Blog of the Mortgage

Comparing First Time HomeBuyer Tax Credits (HERA vs. ARRA)

February 24th, 2009 11:24 PM

Oh What a Difference 6 months makes!?

6 months ago home prices were 10-15% higher than they are today in most counties.
6 months ago we had a very different Administration in place.
6 months ago the brakes had failed and we were hurtling toward the gravel pits to stop the tractor trailer from crashing...
It was summer and I was enjoying the weather, BBQ, friends the whole bit. Heck, the fence between my neighbors place and mine was still standing (it hadn't yet blown over in the wind).
Hey, 6 months ago HERA (Housing and Economic Reform Act) of 2008 was passed into law.
It included a $7500 tax credit for first time home buyers.
(I'll cover it below).

Here we are 6 months later and wouldn't you know it?
Another Act.. this time: ARRA (American Recovery and Reinvestment Act) was passed..
Of course by this time the brakes have failed, the wheels have come off and you can forget about the gravel pits stopping us, at least my Company is still hiring staff and keeping service levels in check (as much as possible)!

Well, in my day to day I came across this company:
MortgageCurrentcy.com.. they've got some great little pieces. one of which I am restructuring and placing in this e-mail so that you can print/read the differences between the HERA/ARRA version's of the first time home buyers credit.

First HERA (2008 Version) -
CREDIT AS CREATED JULY 2008 APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008

Amount: Lesser of 10% of cost of home or $7500

Eligible Property: Any single family residence (including condos, co-ops, townhouses) that will be used as a
principal residence.

Refundable: Yes. Reduces (or can eliminate) income tax
liability for the year of purchase. Any unused
amount of tax credit refunded to purchaser.

Income Limit: Yes. Full amount of credit available for
individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000)

First-time Homebuyer Only: Yes. Purchaser (and purchaser's spouse) may not have owned a principal residence in 3 years previous to purchase.

Revenue Bond Financing: No credit allowed if home financed with state/local bond funding.

Repayment: Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with
2010 tax filing.

Recapture: If home sold before 15-year repayment period ends, then outstanding balance of repayment
amount recaptured on sale.

Termination: July 1, 2009 (But note program changes in 2009)

Effective Date: All revisions are effective as of
January 1, 2009

And now welcoming ARRA (2009)
REVISED CREDIT - EFFECTIVE FOR PURCHASES ON OR
AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009

Amount: Lesser of 10% of cost of home or $8000
Eligible Property: No change. All principal residences eligible.

Refundable: No change. Purchasers will continue to receive refund for unused amount when tax return is filed.

Income Limit: No change. Same income limits continue to apply.

First Time Homebuyer Only: No change. Still available for first-time purchasers only. Three-year rule continues to apply.

Revenue Bond Financing: Purchasers who utilize revenue bond financing can use credit.

Repayment: No repayment for purchases on or after
January 1, 2009 and before December 1, 2009

Recapture: If home is sold within three years of
purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.

Termination: December 1, 2009

Effective Date: All revisions are effective as of
January 1, 2009

So, get out there, inform your Realtors (if they don't already know) and get your customers informed as well.

Let's close some purchase loans in March!

I'm looking forward to helping you close more loans in 2009! Have a great weekend.

You'll need the following links to download these forms:

Education Station
Government Loan Programs

Go out and have fun!

Posted by Raoul Badde on February 24th, 2009 11:24 PMPost a Comment (0)

Appraisal Tips for 2009 & New FNMA appraisal form required

February 11th, 2009 9:00 PM

Sometimes good posts bear repeating: Click Here:

I am going to be in Eureka today so if we haven't yet scheduled a meeting...let's try to meet up before I leave town @ 3pm.

First Some Ideas on Appraisal for 2009: YES, 2009 is going to Suck hind wind for Valuation. Some markets are back to 2005 (raise your hand S.F.) other markets are back to 2001/2000 (Stanislaus, Solano et. al.) the last thing you want is an appraiser "hitting" your value mark.
Lord knows you'll find a lender that has issues with it.

1. It's a refinance market (somewhere in California)
   that being said, GET COMMITMENT from the
    Borrower on appraisal UP FRONT. I had one shop
   close 1 loan out 6 locks because value had evaporated.
2. Comparables: Alright, your lender (like us) let's you
   go back 90 days for comps - how cool is that (some
   handcuff you to 60 days)? At the same time, if this is a
   floated refinance consider completing an appraisal and
   waiting for rates to fall - inside of your wait (30-60
   days) your value could drop another 5-10% (don't
   scoff: it's happened). Remember this is now 120-150
   days from oldest comp (a lot can change in 4-5
   months AND IT WILL)
   So, Don't get the oldest comps for Value, get the
    newest. See what you can get inside of 45 or 30
    days.
   This is a tact that will protect you AND the borrower
   at AVM/Desk Review time.
3. SEND YOUR APPRAISAL WITH YOUR LOAN.
   We are all Jammed up. There are some lenders that
   can't even fund all the loans they get in a single month
   because their warehouse lines are maxed out. I know of
   one that could double production if only they had the
   capacity but right now they're having to sit back and
   wait. The last thing you want to do is: wait 3-4 (up to
   20+) days with some lenders only to have to wait for
   appraisal review issues after your conditions are sent
   in. I mean, you want to lock for 60 days.. that's your
   choice but in my world, I get paid 2 weeks after the
   month ends so, let's Book 'em now!
4. Read and Review: Remember the 4 C's of lending?
   Credit, Capital, Capacity & Collateral? most us learned
   all about these and then promptly forgot about them
   when SIVA-NINJA loans were waived under our noses.
   Well, now we're back in 1990 (and I don't mean the
   parachute pants I saw some dude wearing in the City
   the other day).
   Collateral.. we're back to basics. Read those
   Appraisals BEFORE YOU get surprised by your
   lender.
   when I was a processor I would GRILL my appraiser if
   something was remiss with his valuation. I was nearly
   always prepared for when an underwriter would call me
   back to discuss my loan and they were ALWAYS
   surprised when I would explain our position.
   Explaining our position in 2009 is long gone but being
   prepared is most definitely not. So, DON'T LET your
   processors e-mail those forms off until you've
   reviewed them.
5. Adjustments : jump into your appraisal and start with
the basics.
a. where are the comps located? inside 1 mile for
        urban/sub-urban? inside 5 miles for rural? if not,
        why not?
    b. square footage? room count? bath count? garage?
        lot size? are they at least similar?
    c. adjustments on grid: what are they for? do they
        make ANY sense?
    d. what about your Gross and net adjustments at the
        the bottom? are they within a couple of percentage
        points? REMEMBER: Gross adjustments OVER
          15% = Field Review. I am not kidding.
        Appraisers STILL want to throw the sink at these
        deals. It's not good for you and your borrower gets
        pissed when you have another 1 week delay.

Some thoughts from the Lender side: we've turned down some very good appraisals on some very nice homes in areas that NEVER turn over. Guys, if you get that one deal in the nicest, oldest part of town, get it appraised and get an underwriter from your partner lender (Yours truly) to review it ASAP! Before you submit the loan.

Here's what's going on: The home is worth $500k in the eyes of the buyer because they'll never be able to buy in this neighborhood again until someone passes away.

The problem is that the last home sold in 2007.. for $600k. Our buyer is getting a deal right? Sure, maybe. But now your appraiser is going ALL over town (well outside of 1 mile) to gain comps and sure enough your lender can't even begin to support $350k...

So, check 'em out, call on 'em and get them dealt with early. The sooner you know, the better.

Posted by Raoul Badde on February 11th, 2009 9:00 PMPost a Comment (0)

Status of the FHA.. Longterm Viability of the Program

February 10th, 2009 10:23 PM

From time to time I'll post updates from our
Consultancy firm: Potomac Partners.
This update was provided early December
by Potomac Partners of Washington D.C. for
those of you that are newer to these mails this
firm is run by former HUD executives and their
information is both market leading and and a firm
indicator of future changes in guidelines
especially on HUD business.
We would like to update you on the following:·

In this update, we provide our assessment of the FHA's recently
published FY 2008 audit that is an independent and up-to-date
analysis of FHA's current and projected financial health. We also
discuss the two key questions about the FHA program:
    * Can FHA continue to handle the increasing volume?
    * Will FHA be the next bailout candidate?
A link to the report is provided at
http://www.hud.gov/offices/hsg/comp/rpts/actr/2008actr.cfm
Overview
As FHA is being called upon to shoulder more of the responsibility
for stabilizing the U.S. housing market (FHA's market share now
exceeds 33%), questions are being asked about FHA's capabilities
to perform such a critical role. At the core of these questions are
concerns about FHA's infrastructure and reservations about the
credit quality of FHA's recent originations and its long-term financial
soundness.
In our view, the FY 2008 audit is encouraging and better than we
expected. It shows, to no one's surprise, the FHA program is not
immune from the impact of widespread house price depreciation.
However, FHA's capital ratio (now 3%) remains above the
Congressionally mandated level of 2% and is expected to exceed
this level throughout the next seven years. In other words, despite
the unprecedented market upheaval, FHA is financially sound and
is expected to remain so.
Another particularly encouraging conclusion in the audit is that the
composition of the FHA book did not deteriorate in FY 2008 as many
had feared because of the influx of poor quality subprime loans.
In fact, FHA's over-all loan characteristics for the FY 2008 book
have improved. While not mentioned in the audit, many lenders on
their own implemented tighter underwriting guidelines for FHA
originations (e.g. minimum credit scores). These actions have been
positive for the program.
At the same time, there are an increasing number of critical articles
expressing concern about FHA's infrastructure and long-term
financial soundness.   You may have seen the recent Business Week
cover story entitled "The Subprime
Wolves Are Back" dated December 1, 2009 ( Link -
http://www.businessweek.com/magazine/content/08_48/b4110036448352.htm?chan=magazine+channel_top+stories )   The
basic premise of the article is that unscrupulous subprime lenders
are entering the FHA program and exposing the taxpayer to billions
of dollar of risk because of FHA's inadequate controls.   Based on
other inquiries from the national press, we expect there will be more
unflattering stories about FHA in the coming weeks and months.
While these stories are troubling and damage FHA's reputation in
Washington, we believe the FHA FY 2008 actuarial review
demonstrates there are not widespread systemic problems in the
program.
Each question mentioned at the outset is discussed below.
Can FHA continue to handle the increasing volume?
Over the last 15 months, FHA has demonstrated it can handle its
volume increase which is now running at 4 x's 2007 levels. Despite
receiving minimal additional resources, there are two reasons why
FHA can handle the volume. First, as you know, FHA approved
lenders can perform all of the loan processing, underwriting, closing
and insuring functions without any HUD review.
Secondly, FHA's technology, despite being 25 years old, remains
resilient and fundamentally sound. With the additional resources
being provided, there is now minimal concern that FHA will not be
able to provide mortgage insurance certificates (MICs) in a timely
manner (barring some unforeseen circumstance) even if FHA
business doubled or tripled from current levels. Quite frankly, our
biggest concern regarding FHA's technology is that future changes,
made with the intent of improving performance, may have the
unintended consequence of impairing FHA's performance.
Will FHA be the next bailout candidate?
There was widespread concern that FHA became the "dumping
ground" for subprime loans when that market collapsed in 2007.
Many press reports have been written questioning FHA's financial
strength. The FY 2008 Actuarial Review provides a current analysis
of the status of the FHA program and rebuts the concern that
there is a systemic problem in the program.
FY 2008 Actuarial Review
Highlights
·         The FHA Mutual Mortgage Insurance (MMI) Fund is actuarially
sound and is projected to remain so over the next seven years.
o   The auditors conclude: "despite the current severe housing
market downturn, the capital ratio is and will remain above 2 percent
in future years".
§ Congressionally mandated level - 2%
o   FHA's capital ratio fell to 3% (from 6.4% in FY 2007).
o   FHA's economic value declined to $12.9 billion from $21.2 billion
(39% drop)
·         The steep decline in house prices is the primary cause for
the decline in economic value and the capital ratio.
·         The encouraging news in the audit is that the composition
of the FY 2008 book of business has improved thereby mitigating
concerns that FHA is being flooded by high risk subprime borrowers.
o   Borrowers with FICO scores above 680 increased from 24% in
FY 2007 to 28% in FY 2008
o   Private data sources (McDash Analytics) indicate that the FICO
score improvement was increasing throughout FY 2008
§ 17% of borrowers had FICO scores above 680 in the first quarter
compared to an estimated 35% in the fourth quarter
o   While not mentioned in the audit, lender restrictions on FICO
scores (i.e. no FICO scores below 580) certainly contributed
significantly to this improvement.
§ 27% of borrowers had FICO scores below 580 in the first quarter
compared to an estimated 5% in the fourth quarter (McDash)
As long as house price changes are close to what the auditor (and
Global Insight, Inc. its economic forecaster) project, FHA should
remain actuarially sound. In the auditor's base case scenario, home
prices are expected to decline 11% during the FY 2008 - 2010
period. (NAR data indicates that existing house prices have
declined 9% nationally in the third quarter 2008 compared with
2007.)
In its extended housing recession scenario with cumulative house
price depreciation in excess of negative 18 percent (what the
auditors call "near depression levels"), the FHA fund's capital ratio
still remains positive throughout the eight years (2008 - 2015) of
the audit and exceeds the 2% capital ratio in 2013.
On a positive note, the audit also confirms the quality of new FHA
originations is exceeding the auditor's expectations in the FY 2007
audit. This continued improvement in the over-all composition of
FHA's portfolio mitigates concerns about possible widespread
deterioration in the quality of recent originations particularly the
2008 book.
Bottom line: If FHA never insures another loan, as of September 30,
2008, the auditors project the FHA fund would have $12.9 billion
remaining after paying all anticipated claims and expenses.   In
other words, the auditors are saying that FHA would have
$12.9 billion to pay unanticipated expenses.
Background
FHA is required by law (Cranston-Gonzalez National Affordable
Housing Act of 1990) to have an independent actuarial analysis of
the economic net worth and financial soundness of the MMI Fund
prepared every year.   An actuarial review is the auditor's projection
of the financial performance of FHA's existing portfolio as of a
particular date (September 30th) based primarily on the historical
experience of the portfolio and future macroeconomic forecasts
(house price and interest rates).
The MMI Fund is the fund in which FHA's basic FHA's section 203
loans are placed. Hope For Homeowner (HFH) loans are placed in a
special fund that does not affect the solvency of the FHA basic
program. However, FHASecure loans are placed in the MMI Fund.
Fortunately, there have been less than 5,000 delinquent
conventional loans insured through FHASecure.
By law, FHA is also required to maintain a 2% capital ratio.
The capital ratio is calculated as:
Capital ratio = Economic Value (Capital) of the Fund
                              Unamortized Insurance In Force (IIF)
The economic value is defined as 1) cash available to the fund 2)
the net present value of all future cash inflows and outflows
expected to result from the outstanding mortgages in the fund
(as of the end of the fiscal year being analyzed).
Analysis
It is not surprising that FHA's economic value and capital ratio have
dropped significantly in light of the current market conditions. FHA,
like every other insurer, investor and financial institution, is not
immune from the impact of house price declines or job losses.
Ø Impact of Housing Market Decline on FHA Economic Value
The three major sources of the decline in FHA's economic value are:
·         Updated economic forecasts:    $ -4.6 billion
The audit states: "The forecasted lower house price appreciation
rate caused the FY 2008 economic value to drop by $4,608 million."
·         Updated loss severity rate:     $-2.2 billion
The audit states: "During the past year, with the weakest housing
market in recent history, REO properties suffered from further
decreases in market value. As a result, REO not disposed until FY
2008 may realize particularly severe loss rates."
·         Changes Due to Demand Forecast: $-2.1 billion
Because of the "severe housing correction", "the performance of
newer books of business, especially those of FY 2006-2009 are
expected to be much worse than those projected in the FY 2007
Review".   The audit states: "The very weak housing market implies
that many newly originated loans will quickly fall into a negative
equity position, thereby resulting in higher projected claim rates
relative to what were estimated in the FY 2007 Review."
Almost $9 billion of decline in FHA's economic value is tied to the
decline in house prices. Below are other quotes from the audit
emphasizing the impact of current market conditions on the status
of the Fund.
The auditors state:
Ø Page v of Executive Summary: "This (lower house price
depreciation) is the single most significant impact on the FY 2008
economic value."
Ø Page 6: "The change in the view of the future housing market
from last year has a large adverse impact on this year's results."
Ø Page 16: "This decrease (capital ratio) is driven mainly by the
significant deterioration of the national housing market."
Ø Page 56: "The house price appreciation rate is the most
important economic factor influencing mortgage insurance claim
rates."
The cornerstone of the audit's economic forecast is the change in
house prices. Using OFHEO National House Price Index, the audit
forecasts future index levels for the next two years as follows:
Year          House Price Index
FY 2008                 387.5
FY 2009                 346.6
FY 2010                 344.9
The auditors predicated their review on a 10.5% drop in the house
price index in FY 2009 and a less than 1% drop in FY 2010. The
audit estimates that the house price index will not exceed the FY
2008 level until FY 2013 when it reaches 393.3.
Ø Improving Composition of FHA's Portfolio
The audit includes encouraging information about the loan
characteristics of FHA's FY 2008 book of business. Specifically, the
initial loan-to-value (LTV) ratio of FHA loans continued to decline in
FY 2008. It is also encouraging that seller funded downpayment
assistance loans were a smaller share of FHA's 2008 business
(17.56%) than was originally thought. Finally, private data sources
indicate that FHA's average FICO score continued to improve in FY
2008.
The audit states: "Revised projections of the composition of the FY
2008 book of business ... increased the FY 2008 economic value by
$659 million." Stated another way, the composition of the FY 2008
book is better than was anticipated in the FY 2007 audit.   The two
principal reasons for the improved performance are:
·         Initial loan-to- value (LTV) has improved
During FY 2008, the percentage of FHA loans with LTVs ratios at or
above 97% is 39%. The high LTV category has dropped steadily
since 2005 when it was 55%. At the same time, "there is a clear
increase in the concentration in LTVs less than 95 percent." Thirty
four percent of the FY 2008 originations had LTVs below 95%. In
FY 2005, only 20% had LTVs below 95%.
·         Improving borrower credit scores
FHA data as well as private data sources indicate that borrower
credit scores improved in FY 2008.   The importance of credit scores
is underscored by the following statement of the auditors: "The
estimation results confirmed that credit history is among the most
influential factors explaining the claim probability among individual
FHA-insured mortgages..."
McDash Analytics Inc. data indicates that there has been a
significant improvement in the quality of FHA borrowers during FY
2008.    For example, borrowers with credit scores above 680 have
improved from 17% in the first quarter of FY 2008 to 35% in the
fourth quarter of FY 2008. Borrowers with credit scores below 580
were 27% of FHA's business in the first quarter and 5% in the fourth
quarter of FY 2008.
Ø What It All Means
All things considered, FHA's portfolio is in reasonably good shape.
The principal cause for FHA's net worth decline was the deterioration
in house prices. Probably more importantly, it was not caused by an
increase in new loans with higher risk characteristics.
Recent government actions as well as those expected early in the
Obama Administration should have a positive effect on the Fund.
For example, the Fed purchase of GSE and Ginnie Mae securities is
having a positive effect on interest rates. Lowering interest rates
increases prepayment speeds which reduces risk to the FHA portfolio.
On a prospective basis, Federal action that addresses the dual
problems of house price declines and increasing delinquencies and
foreclosures will have a positive financial impact on the FHA fund.

You'll need the following links to download these forms:

Go.. out and have fun!

Education Station
Government Loan Programs

Posted by Raoul Badde on February 10th, 2009 10:23 PMPost a Comment (0)

Partnering with Me in 2009

February 10th, 2009 10:21 PM

2009 is all about picking your Lending Partners.
2008 was all about figuring out who was left after the wreckage of 2007.
2008 was the year where many (wholesalers) did their very best to stay in but just couldn't make it for any number of reasons.
Relationships built over years and years were decimated with loan officers and lenders looking around to find who was left.

The options in Northern California have diminished too, I kid you not: some 20 options (consistent ones in any case)
in some cases the options are even fewer than that.

2009 brings continued uncertainty for the entire Economy as a whole (now we can start to have pity parties with our friends in Tech and Finance and marketing and advertising and and..). At least we're not alone anymore, right?? Right??

Back to Partnering:

Many of you have partnered with me over the last year and I have helped you through quite a few thick and thin situations.
Don't take it from me though:
Read My References here:
We've taken denials and turned them into approvals, turned around some last minute fall-out loans that others couldn't fund and you and I did.

Having Lending Partners, AE's and Companies you can count on in unstable times is THE MOST Important feature you could ask for today.

Think about your conversations with your Realtor, Affinity Partners and borrowers.
What does uncertainty do to your Sales conversation?
Let me get back to you?
or:
I KNOW I CAN GET THIS DEAL DONE THIS WAY.
It's that simple.

Those of you that have chosen to partner with myself and my team know that we provide unparalleled service.
Training: Your TEAM
Many of you have attended my FHA Trainings (I successfully trained over 400 loan officers on processing/Origination of FHA last year!)

Or my VA Trainings (a more modest 100 people have been through this :)).

Training: YOUR Partners
I also presented on many of my partner's behalf in front of Realtors on FHA, together we've generated loads of future business for each other.
It's a great start.
Question: Have you partnered with an AE & Lender like this for 2009?

Recently I put together a training/refresher on Streamline Refinances that my partner offices benefited from. When the government drops rates down to whatever they're trying to do my Partners will have the tools and information in front of them to grab market share in 2009.

Question: Have you partnered with an AE & Lender like this for 2009?

I'm just asking.. If not and you're interested YOU NEED TO call me so that we can work on getting your business positioned properly for 2009. Let me fill in the blanks for your Team and let's get 2009 really Rockin!

Alright.. enough about me (this will likely be one of the only times---maybe) that I talk about myself.

Now, how about gaining a Partner that MAKES CHANGES to address their market?
My company is one of the largest and fastest growing Mortgage Banking firms in the Country. We're preliminarily ranked #11 nationwide for wholesale and moving up.
Read the article above and let me know if you feel our Philosophies are a match.

in 2008 we experienced tremendous growth and our California Branch was a large part of that. For those of your that closed business with us in 2008, THANK YOU!
More importantly we listened and made some changes that you're going to LOVE.

IMPOUND ADJUSTER GONE:
WE'VE REMOVED THE IMPOUND ADJUSTER for Conventional loans in California! Now, if you take IMPOUNDS you will HAVE IMPROVED PRICING IMMEDIATELY.

Renegotiation Policy:
My Company is constantly assessing the market and making changes that are both Prudent and Intelligent.
in 2008 we CHANGED our rate lock renegotiation policy for the BETTER:
· First renegotiation's base price is calculated by taking the current 30 day price plus .500.

Many, if not all, of these points add up to significant advantages.
In the face of Market Capacity issues, lenders saddled with "skeletons" from years past and some of the reason warehouse line scares locally in northern California where at least 2 outfits nearly lost funding capacity consider My Company as a partner.

I look forward to the opportunity if we're not yet working together.

I'm looking forward to helping you close more loans in 2009! Have a great weekend.

You'll need the following links to download these forms:

Education Station
Government Loan Programs

Posted by Raoul Badde on February 10th, 2009 10:21 PMPost a Comment (0)

Potomac Partners Update & HVCC Summary

February 10th, 2009 10:17 PM

From time to time I'll post updates from our Consultancy firm: Potomac Partners.
This update was provided late last week by Potomac Partners of Washington D.C. for those of you that are newer to these mails this firm is run by former HUD executives and their information is both market leading and and a firm indicator of future changes in guidelines especially on HUD business.
We would like to update you on the following:

Legislation - Mortgage Limits

Fannie Mae and Freddie Mac Appraisal Requirements - May 1st

Legislation - Mortgage Limits

The House of Representatives' Stimulus bill restores the 2008 mortgage limits across-the-board for the remainder of 2009. In other words, if the limit was $729,750 (or any amount above the base limit), the limit for 2009 will be the limit that HUD implemented in ML 2008-06. It appears the HECM limit would stay at $417,000. The change will also affect the GSEs. The bill would provide the Secretary of HUD with the discretion to increase limits further in "sub-areas".

We believe this provision has an excellent chance of being enacted into law by mid-February. In fact, it is possible that the limits could be increased further. One proposal being considered is raising the GSE limit base limit to $ 625,000. That change would have the effect of raising the FHA "floor (65% of $625,000). The increase of the GSE limit to $625,000 is less likely but possible particularly if the jumbo market encounters additional problems in the coming weeks.

Below is the legislation.
SEC. 12002. FHA LOAN LIMITS FOR 2009.
(a) LOAN LIMIT FLOOR BASED ON 2008 LEVELS.-
For mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, if thedollar amount limitation on the principal obligation of a
mortgage determined under section 203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)) for any sizeresidence for any area is less than such dollar amount limitation that was in effect for such size residence for sucharea for 2008 pursuant to section 202 of the EconomicStimulus Act of 2008 (Public Law 110-185; 122 Stat.620), notwithstanding any other provision of law, the maximum dollar amount limitation on the principal obligationof a mortgage for such size residence for such area forpurposes of such section 203(b)(2) shall be considered (except for purposes of section 255(g) of such Act (12 U.S.C.1715z-20(g))) to be such dollar amount limitation in effect for such size residence for such area for 2008.
(b) DISCRETIONARY AUTHORITY FOR SUB-AREAS.-
Notwithstanding any other provision of law, if the Secretary of Housing and Urban Development determines, forany geographic area that is smaller than an area for whichdollar amount limitations on the principal obligation of amortgage are determined under section 203(b)(2) of theNational Housing Act, that a higher such maximum dollaramount limitation is warranted for any particular size or sizes of residences in such sub-area by higher medianhome prices in such sub-area, the Secretary may, for mortgages for which the mortgagee issues credit approval for
the borrower during calendar year 2009, increase the maximum dollar amount limitation for such size or sizes ofresidences for such sub-area that is otherwise in effect (including pursuant to subsection (a) of this section), but inno case to an amount that exceeds the amount specifiedin section 202(a)(2) of the Economic Stimulus Act of2008.

SEC. 12003. GSE CONFORMING LOAN LIMITS FOR 2009.

(a) LOAN LIMIT FLOOR BASED ON 2008 LEVELS.-
For mortgages originated during calendar year 2009, ifthe limitation on the maximum original principal obligation of a mortgage that may purchased by the Federal
National Mortgage Association or the Federal Home LoanMortgage Corporation determined under section 302(b)(2)of the Federal National Mortgage Association Charter Act(12 U.S.C. 1717(b)(2)) or section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C.1754(a)(2)), respectively, for any size residence for anyarea is less than such maximum original principal obligation limitation that was in effect for such size residencefor such area for 2008 pursuant to section 201 of the Economic Stimulus Act of 2008 (Public Law 110-185; 122236Stat. 619), notwithstanding any other provision of law, the limitation on the maximum original principal obligation ofa mortgage for such Association and Corporation for such
size residence for such area shall be such maximum limitation in effect for such size residence for such area for2008.
(b) DISCRETIONARY AUTHORITY FOR SUB-AREAS.-
Notwithstanding any other provision of law, if the Director of the Federal Housing Finance Agency determines,for any geographic area that is smaller than an area for
which limitations on the maximum original principal obligation of a mortgage are determined for the Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation, that a higher such maximum original principal obligation limitation is warranted for anyparticular size or sizes of residences in such sub-area byhigher median home prices in such sub-area, the Directormay, for mortgages originated during 2009, increase themaximum original principal obligation limitation for suchsize or sizes of residences for such sub-area that is otherwise in effect (including pursuant to subsection (a) of thissection) for such Association and Corporation, but in nocase to an amount that exceeds the amount specified inthe matter following the comma in section 201(a)(1)(B)of the Economic Stimulus Act of 2008.

GSE Appraisal Update

Attached is our analysis of the GSE Home valuation Code of Conduct which is effective for applications taken on or after May 1st. While the Code does not apply to FHA loans at the present time, we believe it very possible that they will adhere to this policy in the coming months.
Below are the highlights of the Code and its impact.
In late December, the Federal Housing Finance Agency, the GSEs and the NY Attorney General released a revised Home Valuation Code of Conduct. The purpose of the Code is prevent "improper influences on appraisers". On January 7th, the GSEs published Q&A's on the valuation Code. Fannie Mae's Q&A's are used in this analysis.
The highlights of the Code are:

Lenders must maintain strict separation from the appraisal and loan production functions including any staff compensated on the "successful completion of the loan".

There can be "no substantive communication" about any aspect of the appraisal process. The person performing appraisal assignments (if an employee of the lender) must be trained and "wholly independent of the loan production staff and process".

Mortgage lenders that do not sell directly to the agencies (i.e. "correspondent lenders") are permitted to select and manage the appraisal process. A "correspondent lender" is defined as a lender that closes in its own name w/ its own funds (RESPA definition).

Mortgage brokers are prohibited from selecting or managing appraisal assignments including from appraisal management companies.

Mortgage brokers may not provide the lender with a list of approved appraisers or order an appraisal from a management company.

A lender (including correspondent lenders) may use staff appraisers or appraisers from affiliated or non-affiliated settlement service firms if the conditions of the code are met.

The lender must provide the borrower a copy of the appraisal "promptly" (at least three days prior to closing). The borrower can waive the requirement.

Finally, the Code establishes a new "Institute," funded by the GSEs, to accept complaints from appraisers and the public about "improper influence" of appraisers. It is not yet effective.

To sum up, except as noted above, lenders, their affiliated appraisal firms and independent settlement service providers may continue normal business practices. However, services could become more expensive for lenders and ultimately borrowers. Moreover, lenders are still required secure assurances that these companies are in compliance with the Code.

attached in this link is the Executive Summary provided by Potomac Partners

I'm looking forward to helping you close more loans in 2009! Have a great weekend.

You'll need the following links to download these forms:

Education Station
Government Loan Programs

Posted by Raoul Badde on February 10th, 2009 10:17 PMPost a Comment (0)

Qualifying Taxes in 2009 - A new Hurdle

February 7th, 2009 5:20 PM

I've been on the road with my Streamline Training and FHA Updates for Realtors during the first few weeks of the year.

If you haven't yet, let's schedule an FHA Streamline Training and an FHA/Lending Update-2009 for Realtors. These are great tools to help you build your business this year. The opportunities for us are boundless, we just have to be prepared for the loans and educate our affinity and referral partners.

Speaking of educating on changes, my employer, sent out a notice back in December to all of you that spoke about the collection of property taxes and how to qualify for loans, specifically purchase loans and even more specifically REO purchases as this is where the biggest issue has arisen.

As if all of us in the origination didn't have enough falling knives to deal with; increased MBS Prices, low pull-through issues, FNMA Lending changes, Secondary market changes etc. We now have an additional hurdle to address: ALL OF us in the Lending Community are discovering that with our markets being awash in REO purchases that the County Assessor's offices are soo far behind (9 months in Sacramento - 6 months in Stanilaus - 4-6 months in Sonoma) that we (Lenders) are recieving property tax bills collecting the FORMER RATE OF TAX on the property when it was assessed at twice the current sales price.
This Causes inumerable headaches most especially since so much of our business carries impounds (required for FHA/VA, Often sold on Conventional over 80%).

To elaborate:
my company is receiving tax bills on CA properties for the Oct 2008/2009 tax installment (and now the January/February Tax installment) where the bill is substantially higher than the 125% collected in escrow for required impounds. Until the Assessor has determined the new tax basis, the Collector is collecting at the prior year assessment which is reflected on our title commitment (Prelim). The taxes that my company must pay out of our pocket will be refunded to the homeowner, not us. It is a direct unrecoverable expense/loss to my company.

So, as our announcement in December indicated we are having to COLLECT the higher rate of Tax at underwriting BOTH FOR QUALIFYING AND FOR IMPOUNDS.

Stated another way: we will use the TAXES AS REPORTED ON THE PRELIM for qualifying and impound calculation.

The only exception to this policy is if the Title Company or County Assesor's office can provide You and my company with an updated Tax Certificate showing the lower rate of Tax collection.

We will not be able to accept a "future" rolls estimation of tax as this isn't an actual re-assessment.

Qualifying at Issue (DU/ScoreCard DTI effected)

It's a long and complicated Road. You have likely discovered that ALL investors are currently sending out payment coupons with higher monthly payments (due to the tax impounds) than at closing.
Some lenders right now are also only qualifying at 1.25% of the purchase price, however we're seeing and hearing that those policies are changing across the board and many are switching to our method whereby the borrower is qualified using the higher rate of tax.

Why qualify at a higher rate of tax when we know that in the future the borrower will likely have a lower bill?
Simply because in the near term, and very importantly on FHA and high ratio loans, these higher rates of tax are putting additional financial squeezes on our borrowers post closing.
In an environment where every loan is scrutinized and warehouse linese are drying up left and right the last thing you want to do as a lender that is INTENT ON STAYING IN BUSINESS, is to open yourself up to a possible default issue while you wait for the various counties to catch up and issue the correct and modified tax bill.
So, be cognizant of these changes, make your realtor partners aware of these items and stay ahead of the curve when you are submitting your loans to DU/TotalScoreCard.

When does the borrower get a lower tax rate? How can they lower their bill?
Your borrower can stay on top of their county assessor's office and continue to pressure them for an updated assessment post closing. Once the updated assessment is issued have your borrower contact their servicing lender and get the update over immediately.
At that time the servicer will be able to update the impound collection on the payment coupon and lower the amount collected every month.
Once the Assessor has lowered the tax bill your borrower (by my understanding) will receive a refund from the county for any over-paid taxes after loan closing.

My Company's stance is one that will protect us in this volatile market and will provide you with a continued source of funding now and in the future.
At the very least this is being addressed in underwriting and closing so that your borrower is not receiving a surprise increased payment coupon after the close of escrow.

I'm looking forward to helping you close more loans in 2009! Have a great weekend.

You'll need the following links to download these forms:

Education Station
Government Loan Programs

Go out and have fun!

Posted by Raoul Badde on February 7th, 2009 5:20 PMPost a Comment (0)