Blog of the Mortgage

Get Your appraiser on Board with Lending Changes

March 11th, 2008 8:26 PM

First Things first:
Please reference this post here:
on how to begin dealing with appraisal issues.
For those of you who think that the worst is past us, you're half right.
Read On:
If you remember about 9 days ago FNMA/FHLMC/OFHEO & the State AG of New York agreed to some pretty crazy new terms for Appraisal ordering.
This (for agency: FNMA/FHLM & Jumbo) strips YOU the broker and also the retail lender from ordering an appraisal directly from your most favored source. All of this Changes next year January 1st unless somewhere, somehow a Mortgage Banker/Broker has any friends left in Congress and can actually spin the wheels backwards to give everyone appraisal freedom again.
Purpose:
To eliminate the pressures of appraisal ordering percieved or realized between the originator AND the appraiser. To create yet another big govvie organization that will likely have structural and managerial issues after its creation.
Reality:
You can't call one of your best business partners to help make a loan anymore.
This is like VA appraisal ordering: the underwriter will do it for you. They'll submit the order over a blind order system to an automated round robin delivery for your county or region etc.
You won't know who is doing the work, you won't how they'll do it and it will be different every single time.
Also: the borrowers will be paying COD by credit card or TeleCheck regardless of loan approval/closing.

Some Caveats: NONE OF THIS APPLIES FOR FHA!!!

Alright, alright.. enough of the bad news, I promised you I would prepare and your appraiser. On my submission requirements and rates pages I have posted the information you need. Specifically-Print out: Appraisal Req Adverse Market.
This is a 1 page sheet you can e-mail to your staff and your favored appraisal partners and realtors so that all parties are prepared when it comes down to "brass tacks".

Some points of interest:
1. 2 Comps closed in the last 90 days
2. 1 Comp in the market area that is a pending sale
3. Make sure you appraiser is fully completing page 1/2 of
    the appraisal grid: to wit:
     The Neighborhood Portion @ the top half of page 1.
   Within this grid in the Market Conditions be sure to
     Have them add the LP/SP ratio of the current listings
     along with the average DOM for those same listings.

     Page 2. on the grid: the line item: Date of
     Sale/Time Make sure Days on Market (DOM) are listed
   after the COE date listed.

Have your appraiser complete these items in advance and your appraisal will fly through any underwriters hands. YOU WANT THIS TO HAPPEN. Under the KISS formula this will really create a smooth transaction for everyone involved.
FYI ... many of the above listed requirements for declining/adverse policies are actually set in training practices under USPAP/OREA guidelines that no one and I mean NO-ONE has enforced until now. So, the appraisers will know what to do, they just may resist at first but believe me when I tell you. Our (FAMC) guidance is industry leading.
Taking note of Countrywide/Wells moves to cut max financing to 90 or 92%.. we've been there for 3+ months!

You've probably read some or all of what I've had to say over the last couple of months but if you haven't you can keep abreast of the change(s) and my commentary on my Blog Here:

Other Updates: Posted Here on Education Station:

With our Turn times at Just 2-3 Days and pricing as hot as it is you can't go wrong!

Posted by Raoul Badde on March 11th, 2008 8:26 PMPost a Comment (0)

Nehemiah, Ameridream and Down Payment Assistance for FHA

March 18th, 2008 8:55 AM

Many of you are have noticed that the MyCommunity 100, Flex 100 and HomePossible 100 are all gone in the Whole state of California.
Declining/Adverse/Soft Markets have taken these off of everyone's rate-sheets in the past months.
Notice we were first to lead on that one, it's nice to see others follow along.

Home prices have come down and now there seem to be more buyers in the market, taking their time, reviewing their options. Sellers want to attract these people to their places with options (outside of the Sub-Zero and Wolf Range).
DPA's or DAP's as some people call them are the saving grace STILL AVAILABLE for FHA programs.
DPA = Down Payment Assistance (DAP is the same thing but some people use this instead).
The way they work is this:
The seller lists their home with the with the program of their choice (Nehemiah and Ameridream are two of the biggest and nationwide). The cost to the seller is .75% of the loan or $500 not to exceed $500.
The Realtor can now advertise this property as true 100% financing (provided the price is within the FHA limits for the area) to the marketplace because the seller is in effect going to help with the down payment.
The Seller may contribute anywhere from 1-6% to the DPA program they've enrolled in. This in turn allows the the DPA Program to contribute this same amount into Escrow prior to closing.
The seller's Contribution comes out of the proceeds of the sale while the settlement statement is finalized and the transaction is seam-less.
You can get a list of DPA's in the state and view other important links on my Government Page here:
www.your-ae.com/gov
Why are these programs important now?
Besides the fact that true 100% financing is no longer available through conventional methods these programs are important for a number of reasons.
1. Home sellers and their Realtors no longer have to Cut prices to attract buyers, they can instead enroll in the Gift Program and maintain the price creating stability in the market.
2. 100% is now only offered on full-doc loans within the realm of FHA insured reason. These buyers ACTUALLY have to qualify on the merits of their income as opposed to credit score thereby improving the buyers pool dramatically.
3. These programs do not inhibit the credit for closing cost allowance under FHA guides to 6% so the total credit could potentially equal 12% through the different channels!

With our Turn times at Just 3 Days and pricing as hot as it is you can't go wrong!

Posted by Raoul Badde on March 18th, 2008 8:55 AMPost a Comment (0)

OFHEO Follows HUD recomendation - FNMA Releases Guidelines and Pricing- FINALLY

March 7th, 2008 8:34 AM

First can I say this: Hot Damn! That was some fast actin'. Frankly I've never seen any government decisions made so quickly, unless of course it surrounded War or Terrorism.
So, I guess we're officially at War with the Housing Market? :)
This has turned out to be one very busy week. I'll cover this in points since the information is ALL relevant to us going forward.
All of the Nitty Gritty Details are posted on my site:
Education Station
1. OFHEO has acted on HUD's recommendations and posted their list of Increased Loan Limits. OFHEO guides FNMA/FHLMC in policy decisions so this was the next step.
2. FNMA released their updated LFKAJ guides (that's Loans formerly known as jumbo).
2a. Funny: FNMA is calling these Jumbo Conforming!
2b. The Rate Sheet Fee adjustment is going to be
   ....25% (for Fixed Rates) .75 for ARMS! That's
   GREAT!
2c. These Changes are allowed for loans funded
after 4.1.08
2d. Some Highlights: No Cash-out
                                        Rate& Term: 75/95 & 660 FICO
                                        Purchase: 90/90 & 660 fico
over 90% must be 700 fico
                                        Manual u/w only (for now)
                                        45% DTI Max
                                        2 Months PITI (for O/O)
                                        Appraisal Required
3. FNMA is following FHLMC on the updated LLPA's (that's loan level price adjusters). So, if you have 81% LTV & 640 FICO...2.00% ADD to fee.
   3a. They also updated all of their cash-out and
   2nd,Investor, Units adjusters. It's getting VERY
   Expensive for under 700 score..unless you use FHA
   -which we do.
   3b. these changes are coming June 1st.
4. JOBS today.. SUCKED! -63,000.. (that's a minus).
5. So Mortgage Backed Securities are up 128bps as of 11:24a(est)
6. I'm no longer brining a ratesheet into the field. It's always invalid by noon -just kidding. But seriously. I can't keep up with this.
7. FINALLY: We at Franklin American are awaiting our direction as to ALL of the changes coming and will keep you posted as the news comes.

You've probably read some or all of what I've had to say over the last couple of months but if you haven't you can keep abreast of the change(s) and my commentary on my Blog Here:

Other Updates: Posted Here on Education Station:

With our Turn times at Just 2-3 Days and pricing as hot as it is you can't go wrong!

Posted by Raoul Badde on March 7th, 2008 8:34 AMPost a Comment (0)

HUD increases FHA loan limits! But when can we send these in and fund them?

March 6th, 2008 9:50 AM

Yesterday afternoon while I was contemplating the reasons for wacky Treasury & MBS yield Spreads, HUD Secretary Alphonso Jackson was Stumping in Los Angeles and announced that the NEW HUD LIMITS for FHA are HERE!
You'll want to click here to find out what your county looks like. Much of California is now going to be permitted to fund FHA loans to $729,750. That there is alot of loan.
SO: THE BIG QUESTION IS WHEN, DAMN IT?!
Well, just because HUD has increased the limits doesn't mean we can all run out and start funding these deals.
FHA is just the insurance program. These loans still need to get pooled, securitized and sold.
We are waiting to see what underwriting changes may or may not happen.
What Price adjustments may or may not happen.
And also and this is a huge part: When Total ScoreCard,
the near and dear AUS for FHA will be updated to reflect these loan limit changes.
I've posted and Excel Spreadsheet on Education Station.
It's a copy of the information from the link posted above.
And don't worry, I will be sure to inform you just as soon as I know that we'll be funding these deals.

You've probably read some or all of what I've had to say over the last couple of months but if you haven't you can keep abreast of the change(s) and my commentary on my Blog Here:

Other Updates: Posted Here on Education Station:

With our Turn times at Just 2-3 Days and pricing as hot as it is you can't go wrong!

Posted by Raoul Badde on March 6th, 2008 9:50 AMPost a Comment (0)

Disconnect between Mortgage Rates and Treasury Prices?

March 5th, 2008 3:08 PM

So I've done the evil deed of travelling into the Murky Price waters by trying to predict where pricing was headed on a daily rate sheet. I've sent an Alert to Lock a couple of times that turned out to be wrong. I've also sent a couple that turned out to be right.
Right now I'm at Par on my bets. I can tell you the last time I tried to be right about these kinds of things (2004) I had a much higher success rate. I believe it was closer to 80%. I saved my clients money back in those days and everyone was happy.
Today is, well, it's nucking futs. There seems to be no rhyme or reason to the way mortgage rates are trending in relation to Treasury Yields.
Since I've already gotten my feet wet in this area and because I've gotten more than 20 calls on this question I am going to try to interpret some great articles I found today. Also, I'll reference you back to the first couple of posts on Education on Station on how loans are securitized.
It used to be that 30 Year Bonds were effectively the nearest vehicle to a 30 Year Mortgage Note. And before Barry Habib and his spawn came around we would basically guess where Mortgage rates were trending based on this daily yield. The 30 Year Bond was made redundant in 2001 or 2002 (I don't remember). By 2002-2003 we were all watching the next best thing, the 10 year Treasury Note. It wasn't great but it was pretty good.
Bloomberg today has some features that will help illuminate where we are currently and why Mortgage rates continue to tick up while the underlying fundamentals give reason (at least historically) to lower Mortgage rates (remember these are murky waters at best for me).
1. From Bloomberg: Link Here:
The extra yield that investors demand to own agency mortgage-backed securities over 10-year U.S. Treasuries reached the highest since 1986, boosting the cost of loans for homebuyers considered the least likely to default.
The difference in yields on the Bloomberg index for Fannie Mae's current-coupon, 30-year fixed-rate mortgage bonds and 10- year government notes widened about 12 basis points, to 215 basis points, or 79 basis points higher than Jan. 15...
"There's basically a buyer's strike right now,''According to one Manager.
The so-called option-adjusted spread of Fannie Mae's current-coupon securities matched the highest in at least 11 years yesterday, rising 18 basis points to 134 points, according to Merrill Lynch & Co. index data.
An option-adjusted spread takes into account the impossibility of knowing when the underlying mortgages will be refinanced or otherwise paid off.
Also: Auctions have been performing Miserably
2. From Bloomberg: Link Here:
Almost 70 percent of the periodic auctions in the $330 billion market failed this week as investment banks stopped buying the securities investors didn't want. Yields on the debt averaged 6.52 percent as of Feb. 28, up from 3.63 percent before demand evaporated in January...
Goldman Sachs Group Inc., Citigroup Inc. and other brokers began permitting the failures last month after investors, concerned that insurers backing the bonds might be downgraded, stopped bidding in the auctions conducted every seven, 28 and 35 days.
So there you have it. We're out in the field trying to originate purchase money on newly cheap and declining home prices as well as muddle through declining markets with regard to refinances. We get some relief in terms of Loan Amounts increasing but in the end we're still getting the short end because there is so much continued uncertainty. ADD to this the new Adverse Market Conditions and Loan Level Price Adjustments from FNMA/FHLM and you might be able to see why Rates are where they are.

Frankly, if this market normalizes in the next couple of months (which is probably wishful thinking on my part) then we'll have 5-5.25% par rates 30 Yr. Fixed.
You've probably read some or all of what I've had to say over the last couple of months but if you haven't you can keep abreast of the change(s) and my commentary on my Blog Here:

Other Updates: Posted Here on Education Station:

With our Turn times at Just 2-3 Days and pricing as hot as it is you can't go wrong!

Posted by Raoul Badde on March 5th, 2008 3:08 PMPost a Comment (0)

FHA Loan Limits and DPA (Nehemiah/Ameridream) Updates

March 4th, 2008 8:31 AM

The Whole Industry is a-twitter with the ongoing changes that are happening with regard to loan limits, FHA Expansion and the Mortgage Insurance Companies Reigning in our Lending standards to fit their guidelines.
You've probably read some or all of what I've had to say over the last couple of months but if you haven't you can keep abreast of the change(s) and my commentary on my Blog Here:

This Morning some exciting Updates: Posted Here on Education Station:
1. HUD is going to release the new loan limits based on Median Sales prices around the country this week.

2. DPA (Down Payment Assistance) Programs are getting a much needed respite from legal injunction this week and going forward in perpetuity as they have been declared legal by the U.S. District Court that was overseeing the case to remove these programs in their entirety.
This is a great news as it will continue to allow for true 100% Financing with FHA programs going forward.

Some Caveats:
HUD has not released any stipulations as to changes in underwriting Guidelines.
There are whispers that larger loans (like those in the S.F. Bay Area) might have 2 appraisals required.
The same goes for the GSE's.
You'll recall that I wrote in this space that there was likely going to be a price adjustment and then I confirmed my own suspicion here again after the SIFMA decided against allowing the larger (LFKAJ*) conforming loans into their TBA pools.

Also to note: The GSE's will likely be delivering their version of the new loan limits this week as well, this could get confusing as there are supposed to be two seperate lists published by HUD(for FHA) and the GSE's. eghh!

If you're hoping to start slamming Conforming loans to 90% max LTV/CLTV through my doors in the coming months, which I fully expect, you might find that there will be different guideline requirements for any loans over the current max limit of $417k. So, Ladies and Gentleman, start your engines but be gentle and let them idle(?) until we know more about who and what kind of larger (LFKAJ*) conforming loan amount might be permitted and how it might be priced.

FHA is really starting to look better and better here.
Franklin American brings over 15 Years of Underwriting Experience to support your team!

With our Turn times at Just 2-3 Days and pricing as hot as it is you can't go wrong!
*LFKAJ - from Tanta over @ Calculated Risk
Loans Formerly Known As Jumbo

Posted by Raoul Badde on March 4th, 2008 8:31 AMPost a Comment (0)