Blog of the Mortgage

HUD/VA Changes Coming Soon

October 8th, 2008 9:14 PM

You know I've been posting items from one of Franklin American's advice/consultant partners (Potomac Partners) on HUD/VA business in general. This one carries some Whoppers!

If you ignore this e-mail, well, don't say I didn't warn you!
Please note the highlighted items below.

VA changes
Refis will have the same guaranty as a purchase loan
guaranty on a refi will no longer be limited to $36,000 so the loan amount can exceed $144,000 without additional 25% equity (this is expected as early as 10/1/08)
VA has the authority to increase the LTV on a regular refi up to 100%
stimulus bill mortgage limits are extended for the VA program until 2012
VA limits will not roll back to a mandatory $625,500, which is what would have happened with the end of the Stimulus program at the end of this year.
based on VA's action, we would be surprised if this does not result in the Fannie/Freddie and FHA Stimulus limits being extended until 2012, or at least for the next year

Condominiums
Lenders who have the capacity to approve projects may do so, or they can be submitted to HUD for approval, using a more streamlined process than today.
How is HUD going to manage the lender-approved projects? Several lenders could be working on the same project. This is still not clear although HUD seems to understand the problem.
Spot condo approvals will no longer be eligible.
Regarding right of first refusal, lender will have to ensure that the project does not violate any Fair Housing or other legal issues.
expect a ML by the end of Oct, effective on Jan 1, 2009 Section of the Act will no longer be 234(c). These will fall under 203(b) loans.
There may be a special ADP code.
Since FHA will be treating site condos as SF residences, will VA do the same? It's likely they will, they don't like a veteran to be at a disadvantage.

Allowable closing costs
expect a new ML to regulate these again for FHA loans they are spiraling out of control and HUD is seeing price-gouging will define those services that should be covered by an Origination Fee; this will likely include application, processing, UW fees, etc.
The list is expected to be very comprehensive again about what may and may not be charged.

FHA Performance - Neighborhood Watch
2 yr period ending Aug 07 there were 8xx,xxx loans in the FHA portfolio
2 yr period ending Aug 08 there were 1.37 million loans in the FHA portfolio
most of those 560,000 loans have been on the books for just a few months, they have no seasoning so you would expect to see a decrease in the default rate, but the default rate is virtually the same as a year ago (3.65% a year ago vs 3.55% now)
refis are performing very poorly for FHA; expect to see some tightening on refis, particularly cash-out refis
new construction is not showing a dramatic increase in early defaults from last year

You'll need the following links to download forms & see updates

Education Station
Government Loan Programs

Go out and have fun!

Posted by Raoul Badde on October 8th, 2008 9:14 PMPost a Comment (0)

More HUD Changes and New Loan Limits Coming

October 31st, 2008 7:45 AM

From our Valued Business Partners:
Potomac Partners:

This is a TON of Hugely Important Information.
Read it, Learn it & be Prepared.

We would like to update on the following:

-      FHFA(Fannie/Freddie regulator) expects 2009 mortgage limits to be published by November 7th
-      Upcoming Mortgagee Letters
-      Alternatives to Seller Funded Downpayment Assistance Programs
-      FHA Tolerance Policy on TOTAL Scorecard
-      IRS Bulletin

·         2009 Mortgage Limits

We would like to discuss two issues. They are:

1) 2009 mortgage limits (assuming no legislative changes occur prior to the end of the year)
2) The prospects for legislative changes in a "lame duck" session.

1.2009 Mortgage Limits (Assuming No Legislative Changes)

It now appears GSE and FHA mortgage limits for 2009 will be published sooner than had been previously expected. Last Friday, the Federal Housing Finance Agency (FHFA) announced that 2009 conforming loan limits for Fannie Mae and Freddie Mac should be published by November 7th. Since FHFA also indicated that it will use median home value data estimated by FHA for 2009, we should now have all 2009 mortgage limits including FHA by November 7th. FHA had previously stated that the 2009 limits would not be ready until late November.
This announcement also guarantees that FHA and the GSEs will have the same limits in high cost areas above $417,000. As a reminder, the maximum loan limit drops to $625,500 and the FHA limits in any area above $271,050 will decline in 2009 unless there is legislative action on mortgage limits in a "post election" ("lame duck") Congressional session. We will discuss the prospects for legislation separately below.

Below is a synopsis of the mortgage limits for 2009 based on current law.

·         The Housing and Economic Recovery Act (HERA) guarantees that the nationwide GSE (Fannie Mae & Freddie Mac) limit cannot decline below the current nationwide limit ---$417,000.
o        Impact of this provision:
-         FHA base limit will not decrease below $271,050 (65% of the GSE nationwide limit)
-         The maximum FHA, Fannie Mae and Freddie Mac mortgage ceiling in high cost areas will not be lower than $625,500 (150% of the GSE nationwide limit)
-         VA program had the Stimulus limits extended until December 31, 2011
·         VA guaranty amount may be 25% of the area median sales price x 125% up to a maximum guaranty amount of 25% of $729,750 (175% of the GSE nationwide limit)
·         The calculation factor for high cost areas (i.e. areas above $271,050 for FHA and $417,000 for the GSEs) will be 115% (instead of 125%) for both FHA and the GSEs.
o        Impact: Every area above the base limits ("floors") will experience a decrease in 2009 unless the area median sales price increases significantly
o        For FHA, any area w/ a median sales price above $235,695 is considered a high cost area (i.e. 115% x 235,695 = $271,050)
o        For Fannie Mae and Freddie Mac, any area w/ a median sales price above $362,608 is considered a high cost area (i.e. 115% x $362,608 = $417,000)
·         FHA data sources for median sales price data
o        FHA uses the county w/ the highest median sale price in metropolitan statistical areas (MSAs) to determine the maximum mortgage limits for the entire MSA
o        FHA uses multiple sources including:
-         a state-level nonmetropolitan house price index series produced by the Office of Federal Housing Enterprise Oversight.
·         Expiration of the Stimulus mortgage limits
o        The law imposes different cut-off criteria for FHA and GSE loans
-         For an FHA transaction, the borrower must be approved by December 31st to close a loan at the higher mortgage limits in the Stimulus bill.
·         The definition of "borrower approved" is the same as the one used for the cut-off on seller funded downpayment assistance loans (i.e. "last scoring event" in TOTAL or underwriter sign-off on a manually underwritten case).
-         For a GSE transaction, the loan must be closed by December 31st in order to use the higher limits in the Stimulus bill.

Unless the Stimulus bill is extended, mortgage limits are virtually guaranteed to decline in every high cost area in the country (i.e. areas currently above $271,050 for FHA and $417,000 for Fannie Mae and Freddie Mac. This decrease would be in addition to any declines caused by house price depreciation.
Prospects for Continuation of High Cost Area Limits
(in the Stimulus Bill)
We believe there is a real possibility that the Stimulus Bill mortgage limits could be extended for 2009. While it was unlikely in August, the jaw-dropping events of the last month have increased the likelihood of some action. Secretary Paulson has been emphatic that the economy cannot recover until the "bulk of the housing correction" is behind us. Moreover, the economy is obviously in far worse shape today than it was last February when the first Stimulus bill was passed.
Upcoming Mortgagee Letters

1.       FHA Cash Out Refinance Policy
As we have noted in recent updates, we expect FHA to lower the maximum loan-to-value ratio on cash out refinances from 95% to possibly 85% for all loan amounts. It could be implemented as early as this week and with an "immediate trigger" so case numbers should be assigned and borrowers approved as soon as possible for potentially affected loans in the pipeline.   FHA Neighborhood Watch data indicates the quality of refinance transactions is deteriorating.
2.       Definition of origination fee
As we have mentioned in previous updates, FHA is concerned about the fees being charged borrowers, particularly those which FHA believes are duplicative and should be included in the origination fee. These include application, processing and underwriting fees.
We believe HUD has given us a preview of this letter in ML 2008-29 implementing the Hope For Homeowners Program. In that letter, it is stated:

"Standard FHA policy regarding closing costs (outlined in Mortgagee Letter 2006-4) is applicable, including the 1 percent cap on origination fees. The origination fee compensates the lender for administrative costs in originating and closing the loan. The origination fee covers administrative costs for taking the loan application, evaluating, preparing and submitting a proposed mortgage loan. The origination fee cannot be supplemented by other fees to cover these administrative costs, such as "application or processing" fees or broker fees. The origination fee cannot exceed one percent of the original principal amount of the mortgage."

HUD Condominium Policy

The implementation date will likely be delayed until January 1st. We expect the program requirements to remain basically the same. The highlights are:

Two processing options
o   HUD processing
o   Direct Endorsement Lender Review and Approval
Site condominiums will not require project approval
Minimum required units in a project has been reduced to two units
Eliminate 1 year waiting period for conversions
Project requirements
o   51% Pre-sale
o   51% owner occupancy
o   Right of first refusal is permitted as long as fair housing requirements are not violated
o   Builder permit and final certificate of occupancy

You'll need the following links to download forms & see updates

Education Station
Government Loan Programs

Posted by Raoul Badde on October 31st, 2008 7:45 AMPost a Comment (0)

LP Requires a 45% DTI for underwriting

October 31st, 2008 7:44 AM

Good Lord..I missed this one guys.

Very sorry about the delay (it come out last week Friday).

If you work the following LP lenders:
Taylor Bean & Whitaker, Wells Fargo, HSBC and a couple (isn't Provident Funding using LP?) of others there are some serious changes upon the Horizon.
Not just little ones either.

At Franklin American we accept LP findings but will add/utilize our preferred FNMA/DO overlays if they are more conservative.
Franklin American in growing so rapidly is now selling a very large chunk directly to FNMA.

Also: I am including updates on FNMA High balance below the LP piece. Some great news: Loans up to $625,500 WILL NOT HAVE a price adjustment (unless it's an ARM or Cash-out).
You can download the whole FNMA Announcement here:

Here's some of the Core Points from the LP announcement:

Preview of Upcoming Changes to Credit Requirements

Today, we are previewing the following changes to our credit requirements that will be effective for Freddie Mac settlements on and after February 2, 2009. We will finalize these credit changes in an early November Guide Bulletin where we will:

Eliminate purchases of all mortgages originated with stated income and/or stated assets, including borrower selected programs, lender-branded and marketed programs, and system-selected programs such as Loan Prospector® Accept Plus.

Establish a maximum debt-to-income ratio of 45 percent for all mortgages we purchase, except for Streamlined Refinance Mortgages.

Revise requirements for minimum Indicator Scores by: Establishing minimum Indicator Score requirements for manually underwritten mortgages secured by 1-unit primary residences as follows (Home Possible® Mortgages excluded): 620 for LTV/TLTV/HTLTV ratios less than or equal to 75 percent. 660 for LTV/TLTV/HTLTV ratios greater than 75 percent.

Establishing a minimum Indicator Score of 620 for all mortgages unless otherwise specified for a particular mortgage product in our Guide. Loan Prospector A-minus mortgages are also excluded from this requirement. Revising minimum Indicator Scores for Home Possible Mortgages and lender-branded affordable mortgages. Details for this change will be provided in the early November Guide Bulletin. If the borrower does not have a usable credit score, Sellers must underwrite the mortgage according to the requirements in Guide Chapter 37.

The FNMA High Balance update: 08-27

Replacing Jumbo Conforming:

There are definitional differences between the two laws that were enacted in 2008 authorizing Fannie Mae to have higher loan limits for high-cost areas. The formulas are as follows:
· Economic Stimulus Act - the higher of $417,000* or 125 percent of the area median home price-not to exceed 175 percent of $417,000, or $729,750.
· Housing and Economic Recovery Act - the higher of $417,000* or 115 percent of the area median home price-not to exceed 150 percent of $417,000, or $625,500.
*For one-unit properties in the continental United States.
Fannie Mae's general loan limits will be subject to annual increases based on a formula to be developed by the FHFA. Under HERA, the general loan limits may not decrease even if national housing prices decrease. In areas where 115 percent of the area median home price exceeds our national limits, new high-cost area loan limits will apply.

Although the 2008 general loan limits are likely to be the same in 2009, Fannie Mae will communicate the final general loan limits when they become available. The specific 2009 loan limits for each high-cost area have not been published by the FHFA yet; Fannie Mae expects to receive them in the coming weeks.

The Securities Industry and Financial Markets Association (SIFMA) announced that it will allow high-balance mortgage loans to be "good delivery" in the TBA market for MBS on a de minimis basis.
~

This is great news for us as loan officers regardless of our location.

You'll need the following links to download forms & see updates

Education Station
Government Loan Programs

Posted by Raoul Badde on October 31st, 2008 7:44 AMPost a Comment (0)

Finding HUD Grants to replace DPA

October 31st, 2008 6:49 AM

Down Payment Assistance (DPA) as we all very quickly came to know the programs offered by Ameridream, Nehemiah, HART and others is gone for the time being.
At least the Seller funded kind.

So, since we can't monkey around with the Sales Price to gain access to the 3% statutory investment perhaps it's time we opened up some of the lesser known programs in our various cities, counties and
elsewhere.
Franklin American will approve ALL of these HUD approved programs at the branch level, no having to send off to Corporate for final approval!

Remember: Franklin American WILL ALLOW an Increase of Sales Price over List price to cover credits for Closing Costs. Just not when Seller funded DPA's are involved.

Okay now that's cleared up :) You can send me all those deals you were afraid would get cut ...

Let's get on to the important stuff: this again from the NAMP Blog. Which if you're a Manager or Processor is a must read!
Also check out these links:
HUD Grants/Grantees/Non-Profits Page
HUD Non-Profits page
Find & Apply for HUD Grants
Homebuyer Programs by County
Homebuyer Programs by City
AmericanDream Initiative

Finding Grant Programs
Written By: Bonnie Wilt-Hild
Senior DE Underwriter & NAMP Instructor

As we have seen the end of seller funding down payment assistance, I thought today would be a good day to discuss other available grant programs that might be of use to potential borrowers. Based on what I have found, most appear to be geared to first time homebuyers, which seems to be where the greatest need it.

I would like to start by saying that FHA is still allowing acceptable grant programs in conjunction with FHA financing and it appears that there are several which are administered by both state and federal agencies where the first time homebuyers are concerned. These grant programs usually seem to be soft seconds that are forgiven over a period of years and some do have income restrictions.

The first one I would like to discuss is ADDI or the American Dream Down Payment Initiative which is actually administered by HUD. It is designed for first time homebuyers and is a 10,000 which can be used for down payment and closing cost expenses and is recorded as a soft second and ultimately forgiven at a rate of 20% per year. There are income restrictions associated with the program based on the number of family members in the home.

Federal funds for this grant are distributed nationwide and the fund is usually administered by state agencies as well as county and city agencies. Direct links to these agencies can be found on HUD's website at www.hud.gov, click on the grants link on the left side of the page and you will see the information for ADDI on the right side of the next page. By clicking on this link you should be above to follow the links to determine which agencies in your area are administering the grant as well as income limits etc.

I have also found several grant programs through state and local agencies that are acceptable to HUD. If you log on the websites for your local city department of housing and community development as well as your states department of housing and community development there are links for homebuyer assistance that includes grant and gift information available for homebuyers in these areas.

An example would be Baltimore City, Maryland which has a Trolley Car grant. If potential homebuyers take a Trolley Car ride to view properties located in certain city neighborhoods and contract one of these properties within 90 days of the ride, the City of Baltimore will give these individuals a grant for 3,000 towards closing costs. They also have another grant, called Live where you work, which provides similar grant funds for individuals employed and purchasing properties in Baltimore City.

As you can see there are still several options available to homebuyers in addition to the no longer allowed seller funded grant programs. All that is required is a little research and most originators should be able to come up with quite a few options for potential borrowers.

In addition, these options are also great sales tools where real estate agents as business partners are concerned. Processors and underwriters can also research the programs and access the information on the grant provider's websites. Most of the programs are really user friendly from and underwriting standpoint as well so take a time out and do a little research to see what your company can now offer as an alternative option to seller funding DPA.

About the Writer. As an NAMP staff writer, Bonnie serves as a senior instructor for FHA Online University as well maintains a full-time job as Senior DE Underwriter for a major banking institution.

You'll need the following links to download forms & see updates

Education Station
Government Loan Programs

Posted by Raoul Badde on October 31st, 2008 6:49 AMPost a Comment (0)

Checlist for October

October 8th, 2008 9:13 PM

This e-mail is a heads up reminder Checklist and will start off a new series of more important e-mails geared even more specifically at you and your business for the next quarter, 6 months or longer. These mails will contain tips, ideas and other pertinent pieces that will, if nothing else, spurr your imagination or personal idea department.
Today I'm covering:

Checklist for October - Getting in Compliance

New DRE MLDS Forms 882 - 883 - 885 know them & make sure your clients sign them - they required with EVERY transaction.

FHA UFMIP Goes up to 1.75% for case numbers after 10-1-08 (regardless of LTV)

FHA Monthly MI goes up to .55% for case numbers after 10-1-08 (LTV's over 95% - for <95% .50 monthly).

FHA Requires new form 92900-LT to replace 92900-A (MCAW)

Hope for HomeOwnership Debuts 10-1-08

PMI Requires 720 Fico for >80% LTV in CA

PMI requires DTI of 45% >80% LTV in CA

GE/Genworth requires DTI of 41% for All loans

GE/Genworth requires 720 score for all loans

Radian MAX LTV is 90% (the official death of FNMA 95% in California)

Build a Linked-In Account & ask your previous customers for referrals