Blog of the Mortgage

• Removal of DPA (Nehemiah, Ameridream et. al.) – Beginning Oct. 1st
• National Licensing Registry for all loan officers (includes RETAIL!)
• Moratorium of FHA Risk Based Pricing – Beginning Oct. 1st - This mean for Case file #’s after October 1st we can use the old grid
• Permanent Calculations for loan limits in high cost areas: 115% of Median home prices for the area or $625,500 whichever is less
• Permanent increases to the FHA, VA & GSE limits based on the above - All beginning after January 1st
• Increasing minimum down payment on FHA loans to 3.50%

• Must have a Mortgage note dated between: Jan.1 2005 & June 30th 2007
• Be On-time or Late on your Mortgage payments
• Use at least 31% of your gross income to pay your Mortgage payment
• Prove that their existing payments are financially “squeezing” them thus incurring - Likely future late payments
• Remove any other mortgage debt against the home (2nd’s, 3rd’s etc) - Seriously, REMOVE/Eliminate/Pay-off
• Gain a new appraisal for the home
• Request a refinance of the existing 1st lien to a Maximum of 90% of the new value
• Put up with Case by case underwriting
• Pay annual MIP = 1.5% of the new mortgage note
• Pay 3% “exit” fee in a refinance or sale (effective pre-payment penalty)
• Share a minimum of 50% of the profits on future sale
• Starts @ 100% and goes down to 50% in year 5 after the new loan is originated.

• House vote expected Wed 7/23 on final version of the omnibus housing bill.
• Potomac believes that Senate will accept House changes and pass bill possibly as early as Thursday or Friday.   
• Seller funded DPA - Potomac believes that Congress will either 1) not stand in the way of HUD action to terminate, or 2) accept the Senate termination language.  
• Cash investment - Not sure yet on 3.5% or 3%.  At a minimum, it should be a simpler calculation eliminating the state closing cost variation. 
• Risk-based pricing - The moratorium remains in the legislation. However, FHA continues to lobby against it.  

• Maximum loan amount in high cost areas - $625,000
• Calculation factor for high cost areas will likely be 115%
• Both of these provisions will apply to FHA, Fannie Mae and Freddie Mac mortgages

• Seller funded downpayment assistance programs - We understand from several sources that Congress will either 1) not stand in the way of HUD action to terminate seller funded downpayment  assistance programs through the rulemaking process they restarted last month or 2) accept the Senate termination language.  
• Mortgage broker approval & eligibility criteria - We understand there will be no relaxation of broker approval & eligibility standards (e.g. no surety bonds)
• We have not heard anything on the status of the provision permitting  qualified D.E. lenders to accept loans from any originator (similar to Fannie and Freddie Mac requirements) Based on what we are hearing in general, it appears unlikely this provision will be accepted.
• Risk-based pricing - The moratorium remains in the legislation. However, FHA continues to lobby against it.

• FHA base limit ("floor") is increased from 48% to 65% of GSE limit ($271,050)
• Maximum loan amount in high cost areas is increased to 150% of the current GSE base limit ($417,000).  The new limit for FHA, Fannie and Freddie will be $625,000.  VA should have equivalent guaranty ($156,250)
• The factor for calculating increases is likely to be 115% (It was 110% in Senate bill and 125% in the House and Stimulus Bills). We understand this provision will also apply to Fannie and Freddie.

We get left in the lurch

I just spent the 4th of July and the subsequent weekend grilling meat, spending time NOT working on the weekends and enjoying time with my friends and family and being thankful that I made it all the way to July '08 in the mortgage business.
I can't believe it's been almost a year since ABC/AHM (my last company) went Bankrupt. Amazing where the time goes.
I'm just happy to be working for a stable and consistent company and to be able to provide this source to you and your customers.
Earlier this year (May 10th) in this space I wrote about how the MI companies were pushing us out
of business whether it was on a rate sheet or not.
Last week Friday we got the updated (linked here) MI Insurance Grid from Genworth (GE). This little hand-out shows us that as of August 14th no one will be able to write >90% LTV business in California, regardless of what FNMA is saying.
You're maximum LTV in California is now going to be 90% for conventional. Add in all the price adjustments and FHA really starts to look better and better every single day. Those of you funding FHA business with my team and I right now know exactly what I'm talking about.
Back to FNMA and the MI companies. About 1.5 months ago FNMA was pressured (politically from the White House on down) to remove the declining markets policy they had instituted. I wrote it about back then and some of you were able to get your business funded with some of the more aggressive conventional lenders. Now, the MI companies are still hemorrhaging cash and reserves. These firms are doing whatever is necessary to stop the bleeding and doing sub 90% business is part of it. Keep in mind the MI companies are throwing their declining blanket on the entire state of California, there is no county list to pick and choose anymore.
Triad is basically out of business since FNMA canned their affiliation with them. Radian was just served with a notice from FHLMC at the same level (we'll see what comes of them). These (MI) companies stock prices are at all time lows as they have to continuously write down their reserves/assets and adjust their earnings into negative territory. Not good. And so you get what you had here last week:
No more 95% business in declining markets. Period.

7.0 Changes and Announcement 08-16

My counterparts and I just spent 3 sweltering and humid days cooped up inside a hotel in the Dallas area (thank god for air conditioning!) meeting with others on the sales team in the Western Division and talking to our executives and our various industry partners about the direction of our company and a state of the state of our business overall. I only wished we’d have had a representative from HUD there to talk to us.
What we got was the next best thing: A former HUD higher up whose wife actually envisioned and created the Neighborhood Watch program that we can all use to see how much HUD business is going through which HUD channels. This gentleman is part of a two person consulting team - Potomac Partners - that produces the great legislative updates that I forward to you. FHA is here to stay and its variations and special features aren’t likely to be altered too much going forward as the current administration and likely which ever group takes over in January will really tremendously on HUD to help support the housing market and by extension our business.
The other person we spoke to was a representative from FNMA. Well now that was interesting.I’ve never seen someone whose company was propped up by the federal government the two days before her presentation act as calm and collected as she did.
I can only hope this is a good thing.
Last month early on I sent you a notice about the use of DU 7.0 and the requirements and changes coming with this new release. 5.6 is officially retired now and 5.7 is being phased out from usage going forward. You need to make sure that you’ve run your loans through 7.0 beginning August 1st with us. Some of my competitors might let you run 5.7 until sometime until mid-August or September 1st.
Bottom line is that 7.0 is going to push about 20% more loans from Approve Eligible into EA world (which is NOT good), considering that MI is impossible to gain on this business and many of us have discontinued these products due to their inherent risk you’ll have less options for these borrowers.
The representative from FNMA did clarify for us that 7.0 is still an asset and equity position driven engine (not credit score – I bet you didn’t know that) so the borrower with 10% equity and $5k in the bank might not get the same approval as the same equity borrower with $25k in the bank. FHA is really going to be a way for us to keep more loans going forward.
  Also, many of you have noticed that there is a new policy that is officially effective August 1st (see the link above) with respect to borrowers moving up from their current residence.
FNMA now requires that people moving up have the following pieces in place in order to qualify for a lateral/move-up purchase:
For properties being turned into 2nd Homes

• Qualify with both housing payments
• 6 Months of PITI for BOTH properties

• Lease agreement for the property being rented out
• Canceled Check for the deposit.
• 70% LTV (30% Equity) in the residence that is being rented out

• Both payments must be used to qualify (no rental offset)
• 6 Months of PITI for BOTH properties