Blog of the Mortgage

There was a time not long ago when I would make my case with a nice little letter to the underwriter on my loan at submission. I would explain the way I derived income (my own special math), what I knew about the job history (spotty) and why the assets were suddenly improving (lottery!).

In the end this was my way of endearing my underwriter to my methodologies and at many times it resulted, if nothing else, in a phone call to go over options for the borrower.

Most of the time it was to thank me for the letter and to notify me of my approval. Now, we're all getting re-trained and re-reviewing our expertise in full-doc underwriting. How to calc overtime, bonus, hourly, averages of changing incomes etc.

Unfortunately much of this isn't getting checked along the way and our DU Runs end up invalidated by the final underwriter for a number of reasons. Sometimes files end up in suspense and we're left scrambling to understand the underwriters thought process for THEIR decision.

Where this has been very fairly counter balanced is when the loans come in with cover letters or e-mail discussion threads between the loan officers and the AE. This significantly illuminates issues known to exist prior to the file being underwritten and helps the underwriter to understand the initial numbers or the back story of a loan.

Correction/Clarification posted below:

 I am scheduling Streamline Refinance Refresher's for individual offices. E-mail me to schedule your Streamline Refresher so that your group is ready for the next refinance boom.

Many of us were looking at gearing up for a BOOM in the low yielding but fantastically borrower benefiting Streamline Refinance loan.

For those of you new to HUD/FHA loans this is the "Original" No-Doc loan.
No income/assets/job information
Only Mortgage rating required
No appraisal required
No increase in loan balance (over original note) permitted
No appraisal required

This is a GREAT loan with falling rates AND falling values.
You don't make much BUT a great shop set up correctly can crank out literally hundreds of these deals a month and make it up in Volume. Those of you that remember getting into the business and first learning Streamlines know what I'm talking about.

Well, yesterday with little to no fanfare (as usual) HUD released ML 08-40 to provide clarification for refinances.
First the good news.
For all rate and term refinances in 2009 the Max LTV will be 97.75 (BEFORE THE UFMIP of 1.75%). THIS IS HUGE when using an appraisal or doing a conventional debt consolidation loan (taking out existing conventional 1st/2nd's for folks with some equity).

Cash Out LTV's will be limited to 95% up to $417k loan, for loans over $417k the LTV will be limited to 85% (as with "Jumbo's in 2008).

Now, perusing this letter all is well until you get to page 4 of 5 and you find this statement under additional underwriting and eligibility criteria:

This only applies to refinances of Conventional loans into FHA loans. NOT Streamlines.

• 
  The subject property must have been owned by the borrower as his or her principal residence for at least 12 months preceding the date of the loan application.
• If said property is encumbered by a mortgage, the borrower must have made all of his/her mortgage payments within the month due for the previous 12 months, i.e., no payment may have been more than 30 days late and is current for the month due.
• The property that is security for the refinanced mortgage must be a 1- or 2-unit dwelling.
• Any co-borrower or co-signer being added to the note must be an occupant of the property.  Non-occupant owners may not be added in order to meet FHA's credit underwriting guidelines for the mortgage.
  

Madyalook!!

Hey, it might not happen today but if you think about how Henry Paulson can flush away $700 billion overnight as he just did then, well, this story might just come to fruition.

This administration or next.

Some key points of the article found here: Treasury thinking about 4.5% interest Rates

"The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%, more than a full percentage point lower than prevailing rates for a standard 30-year fixed-rate mortgage."

Okay.. the last time banks were "encouraged" with $700 Billion they paid back bonuses, wages and other crap and bought other banks with the money.

Even today BofA head of state - Ken Lewis was quoted that this would be a good time to hoard cash!

Huh? You took your handout to hoard it? It's no wonder the we're in such a mess.

"But Treasury Secretary Henry Paulson views lowering mortgage rates as key to fixing the housing crisis, which he says is at the root of the widespread economic and financial problems, hence the mortgage-security-buying program announced last week." - WOW! REALLY? Thanks DUUUDE! All of us in the Trenches can award this guy the NSS Plaque of the week (that's No Shit-Sherlock - excuse me here).

"On the refinancing front, the Mortgage Bankers Association said its index of refinance applications had tripled, the largest increase since it began tracking this data in 1990." - Hey, I'm looking around, my business is 90% purchase, yours? Did you get 3 more apps than last week? 300% increase. This doesn't mean much since fully 50-60% of homeowners are underwater in California.

"I don't think it's the answer to the foreclosure problem because that problem is a combination of negative equity with unemployment," said Mark Zandi, chief economist of Moody's Economy.com. "Lower rates aren't going to help those homeowners under water refinance or get a job, at least not quickly."  We know this is the case, we have some 11 months of supply and overall it's an interesting world out there. to say the least.4.5% would help new homeowners most definitely although I'd be happy to not have prices go right back up to unaffordable because of this (it wouldn't happen because too many in the middle have been burned- the once bitten twice shy thing).