Real Estate Mortgage News

Loan Limits Changes Coming to a Town Near You!

2008-11-10T10:59:51-05:00

There is both good and bad news about loan limits headed your way and much of it will depend on where you are in the country. If you don’t like the news…then don’t worry, I’m projecting more changes will be on their way. As with most changes in lending these days, as one opportunity opens another one closes, be sure to use the ones that are open while they last…

Last year the economic stimulus package brought about an opportunity for home-buyers/owners in high housing cost areas to buy or refinance with premium interest rates. The jumbo loan market had all but dried up and there was an immediate need in the marketplace for these loans. We did and continue to do many of these loans; it was an impact-full market adjustment that opened up money to the marketplace. Well, as of the end of this year, those loans are gone. Many lenders are cutting them off early because the loan must actually be delivered to Fannie/Freddie by the 12/31 cutoff. I have seen some sources already stop accepting rate locks on these loans and I would expect to see most following very soon.

With that said both the GSE’s (Fannie Mae and Freddie Mac) and FHA loan limits will be changing starting in the beginning of 2009. While the limit adjustments have not yet been determined it seems to be certain that if we are comparing these limits to the “pre-stimulus” adjustments than they will all be going up. When compared with current loan limits most think that some will go down and others up. The rumors (and I caution this is just rumor, there is no hard facts available yet) are that we will see a minimum increase in all areas to $417,000 (meaning that the lowest ceiling for FHA will be the current standard conforming loan limit) and that high cost areas will have loan amounts to $650,000.

Again, I would expect that there will be further changes coming during 2009 as the political power shifts. I will keep everyone informed as this information turns from speculation to facts. In the meantime, the good news is there are options for folks who need jumbo loans now. Well qualified home buyers in high sale price areas are actually the focus of many portfolio lenders since they are being somewhat left out of the market. We have access to very competitive rates on loans as high as $2,000,000, as always good credit and a down payment are important parts of gaining access to these premium loan products. Call me with any questions or scenarios.

--Keith

Please visit our website for additional information about our company, loan programs, and helpful tools like mortgage calculators and more:

http://www.EagleNationwide.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Appraisals Aren't Just for Banks!

2008-10-15T12:07:49-04:00

When I was about 9 years old, my grandfather taught me a lesson about what something…anything, is worth. I had a Ricky Henderson rookie baseball card and I rather proudly showed him the card and declared, “this is worth $45!” He asked me how I knew that, to which I told him that the Beckett Baseball Card Guide said so. He gave me a look and immediately changed our plans for the afternoon; we were going to find out what it was really worth. …of course I said…”Pop-pop, I told you, it’s worth 45 dollars, it says so right here."

We went to the local baseball card store, where he told me to show the man behind the counter my card. I did, and he told me to ask how much the man would buy it for. Well, as some of you can imagine, I was not offered the $45 that Becket Baseball Card Guide said it was worth. Rather, I was offered somewhere around $30, to be honest I don’t remember exactly how much he offered. What I do remember is telling my popup that the man was a crook! …so he took to me to another card store... At that card store I was offered even less! When I said I’d had enough and didn’t want to sell the card anyway, my grandfather offered me a sentence that is probably not new to you all, but was wisdom that I still carry with me to this day; something is only worth what someone is willing to pay for it.

Cute story right? …well, like my grandfather, there was a purpose in taking you through that journey. I talked to a realtor recently who had a seller that both wanted to sell soon, the property had already been on the market for 6 months, and they wanted to get as much as possible. Sound familiar? I’m sure it wont shock you to hear that “as much as possible” in the realtor’s head, was a lower number than what the seller had in their head.

We eventually started talking about the value of ordering an appraisal on the property. In today’s market, an appraisal can be very important to order early in the game, here’s a few reasons why:

Sellers really don’t know what their house is worth. Now I know that in my story above, Becket Baseball Guide essentially is the same as an appraisal. But I can tell you that a new guide is always better than an old one. Most sellers that are having trouble “finding someone to pay what it is worth” really are just looking at an old value guide. An appraisal done upfront can immediately set the expectations correctly. It doesn’t mean that you and the seller have to put it on the market for exactly what the appraiser says, but it does provide a base of understanding to begin finding what someone is willing to pay.

Appraisals provide valuable information about the Seller’s property. The 15-25 pages of an appraisal report, when done correctly, will leave your sellers feeling informed and better able to make decisions when offers come. The last thing anyone wants to see happen to a seller in today’s market is to have an offer get rejected that 2 months later the seller is dying for! In all markets, good/bad…real estate/baseball cards, informed participants have an edge over the uninformed.

Appraisals can actually affect value! Put simply, if you are marketing to people other than cash buyers, then the mortgage will be based on the LOWER of the purchase price or the appraised value. What that means is if you have a 5% down buyer on a $100,000 house. The buyer is expecting to put $5,000 down. If the appraisal comes in at $90,000, then to keep the same loan terms, the customer will need to put 5% of the $90,000 ($4,500) AND the difference ($10,000). Of course there are other options…lower the sales price, take a different loan, or the customer interprets the situation as overpaying for the house and walks.

Having an appraisal done early removes so many of the small things that can go wrong, it also educates the sellers to make good choices that will ultimately lead to a better experience. One last thing…if you ask us to order the appraisal for you, then any buyer can use that appraisal and not have to pay for it, one less thing for the buyer to worry about and one more thing that you protect yourself from going wrong.

“People can’t be perfect but loan files can, if you want proof that a perfect loan file exists, just look at the ones ready to close. Nothing is closing till its perfect right now, so don’t waste time doing anything but getting the file in that condition”

--Keith

Please visit our website for additional information about our company, loan programs, and helpful tools like mortgage calculators and more:

http://www.EagleNationwide.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Tightening Credit Standards...not just something you hear about on TV

2008-10-03T10:40:15-04:00

I’m skipping right past all of this bailout business to get to the stuff that affects us everyday. I almost feel weird not acknowledging it all so…how bout that bailout!

…ok, now on to the stuff that affects our jobs today.

Last week President Bush spoke on TV and declared what most of us heard as a Financial State of Emergency. Using words like crisis, panic, and instability, the message was clear that there was about to be some additional government influence in our world. Currently, the candidates are standing in front of us saying that their opponent, if elected, will make fatal mistakes for this economy. And everyday, we all show up to work and live with the definition of "tighter credit standards". If you are a builder, Realtor, underwriter, branch manager, account executive, or loan officer you are seeing and managing through Tighter Credit Standards and you may not even know it.

Have sellers with reasonable prices that can’t find buyers? ...tighter credit standards.

Trying to sell a house to a Self Employed customer with an 800 fico score and can’t figure out why he’s not ready to close? … tighter credit standards.

Submit a loan package and get 34 conditions on your approval? ...tighter credit standards.

Have a lender require 6 comps, a market analysis, and 3 pending sales...then request a second appraisal? Yup...tighter credit standards.

The market has spoken, and usually when capital markets speak, the message is loud to make 100% certain it is heard. So what do we do? You all know each of you business's much better than I, so I will only say what we are doing. I'd love to hear from some of you about the successful things you are doing.

Accurate 1003's. Seems simple, an application has to be accurate right? Well, it used to not matter if someone started there job in November of 2006 and the application didn't list the previous job, close enough to 2 year employment history, right? ...wrong! Know why? ...yep...Tighter Credit Standards.

Solid appraisals from experienced local experts. We will only work with an appraisal that comes as a referral or is someone we know can deliver a "lendable value report." A value that can't be lent on is a waste of everyone's time and money. We work very closely to make sure that we are always dealing with a local (to the property) appraiser that has the expertise to answer any value questions.

Two Stage Underwriting. Last quarter we rolled out a part of our process that has proven invaluable. Prior to submission to underwriting, every single loan that comes out of our office is "pre-underwritten" by me. Every one. Every pay stub is reviewed, every bank statement, and every 1003. While this has increased the time from application to submission by about 1 day, it has reduced our overall process time by 2 days!

Tightened Credit Standards mean to me that my job is to get a loan file to be perfect. A person will never be perfect, but I assure you loan files can be. It takes time, training, knowledge, and commitment, but I assure you a perfect loan file can be achieved and they literally FLY through the process. If you ever want to see what a perfect loan file looks like, it’s the one that’s closing...Tighter Credit Standards have changed one major thing in our world, loans don't close until they are perfect.

As an extra note, we are happy to announce a new addition to the Eagle Team! Fran Lupinetti comes to Eagle Nationwide with 13 Years of processing experience; some of you may know her from Chapel Mortgage where she was the post closing and warehouse manager. Fran’s grit, determination, and understand of the loan process will prove invaluable as we continue to grow and service your needs. Welcome Fran!

--Keith

Please visit our website for additional information about our company, loan programs, and helpful tools like mortgage calculators and more:

http://www.EagleNationwide.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Update on Jumbo Loans and We're Hiring!

2008-09-23T15:42:37-04:00

Hi everyone, I know I’ve been absent from the postings a bit the last 2 weeks. I was at our annual convention last week and between all the awards and compliments I couldn’t find time to write (actually it was 3 days of meetings and hearing about our executive’s golf handicaps).

You’ve all been keeping us so busy that it’s getting harder and harder for me to find time to write. Mind you, I’m not complaining and we are again actively interviewing for more help. So, the first part of this, is to ask if any of you know of any well educated loan officers? As most of you know, we generally like to hire only the hardest working and the most education committed loan officers. We feel that we’ve had great success with this approach, but it does makes hiring a challenge as there are less of these in the business than ever before. We offer an industry leading compensation package including 401k, base pay, commission, and health insurance. If any of you know displaced loan officers or former managers looking to simplify their duties, I hope that you’ll think of us at Eagle Nationwide.

Most of you know that we are very competitive from a rate standpoint and I wanted to bring to your attention a loan that we are seeing used over and over. Our “Agency Jumbo” loan has been one of the best programs out there for well qualified borrowers. Thursday of last week I locked an $855,000 purchase at 6% on a 30 year fixed with no points or lender fee’s. I will say that access to this loan can be limited for some borrowers, but we are closing these deals often. I know it may be surprising to hear, but parts of our jumbo market are VERY strong. We bank a lot of these loans and are able to out price most (all) of our competition, I have yet to price one that didn’t get an exuberant “REALLY!” from the customer. The next time you have a well qualified buyer that you want to impress, tell them to call me; I promise they will thank you up and down.

As a quick final note, I wanted to say how much I believe this is a great time to be in the real estate business. A professional that knows what he/she is doing is richly rewarded in times of turmoil because of the heightened need for clients to trust the professionals they rely on. If you find yourself not sure of something on the lending side, please ASK ME. A quick email or phone call can make a big difference. Customers are drawn to competence in a changing market like flies to light. They will respect you not only for your knowledge, but for your ability to find correct answers. Let me help you look good, it’s the best service I can offer.

--Keith

http://www.eaglenationwide.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Yet another FHA MIP/PMI change

2008-09-04T12:17:16-04:00

It’s getting hard to keep up with the legislatures as they decide what is and isn’t ok for FHA loans. The most recent update is to the up-front mortgage insurance.

At the end of this, I’ve included a short primer for understanding FHA Mortgage insurance.

I recently wrote to you all about a risk based pricing model that adjusted the cost of the up front insurance on an FHA loan based on the credit score and the loan to value ratio. Our legislative bodies have now decided that a “one year moratorium” needs to be placed on this concept.

They have opted to change the up front insurance to 1.75% for all borrowers. If you recall, the previous level was 1.5%, so the net change here is that all borrowers now pay .25% more in up front mortgage insurance. If you look at the chart from the old premiums, you’ll see that this is the same or an increase from the recent changes for many borrowers and a decrease for only a few. With more well qualified borrowers taking FHA loans, this feels to me like a penalty to them (as much as a half point more in cost now).

If you have clients that are well qualified and will possibly be going the FHA route, please have them call me now. I will have their FHA case number assigned which, if done before October 1st, will lock them in to the lower premiums even if they don’t buy a home for several months.

If you have customers with lower scores, we will be advising them to hold off on having the case number assigned until after October 1st as it will likely save them money (of course we can still pre-approve them and they can even go under contract in the meantime).

Mortgage insurance primer:

There are 2 types of insurance that a home owner pays when they finance a purchase or refinance using an FHA loan; upfront and monthly.

The upfront is an amount (as explained above now 1.75% for all borrowers) that is added to the balance of a loan and is financed into the loan and monthly payments without effecting the loan to value. This effectively means that if you put 3% down, you actually only have 1.25% equity the day you buy the house.

The monthly amount is smaller and is a percentage of the loan amount divided by 12 and tacked onto each payment. Most borrowers will pay .50 percent (.005 x loan amount/12) if the LTV is less than or equal to 95 percent. For LTVs above 95 percent, annual premiums will be .55 percent of the loan aount. Borrowers of 15 year loans will pay no annual premium if the LTV is less than or equal to 90 percent, and .25 percent if the LTV exceeds 90 percent.

--Keith

http://www.eaglenationwide.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

FHA Expanded -- Officially Available

2008-08-19T16:09:20-04:00

Drum roll please…

Borrowing money just got easier!! (I had to actually say that…because it’s the first time this year I can)

I am happy to announce the completion of a multi stage project that I have been working on for the hardest to approve home buyers. Eagle Nationwide Mortgage has secured sourcing of 500 Fico FHA loans! That means that while other lenders are turning down your buyers, we are now able to get those loans closed. I’m sure you are not all as excited as I am, but this step marks a true expansion of lending guidelines, and we all know how rare that is! Even more exciting is that we are doing it while other lenders are increasing their minimum fico to 580, 600, and some as high as 640!

Some Details on the program:

Income Ratios are very important! We are looking for buyers that can afford their house.

2 months of mortgage payments in reserves. This is not required, but will make the approval much easier. 401k, IRA, 203b, and some pensions can be used!

Collections accounts, outstanding medical bills, and delinquent credit is ok (with a 500 credit score, this is all expected).

Judgments must be paid prior to closing.

Down Payment Assistance can be used! (For now; that will be changing in the future)

Rates are very competitive, current rate for a 500 fico borrower with good income and reserves -- 7%.

Only 30 year fixed will be offered at this time.

Some of you already knew that I was close to completing this and have already sent me a few customers that are now approved. Others of you are going to have clients that I’ll need to speak with right away, please pass on my information and know that I will take the proper time with each and every one of them. We started approving these customers yesterday and are very excited about the help we can now extend to you and your clients.

--Keith

http://www.eaglenationwide.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Housing Bill Notables, Part 4

2008-08-14T11:46:32-04:00

This will be the last in our Housing Bill Series; pretty amazing that 700 pages came down to 4 important paragraphs.

The last, and some would say most important part, is the “cram down” of a loan. I’ve read and heard a lot of explanations and most (all) of the explanations have been wrong in some way. I’m going to try to explain this “offer” from the government without inserting my opinion about it, guess we’ll see how that goes…

Part 4: FHA Backed Lender Bailout

(AKA, the best deal ever written for the government)

The intention of this center piece of the housing bill is to minimize the foreclosure rate. It acts essentially as a way of offering a “short sale” to the current homeowner. Well, at least that’s the intention.

The first important note about this is that it is OPTIONAL for the lender to participate. If the current lender on a mortgage decides that it is in their interest, they will be able to add FHA insurance to a loan given a very specific set of criteria:

o       They will need to reduce the balance on the loan to 90% of the current market value (not 90% of the current loan), meaning the customer will have the home appraised and their new loan will be equal to 90% of the value.

o       Then, the lender will pay to FHA 3% of the loan amount as a one time fee.

o       The customer will then pay a monthly premium to FHA (that will be added to their mortgagee payment) equal to 1.5% of the loan amount divided by 12.

o       The lender/customer must be able to document income that proves that the customer is able to afford this new loan.

Some notes worth mentioning; FHA is only insuring any money lost on this new loan (90% of current appraised value) in the event of a foreclosure. Since the new loan amount is based on 90% of the CURRENT value, it is possible…even likely, that the property itself could cover the amount due in a foreclosure…in that case FHA would pay nothing to the bank. Ultimately, FHA (read: our government…the writers of this law) get a 3% fee and 1.5% per year to insure a loan on a house that has equity, not a bad deal.

Also, there are 2 important factors that need to overlap for a homeowner to actually benefit from this;

1) The customer has to be able to prove that they can afford this new loan AND the payment for the FHA insurance.

2) The bank has to be willing (read: financially motivated) to take a write down on the loan amount…and pay 3% of the new loan to FHA.

Since the 90% rule is based on a new appraisal, the write down can not be determined when this process begins. Because of that banks will be hesitant to offer this to anyone but the “most likely” to default customers…and those customers are probably going to be the ones who have trouble with the 1st issue; proving they can afford the new loan. Without both of these factors, there will be no relief generated through this program.

Make no mistake, there will be people benefiting from this. Banks will participate because it will allow them to quantify their losses in a definite way (the loss will be the difference between the previous loan amount and 90% of the current value minus the 3% fee). There is value to shareholders in these banks to defining the losses from previous lending mistakes. That alone will provide some financial motivation to offer this to current homeowners in their portfolio.

And there will be customers who can afford the new proposal, but my question about the value of this part of the bill is this;

If the loan will now be backed by a home with equity. And the bank can document that they can afford to make payments. Why does the bank need the FHA insurance? Isn’t this really just unnecessary insurance on an extremely low default risk?

…so much for my opinion being left out.

--Keith

http://www.eaglenationwide.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Housing Bill Notables, Part 3

2008-08-11T16:56:20-04:00

Thanks to all of you for the referrals last week, I am glad I could turn so many last minute crises into home closings. We recently hired more help so we are ready and able to handle all of your challenging cases (we have great rates and incredibly quick turn times for well qualified home buyers too!).

On to part 3: A somewhat well known tax loophole is about to be closed, and if you or your clients own a vacation home or an investment property it may be motivation to sell.

As some of you may know there is a capital gains cost on any profit from the sale of a non-primary residence property. This tax on the profits could be avoided in the past, however, if the owner moved into the property and called it his/her residence for 1 day. Rarely, did a property get sold and not have the owner “move-in” for a day. Effective with the passing of this bill, the reduction to taxes on profits will now be based on how long the owner lived in the property. One day will provide virtually no tax relief and it will be hard to “fudge” the numbers if you want to get rid of a substantial portion of the taxes. The profit will now be taxed as ordinary income. If you have a big profit available in a non qualifying personal residence, now may be a good time to sell even with the market being a little slow.

--Keith

http://www.eaglenationwide.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Housing Bill Notables, Part 2

2008-08-06T13:46:02-04:00

Free money from the government? (did that sound like an infomercial to everyone?…if you were wondering, I am not wearing a suit with numbers and question marks all over it.)

In Part 2 of the Housing Bill series, we are going to get everyone up to speed on the First Time Home Buyer Tax Credit. (Which is not just for first time home buyers, nor is it really a tax credit.)

First, let’s set the record straight, this is not free money from the government. Let’s look at who and how much.

Who – Anyone who has 1) not owned a primary residence in the last 3 years (not only first time home buyers), 2) who makes less than $75,000 year as a single filer or $150,000 year as a joint filer, and 3) buys a primary residence between April 8, 2008 and July 1, 2009.

How Much – 10% of the purchase price of the property up to $7500.

So, now that we know who and how much let’s undress the “tax credit” a bit shall we. This “credit” needs to be paid back starting the second year of home ownership through the tax return at $500 per year (that number has some assumptions, but 95% of the people who get the tax credit will pay $500 per year). Yeah…not really a tax credit huh, more like an interest free loan. The beauty of this is the extra incentive for people who qualify to enter the housing market. The marketability of this incentive will pull people from the rental market and drop them into the buying market. As professionals, we need to make sure they understand it while we reap the rewards of the increasing buyer pool.

That’s all for now. I’ll be back soon to you all with a reason why vacation home owners and investment property owners may want to consider upgrading!

--Keith

http://www.eaglenationwide.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Housing Bill Notables, Part 1

2008-08-04T12:22:12-04:00

Today we’ll start a series of brief updates that will focus on the Housing Bill that was signed into law on Wednesday July 30th.

The bill is 700 pages and I have read enough of it over the last 5 days to make all of our eyes water. I’ve picked out the items with the biggest and most immediate impact on all of us. The bill includes a few things that produce challenges as well as a few that produce opportunities.

Part 1: Removal of Down Payment Assistance (DPA) loophole

For quite some time, lobbyists in Washington have been trying to get rid of this program that essentially allows an FHA borrower to buy a house with only $500 coming out of their pocket. Through some nifty loophole work, a seller could “donate” the 3% down payment to a company that, as a non-profit, qualified as a source for the buyer’s down payment. This method has been essentially a paper transaction that allowed selling homes with little to no money down and is one of the last ways for a buyer to do so.

The Bad News: Effective October 1st, 2008 DPA is no longer a valid source of funds for use in an FHA loan. To be specific, the approval from the lender must be completed prior to October 1st. The fine print here is that so long as our buyers are approved prior to this date, we can continue to offer the DPA program.

The Good News: In a recent communication from Ameridream (the nations largest DPA organization), they are claiming that a bill is already in the works to get DPA re-instated. The murmurs are that the exclusion of DPA was a political move that was required to get the bill passed and that there is plenty of political support to get it re-instated PRIOR TO the October 1st deadline. I will keep you all posted on this.

Even with the good news, we all have great reasons to stress the urgency to buyers and sellers right now. Buyers who need this program might be left in the cold if they do not move quickly enough. Sellers, especially those in the “entry level housing” market, could see a further reduction in the number of qualified buyers. For anyone selling a house in this market, this news should be motivation for accepting an offer that’s been made.

--Keith

http://www.eaglenationwide.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com