by-county FHA loan limit list. The first spreadsheet shows each county at or above the $729,750 maximum; the second list is everyone else.

If your home’s county is on neither list, use the “base” numbers above.

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Home Prices Edged Lower In August

yourmortgageplanner — Mon, 26 Oct 2009 20:23:36 +0000

According to the government, home values edged lower last month.

The Federal Housing Finance Agency’s Home Price Index report shows values down by 0.3 percent from the month prior – the index’s first down month since April.

The Home Price Index is based on the value of homes financed via Fannie Mae or Freddie Mac and, in this sense, the FHFA Home Price Index is more of a “national” real estate index than its private-sector cousin, the Case-Shiller Index.

But like the Case-Shiller, the HPI is as notable for what it specifically excludes as for what it includes. Most notably, the Home Price Index doesn’t account for homes meeting any of the following descriptions:

Is considered new construction
Is a multi-unit property
Is financed by an entity other than Fannie Mae or Freddie Mac

Given the resurgence of FHA financing this year, this last exclusion is especially glaring. FHA represents about one-third of all mortgage loans in 2009.

Because of these exceptions, some analysts label the Home Price Index incomplete. The same could be said of every method of home valuation, however. Case-Shiller only collects data from 20 markets, for example.

In light of these shortcomings, therefore, what’s most important is to recognize that both of the “popular” home valuation reports show similar patterns — home prices have leveled and are showing signs of a rebound.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

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Why Look At Adjustable-Rate Mortgages?

admin — Mon, 12 Oct 2009 16:11:43 +0000

According to the Freddie Mac weekly mortgage rate survey, the relative cost of a 5-year ARM is dropping versus its 30-year fixed-rate cousin.

During the first 5 months of 2009, the products ran neck-and-neck. Today, they’re a half-percent apart.

On a $200,000 home loan, that’s a difference of $60 per month.

Adjustable-rate mortgages aren’t for everyone, but for the right household, they can be a terrific fit. A few scenarios that warrant consideration of a 5-year ARM include persons:

Buying a home with an intent to sell within 5 years
With a 30-year fixed mortgage and plans to sell within 5 years
Interested in low payments and comfortable with longer-term interest rate and payment uncertainty

Additionally, with homeowners with existing ARMs may want to consider taking on a new ARM, if only to extend their initial, fixed rate period.

Before choosing an ARM, make sure to speak with your loan officer about how adjustable-rate mortgages work, and what causes them to adjust. Although conventional ARMs are limited in how far they can adjust, it’s important to know the risks.

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Home Prices Still On The Rise

yourmortgageplanner — Wed, 23 Sep 2009 20:20:09 +0000

As reported by the government, home prices are rising nationwide, up 0.3 percent in July.

Furthermore, versus November 2008, the Home Price Index has clawed back to unchanged.

The housing market appears to be holding its own.

However, we have to be careful about putting our full faith in the Federal Housing Finance Agency’s data. It’s somewhat flawed.

The Home Price Index is a national statistic and all real estate is local
The Home Price Index’s methodology specifically excludes key housing demographics

As an obvious example, HPI only accounts for homes with Fannie Mae- or Freddie Mac-backed mortgage. Lately, the percentage of homes meeting that description is shrinking.

As FHA financing rises in popularity, Fannie and Freddie back far fewer loans than in the past. Furthermore, the HPI sample set also excludes newly-built homes and multi-unit properties.

Because of these exclusions, some analysts call the HPI incomplete. The same could be said of all home price metrics, however – including the venerable Case-Shiller Index.

Therefore, what should be of interest to today’s buyers and sellers is that all of “popular” home valuation models seem to be telling the same story – home prices have stopped falling and look like they’re beginning to rebound.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

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Is It Time For An ARM?

yourmortgageplanner — Thu, 06 Aug 2009 19:30:12 +0000

At least one thing is back to normal in the mortgage markets — it’s no longer cheaper to go with a fixed rate mortgage than an ARM.

As reported by Freddie Mac, a conforming 5-year ARM is priced a half-percent lower than a comparable 30-year fixed.

Earlier this year, the pricing was reversed.

It’s uncommon for fixed rate mortgages to be cheaper than comparable ARMs because, with fixed rate mortgages, lenders commit to a particular interest rate over long period of time. There is a lot of risk that comes with doing that.

By contrast, an adjustable rate mortgage is designed so that after a certain number of years, the mortgage rate changes to reflect the current market conditions.

In theory, ARMs are less risky for lenders than are fixed rate mortgages and, therefore, we would expect them to have lower mortgage rates. That wasn’t the case for the 6 months ending in early-May, however. When fixed rate mortgages were scraping the 4.500 percent marker in January, 5-year ARMs weren’t struggling to stay sub-5.

The same goes for late-April’s mortgage rate dip.

Historically, there’s been a trade-off between ARMs and fixed rate mortgages.

ARMs give lower mortgage rates with less predictability
FRMs give higher mortgage rates with more predictability

Earlier this year, market conditions rendered fixed rate loans the best of both worlds — lower rates and predictability. Today, we’re back to “normal”.

No matter how long you plan to live in your home, talk to your loan officer about your adjustable rate options, if only to know your options. Given today’s interest rate disparity and how it can affect your monthly mortgage obligation, you may find the unpredictable nature of an ARM to be acceptable risk.

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Mortgage Rate Review Week of July 24, 2009 (Chart)

yourmortgageplanner — Sun, 26 Jul 2009 21:30:45 +0000

Mortgage Backed Securities (FNMA 4.5% 30YR) gave up little ground this week shedding only 9bp. Although you wouldn’t think that if you read all the “Increase in Mortgage Rate” Tweets, in reality Mortgage Rates ended the week where they started. To view real time rates check my Real Time Mortgage Rates page. The equity markets contributed to the roller coaster ride for MBS (see chart) as the DOW posted great gains this week while having its best two week since 2000. For the week ahead look for the Treasury Auctions and Economic calendar to influence rates.

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Home Values Increased In May…

yourmortgageplanner — Thu, 23 Jul 2009 23:34:44 +0000

Home values around the country appear to be leveling.

The Federal Housing Finance Agency’s latest Home Price Index report shows values up by nearly 1 percent in May versus the month prior.

Since peaking in April 2007, values remain off by 11 percent nationwide.

The FHFA Home Price Index is an interesting metric. Different from the Case-Shiller Index which collects data from just 20 U.S. markets, the Home Price Index reflects every U.S. home that backs a mortgage sold to Fannie Mae and Freddie Mac.

In this sense, the FHFA Home Price Index is more “national” than the Case-Shiller Index but the HPI has its flaws, too.

The House Price Index specifically excludes from its measurements the sales price on any home purchase with any of following traits:

Is new home construction
Is a multi-unit property
Is financed by an entity other than Fannie Mae or Freddie Mac

Because of these exclusions, some analysts say the report is incomplete. The same could be said of every method of home valuation, however.

Therefore, what’s most important to today’s home buyers and sellers is that each of the “popular” home valuation reports shows similar patterns. Home prices appear to have stopped falling and may be even starting to recover.

It won’t be for a few years that we’ll be able to look back and point to the exact month that real estate bottomed. Nevertheless, considering how the data has presented as of late, it’s reasonable to think that we’ve already hit it. Certainly, that’s what the Home Price Index suggests.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

Monthly FHFA Home-Price Gain Not Enough to Call Bottom (blogs.wsj.com)
Feds defent home valuation code of conduct (seattlepi.com)

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Mortgage Rates Weekly Review – June, 19 2009 – Rates Heading Lower (Chart)

yourmortgageplanner — Sat, 20 Jun 2009 17:44:53 +0000

Another positive week for Mortgage Rates. The Benchmark FNMA 30 YR 5% posted a positive 28bp improvement overall this week. The newfound lack of confidence in the U.S. recovery coupled with the Geopolitical landscape are contributing factors to the resurgence in lower rates. Fridays close is a positive sign for chartist or technical analyst similar to stocks when a security finishes positive on low volume it is a good sign. The old saying volume precedes price, displays the fact money is moving back into the security. This upcoming week should be interesting as the FED is set speak, one can only wonder if they will discuss the uncalled for kneejerk rise in MBS and Mortgage Rates.

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#HVCC CALL TO ACTION

yourmortgageplanner — Wed, 10 Jun 2009 20:06:41 +0000

To: All Mortgage Brokers, Real Estate Agents, Appraisers, Lenders, Home Builders, Title Agents, and Consumers
From: Marc Savitt, President- National Association of Mortgage Brokers

After more than a year of exhaustive negotiations with Fannie Mae, Freddie Mac, James Lockhart, Director of FHFA (GSE Regulator), and NY Attorney General Andrew Cuomo, NAMB believes the time has come for your individual voice to be heard.

In order for this “Call to Action” to be effective, we ask that you fully participate, encourage others to join the action and continue calling and emailing every day, until advised to stop by NAMB. This will NOT be a one day action!

We have received hundreds of e-mails through the hvcc@namb.org e-mail address outlining specific cases where the HVCC has created delays and additional costs to consumers. NAMB has categorized and compiled a report of the examples received, which was sent to FHFA Director James Lockhart. Please use your own examples in your conversations with legislators, regulators, or their staff. Also, please visit the NAMB HVCC Resource Center for additional information and documents on the HVCC.

Who will you be contacting?

NY Attorney General Andrew Cuomo’s Office: (212) 416-8000, Internet Complaint
Federal Housing Finance Agency (FHFA): (866) 796-5595, director@fhfa.gov
Fannie Mae: (202) 752-7000, headquarters@fanniemae.com
Freddie Mac: (703) 903-2000, Internet Complaint
Senators, Representatives and Governors: Click here for contact information.
Also, please contact your local TV and Newspaper outlets.

Below are talking points and background information to assist in your conversations. Please remember we are all professionals and should conduct ourselves accordingly in any communication with the above parties. For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.

Talking Points:

1. NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.

2. Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.

3. AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.

4. HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation.

5. No Portability! Consumers are “trapped” with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.

Background:

I. Lack of Portability

A. Lenders are not allowing borrowers to transfer appraisals, regardless of the reason.

B. Forces the borrower to pay for another appraisal and wait for a new appraiser to be assigned and complete it, increasing the total cost and time needed for obtaining a home. Delays in turnaround times also cause the borrower to miss rate lock deadlines and possibly face penalties charged by the lender.

C. In a poll conducted by NAMB, 75.8% of respondents said that 0% of their appraisals are portable since the enactment of the HVCC.

II. Lack of Quality

A. AMCs are assigning appraisers from a different municipality, county, or even state to appraise the target house, therefore unfamiliar with the neighborhood and unable to produce an accurate appraisal.

i. Because of this, the HVCC is forcing appraisers to be in direct violation of the Uniform Standards of Professional Appraisal Practice (USPAP) for jurisdictional competence.

B. Because AMCs pay appraisers such low fees, those assigned appraisers willing to do the work are often inexperienced and fail to adequately appraise the home.

III. Increased Cost of Appraisals

A. The minimum increase we have seen in direct consumer cost is $150 per appraisal. That, coupled with the drastically increased appraisal turnaround times that impose extended lock periods at an average expense of $561.95 per loan, is now costing consumers an estimated additional $711.95 per transaction.

B. $150.00 – minimum increase per appraisal
$561.95 – average loan amount of $224,778 at .25% for extended lock period
$711.95 – average total increase per transaction
x 3,870,552* – 2007 HMDA report of residential real estate loans originated
$2,755,639,496 – $2.8BILLION in increased fees to consumers!

IV. Articles Illustrating the Effects of the HVCC

A. The Appraisal Bubble – The Center for Public Integrity

B. The Cure is Worse than the Disease – AppraisalPress

C. Appraisals Roil Real Estate Deals – The Wall Street Journal

i. Feel free to forward these articles and/or reference them in your conversations.

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1.	NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.
2.	Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.
3.	AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.
4.	HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation.
5.	No Portability! Consumers are “trapped” with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.

I.	Lack of Portability
	A.	Lenders are not allowing borrowers to transfer appraisals, regardless of the reason.
	B.	Forces the borrower to pay for another appraisal and wait for a new appraiser to be assigned and complete it, increasing the total cost and time needed for obtaining a home. Delays in turnaround times also cause the borrower to miss rate lock deadlines and possibly face penalties charged by the lender.
	C.	In a poll conducted by NAMB, 75.8% of respondents said that 0% of their appraisals are portable since the enactment of the HVCC.
II.	Lack of Quality
	A.	AMCs are assigning appraisers from a different municipality, county, or even state to appraise the target house, therefore unfamiliar with the neighborhood and unable to produce an accurate appraisal.
		i.	Because of this, the HVCC is forcing appraisers to be in direct violation of the Uniform Standards of Professional Appraisal Practice (USPAP) for jurisdictional competence.
	B.	Because AMCs pay appraisers such low fees, those assigned appraisers willing to do the work are often inexperienced and fail to adequately appraise the home.
III.	Increased Cost of Appraisals
	A.	The minimum increase we have seen in direct consumer cost is $150 per appraisal. That, coupled with the drastically increased appraisal turnaround times that impose extended lock periods at an average expense of $561.95 per loan, is now costing consumers an estimated additional $711.95 per transaction.
	B.	$150.00 – minimum increase per appraisal $561.95 – average loan amount of $224,778 at .25% for extended lock period $711.95 – average total increase per transaction x 3,870,552* – 2007 HMDA report of residential real estate loans originated $2,755,639,496 – $2.8BILLION in increased fees to consumers!
IV.	Articles Illustrating the Effects of the HVCC
	A.	The Appraisal Bubble – The Center for Public Integrity
	B.	The Cure is Worse than the Disease – AppraisalPress
	C.	Appraisals Roil Real Estate Deals – The Wall Street Journal
		i.	Feel free to forward these articles and/or reference them in your conversations.

Your Mortgage Planner 2.0 Blog» Your Mortgage Planner 2.0 Blog

How To Refinance When Your Home Is Underwater

2010 FHA Loan Limits Released

Home Prices Edged Lower In August

Why Look At Adjustable-Rate Mortgages?

Home Prices Still On The Rise

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#HVCC CALL TO ACTION