MiJoyMortgage by Mitch Wilcox

My Blog Has Moved!

2012-11-30T08:30:00.001-08:00

If you're looking for the MiJoy Mortgage and/or blog from Mitch Wilcox it is now located at:
http://mitchwilcox.com/blog-2/

Thank you for your continued support!

Mitch Wilcox

Mortgage rates at new all-time lows....

2012-07-23T11:40:00.001-07:00

How many times can we say that? I don't know but let's all take full advantage of it while it's here!

Inquire now about a refinance or new purchase loan.

Here's some brief commentary about what's up:

The European debt crisis is back with a major sell-off in US and global equity markets, and a move into US treasuries pushing the bellwether 10 yr note and mortgage rates to new historical lows. This week Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund will descend on Greece to review the debt crisis in Greece. There is now concern that Greece will fall into depression similar to the US depression in the 30s, and increasing concerns Greece will exit the EU. It shouldn’t be a shock to markets; there is little chance Greece can survive in the EU.

Nevertheless, after a couple of weeks with not much out of the region it is now back with renewed fears. The reaction is sending US interest rates to record lows and the stock market down hard this morning.

After euro finance ministers failed to staunch a decline in the single currency with the approval of a 100 billion-euro ($122 billion) aid package for Spanish banks last week, the 3 governing bodies will seek to determine the fiscal state of Greece, where the crisis began almost three years ago. The euro currency is crumbling, setting new lows against the dollar and the Japanese yen. The euro slipped below its lifetime average against the U.S. dollar at $1.2080. The market consensus now is that Greece will not be able to meet the requirements set out when it got bail-out money. Over the weekend, Germany said it will not agree to reworking the Greek bailout plan. “If Greece doesn’t fulfill those conditions, then there can be no more payments,” German Vice Chancellor Philipp Roesler told the media yesterday, adding that he is “very skeptical” Greece can be rescued and that the prospect of its exit from the monetary union “has long ago lost its terror.”

The renewed concerns over the debt crises in Europe will support the bond and mortgage markets this week. However, although this morning the fear factor and concerns are at high levels, we have experienced this many times in the last couple of years. Markets will react on any comments out of the region. While Greece in the wider perspective is finished in the EU, monentary comments from the IMF, the ECB or the EU that sound more optimistic will get traders’ attention with market swings that could be severe, similar to what we are seeing this morning. That said, technically the bond and mortgage markets are increasing their bullish bias. Expect the possibility of volatile markets this week.

Until next time....

Why an FHA loan?

2012-07-17T11:49:00.000-07:00

Let us count the ways....make sure you check out the monthly payment info at the bottom of this post...and: Get more info on FHA loans.

FHA
Section 203(b) Mortgage Insurance for One-to-Four-Family Homes

Through this program, the US Dept. of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) insures mortgages made by qualified lenders to people purchasing or refinancing a home of their own. FHA does not make loans; FHA insures loans.

FHA's mortgage insurance programs help families become homeowners by providing qualifying standards that are in many cases easier to meet than for other types of mortgage loans. FHA mortgage insurance also encourages lenders to make mortgages to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, by protecting the lender against default on mortgages for properties that meet certain minimum requirements--including manufactured homes, single-family and multifamily properties, and some health-related facilities.

Section 203(b) is the centerpiece of FHA's single-family mortgage insurance programs-the successor of the program that helped save homeowners from default in the 1930s, that helped open the suburbs for returning veterans in the 1940s and 1950s, and that helped shape the modern mortgage finance system. Today, FHA One- to Four-Family Mortgage Insurance is still an important tool through which the Federal Government expands homeownership opportunities for first-time homebuyers and other borrowers who would not otherwise qualify for conventional mortgages on affordable terms, as well as for those who live in underserved areas where mortgages may be harder to get. FHA is actively involved currently to further provide assistance through programs like “FHA Secure,” a program designed to assist borrowers that can qualify to refinance out of a loan they have had trouble making payments on. These obligations are protected by FHA's Mutual Mortgage Insurance Fund, which is sustained entirely by borrower premiums. This program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified buyers. Insured mortgages may be used to finance the purchase of new or existing one- to four-family housing, as well as to refinance debt.

Why Choose FHA Section 203(b) loans?

Get to closing faster – easier to qualify:

No minimum credit score is required
Non-traditional credit is acceptable
Low down payment – 3.5% on 203(b).
Non-occupant co-borrower is permitted
Expanded qualifying ratios
No cash reserves required
No sales price limits
No income limits
Gift down payments OK from family
Seller paid costs allowed
No “declining market” issues

Compatible with industry requirements on:

Appraisal and repair
Closing costs
Lender insurance
Automated Underwriting Systems (AUS) using FHA's TOTAL Scorecard

Protections and advantages:

Fully assumable
Default assistance
Non-credit qualifying streamlines refinances
Competitive interest rates and lower premiums
Certain liens may remain unpaid
Now features “risk-based-pricing”
Similar documentation for comparable products
No prepayment penalties

FHA's loan products meet your borrowers' needs:

Flexible buy and repair with Streamlined 203(k) mortgage
Reverse mortgage (HECM)
95% cash-out refinances
Manufactured homes
Multi-unit

Additional information/guidelines/considerations:

Single family loan limits vary by county...get more info on FHA loans.

How much down payment is required?

If you figure 3.500% of the sales price as a minimum you will be fine.

What can sellers pay?

Sellers can pay up to a maximum of 6.000% of costs based on the sales price.

Is an FHA loan harder to complete than a conventional loan, as related to processing times, qualifying, documentation, appraisal, or inspections?

Other than the required HUD documentation, and slightly different credit standards the process is not much different than it is for conventional loans. For consideration:

18” crawl space required.
Process for appraisal/inspection now the same as for conventional loans.
No requirement for water flow test; purity only.
Pest & Dry Rot inspection is not a requirement.

How do we know what a borrower will qualify for, given all of the new FHA information?
Contact your FHA approved and qualified lender.

As promised, here is some payment information based on a $175,000 purchase price:

Purchase Price              $175,000
Minimum Down (3.5%)      $ 6,125
Monthly P/I at *3.250%     $ 775.00
Monthly MI                     $ 179.00
Taxes (Est.)                   $ 200.00
Insurance (Est.)             $   50.00
Total                             $1,204.00

Need more info? Get it here.

*3.414% APR, subject to change based on market conditions.

Why a VA Loan?

2012-07-17T11:12:00.000-07:00

Why indeed!

How about the lowest rates in history?

For our Veterans, rates are as low, comparatively, as they are for other programs. Here's an approximate payment breakdown for a $175,000 home purchase:

Down payment -0- (Yes, you saw this correctly...ZERO down for VA loans)

Monthly principal & interest at 3.250% (Yes, 3.250%, 3.412% APR):      $   762
Estimated monthly property taxes:                                                             $   208
Estimated monthly homeowners insurance:                                             $     50
Total monthly payment:                                                                                $1,020.

Can you say "Cheaper Than Rent?" I think that you can!

Get more info on VA loans.

Here's some VA stuff to ponder:

Why VA?
-100% financing up to the County loan limits established by the FHFA (Federal Housing Finance Agency).
-No bottom line credit score.
-Streamline refinance interest rate reduction loan.
-Fully assumable by any qualified person (does not have to be a Veteran).
-Fixed and adjustable rate mortgages.
-VA funding fee can be added to 100% financing.
-Seller can assist with closing costs.

Breaking it down

VA insures loans, like FHA, but does not make loans. The borrower qualifying standards, like most loan programs, are not that much different than FHA or conventional. VA does like to reward Veterans however (rightly so!), and lenders will do all they can to put a Veteran into a home.

Allowable vs. Unallowable Costs

There are certain fees Veterans are not allowed to pay.

VA ALLOWABLE FEES

The Lender may not charge a veteran borrower any fee that is not included in the schedule of fees below. The fee schedule applies only to charges paid by the veteran borrower. The veteran may pay reasonable and customary amounts of the following fees:

PURCHASE TRANSACTIONS / REFINANCE TRANSACTIONS

· Loan Origination Fee (not to exceed 1% of the loan amount)

· Loan Discount (reasonable - not to exceed 2% financed)

· Appraisal Fee

· Credit Report

· VA Funding Fee (See Chart below)

· Flood Certificate Fee

· VA Compliance Inspection

· Title Examination/Search

· Title Insurance

· Title Endorsement (environmental protection)

· Recording Fees

· Recording of Warranty Deed

· Tax Stamps

· Release Fees

· Tax Stamps

· Survey

· The portion of taxes, assessments & similar items for the current year chargeable to borrower & initial deposit for tax & insurance

· Escrow account

· Pest Inspection

· Overnight Delivery Fee

· Subordinate/Demand/Reconveyance Fees

· Taxes

· Hazard Insurance

· The borrower must either:

o Pay the VA Funding Fee in cash at closing, or

o Include the entire VA Funding Fee in the loan amount.

UNALLOWABLE FEES

The Veteran cannot pay these:

· Lender fees such as Document preparation, processing fees, administration fees, application fee, etc.

· Escrow or Set-Up fee

· HOA transfer fee

· Pre-paid interest on a new loan

· Title endorsements exceeding $50

· Early Issue title insurance

· Compliance Inspections in excess of one

If you figure about $2500 for a purchase price/loan in the $175-200K range you will be close on what the Veteran cannot pay. Any interested party, other than the Vet, can pay the unallowable fees.

Get more info on VA loans.

Historical Lows Again for Mortgage Rates

2012-06-01T09:23:00.001-07:00

I'm not sure how often that headline will be repeated, but interested consumers would be wise to get a loan application on file right now to take advantage of rates.

The thing is, once rates drop, those with applications already on file will benefit. Those who don't may not.

It takes much longer these days to prepare a loan file so a loan rate can be locked in. Lenders get backed up very quickly and you must get in line behind those who responded or are better prepared.

First come, first served is the mantra here. It could be hours, days, or weeks before your lender can get your file ready to lock.

Doing business with me, I have significant support staff and I work long hours....I'm just saying....

Honestly, your best bet is to get an application on file so I can contact you and review the sensibility of a refinance for you with some solid info to go on. Fill in everything you can and send it...I'll find you!
Go here and get started: https://0990471896.secure-loancenter.com/WebApp/Start.aspx.

Who can benefit? Anyone with a mortgage should be looking at the potential of lowering their rate. If you have an FHA or VA loan, in particular, it's very unlikely there will be a better time for you to do this.

Got a conventional loan? We have historically low fixed rates right now for 10, 15, 20, and 30 year terms. It may be a great time to reduce the term of your loan.

Why are rates so low? Take your pick: trouble in Europe (yes, we are in a global economy now), poor domestic jobs report, investors fleeing to the safety of mortgage backed securities, and general economic conditions. The fact is that rates are low and we don't know how long they will stay there.

Need to know what you will need for documentation? What the process is? Here's some general info (keep in mind that your situation will be unique to you): http://www.mijoymortgage.com/Loan_20_Process1.html

Again, your best bet is to get an application on file ASAP:
https://0990471896.secure-loancenter.com/WebApp/Start.aspx.

Until next time...

Mortgage Rates Officially Hit New All-Time Lows

2012-05-17T15:21:00.001-07:00

Mortgage Rates hit new all-time lows today.

In most cases, lenders' offerings are just slightly better across the board than they were in late January, the last time the market's officially noted "new all-time lows," though some lenders are not quite back to their previous best levels.

So, what's going on? A few things...

A much weaker-than-expected reading on a widely followed report on business conditions in the mid-Atlantic region gave rates markets a bit of an early jolt lower. From there, an absence of additional data gave way to technical momentum, helping rates even lower.

Markets are facing tremendous uncertainty over the eventual outcome of Greek elections in June, as well as the fate of the Spanish banking sector. Today, Spain saw their own version of the "run on banks" that occurred in Greece yesterday, reminding traders that, even if Greece makes it out of this mess still in the Euro-zone, that there are bigger fish to fry.

All that uncertainty has investors piling into safe-haven assets. In a global economy where a currency as massive as the Euro is in serious trouble due to problems in one small Euro-zone country, investors are just looking for a safe place to park their assets. US Treasuries have been one such place and their recent rally benefits other products in that same medicine cabinet, such as MBS (the "mortgage backed securities" that most directly influence mortgage rates).

Apart from Europe, there's also the consideration of Fed policy in the US. Whether or not the Fed extends recent quantitative easing measures or embarks on new ones is a matter of great concern to bond markets. At the last policy announcement, the door was left open for additional easing as-needed, and yesterday's "minutes" from that policy meeting essentially confirmed that open door. Markets perceive that "as needed" is becoming more and more "needed" if the Fed sees signs in the domestic economy like the one seen in this morning's weak data.

When investors think the Fed is more likely to buy more fixed-income investments, rates stay low or move lower, all other things being equal.

Any way you account for the causes, the bottom line is that mortgage rates are lower.    Keep in mind, of course, that while the European credit theater will likely continue to weigh on markets, keeping rates fairly contained in this new, low range, that "cement" can always be broken if sufficient force is applied.

While fond of mentioning the increasing barriers to improvement at current levels, it's not that I think rates can't improve, it just feels that it will be slow going, and with risks of periodic bounce back.  The wisdom of locking or floating slightly favors locking at this point, in my opinion.

Until next time...

Are We There Yet? Housing and Lending Temperatures

2012-05-09T10:26:00.000-07:00

It seems every time I turn around we have new data to digest. The fact is that actual results often speak louder than data. The human equation always makes things interesting, and can be one of the biggest factors in determining economic direction.

We are what we think. So, what do we think, and what are the actual results in the real estate and lending world right now?

The fact is we are transacting home loans; more than we've done in the last 4 years or so. There is plenty of money out there for good credit borrowers. Yes, underwriting requirements continue to be tight, but get past that and you're good to go.

Underwater? HARP 2 contunues to be a viable option for many.

Wells Fargo's economic team suggests that early reports indicate that the critical spring home buying season has gotten off to its best start in five years. "Sales of new single-family homes totaled 83,000 units during the first quarter, up 16 percent from a year ago, while sales of existing single-family homes rose 7.2 percent, marking the best combined pace for first quarter home sales since 2007. The rise in existing home sales has generated a little excitement, as news is spreading that homes sold outside the foreclosure process are often receiving multiple bids and selling above the asking price."

Wells suggests that "the sudden prevalence of multiple bids around the country appears to be the result of unseasonably mild winter weather, which brought buyers back into the market to a much greater degree than sellers. The first quarter is typically the slowest quarter of the year, with March being the only busy month. Inventories of existing homes have fallen to just a 6.3-months' supply, and the inventory of unsold vacant homes has fallen by 353,000 units over the past year. Inventories of new homes continue to decline and are now at a paltry 144,000 units nationwide. Only about one-third of those homes are actually completed. With inventories dwindling, home prices have improved a bit."

Of course Realtors and Lenders can tell you that the better news on sales and prices, along with near record high affordability and near record low mortgage rates, has encouraged builders to move forward with a few more projects. Starts of new single-family homes rose 16.7 percent during the first quarter, for a total of 104,600 units.

But the Jefferies Monthly Housing Monitor took somewhat of the opposite tack: On the surface it appears that momentum is building towards favoring a near-bottom in U.S. housing. Small positives have emerged, as they have in the past, but the data is "still inconsistent enough to keep us concerned about such a fragile sector. Nonetheless, it is easy to agree that mixed is certainly better than down and the recent stronger-than-expected pending homes sales report adds support. The positive spin is that we haven't seen material drops in recent months in most housing data, and in some cases we have seen actual improvements. The negative spin is simply that the market remains saturated with inventory (lots in the "shadows") and that lending activity for home purchases remains exceptionally tight in the face of record low costs of home ownership."

Practically everyone agrees that if affordability is at record levels, the government continues to try and prop up housing markets, so why are we still mired in such a soft housing sector? On the lending side, loan officer's and underwriters can tell you that access to, and the securing of, mortgage capital is still a challenge for many borrowers. Loan origination is economically very lucrative for lenders, but lack of clarity on future regulatory fronts and the costs of compliance weigh heavily on the sector: simply put, lack of clarity results in lack of funding.
See: http://mijoymortgage55.blogspot.com/2012/04/taming-underwriting-beast.html

Politicians and others have floated ideas regarding housing recovery related to negative equity and/or shared appreciation loan modification plans that address homeowner/lender responsibility.
See: http://mijoymortgage55.blogspot.com/2012/02/menendez-introduces-bill-to-keep-people.html.

Here's a "piggy-back" idea that seems to be gaining momentum in some circles:

Steve Kaye with Catalyst Funding says: "A little over 2 years ago I went to see my Congressman, Darrel Issa (R-US Rep, CA); since January 2011, Rep. Issa has served as Chairman of the House Oversight and Government Reform Committee.

I wished to share a plan that stressed a more aggressive approach to the housing crisis was necessary; one that extended beyond simple loan modification.

The problem with a straight modification-only plan is that it only provides a temporary solution - at best - and only addresses the mortgage payment - which is no longer the only issue or concern. The homeowner who is $150K or more upside down on his mortgage would absolutely benefit from saving $500 a month or more on his mortgage payment. However, when he wakes up the next morning, he is still going to be $150K upside down on his mortgage and looking at a minimum of 8-10 years at normal appreciation to climb out of that hole. No...This is merely a band aide that would only extend our housing woes."
He continued, "I lobbied for historic reform that would require, in conjunction with the modification, a principal reduction plan that would put home values at 100% of current market value --- a 'clean start", so to speak. It would not give the gift of equity, but would provide some optimism and hope for the future. And if the owner sold in the following 5 years, 50% of any equity gained would have to be paid to the existing lender who provided the modification/reduction. Other portions of the Plan addressed additional ways to stimulate the market in regard to expanding home ownership and purchasing power without compromising normal loan qualifying. Clearly, we cannot stimulate the housing market by only providing opportunity for 1st time home buyers. Yes, there would be losses absorbed by lenders and financial institutions However, the revitalization and stabilization of the housing industry would stimulate the economy and provide additional earnings through more home lending, more use of credit, etc. Homeowners who are not upside down will also gain as equity - lost during these past years - will return and provide value. The more I have read over the past year, the more I am convinced that these 'simplistic' ideas will, in some manner, be put into play at some point --- they have to.
Some excerpts are from Mortgage Daily, 5-9-12

Certainly, any successful loan modification or refinance must address not just monthly payment savings; negative equity will continue to be a drag on housing and full economic recovery. While saving on the payment is better than not....it would be great if, while saving on the payment, negative equity issues could be addressed at the same time in a modification or refinance.

Your ideas or comments are appreciated!

Until next time...

HARP 3? It's All The Rage

2012-05-08T09:21:00.000-07:00

What? HARP 3? Didn't we just start HARP 2?

Yes, we did. Follow the bouncing ball....

While it may be to your advantage to refinance now on HARP 2, let's make sure it's a good idea...start here: http://www.mijoymortgage.com/UNDERWATER_HARP_2.0.html.

OK, onto the latest news of the day.....will there be a HARP 3? Following is a pretty detailed look at the questions of "if" and "why." The fact is HARP 2 has not been an effective across-the-board remedy for everyone.

To make all of this easy, contact me for an evaluation after you visit: http://www.mijoymortgage.com/UNDERWATER_HARP_2.0.html.

I am evaluating individual scenarios on a case-by-case basis. Some HARP 2 refinances make really good sense and some don't. For certain you will get honest answers. Check out my testimonials: http://www.mijoymortgage.com/Testimonials.html.

HARP…HARP 2.0…HARP 3.0…HARP 4.0... will the industry have trouble keeping track of which borrower refinanced under which HARP? The Home Affordable Refinance Program certainly has its proponents, and its critics, along with a fair number of LOs/lenders who are on the fence about it, warily watching what happens.

While the HARP 2.0 program is not even 6 months old, there is already chatter about a “new and improved” policy that could represent a new phase of refinancing-related policy risk. There have been critics from the start, of course, and this is giving them fodder to ask, “Why didn’t they do it right the first time? What makes us think that this will be the last HARP?” And borrowers, faced with rumors of kinder, gentler HARP, are wondering what is in store for them.

A big factor in the whole process, of course, are the overlays that have been put in place by the aggregators. We know that neither President Obama nor Congress set underwriting guidelines. And FHFA’s Freddie Mac and Fannie Mae may give a program to our lenders, but if the aggregators put on overlays then those lenders who can will go directly to Fannie Mae.

Recently the Senate Banking Committee held a hearing about some of the initiatives highlighted in President Obama’s plan to “Help Responsible Homeowners and Heal the Housing Market.” While there are many facets to the plan, the most recent substantive discussion focused on initiatives to help agency borrowers refinance. Some find it fascinating that, in spite of the government’s apparent desire to extricate itself from supporting the mortgage market, proposals continue to pop up suggesting the exact opposite.

A key part of the discussion focused on examining the Menendez-Boxer discussion draft of the “Responsible Homeowner Refinancing Act of 2012”. What are the HARP enhancements that are being contemplated? Well, the discussion draft has a host of recommended changes to the HARP platform. Generally, they fall along the lines outlined under President Obama’s plan to “Help Responsible Homeowners and Heal the Housing Market.”

On the agency side (Fannie/Freddie, the "GSE's"), the key principals of the plan threefold: to eliminate appraisal costs for all borrowers, increase competition so borrowers get the best possible deal, and extend streamlined refinancing for all GSE borrowers. The Menendez-Boxer discussion draft details how the administration is planning to achieve these aims.

Experts suggest that there are two significant issues that the politicians are looking to address. One is to introduce measures to facilitate cross-servicer refinancing ( a new loan being done by a lender who does not currently service the existing loan), and the other is to increase the amount of borrowers eligible for the program by reducing eligibility criteria. As best anyone can tell, the key focus seems to be in encouraging cross servicer refinancing – something that the big aggregators have discouraged using LTV overlays and other restrictions to accomplish. As one senior executive at a Top 5 aggregator told me, “None of us want to be financially or legally responsible for someone else’s junk.”

The biggest push seems to be reducing barriers for cross-servicer refinancing to promote competition and lower mortgage rates. There are a couple key ways that the bill proposes to accomplish this. First, Fannie Mae and Freddie Mac would be prohibited from disqualifying or varying borrower eligibility requirements based on LTV, CLTV, employment status, or income. (Currently, borrowers under the manual - same servicer - process qualify for HARP based exclusively on payment history, borrower benefit provisions, and verbal verification of employment. The threshold for cross-servicer refinancing is much higher under the automated underwriting systems.) Lenders using AUS for a cross-servicer HARP refinance are required to collect documentation and borrower credit, are subject to debt-to-income limits within DU/LP (Fannie & Freddie's underwriting systems), and are subject to different pay history requirements across FNMA (Fannie) and FHLMC (Freddie).

Effectively, as any loan officer or underwriter can tell us, the cross-servicer refinance is much closer to a full underwrite of the loan, while the manual HARP process is closer to a no-underwriting process. Disallowing any variance across same- and cross-servicer refinances in employment status and income eligibility, could ease borrower qualification for cross-servicer refinances and promote competition.

Second, the reps and warrants for cross-servicer refinances would be eased to match those of same-servicer refinancing. Under HARP 2.0, lenders under the manual process are relieved of most reps and warranties on the old and new loan provided that borrowers satisfy payment history requirements and borrower benefit provisions, and have their employment verified verbally. For cross-servicer refinancing, lenders retain significant rep and warranty risk on the new loan. They are responsible for the loan case file being complete, accurate, and not fraudulent. Furthermore, they must comply with the underwriting documentation requirements regarding income, employment, asset, and property fieldwork. If any of these are incomplete, the lenders could be on the hook for reps and warrants on the new loan. And, as mentioned above, who wants to deal with another lender’s junk?

While these rep and warrant issues may sound somewhat mild, those for cross-servicer refinancing under DU and LP are very similar to what existed before HARP 2.0. Generally, there have only been changes to the reps and warrants on property valuation when an AVM is used. It’s important to note that these issues do present a significant issue for qualifying for loan from a new lender.

Until next time...

Dodd-Frank...can we ever get enough?

2012-04-23T09:34:00.001-07:00

Can we really ever have too much Dodd Frank news?

The House Financial Services Committee has unveiled the Dodd-Frank Burden Tracker, an online resource to help the public keep track of all the new government rules and red tape required by the Dodd-Frank Act. Check it out if you dare.

The Dodd-Frank Act mandates that government regulators write more than 400 new rules and requirements that will be imposed on the private sector. Since the law was passed by Congress and signed by the President Obama in July 2010, the Tracker reveals that regulators have written only 185 of the 400 rules, these 185 rules consume 5,320 pages, and it will take private sector job-creators 24,035,801 hours every year to comply with these first 185 Dodd-Frank rules.

Really….you read that right. So far, about 46% of the new rules have been written. Not implemented…just written. And yes, you also read that over 24 million hours per year are required to comply with only the 185 rules written so far.

Could I be the only one who thinks this is just plain crazy? There’s no doubt in my mind that we must have effective, well-written laws on the books. The question on the mind of many of us in the mortgage business is: Didn’t we, and don’t we already have laws on the books addressing mortgage fraud? Yes, we did and yes we do. Before Dodd-Frank was ever conceived, those laws were on the books.

All the more reason for more laws, you say. Tougher ones. Ones that work, by George! It's Vern & Jimmy time...

Jimmy, did you know that mortgage fraud is more prevalent now than before this here Dodd-Frank thing came a-rollin’ down the pike?

Well now, how can that be Vern? Wasn’t this jewel of post-apocalyptic mortgage mayhem supposed to stop Wall St and every lovin cotton pickin fraudulent mortgage person in their tracks?

Now Jimmy, you and I both know that no matter how many laws you got out there, you just ain’t gonna stop them-there folks whose goal in life is to do things in a crooked manner. And you and I both know that it’s always that one bad apple that spoils the barrel and starts the downward trail to sour the cider.

So what you’re tellin me Vern is that we made a whole new set of laws to address one bad apple? Here I thought there was a passel of bad apples in this mess.

There was Jimmy, there was. A whole lot of bad apples. But, this time the bad apples came from every nook and cranny of the entire system, not just one part of it.

Well then, Vern, why aren’t we fixing the system? Wouldn’t that make more sense?

That’s a great idea Jimmy! What do you suppose would get us going in that direction?

Vern, I’m thinkin if we all give our 2 cents worth to Congress, and we vote for the folks that do what we ask them to…maybe that’d be a start?

Hmm…

We did receive an extension/clarification of the Volcker Rule, part of Dodd Frank.

The Volcker Rule bans banks from trading with their own funds and greatly limits their ability to invest in hedge and private equity funds. It seeks to limit risk-taking by banks that have government backstops like federal deposit insurance. Some of that sounds okay, but it also eliminates banks' ability to use MBS's and other instruments to hedge their locked residential pipelines - and does that really help borrowers and the public?

Anyone hedging borrower rate locks breathed a sigh of relief when the Federal Reserve clarified that U.S. banks will have at least until July 21, 2014 to ease into the Volcker rule's trading and investing crackdown. The Fed also said it has the ability to extend the compliance period for the yet-to-be-finalized rule (sound familiar?) beyond that date if needed.

I wonder if Congress and others are listening to the Jimmy’s and Vern’s out there, and truly understand we all want sensible system-wide solutions that truly work, without spending an arm and a leg to get there.

The fact is we have more than enough laws on the books; we have compliance and rules coming out our ears. It's nearly put an end to sensible lending practices. How about enforcing these laws without all of the deal-making back-room shenanigans? It’s pretty simple; put people in jail who break the law. Hand out sentences with meaning. No second chances for someone who steals our money.

And finally, how about we work on a long-term fix instead of spending more and more money on poorly crafted, expensive, and what is proving to be a boondoggle piece of legislation that will likely never be fully implemented, let alone interpreted correctly by the courts, once the lawsuits begin.

I’ve said it before and I’ll say it again. Dodd-Frank was bad legislation to begin with and it still is. No amount of dressing is gonna turn this into a tossed salad of any flavor. Consumers are writing big checks for this and we’ve only just begun.

Make your feelings known to your legislators; let them know you will be speaking with how you vote.

Don’t agree with this post? That’s OK…just don’t get mad when your mortgage lender drives you crazy with rules, regulations, underwriting and appraisal requirements that, at best, represent a major challenge and disruption in your life. And, at worst…. a loan denial.

Until next time...

Taming the Underwriting Beast

2012-04-16T11:44:00.001-07:00

“The Perfect Loan File”

We’re in a whole new world in mortgage loan underwriting. There really is no such thing as “The Perfect File.” In over 35 years of personal experience, I don’t recall a time when lender underwriting requirements have been as strict as they are now.

It would be laughable if it wasn’t so serious. I am seeing underwriting requirements that on the surface seem ridiculous.

Why is this happening? The following Forbes article does a good job explaining why we have underwriting requirements that are tighter than a double kinked garden hose (and that’s pretty darn tight). And, what steps to take to get the water flowing…

Forbes

Mark Greene, Contributor

The media has it all wrong – securing mortgage approval and satisfying credit underwriting guidelines are not the difficulties plaguing mortgage consumers. It’s in meeting the rigorous documentation requirements that most people fall flat. The good news is, the fix is simple. Just scan, photocopy, fax, and deliver every aspect of your financial life. Then, shortly before closing, check everything again.

Mortgage consumers who enter the mortgage approval process ready to battle their chosen mortgage lender will come out with a nightmare story to tell. As the process, requirements, and guidelines are the same for everybody, your mindset is the game-changer. Accepting the redundant documentation necessary for lender approval will make everyone’s life easier.

When I was a kid, my father occasionally issued directives that I naturally thought were superfluous, and when asked why I needed to do whatever it was he wanted me to do, his answer was often: “Because I said so.” This never seemed to address my query but always left me without a retort, and I would usually comply. This is exactly what consumers should do during the mortgage approval process. When your lender requests what seems to be over-documentation and you wonder why you need it, accept the simple edict – “because I said so.” You will find the mortgage approval process much less frustrating.

So, what’s the perfect loan? Well, it’s one that (a) pays back the lender and (b) pays back the lender on time. Underwriting the perfect loan is not the goal that mortgage lenders aspire to today.

The real goal is the perfect loan file.

Mortgage lenders have suffered staggering losses and gone out of business because of the dreaded loan repurchase. As mortgage delinquencies increased, Fannie Mae and Freddie Mac began to audit mortgage loans they had purchased and discovered substandard and fraudulent underwriting practices that violated representations and warranties made, stating these were high quality loans. Fannie and Freddie began forcing the originating lenders of these “bad” loans to buy them back. So a small correspondent mortgage lender is forced to buy back a single mortgage loan in the amount of $250,000. This becomes a $250,000 loss to a small mortgage business for a single loan, because it will never be repaid.

It doesn’t take many of these bad loan buybacks to close the doors on many small mortgage operations. The lending houses suffered billions of dollars of losses repurchasing loans from Fannie and Freddie, and began to do the same thing for loans they had purchased from smaller originators.

The small and medium sized mortgage originators that survived created underwriting guidelines and procedures to eliminate the threat of future loan repurchase losses. The answer? The perfect loan file.

It’s no longer necessary to have excellent credit, a big down payment and stable employment with income sufficient to support your debt service to guarantee your loan approval. However, you must have a borrower profile that meets the credit underwriting guidelines for the loan you are requesting. And, more importantly, you have to be able to hard-copy-guideline-document your profile.

Every nook and cranny of your financial life has to be corroborated, double- and triple-checked, and reviewed again before closing. This way, if the originating lender has created a loan file that is exactly consistent with published underwriting guidelines and has documented while adhering to those guidelines, the chances are that your loan will not be subject to repurchase.

Borrowers also need to prepare for processing and underwriting. Processors and underwriters are the people trained and charged with gathering (processors), all of your required-for-approval financial documents, and then approving (underwriters), your loan. You can assume these people are well trained and very experienced, as they are tasked with assembling and approving a high-quality-these-people-will-pay-us-back loan file. But just how do they go about that?

The process begins with the filter – the loan originator (a.k.a loan officer, mortgage consultant, mortgage adviser, etc.) – tasked to match the qualifications of a particular mortgage deal to the appropriate underwriting guidelines. It is the filter’s job to determine if a loan scenario is approvable and to gather the documentation to support that determination. It is here, at the beginning of the approval process, where the deal is made or broken. The rest of the approval process is just papering the file.

The filter determines whether the information provided by the borrower can be validated and documented. This is simple, since most mortgages are approved by automated underwriting engines such as Desktop Underwriter, and the automated approval generates a list of the documents needed to paper the loan file. An underwriter can, at this stage, request additional supporting documentation evidence at their discretion, as not all circumstances neatly fit into the prescribed underwriting box. If the filter creates a loan file with accurate information, then secures the documentation resulting from the automated underwriting findings, the loan will close uneventfully.

So, let’s begin with the pre-approval call. Mortgage pre-approval is typically accomplished with a telephone interview. A prospective borrower calls a mortgage rep (filter), and the questions begin. There will be lots of questions as this critical phase of the process is akin to the discovery period in a trial – you’ll need to disclose everything. Expect to answer queries on what you do for a living, how long you’ve been employed in your current field, and what your salary is. If there is a co-borrower, they will have to answer the same questions.

Every dollar in checking, savings, investments and retirement accounts, also known as assets to close, as well as gifts from relatives and non-profit grants, has to be accounted for. Essentially everything appearing on a borrower’s asset-radar-screen has to be documented and explained.

If you were previously a homeowner and sold your home in a short sale, or if you own a home now and plan to keep it as an investment or rental property, there are new and specific underwriting guidelines created just for you. In these cases, full disclosure of your credit and homeownership past can potentially eliminate unforeseen mortgage approval woes. For instance, Fannie Mae has a new underwriting guideline called “Buy-and-Bail,” for current homeowners’ planning on keeping their existing home as an investment/rental property. Properties not meeting the 30% equity test for “Buy-and-Bail” result in additional asset requirements to purchase a new home. Buyers with a short sale history may have to wait two to three years before they are eligible for mortgage financing again. Full vetting of your previous mortgage life will save you the dreaded we-have-a-problem call from your mortgage lender.

It all comes down to your proof. If the lender asks for a specific document, give them exactly what they are asking for, not what “should be OK,” – because it won’t be. This is where the approval process tends to go off the rails, when the lender asks for specific documentation and the borrower supplies something else. Here, too, is where both sides get frustrated. So if the lender asks for a bank statement and there are 5 pages for that bank statement, send them all 5 pages, and not just the summary. If you send them the summary page and they ask again, don’t complain that the lender keeps asking for the same thing when you never sent it in the first place. This may sound elementary, but the vast majority of mortgage approval process woes stem from scenarios just like this.

The reason the mortgage approval process is now so rigorous is simple. Avoiding defaults and loan buybacks has become the primary goal of mortgage lenders. Higher standards are reducing loan defaults, which should mean fewer foreclosures in the future. Government data shows that less than 2% of loans originated in 2009, that were resold to Freddie Mac and Fannie Mae went into default after 18 months, down from more than 22% default rates for 2007 loans.

So when your lender requests specific documents from you, you may want to give it to them, just “because they said so.”

You can thank my dad for that.

Until next time…

All About HARP II

2012-04-16T11:36:00.000-07:00

HARP Refinance Program: The Complete HARP II Eligibility Requirements

If you currently have a HARP application with me, I will be contacting you soon as the program guidelines are beginning to sort out. This post is for general HARP inquiries and for those borrowers new to the information.

Welcome to my blog. I'm glad you're here. Get notified by email when I write something new on this blog. Enter your e-mail to the right>>>>

Go here for the appication process in a nutshell.

UPDATE: The government's new HARP 2.0 Refinance Program is available to U.S. homeowners as of March 17, 2012. This post is accurate and up-to-date. Click here to get a HARP refinance rate quote.

If you're underwater on your conforming, conventional mortgage, you may be eligible to refinance without paying down principal and without having to pay mortgage insurance.

Here are the details of the government's new 2012 HARP refinance program.

Get a HARP refi quote now.

What Is HARP?

HARP was started in April 2009. It goes by several names. The government calls it HARP, as in Home Affordable Refinance Program.

The program is also known as the Making Home Affordable plan, the Obama Refi plan, DU Refi +, and Relief Refinance.

In order to be eligible for the HARP refinance program :

1. Your loan must be backed by Fannie Mae or Freddie Mac.

2. Your current mortgage must have a securitization date prior to June 1, 2009

If you meet these two criteria, you may be HARP-eligible. If your mortgage is FHA, USDA or a jumbo mortgage, you are not HARP-eligible.

HARP : Questions and Answers

Do these question-and-answers account for the "new" HARP mortgage program?

Yes, everything you are reading is accurate as of today, April 16, 2012. This post includes the latest changes as rolled out by the Federal Home Finance Agency on October 24, 2011, and as confirmed by Fannie Mae and Freddie Mac on November 15, 2011. HARP 2.0 was formally released by Fannie Mae and Freddie Mac March 17, 2012.

Is "HARP" the same thing as the government's "Making Home Affordable" program?

Yes, the names HARP and Making Home Affordable are interchangeable.

How do I know if Fannie Mae or Freddie Mac has my mortgage?

Fannie Mae and Freddie Mac have "lookup" forms on their respective websites. Check Fannie Mae's first because Fannie Mae's market share is larger. If no match is found, then check Freddie Mac. Your loan must appear on one of these two sites to be eligible for HARP.

If my mortgage is held by Fannie Mae or Freddie Mac, am I instantly-eligible for the Home Affordable Refinance Program?

No. There is a series of criteria. Having your mortgage held by Fannie or Freddie is just a pre-qualifier.

My mortgage is held by Fannie/Freddie. Now what do I do?

Find a recent mortgage statement and write "Fannie Mae" or "Freddie Mac" on it -- whichever group backs your home loan -- so you don't forget. Give that information to your lender when you apply for your HARP refinance. Click here for a HARP rate quote.

My mortgage is backed by Wells Fargo. Am I eligible for HARP?

It's possible that your mortgage is backed by Wells Fargo, but the more likely answer is that Wells Fargo is just your mortgage servicer; the bank that collects your payments. Wells Fargo backs very few of its own loans. Most loans for which payments are sent to Wells Fargo are backed by either Fannie Mae or Freddie Mac. Double-check with Fannie Mae and Freddie Mac before assuming Wells Fargo backs your loan.

My mortgage is backed by Bank of America. Am I eligible for HARP?

Bank of America does back some of its own loans, but the more likely answer is that Bank of America is your mortgage servicer; the bank that collects your monthly mortgage payments. Bank of America backs very few of its own loans. For most loans for which payments are sent to Bank of America, Fannie Mae or Freddie Mac are the actual loan-backers. Double-check with Fannie Mae and Freddie Mac to make sure Bank of America doesn't hold your loan.

My mortgage is backed by Chase. Am I eligible for HARP?

There is a chance that Chase backs your loan, but what's more likely is that Chase is just your mortgage servicer; the bank that collects your payments each month. Chase backs very few of its own loans. For most loans for which payments are sent to Chase, you'll find that Fannie Mae or Freddie Mac are the actual loan-backers. Double-check with Fannie Mae's and Freddie Mac's websites to make sure your loan is not held by Chase.

What if neither Fannie Mae nor Freddie Mac has a record of my mortgage?

If neither Fannie nor Freddie has record of your mortgage, your loan is not HARP-eligible. However, you may still be eligible for a "regular" refinance to lower rates. Use this form to get a rate quote to see your options. Or, if your mortgage is insured by the FHA, use the FHA Streamline Refinance program. The FHA Streamline Refinance helps underwater homeowners, too.

Does HARP work the same with Fannie Mae as with Freddie Mac?

Yes, for the most part, the HARP mortgage program is the same with Fannie Mae as with Freddie Mac. There are some small differences, but they affect just a tiny, tiny portion of the general population. For everyone else, the guidelines work the same.

Am I eligible for the Home Affordable Refinance Program if I'm behind on my mortgage?

No. You must be current on your mortgage to refinance via HARP.

I've been told by my bank that I'm not eligible for HARP. I think my bank is wrong. Can I get a second opinion?

If you've been turned down for HARP but believe that you're eligible, apply with a different bank and see what happens. Different banks are using different variations of the HARP 2.0 program. The edits are subtle, but they're enough to cause some people to get denied who should otherwise have been approved. If you've been turned down for HARP 2.0, use this form to get a rate quote from a different bank.

What are the HARP program's mortgage rates?

Mortgage rates for the HARP mortgage program are the same as for a "traditional" refinance. There is no "premium" for using the HARP program.

Will the Home Affordable Refinance Program help me avoid foreclosure?

No. The Home Affordable Refinance Program is not designed to delay, or stop, foreclosures. It's meant to give homeowners who are current on their mortgages, and who have lost home equity, a chance to refinance at today's low mortgage rates.

What are the minimum requirements to be HARP-eligible?

First, your home loan must be paid on-time for the prior 6 months, and at least 11 of the most recent 12 months. Second, your mortgage must have been sold to Fannie or Freddie prior to June 1, 2009. And, third, you may not have used the HARP mortgage program before -- only one HARP refinance per mortgage is allowed.

My mortgage was securitized shortly after the HARP deadline of May 31, 2009. Can I get a waiver or exception?

No, there are no "date exceptions" for HARP. If your loan was not securitized on, or before, May 31, 2009, you cannot use HARP.

If I refinanced with HARP a few years ago, can I use it again for HARP II?

No. You can only use the HARP mortgage program one time per home. If you used HARP 1, you cannot use HARP 2.0.

I refinanced into a HARP loan a few years ago, but my bank never told me it was a HARP loan. I feel like I was lied to. Can I use HARP again under the HARP II program?

No. You can only use the HARP mortgage program one time per home. If you used HARP 1, you cannot use HARP 2.0.

Is there a loan-to-value restriction for HARP?

No. All homes -- regardless of how far underwater they are -- are eligible for the HARP program. Click here for a HARP rate quote.

I am really far underwater on my mortgage. Can I use HARP?

Yes, you can use HARP even if you're really far underwater on your mortgage. There is no loan-to-value restriction under the HARP mortgage program so long as your new mortgage is a fixed rate loan with a term of 30 years or fewer. If you use HARP to refinance into an adjustable-rate mortgage, your loan-to-value is capped at 105%.

Maybe I wasn't clear. I am really, really far underwater on my mortgage. Are you sure I can use HARP?

Yes, I am sure. The new HARP mortgage program specifically has no loan-to-value restriction so that homeowners in Florida, California, Arizona and Nevada can take advantage of it. You can have 300% loan-to-value, and still be HARP-eligible. HARP is now unlimited LTV for fixed rate loans with 30-year terms or less.

If I refinance with HARP using an ARM, do I still get "unlimited LTV"?

No, if you use an ARM for HARP 2.0, you are limited to 105% loan-to-value. Only fixed rate loans get the unlimited LTV treatment.

Will my home require an appraisal with the HARP mortgage program?

Sort of. Although your home's value doesn't matter for the HARP mortgage program, lenders will run what's called an "automated valuation model" (AVM) on your home. If the value meets reliability standards, no physical appraisal will be required. However, your lender may choose to commission a physical appraisal anyway -- just to make sure your home is "standing".

Is HARP the same thing as an FHA Streamline Refinance?

No, the HARP mortgage program is administered through Fannie Mae and Freddie Mac. FHA Streamline Refinances are performed through the FHA. The programs have similarities, however.

I have an FHA mortgage. Can I use the HARP 2.0 program?

No, you cannot use the HARP 2.0 program for an FHA loan. If your current mortgage is backed by the FHA, and your home is underwater, use the FHA Streamline Refinance program. Click here to read about the FHA Streamline Refinance program.

I have a USDA mortgage. Can I use the HARP 2.0 program?

No, you cannot use the HARP 2.0 program for a USDA loan. If your current mortgage is backed by the USDA, and your home is underwater, use the USDA's Refinance program. Click here to get USDA mortgage rates.

I have a VA mortgage. Can I use the HARP 2.0 program?

No, you cannot use the HARP 2.0 program for a VA loan. If your current mortgage is backed by the VA, and your home is underwater, use the VA's IRRRL program. Click here to get VA mortgage rates.

Does Ginnie Mae participate in the HARP Refinance program?

No, Ginnie Mae does not participate in the HARP Refinance program. Ginnie Mae is associated with FHA mortgages -- not conventional ones. HARP II is for conventional mortgages only.

Do I have to HARP refinance with my current mortgage lender?

No, you can do a HARP refinance with any participating mortgage lender.

So, I can use any mortgage lender for my HARP Refinance?

Yes. With the Home Affordable Refinance Program, you can refinance with any participating HARP lender. Click here for a HARP rate quote.

My current bank says that they're the only ones who can do my HARP Refinance. Is that true?

No, that's not true. Or, at least it shouldn't be. There are very few instances in which a HARP applicant will be precluded from shopping for the best rate. It's doubtful that your situation is one of them.

My current mortgage is with [YOUR BANK HERE] and I don't like them. Can I work with another bank?

Yes, with HARP, you can work with any participating lender in the country. Click here for a HARP rate quote.

I put down 20% when I bought my home. My home is now underwater. If I refinance with HARP, will I have to pay mortgage insurance now?

No, you won't need to pay mortgage insurance. If your current loan doesn't require PMI, your new loan won't require it, either.

I pay PMI now. Will my PMI payments go up with a new HARP refinance?

No, your private mortgage insurance payments will not increase. However, the "transfer" of your mortgage insurance policy may require an extra step. Remind your lender that you're paying PMI to help the refinance process move more smoothly.

My bank says I can't refinance with HARP 2.0 because I have PMI. Is that true?

No, it's not true. You can refinance via HARP 2.0 even if your current mortgage has private mortgage insurance.

Why does my loan officer tell me I can't refinance with HARP because my current mortgage has PMI?

The new HARP program is exactly that -- new. There are new rules and guidelines and not every bank is up-to-speed on what's going on. If you're hearing that you can't refinance your current mortgage because it has PMI on it, that's a signal that you're working with sub-optimal loan officer. You may want to shop around. Click here for a HARP rate quote.

My current mortgage has Lender-Paid Mortgage Insurance (LPMI). Can I refinance via HARP?

Yes, you can refinance your mortgage via HARP 2.0 if your current loan has lender-paid mortgage insurance (LPMI). It's your loan officer's responsibility to make sure that your new mortgage carries, at minimum, the same amount of coverage.

I have no idea what that means. How do I choose my PMI "coverage" when I refinance a HARP loan that has LPMI?

Don't worry about it. Your loan officer will know what to do. Just make sure you disclose that your mortgage has LPMI so the bank knows what to do. Otherwise, your loan could be delayed in processing. Click here to get a HARP rate quote.

How do I know if my mortgage has Lender-Paid Mortgage Insurance (LPMI)?

To find out if your mortgage has lender-paid mortgage insurance (LPMI), locate your loan paperwork from closing. There should be a clear disclosure that states that your mortgage features LPMI, and the terms should be clearly labeled for you.

I don't see an LPMI disclosure in my closing package but I think that I have it. How do I know if my mortgage has LPMI?

If there is no LPMI disclosure, first check if your first mortgage's loan-to-value exceeded 80% at the time of closing. If it did, look to see if you are paying monthly mortgage insurance. If you are not paying monthly PMI, you're likely carrying LPMI.

What's the bottom line with HARP refinances and mortgage insurance?

With HARP, regardless of whether you have borrower-paid mortgage insurance (BPMI) or lender-paid mortgage insurance (LPMI), a refinance is possible. The key is that the new loan has mortgage insurance coverage at least equal to the mortgage insurance coverage on your current mortgage.

What if my lender won't give me a HARP refinance because I have mortgage insurance?

If your lender tells you that you can't have a HARP 2.0 loan because you have mortgage insurance, find a new lender. There are plenty that of banks that can -- and want to -- help you. Click here for a HARP rate quote.

What's the biggest mortgage I can get with a HARP refinance?

HARP refinances are limited to your area's conforming loan limits. In most cities, the conforming loan limit is $417,000. However, there are some cities in which conforming loan limits are as high at $625,500.

Can I do a cash-out refinances with HARP?

No, the HARP mortgage program doesn't allow cash out refinance. Only rate-and-term refinances are allowable.

Can I refinance a second/vacation home with HARP?

Yes, you can refinance any second/vacation property with HARP, even if the home was once your primary residence. The loan must meet typical program eligibility standards.

Can I refinance an investment/rental property with HARP?

Yes, you can refinance an investment/rental property with HARP, even if the home was once your primary residence. You can refinance a home on which you're an "accidental landlord" via HARP. The loan must meet typical program eligibility standards.

I rent out my old home. Is it HARP-eligible even though it's an investment property now?

Yes, you can use the HARP Refinance program for your former residence -- even if there's a renter there now.

How long do I have to stay in my house if I use HARP on my primary residence?

There is no specific time frame for which you're required to stay in your home if you use HARP 2.0. Just like any other mortgage, if you plan to stay in your home post-closing, it's your primary residence. If you plan to turn it into a rental, it's an investment property. Click here to see today's HARP mortgage rates.

These things I'm reading here... Why, when I call my bank, do they tell me it's not true?

It's possible that the call center representative to whom you're speaking is neither knowledgeable about HARP, nor the actual mortgage underwriting process. This post is researched and cross-referenced against Fannie Mae and Freddie Mac guidelines, and publicly-available reports from the FHFA.

Are condominiums eligible for HARP refinancing?

Yes, condominiums can be financed on the HARP refinance program. Warrantability standards still apply.

Can I consolidate mortgages with a HARP refinance?

No, you cannot consolidate multiple mortgages with the HARP refinance program. It's for first liens only. All subordinate/junior liens must be resubordinated to the new first mortgage.

What happens to my second mortgage when I refinance my first mortgage using HARP 2.0?

HARP 2.0 is meant for first liens only. Second liens are meant to subordinate. You'll get to replace your first mortgage and your second mortgage will remain as-is. Just be sure to mention your second mortgage at the time of application so your lender knows to order the subordination for you.

My second mortgage isn't backed by Fannie Mae or Freddie Mac. Is that a problem?

No, it doesn't matter if your second mortgage isn't backed by Fannie Mae or Freddie Mac. Second mortgages are ignored as part of HARP. They can't be refinanced, and they can't be consolidated. Second mortgages are a non-factor in HARP 2.0.

My bank is not setup for HARP and I want to refinance. What do I do?

If your current bank is not setup for HARP, find a new lender. HARP is available through any participating bank (and there are a lot of them). Click here for a HARP rate quote.

Can I "roll up" my closing costs with a HARP refinance?

Yes, mortgage balances can be increased to cover closing costs in addition to other monies due at closing such as escrow reserves, accrued daily interest, and a small amount of cash. In no cases may loan sizes exceed the local conforming loan limits, however.

I am unemployed and without income. Am I HARP-eligible?

Yes, you do not need to be employed to use the HARP mortgage program. HARP applicants do not need to be "requalified" unless their new principal + interest payment increases by more than 20%. If the new payment increases by less than 20%, or falls, there is no requalification necessary.

What is the maximum income that a HARP applicant is allowed?

The HARP refinance program has no maximum income limits. You cannot "earn too much" to qualify. Click here to get a HARP rate quote.

So, I can't earn too much money to use HARP 2.0?

No, there are no income restrictions for the Home Affordable Refinance Program (HARP). A similar-sounding program, though -- Home Affordable Modification Program (HAMP) does have income limitations. Many people confuse the two.

Is HARP the same thing as HAMP?

No. HARP stands for Home Affordable Refinance Program. HAMP stands for Home Affordable Modification Program. Both programs are supported by the Making Home Affordable initiative, but that's about where the similarities end.

I am now divorced. I want to remove my ex-spouse from the mortgage. Can I do that with HARP?

Yes. With HARP, a borrower on the mortgage can be removed via a HARP refinance so long as that person is also removed from the deed; and has no ownership interest in the home. Click here for a HARP rate quote.

Do HARP refinances use Loan-Level Pricing Adjustments (LLPAs)?

Yes, HARP mortgages use loan-level pricing adjustments, but LLPAs are dramatically reduced on a HARP refinance and, in some cases, waived entirely. For example, there are no LLPAs for fixed-rare HARP refinances with terms of 20 years or fewer. For all other loans, loan-level pricing adjustments are capped at 0.75 points.

Does a HARP Refinances require LLPAs for a 15-year fixed rate mortgage?

No, there are no LLPAs for 15-year fixed rate mortgage via the HARP Refinance program.

Is there a minimum credit score to use the HARP program?

No, there is no minimum credit score requirement with the HARP mortgage program, per se. However, you must qualify for the mortgage based on traditional underwriting standards.

Do I have to refinance my mortgage with my current lender?

No, you can do a HARP refinance with any participating lender you want. Click here for a HARP rate quote.

My current lender tells me that if I want to do a HARP refinance, I have to go through him. Is that true?

No, it's not true that you can't shop for the lowest HARP refinance rates available. You are allowed to do a HARP refinance with any HARP-participating lender.

My bank called me for a HARP refinance. The rate seems high. Should I shop around?

Yes, it's always a good idea to shop for the best combination of mortgage rates and loan fees. However, be sure to shop with reputable lenders that have experience underwriting and approving HARP mortgages. HARP 2.0 is a new refinance program and not many banks have expertise with them. You don't want to have your loan approval fall apart because your lender failed to underwrite to HARP mortgage standards.

Where can I get the lowest rates on HARP loans?

The HARP program is just like any other mortgage -- you'll want to shop around for the best rates and service. However, because HARP is a "specialty loan", you may want to limit your shopping with reputable lenders that know how to specifically handle HARP loans.

What are the costs to refinance via the HARP program?

Closing costs for HARP refinances should be no different than for any other mortgage. You may pay points, you may pay closing costs, you may pay neither. How your mortgage rate and loan fees are structured is between you and your loan officer. You can even opt for a zero-cost HARP refinance. Ask your loan officer about it.

What does the term "DU Refi Plus" mean?

"DU Refi Plus" is the brand name Fannie Mae assigned to its particular flavor of the HARP mortgage program. "DU" stands for Desktop Underwriter. It's a software program that simulates mortgage underwriting. "Refi Plus" is a gimmicky-sounding term that could have been anything. The name has been trademarked, however.

What does the term "Relief Refinance" mean?

"Relief Refinance" is the Freddie Mac equivalent of DU Refi+.

For how long should I lock my mortgage rate via the HARP Program

Lock for 45 days, at minimum. This is because the HARP mortgage program, while streamlined for simplicity, still has some grey areas that can lead to delay. It's better to have a rate lock that lasts too long than not long enough.

When does the HARP program end?

If you are HARP-eligible, you must close on your mortgage prior to January 1, 2014 --days from now.

How do I apply for the HARP program?

Use this form to get a rate quote. If the rate looks good, you can accept it. There is no fee for applying.

Apply For HARP 2.0 (Home Affordable Refinance Program)

Lastly, don't forget! The Home Affordable Refinance Program is not meant to save a home from foreclosure. It's meant to give underwater homeowners a chance to refinance without paying PMI. If you need foreclosure help, call your current loan servicer immediately.

Until next time...

Rate Quotes-More of what other lenders don't want you to know...

2012-04-02T12:11:00.000-07:00

Here's more of what other lenders don't want you to know...this is all about interest rates and interest rate quotes. Boring, huh? Uh, maybe not... thousands (yes, I said thousands) of dollars are at stake for a bad decision.

What's the right decision?

Hey Mitch, I want the lowest rate I can get...what is it right now?

Should I make one up or should I find out what I really need to know to quote an accurate rate? I could go either way but really...come on now.

This question and process is really nothing new to those of us that do this for a living, even in these times.

Honestly, the key is to get accurate information from our borrowers so we can make sure we're providing the best loan, the best rate, and the best fee structure based on specific borrower needs for a specific transaction.

OK Mitch, same old hoo-haw that I hear from every loan person out there...yeah, I get it; you're all special, you're all great and you're all looking out for my best interests....but aren't you more worried about your own pocketbook than mine?

Isn't that Hee-Haw? Anyway, heck, yes I'm worried about my pocketbook! Aren't we all? But my pocket book is a non-issue...it always takes care of itself based on conducting business the right way. Clients, associates, family and friends all need to know that any answer, or any strategy I recommend is based on accuracy, true knowledge, and is well planned. True knowledge comes only from experience and accurate interpretation of all facts material to the specific scenario being considered.

Wow, you sure do talk alot. Can I get an answer now please?

Here's your answer: Let's make sure we have the right information about you, and any property being considered. That's all I need to provide you an accurate quote.

How come I see all these quotes from lenders on the Internet and everywhere else without me having to give up my life story then?

All lenders can provide quotes based on "normal" or assumed parameters. I do this every day and provide "Daily Rates" to consumers and the financial communities. Want on this list? E-mail me and type "Rates" in the subject line. I'll add you. No hoo-haw.

The key is, how accurate are these quotes? Do the lenders provide true and accurate quotes based on real-life stuff, or are the quotes based on a loan that 1 person in a million may qualify for only while the tide is out at midnight on a Sunday?

Please don't tell me that lenders bend the truth....we all know that could never happen....

Wait a second while I get done laughing....OK, I'm ready....yikes. Can you say marketing? The sad truth is that you gotta get past the hype, the pie-in-the-sky too good to be true stuff.

There is no short cut to finding someone who knows what they're doing, and who you trust. If you don't know someone, how do you find this person?

Rely on word-of-mouth, your friends, associates, financial professionals, and your real estate person. Feel free to contact me anytime and judge for yourself.....I'm happy to help.

Until next time.....

HARP II Update-If it sounds too good to be true...

2012-04-01T10:16:00.000-07:00

...it probably is.

Be careful...once you do a HARP loan you can't do it again....you get one shot and one shot only. Better get it right!

Many mortgage lenders/loan officers are marketing the heck out of this (yes, I said marketing), and some of what they say may turn out to be true. Mostly not I think. Hmmmm....do you think they're all thinking about paychecks? Naw...they wouldn't do that, would they?

How about this? Let's do business the right way and make certain that every consumer who can benefit gets the maximum benefit. Now there' a concept.

It's simply too early in the process to get the best loan at the lowest rate. Patience will pay off. Get on my HARP e-mail list (type HARP on the subject line and I'll add you), or submit your e-mail (look to the right!) to automatically receive any new blog posts/HARP updates, or contact me (e-mail is best to start).

I hope you check around before you get started down a path that you later find was the wrong fork in the road. As lenders roll out their guidelines, it's pretty likely those guidelines will loosen up over the next few weeks/next month so I wouldn't be in a huge rush to get this done; just a normal rush.

Why would you believe me over what some others are saying? Unless you know me or have done business with me, you simply don't know me...I get that. So, here are some of my testimonials which I guess you can choose to believe or not. Fact is they are all real people who would not hesitate to tell you that. Here you go: http://www.mijoymortgage.com/Testimonials.html

What to do? I will always have solid answers for you and will provide reliable, timely and realistic information. Here are the guidelines: http://www.mijoymortgage.com/UNDERWATER_HARP_2.0.html

We are beginning to process HARP 2.0 applications; it would be a good idea to have your application on file if you haven't done so already. Even though it's been a slow process, lenders have been rolling out their guidelines and we are beginning to see some realistic information now. I expect that we will have some make-sense scenarios to help you as a consumer looking for a way to lower your payment.

Here's what you should do to proceed:

Verify that you qualify: http://www.mijoymortgage.com/UNDERWATER_HARP_2.0.html.
In the event you haven’t filled out an application on-line please do so immediately so we can minimize the application time needed: https://0990471896.secure-loancenter.com/WebApp/Start.aspx. Enter as much info as you can and then send it right away.
Please provide me with 2 day and time alternatives when I can contact you to review and finalize your application and move forward. Please be certain I have the best phone # to contact you.

Until next time...

Underwater? HARP 2.0 Update-Getting Closer-Stay Tuned

2012-03-13T08:35:00.001-07:00

Underwater?
Refinance to a lower monthly payment for qualified borrowers.
No appraisal is required.

HARP 2.0 features unlimited LTV (loan-to-value). If you're "underwater" and need to lower your payment, it may be your turn to take advantage.

Do you qualify? Here are the program basics: http://mijoymortgage.com/UNDERWATER_HARP_2.0.html.

Previous HARP 2.0 post/update:

http://mijoymortgage55.blogspot.com/2012/01/underwater-whats-up-with-harp-20.html

Please pass this along to anyone you feel might benefit:

FHLMC (Freddie Mac) loaded the HARP 2.0 guidelines to its system this past weekend, FNMA (Fannie Mae) will load theirs the weekend of 3-17.

It will take about 2-3 weeks beyond that (best guess) for investors to put forth their individual programs. We will know as investors roll out their individual programs what we can do for individual borrower scenarios.

If you are in my data base for follow up you will be among the first to know what possibilities there are….updated posts to follow as the program guidelines roll out.

If you need/wish to be added to my database please e-mail me.

It would be a very good idea to get your loan application ready on my secure site here: https://0990471896.secure-loancenter.com/WebApp/Start.aspx

Those with applications on file will be processed first.

Until next time...

Hold Your Lender Accountable-The Top 5 List

2012-03-11T11:42:00.001-07:00

Other lenders don't enjoy my posts very often. They don't want you to know this stuff, or even think about it. They want quiet little consumers busily attending to their daily activities, relying on their loan officer to safely keep watch over what is likely their biggest financial asset. Huh?

More than ever, knowledge is power. It's pretty much a given that in today's world, the wrong mortgage loan can be pretty devastating. Please be careful and please make informed decisions. I'll cover this for you a bit down the line in this post.

There's plenty of regulatory stuff hanging around, enforcing the law for big banks on down the line to Johnny Joe Corner Mortgage, that causes these folks to develop a severe case of the yikes; here comes another mortgage zombie ready to rip off another piece of flesh! Yeah, that's painful and all, but who has empathy for guys that think they're suffering when they're down to only one new beemer and (gasp!) a now ancient 2 year old Audi? Really?

Good thing my car is 8 years old...hey, it still looks and runs great. Do you really care if these people suffer for all of the market issues that have contributed to one of greatest real estate debacles this country has ever seen? While the great majority of folks who do what I do are 100% above-board, and hate this mess as much (or more) than anyone, there are those (there are always going to be "those") who should be put in jail. Enough of that.

This post is for those who seek a good and honest loan; one that does what it's supposed to do. Yes, there are still loans that fit that definition; I do them often.

What should you watch out for? Even though the mortgage loan officer ranks have thinned considerably, believe me when I tell you there are still some mortgage idiots out there. People that have no more business transacting a loan with you than a kindergartner. Anyway, it's time to let you know what to watch out for. Here's the list:

Lenders and loan officers that manipulate the APR (Annual Percentage Rate). It's designed for loan cost comparison; it doesn't always work out that way. Here's a commentary that addresses this fun little adventure into APR-land.
Loan Officers/Lenders that provide inaccurate cost and/or rate estimates, just to get your business, then provide a different set of numbers when you get to escrow.
Lenders requiring you to be pre-approved by them when they own the house you want to buy. The excuse is they want to be sure your chosen lender knows what they are doing....when in fact it's an obvious marketing ploy. Do you really want to do business with lenders that practice organized crime? Tell them to take a hike.
Loan officers that are late for appointments, are dis-organized, that interrupt your meeting with phone calls, that provide mis-leading or false information, that provide inaccurate promises based on costs or time lines, that rely on "assistants" to do their job for them while they are out having fun....spending your money.
Finally, do some comparing and be careful not to focus too much on introductory on-line stuff, or on lender fee and rate promises that just sound too good to be true. We all know how that turns out. Find an experienced lender that provides service. Not lip service; real honest to goodness careful attention to detail (the actual loan officer, not their assistant). One that provides advice based on what's best for you, not what's best for their own checkbook.

The simple fact is that all mortgage lenders have essentially the same money sources in these times. The real and true difference is all about the level of service provided. Does your loan officer have access to the modern and necessary tools to get the job done? Are they experienced and can provide real testimonials to the level of service they provide? Does this person transact business the right way? Do you feel that the combination of value and service (real service to meet your needs) passes the test? Are you comfortable with what it feels like?

I really put this post together by request. Many of my clients expressed that the current state of affairs in the mortgage business has left them at a loss as to what to do. Who to trust, what to believe, and simply what is going on and how long will it last? I respectfully submit that no matter what the atmosphere is, if you develop a relationship with a true professional, someone that you can trust, you will be well cared for and will end up with the right loan.

That's it for now. Until next time...

How Many Are Unemployed? Or...Who's On First?

2012-03-08T08:28:00.000-08:00

Abbott and Costello
COSTELLO: I want to talk about the unemployment rate in America.
ABBOTT: Good Subject. Terrible times. It's 9%.
COSTELLO: That many people are out of work?
ABBOTT: No, that's 16%.
COSTELLO: You just said 9%.
ABBOTT: 9% Unemployed.
COSTELLO: Right 9% out of work.
ABBOTT: No, that's 16%.
COSTELLO: Okay, so it's 16% unemployed.
ABBOTT: No, that's 9%...
COSTELLO: Wait a minute. Is it 9% or 16%?
ABBOTT: 9% are unemployed. 16% are out of work.
COSTELLO: IF you are out of work you are unemployed.
ABBOTT: No, you can't count the "Out of Work" as the unemployed. You have to look for work to be unemployed.
COSTELLO: BUT THEY ARE OUT OF WORK!
ABBOTT: No, you miss my point.
COSTELLO: What point?
ABBOTT: Someone who doesn't look for work can't be counted with those who look for work. It wouldn't be fair.
COSTELLO: To whom?
ABBOTT: The unemployed.
COSTELLO: But they are ALL out of work.
ABBOTT: No, the unemployed are actively looking for work. Those who are out of work stopped looking. They gave up. And, if you give up, you are no longer in the ranks of the unemployed.
COSTELLO: So if you're off the unemployment rolls that would count as less unemployment?
ABBOTT: Unemployment would go down. Absolutely!
COSTELLO: The unemployment just goes down because you don't look for work?
ABBOTT: Absolutely it goes down. That's how you get to 9%. Otherwise it would be 16%. You don't want to read about 16% unemployment do ya?
COSTELLO: That would be frightening.
ABBOTT: Absolutely.
COSTELLO: Wait, I got a question for you. That means there are two ways to bring down the unemployment number?
ABBOTT: Two ways is correct.
COSTELLO: Unemployment can go down if someone gets a job?
ABBOTT: Correct.
COSTELLO: And unemployment can also go down if you stop looking for a job?
ABBOTT: Bingo.
COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to just stop looking for work.
ABBOTT: Now you're thinking like an economist.
COSTELLO: I don't even know what the heck I just said!
And now you know why the Administration's employment figures are improving!
Until next time...

$100 Down-50% Discount on Home Price for Law Enforcement, Firefighters/EMS, Teachers

2012-03-05T08:58:00.001-08:00

About Good Neighbor Next Door-from HUD
Law enforcement officers, pre-Kindergarten through 12th grade teachers and firefighters/emergency medical technicians can contribute to community revitalization while becoming homeowners through HUD's Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return you must commit to live in the property for 36 months as your sole residence.

How the Program Works
Eligible Single Family homes located in revitalization areas are listed exclusively for sales through the Good Neighbor Next Door Sales program. Properties are available for purchase through the program for five days.

How to Participate in Good Neighbor Next Door
Check the listings for your state. Follow the instructions to submit your interest in purchasing a specific home. If more than one person submits on a single home a selection will be made by random lottery. You must meet the requirements for a law enforcement officer, teacher, firefighter or emergency medical technician and comply with HUD's regulations for the program.

Get pre-approved! You can contact me here: mitch.wilcox@bankoforegon.net.

HUD requires that you sign a second mortgage and note for the discount amount. No interest or payments are required on this "silent second" provided that you fulfill the three-year occupancy requirement.

The number of properties available is limited and the list of available properties changes weekly.

To learn more, please see our Good Neighbor Sales Frequently Asked Questions!

Still have questions or want to get started on loan pre-approval? Contact me!

Until next time...

FHA Loan Costs are increasing-are we surprised?

2012-02-28T09:46:00.001-08:00

Uh, no we aren't surprised given the red ink that HUD is being washed with.
Here's a summary (more details below):
FHA Comparison – Loan terms over 15 years:
                                          Current/Prior to 4-1-12   On/After 4-1-12

Purchase Price                   $175,000                        $175,000
Minimum Down (3.5%)       $ 6,125                         $ 6,125
Base Loan                          $168,875                         $168,875
Loan with financed MI         $170,564                         $171,830
Monthly P/I at 3.750%         $ 789.91                          $ 795.77
Monthly MI                           $ 163.46                          $ 178.99
Total PI/MI                           $ 953.37                          $ 974.76
Total payment increase                                              $   21.39

What affect will this have on borrower qualification? To qualify for the same loan as above a borrower will need an additional $30 per month in income, assuming a 30% tax bracket.

The update notice:
The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent (now 1.15% for loan terms >15 years). This change is effective for case numbers assigned on or after April 1, 2012. FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500. This change is effective for case numbers assigned on or after June 1, 2012.

The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount. This increase applies regardless of the amortization term or LTV ratio. FHA will continue to permit financing of this charge into the mortgage. This change is effective for case numbers assigned on or after April 1, 2012.

Your takeaways:

Effective for case numbers on/after 4-1-12.
Sales contract dates, all loan documents and FHA case # must be dated on/before 3-31-12.

Why does this matter? If you're in the buying or refinancing market, better get 'er done....you will save money. Apply now: https://0990471896.secure-loancenter.com/WebApp/Start.aspx

As anticipated, HUD announced that mortgages backed by the FHA will become more expensive. Once again, future borrowers are paying for the problems of previous borrowers - the money will be used to bolster the sagging reserves in the FHA mortgage insurance premium fund. Hopefully any more claims that FHA is "fine" and doesn't need more capital will stop in the near future - it does need more capital. The increase in insurance premiums would bring in about $1.25 billion during the rest of 2012 and through September 2013 which will be added to about $1 billion FHA is receiving from the servicer settlement. Every little billion helps...

First, remember that the agency does not make loans, or buy loans, but instead insures mortgages that meet its guidelines. Mortgage insurance, similar to a guaranty fee, protects one party from the risks of the borrower becoming delinquent of going into foreclosure. With all this talk about FHA and compare ratios, and the removal of the streamline product from the calculations, it might be helpful to know where to find it. Anyone wishing to check it out for themselves can do so here. Click on the "Early Warnings" menu, Single Lender or general, and go from there. (And no, I don't know specific lender ID's.) If you want to see compare ratios excluding streamline refinances, they can be found through the "Analysis Menu."

FHA's guidelines are very lenient, although most lenders have overlays in order to bolster the product, and claim that borrowers with credit scores of 580 or more can put down as little as 3.5 percent. The FHA will increase its annual mortgage insurance premium by 0.10 of a percentage point for loans under $625,500, which would now cost 1.25 percent of the loan amount, up from 1.15 percent, on 4/1. And starting on 6/1 the premium for larger loans would rise more, or by 0.35 of a percentage point, bringing the total premium to 1.5 percent. This annual premium is broken down in monthly payments. The upfront mortgage premium is also increasing by 0.75 of a percentage point, bringing the premium to 1.75 percent of the loan amount, which can be financed/added into the mortgage.

I have not heard any details yet on the FHA's possible plans on some softening of the streamlined refi rules or charges for borrowers refinancing pre-Oct 2010 loans that were made under much lower annual MIPs. The expectation is that the FHA will grandfather all or a portion of the old, lower MIP. Certainly investors in Ginnie Mae MBS's are concerned about how much easing that HUD will do on streamlined refis.

As noted recently, Fannie & Freddie's big book of problem loans came from 2005-2008, but the FHA wasn't insuring many loans in the bubble years. The FHA's big exposure has come with its gain in market share after the demise of the subprime lending industry (remember LO's saying FHA loans are "the new subprime"?) And though recent production is "better" quality, they're still FHA loans, which means cum default rates well above 5%, which means that the FHA fund will continue to face financial pressures for the next several years.

Put another way, what the does the change mean to borrowers? In the future, the two tiers of FHA MI change. Starting April 1 the up-front MI for loans up $729,750 will be 1.75% of loan amount (up from 1%). The annual MI for loans up to $729,750 will be 1.2% of loan amount if the down payment is 5% or more, or 1.25% of loan amount if the down payment is less than 5% starting 4/1. And the annual MI for loans $625,501 to 729,750 will be 1.45% of loan amount if the down payment is 5% or more, or 1.5% of loan amount if the down payment is less than 5% starting June 1. Borrowers had better pay attention to when they're in contract!

Until next time....

Menendez Introduces Bill to Keep People in their Homes

2012-02-16T09:07:00.000-08:00

I’ve made the comment on a number of occasions that, to date, we just don’t have any real answers to the foreclosure mess. Smarter people than me (that’s almost everyone) are starting to come up with ideas that may jumpstart matters in getting us out of this mess we’re in.

I choose not to debate any longer about whom we should blame, who deserves or doesn’t deserve a break, and who did or didn’t take advantage of the system. You folks that see graphite ropes snaking down from black helicopters with ninja-like warriors sliding into your backyard can debate that if you wish. Keep gathering those storable food and water stocks and guarding against the inevitable EMP that’s sure to end the world as we know it.

The fact is we need positive forward-thinking and a way to move forward. We need to be thinking about sensible solutions to what has the real potential to harm all of us for a long time. Whether you were affected by this mess, or were able to avoid it, it’s time to take the best action for moving forward. Did I mention “forward” movement?

One of the better ideas I’ve heard is the Menendez Bill introduced last week. It may not have all the answers and it may not make everyone happy, but it’s one of the first “out of the box” plans I’ve seen that meets the sensibility test in many ways. You may want to check it out; there are other plans out there and I suspect we will see other proposals that address shared appreciation loan modification plans that address homeowner/lender responsibility.

It’s time for innovative ideas and solutions. I offer the following from Senator Menendez’ web site as a possible launching platform:

Menendez Introduces Bill to Keep People in their Homes

Housing Chairman Continues His Fight to Help Underwater Homeowners

February 9, 2012

WASHINGTON, DC – U.S. Senator Robert Menendez (D-NJ), Chairman of the Senate Subcommittee on Housing, Transportation and Community Development, today introduced an innovative bill to keep families in their homes, despite their mortgage being worth more than their home.

“Unfortunately, far too many New Jerseyans are underwater on their mortgages and are all too familiar with the burden this brings. When you owe more than your house is worth through no fault of your own, relief can be hard to come by. More and more people are choosing to walk away, since they feel that’s their only viable option, which only exacerbates the problem,” Senator Menendez said. “My bill aims to break this cycle and give homeowners the relief they are looking for by working with banks to find acceptable solutions for everyone.”

The Preserving American Homeownership Act is specifically aimed at homeowners who owe more than their house is worth (“underwater”), which is currently estimated to be more than 10 million properties and approximately 22% of all homeowners. On average, these homeowners owe anywhere from $40,000-$65,000 more than their home is currently worth.

Millions of homes are underwater currently because of the broad national decline in home values that has occurred since 2006, which can be seen here. Because of this, homeowners – whose home values declined through no fault of their own – are less likely to remain in their homes, further hurting the already fragile market, and banks are reluctant to reduce the amount owed to them (“principal”) because they will be losing income.

Senator Menendez’s bill seeks to help both parties – homeowners and lenders – by creating a program in which banks reduce the mortgage principal for eligible homeowners. In exchange, banks would be entitled to a portion of the increased value of the home down the road as home values increase

President Clinton recently outlined a similar plan during the National Retail Federation’s Annual Convention and Expo as reported in the American Banker. Clinton said: “The lender would, in effect, invest in the home so the banks would not have a bad debt on their books,” Clinton said. “The harsh way to do it is to foreclose on everyone now and turn everyone into renters – I hate that way.”

“We applaud Senator Menendez for introducing The Preserving American Homeownership Act,” said Richard A. Smith, president and CEO of Realogy Corporation, a leading global provider of real estate and relocation services headquartered in Parsippany, N.J. “This debt-for-equity arrangement offers a solution for qualified underwater homeowners to work together with their lenders to achieve a mutually beneficial outcome — avoiding the lengthy and costly process of foreclosure, offering the likelihood of appreciation to both parties and contributing to a stabilizing housing market.”

“I’m a prime example of how shared appreciation mortgage modifications can really help homeowners,” said Juliana Collins who benefited from this specific modification previously. “When my house depreciated $200,000 in less than 3 years, it was a nightmare that I was unable to refinance my way out of. This modification finally gave me the peace of mind that not only will my family and I get to stay in our home, but I also won’t have to work multiple jobs and risk my health to be able to afford a mortgage that’s underwater.”

Chief Economist at Moody’s Analytics, Mark Zandi, on shared appreciation mortgage modifications: “I think [they’re] an excellent idea. … I do think [it] is appropriate – that there should be shared appreciation of any principal write down … but I think given that we’ve got this issue for the next three, five, seven years, I think this is entirely appropriate to do. Hopefully we learn from this and this will be part of the tool kit going forward.”

This program is a responsible win-win for everyone: underwater homeowners receive relief on their mortgages, while banks agree to take a short-term reduction for a long-term gain as the housing market recovers. In a similar program tested by a private mortgage servicer, almost 80% of homeowners who were offered the opportunity to participate chose to do so and had a re-default rate of only 2.6%.

Additional Details

• The principal balance of the loan would be reduced to 95% of the re-assessed value of the home and over a three-year period, provided the homeowner is able to make reduced payments, the principal balance would be reduced in 1/3 increments per year.

• In exchange, the bank would receive a fixed share (at most 50%) of the increase in the home’s value when the home is sold or later refinanced. The share depends on how much the bank initially reduced the principal. For example, if the bank reduced the principal by 20%, they would receive a 20% share of any later increase in the home price.

• Home values would be determined by independent third-party appraisers.

• Two pilot programs would be established by the FHFA and FHA for a length of two years for homeowner acceptance.

• Homeowners are eligible no matter how far underwater they are.

• Homeowners who are in default or foreclosure are eligible, but they must make timely payments on the modified mortgage going forward or they will not receive any principal reduction.

• Primary residences are eligible, but secondary residences and investment properties are not.

• If capital improvements are made to the home, homeowners will receive credit for the appreciation and banks will not receive a share of that appreciation.

Until next time…

The $25 Billion (?) Mortgage Settlement

2012-02-10T08:56:00.000-08:00

From Mortgage News Daily, 2-10-12
The press can stop speculating on the servicing settlement: a final settlement between the nation's five largest mortgage servicers, two federal agencies and 49 of the states' attorneys general (AGs) was announced Thursday. (Ok, Oklahoma, what's the deal?) The market measured this as a slight positive for banks as the uncertainty of the settlement is cleared up and banks can now focus on moving forward on foreclosures. Bank of America, JPMorgan Chase & Co., Wells Fargo & Company, Citibank, and Ally Financial, (formerly GMAC) and their servicing subsidiaries have agreed to commit a minimum of $17 billion directly to borrowers through a series of relief effort options including principal reduction.

For more granularity, the ponying-up consists of Ally/GMAC ($310 mil), BofA ($11.8 billion), Citi ($2.2 billion), JP Morgan ($5.3 billion), and Wells Fargo ($5.4 billion) for $25 billion. Servicers will likely provide up to an estimated $32 billion in direct homeowner relief. There will be $4.2 billion paid directly to the states and $750 million to the federal government. In addition, a comprehensive set of new standards will be implemented to protect homeowners from future abuses and an independent monitor will be appointed to ensure servicer compliance. HUD Secretary Shaun Donovan has also commented that the total cost may increase to $45bn if additional banks sign onto the settlement deal.

Of course this does little to stop future lawsuits against these piñatas of the financial world. Nothing in the agreement grants any immunity from criminal offenses and will not affect criminal prosecutions. The agreement does not prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five servicers. The pact also enables state attorneys general and federal agencies to investigate and pursue other aspects of the mortgage crisis, including securities cases. The settlement only covers servicer liability for robo-signing and improper mortgage servicing. Notably, it does not cover any wrongdoings associated with mortgage securitizations, MERS, or any criminal liability.

"Because of the complexity of the mortgage market and this agreement, which will span a three year period, borrowers in some cases may be contacted directly by one of the five included mortgage servicers regarding loan modification offers, may be contacted by a settlement administrator or their state attorney general, or may need to contact their mortgage servicer to obtain more information about specific programs and whether their loan qualifies. More information will be made available as the settlement programs are implemented."

Barclays Capital broke down the numbers. $17 billion will come in the form of principal reductions on first and second lien mortgages ($10 billion), forbearance modifications, and costs to facilitate short sales. Principal reductions will not be applied to any loans in agency MBS trusts, and for principal reductions on non-agency loans or in bank portfolios, the servicer must determine that the modification results in a higher NPV than foreclosing on the home. $3 billion of the settlement cost will come in the form of refinancings for borrowers who are current on their mortgage payments but underwater. $1.5 billion, per Barclays, will be used to provide immediate cash payments of up to $2,000 to borrowers who lost their homes to foreclosure between January 1, 2008 and December 31, 2011.

The modifications, refinancings, and borrower payments outlined in the settlement will be performed over three years, with 75% of each bank's target required to be reached within two years. Servicers will identify borrowers eligible for these benefits over the next six to nine months. Banks that fall short of their settlement targets by the deadlines will be assessed cash penalties. Joseph Smith, the former North Carolina Commissioner of Banks, has been selected as a third party monitor to provide oversight of the participating bank servicers.

As part of the settlement, the participating banks will be required to comply with new servicing standards, most of which likely have already been implemented or are in the process of being incorporated into standard servicing procedures. (They are too numerous to repeat here.)

If you were a bank, wouldn't you try to modify as many non-portfolio loans as possible through this program since while they only get a 50% credit, banks also escape the actual monetary costs of forgiveness? However, this may not be possible for multiple reasons, and things become pretty complicated. For one thing, Barclays notes, the bank servicers will have to follow some NPV rules to make a judgment on whether to apply a principal forgiveness modification. All of the five servicers are part of the HAMP program and have presumably already been applying NPV tests to delinquent loans and have already determined on which loans a debt forgiveness modification would make sense. This settlement cannot change that assessment. Of course, more loans could be modified through debt forgiveness due to the increased HAMP PRA incentives that were announced a few weeks ago but this settlement does not change the NPV calculation beyond that.

So what can we gather from all this? As I told one reader, the whole thing was pretty much greeted with a shrug rather than champagne corks popping, especially since it certainly doesn't end many types of lawsuits. For the impact on non-agency RMBS modifications it is small, but will keep foreclosure rolls slow for another 6-12 months. The details released specifically exclude Fannie Mae/Freddie Mac pools from this settlement but one can expect that loans in private-label pools will be affected. It seems that the banks will be required to target the $17 billion in forgiveness and other relief, and will receive a 125% credit for every dollar of forgiveness that they apply to portfolio loans - but only a 50% credit for every dollar of forgiveness applied on loans that they service but do not own. The program will have a significant impact on liquidation timelines as it is likely to slow down 90+ delinquencies to foreclosure and foreclosure to REO roll rates as servicers take some time to adjust to the new servicing standards. After that, however, we expect these rates to pick up and rise to levels higher than that experienced over the past 12-24 months.

More to follow as this unfolds...until next time.

What About This APR Thing?

2012-02-03T15:19:00.000-08:00

The Annual Percentage Rate (APR) is a way to compare the costs of a mortgage loan. Isn't it? Well, that's what it's supposed to do. The purpose is to provide you with a nice standard for comparing the percentage cost from one loan to another. Does it work? Kind of. Is it a reliable means of truly comparing a cost for a loan? Yes, it can be but it's usually not. Really.

OK, what kind of double talk crazy mumbo jumbo is this? Well, it is a US Government standard so it's just got to be the more solid than all of the gold in Ft. Knox, right? Oh yeah, there's not as much gold there as we thought, so never mind about that. Anyway....

Why use APR then?

Loans can be confusing. Slick lenders (Gasp! There aren't any of those are there?) can quote a lot of different numbers that mean different things. Why, that sounds like a deliberate attempt to confuse people! You think? In an order to reduce confusion, the US Government passed the Truth in Lending Act (TILA). We love our acronyms. TILA hasn't fixed this. Unscrupulous Lenders can (and sadly do) manipulate the numbers in their favor to talk you into their loans. Why Earl, after all....ain't their APR lesser than the other un?

One of the provisions of the TILA is that lenders are required to quote the APR to potential borrowers. I am particularly fond of the fact that something so important has the word "truth" in it; brought to you by the very business who provides very little of it on occasion. OK, to be fair, most of us are 100% above-board, honest individuals who want the same thing you do. Honesty, Fairness. The TRUTH.

If all lenders quoted the APR per TILA rules it would be a fair and consistent yardstick of the true cost of a loan. Unfortunately...all things are not always equal. To further confuse matters, the APR can include more than just the interest cost of a loan. On a mortgage, the APR might include Private Mortgage Insurance, processing fees, and discount points. There are other fees and charges that may or may not be included in a given APR quote....based on lender "interpretation" of how they want the APR to look. Well now hold on there just a minute, missy. Is that there legal? Uh.....no, it isn't. Well then, how do lenders get away with that? You see, Jimmy; there's a big difference between making a law and enforcing a law. As we all know.

Therefore, comparing one APR from one lender to another is about as reliable as your Doctor getting you from the front waiting room to the little waiting room, and then into the exam room on time. Practically impossible. Or, when the cable guy says he'll be there between noon and 5, you might as well plan on about 5:30, the next day. Sorry, I digressed there.

Point is, you can’t simply rely on an APR quote alone to evaluate a loan. The cost of a loan is mostly about cost over time. How much will a loan cost based on how long you will have the loan? If you want somewhat of a fairly understandable explanation of how you know you're getting a fair loan, here's some yay-hoo attempting to provide an explanation: http://mijoymortgage55.blogspot.com/p/video-library.html. Check out the last video titled: "Are You Getting A Fair Loan?" Or, feel free to watch all of them if you like pain.

And in the event that none of this makes sense to you, feel free to contact me directly and I can further confuse you...or something like that. Until next time....

The new Obama Plan and more....get a grip!

2012-02-02T14:11:00.000-08:00

The new Obama Plan, and…

Commentary on the current state of proposed mortgage plans, or:

How will all of these plans work? Or will they?

Wondering what in the world is going on and what good will it do? Here’s the deal:

Current FHA Loans: If you currently have an FHA loan and your rate is at least 5.000% you can likely lower your rate and payment for little to no cost. Contact me for the low down.

“Underwater” loans: Go here: http://mijoymortgage55.blogspot.com/2012/01/underwater-whats-up-with-harp-20.html.

From Mortgage Daily 2-2-12:

The HARP 2.0 initiative is aimed at helping agency (Fannie/Freddie) homeowners to refinance. Then came HAMP 2.0 (this past Friday), aimed at helping to encourage more modifications.

Then, Obama unveiled a separate refinancing program (discussed below) targeted at non-agency homeowners (making refinancing easier for mortgages not backed by Fannie or Freddie). Finally, in the coming days/weeks we could get a final foreclosure settlement as well as a plan to sell foreclosed homes in bulk. In aggregate, all these policy moves could help at the margin but most believe they fall short of some grand Fannie/Freddie automatic refinance plan for which some investors had hoped. Maybe we're done with government initiatives for the year? Perhaps not - don't forget chatter out there about the foreclosed properties sitting on the agency's balance sheets, and large scale plans of selling them to investors. And we have some type of possible settlement between the state's AG's and large servicers...

Regarding President Obama's election year housing plan, which is probably going to require Congressional approval, and is therefore highly unlikely...there are fact sheets ranging from 7-10 pages. It certainly gave investors something to talk about yesterday, even if it will take many months, if at all, to roll out. There is too much to reproduce here, check out the original. Most believe that this plan will not pass through Congress, given the level of political polarization. And it is difficult to understand why the Administration thinks it can get this proposal through Congress when it cannot get the parts that do not need Congressional approval through the GSE's (Fannie & Freddie) and FHFA (a federal agency). If rising pressure on the GSEs does lead to them to adopt the agency components of this plan, there will be an enormous effect on agency MBS (Mortgage Backed Securities).

One statement noted, "... believe these steps are within the existing authority of the FHFA. However, to date, the GSEs have not acted, so the Administration is calling on Congress..." Most of the proposals for the plan do not need Congressional approval but the Administration is implying that the main reason to send these proposals to Congress is that the Administration cannot get the GSEs (and presumably FHFA) to do what needs to be done "in the taxpayer's interest..." Consequently, this public proposal seems to be a way to put pressure on the GSEs and FHFA to do what the Administration wants. I guess this is how modern government functions...

So please dig into the fact sheet noted above - that is what the market knows.

Consumers should probably not become too enamored or bogged down in the plan, as it will take, if it happens at all, several months to sort out, digest, and implement.

OK, there you have it. Still confused? Contact me...better do it now... Before you lose it and go off and do something crazy.

Underwater? What's up with HARP 2.0?

2012-01-26T10:19:00.000-08:00

Does Fannie or Freddie own your loan? You know you can refinance now up to 105% of value right? What about the new HARP 2.0 program that will allow unlimited loan-to-value?

Here is an update for HARP 2.0:

The HARP 2.0 program will not be available until late March of 2012 for borrowers who are upside down by more than 25%.

To remind, Fannie Mae and Freddie Mac loans executed before May 31st, 2009 are eligible.

The HARP 2.0 loan approval process must utilize the Automated Underwriting Systems (AUS) for Fannie & Freddie; underwriting engines which unfortunately won't support the HARP 2.0 updates until March 2012.

We can offer the updated HARP 2.0 features as soon as the AUS engines recognize the new HARP II guidelines, and once lenders publish their guidelines. I will continue updates as we learn of any new information, particularly in the event the implementation timeline changes.

Want to know what you can do now, or to get an application on file?

Do this:

Homeowners can determine if they have a Fannie Mae or Freddie Mac loan by going to:

http://www.FannieMae.com/loanlookup/
https://ww3.FreddieMac.com/corporate/
• The program will continue to be available for loans with LTVs above 80 percent.

• Borrowers must be current on their mortgage payments with no late payment in the past six months and no more than one late payment in the past 12 months.

What should you do?

I anticipate a significant response to this program. Here's what I recommend:

Once you have determined you have a loan owned by Fannie or Freddie, and you meet the criteria based on the above information, you will need an application on file for us to begin your refinance. The quickest way to start and move forward is to provide me with an on-line application here:

https://0990471896.secure-loancenter.com/WebApp/FullAppLogin.aspx

The Fed Surprise-Review Your Mortgage Now

2012-01-26T09:49:00.000-08:00

The bond and mortgage markets opened better yet again this morning, still reacting to the Fed’s surprise yesterday saying the Federal Funds rate would stay at 0.00% to 0.25% clear out to the end of 2014. Prior to yesterday the Fed was saying mid-2013.

The motivation from the Fed is that the central bank has lowered its forecasts for US growth this year and next. Fed Chief Ben Bernanke apparently is now more concerned about growth than he was six weeks ago.

What does all of this mean to you and me? Mortgage rates will stay low and it’s time for an annual review of your mortgage.

Many of you are already proceeding with reviewing your refinance options and anyone interested in interest rate or interest cost reduction should be looking at this right now.

How low will rates go? That’s a very good question; we have been at or near historical lows for quite some time. One thing is for certain; those who act first will be done first.

What should you do? Call or e-mail me for an analysis, If you want faster action, you can apply on my website and I will evaluate your situation and advise you before proceeding: https://0990471896.secure-loancenter.com/WebApp/FullAppLogin.aspx.

How's that Dodd-Frank thing working out for us?

2012-01-05T11:30:00.000-08:00

Think all the new Dodd-Frank rules have impacted us yet?

You and I as the “consumers-at-large” in this debacle have yet to write the check on this. It appears we haven’t even paid 1/4 of the bill yet.

Can you believe that regulators have missed roughly three-quarters of the deadlines for implementing the Dodd-Frank financial reform law through 2011, according to a new report?

So far, 200 deadlines for drafting rules to implement the Wall Street overhaul have come and gone, and regulators have met only 51 of them, according to the law firm of Davis Polk.

Another 200 rulemaking requirements stemming from the law still await regulatory action. Just 21.5% of the rulemaking requirements have resulted in finalized rules, while 38.75 percent currently have proposed rules. Another 39.75 percent of rules that ultimately will have to be implemented to make the law a reality have yet to be proposed.

This piece of work was bad legislation to begin with, and it’s still bad legislation. It will continue to cost consumers for years to come. It was formulated and implemented by legislators that do not understand the mortgage business and felt they needed to show the world they had the guts to stand up to Wall Street.

In the sad but true department, Wall Street played its role in all of this, but there’s plenty of room for finger-pointing. As I’ve said before, the best action now is to find the cheapest and most efficient way out of the housing and credit market messes.

This isn’t it.

Here's the report:

http://www.davispolk.com/files/Publication/0070db24-e562-4666-832c-03ad96defd42/Presentation/PublicationAttachment/b1836732-9b89-46be-a9e5-07c77a08d62a/Jan2012_Dodd.Frank.Progress.Report.pdf