Treasury Department Considers Plan to Lower Mortgage Rates

I think the FDIC is beginning to get finally get it. Either that, or they are reading my blog.

AP

WASHINGTON -- Financial industry lobbyists are urging the Treasury Department to take steps to lower mortgage rates in an effort to stabilize the housing market.

Under the proposal, Treasury would seek to lower the rate on a 30-year mortgage to 4.5 percent, Scott Talbott, a vice president at the Financial Services Roundtable, said Wednesday.

That's about one percentage point below the current rate of 5.6 percent.

Treasury would do so by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac, Talbott and other industry sources said. While details of the proposal are in flux, the program could be similar to the effort announced last week by the Federal Reserve to purchase up to $500 billion of mortgage-backed securities from the two mortgage giants, Talbott said.

Mortgage rates dropped steeply in the wake of the Fed's announcement. Additional purchases could drive mortgage rates down further, and enable Fannie and Freddie to purchase or back more home loans. Fannie and Freddie, which were seized by federal regulators in September, own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt. Treasury is strongly considering the proposal and could announce a decision as early as Monday, industry sources said.

Treasury spokeswoman Brookly McLaughlin said she would not comment on speculation about actions the department may take in the future.

Treasury could make the proposal as part of a request for the second $350 billion of the $700 billion financial rescue fund, industry sources said.

Treasury Secretary Henry Paulson has been criticized by members of Congress for using the bailout money to shore up Wall Street banks, while doing nothing for homeowners facing foreclosure.

The proposal was reported Wednesday on The Wall Street Journal's Web site.

In recent weeks, a diverse set of industry groups from real estate agents to carpet makers have called on lawmakers and the incoming administration of President-elect Barack Obama to subsidize lower mortgage rates and beef up tax credits to help stimulate housing demand.

The National Association of Realtors has been pushing a plan under which the federal government would spend $50 billion to lower mortgage rates. It says doing so would yield about 500,000 more home sales.

The National Association of Home Builders is leading a new "Fix Housing First" coalition to push for aid to the ailing housing sector, including a tax credit of up to $22,000 for anyone who buys a home before the end of 2009.

"The goal is drive mortgage rates so low that home prices not only stop falling but begin to rebound," said Greg McBride, senior financial analyst at Bankrate.com.

While the plan, if enacted, will help anybody looking to buy or sell a home, or refinance out of an expensive mortgage, it may not help those whose credit is so damaged that banks don't want to lend to them.

"It may change the number of borrowers seeking loans but it won't change the qualifications for who gets those loans," McBride said.

VA Loan Update - You Can Now Go To 100% LTV on a Cash Out Refinance

That's right folks. The VA has recently changed it's guidelines to allow a veteran borrower to borrower 100% of their home's value on a cash out refinance loan. This is an increase from the previous maximum of 90%. You gotta love the VA, especially when FHA is decreasing their max ltv to 85% on a cash out.

My Solution to the Housing Crisis

Let me start off by saying that this is not the only solution, but a simple one that will not cost the government billions of dollars. My approach is a 3 pronged attack:

1. Government Subsidized/Mandated Mortgage Interest Rates

Lower Thirty Year Fixed Rate to 4%

All of the people who want purchase a home but haven't yet -1st time home buyers, procrastinators, people still waiting for prices to come down - would seriously reconsider if they new they could get a rate of 4%. Even the people who were responsible and have good credit and equity would pick up the phone to refinance their loan. This will last for 18 months - anyone that wants to refinance into this and can qualify, can apply.

2. Government imposed 18 month moratorium on all primary residence foreclosures. This will help to put a stop to plummeting housing prices due to short sales and foreclosures. I think we can all agree that for the most part, the lenders don't want these houses back anyway; so they are not losing buy not taking back these houses. Also, this will keep people from abandoning their house after receiving a foreclosure notice.

3. All lenders must modify all primary residence loans (1st and 2nd mortgages) to an affordable payment for the borrower (for those who apply). We will use 31% debt to income ratio as definition of affordable. (monthly p.i.t.i payment divided by monthly gross income)

If modification results in principal reduction - so be it - no future shared appreciation. My reasoning: if they will short sell and take the loss, then they will modify and take the loss, end of story. Go out and make new loans to recoup the money. That's what I'm gonna do.

This is about as simple as it can get, and this will get the economy going again. If people see that they can get a rate of 3.5-4% on a 30 year fixed, they will start to buy and refinance again. This will create jobs through a ripple effect, as well as help to put a bottom in on the housing market by creating demand.

Posted by Joseph P. Mazzei at www.mymortgagebroker.blogspot.com

100% Financing - Yes, It Still Exists!

Much "to do" has been made over the recent housing legislation that has eliminated the use of seller funded DAPS (down payment assistance programs). I can say this - HUD has been against these programs for years, and the new bill was their way of finally getting rid of them - at least for now. But do not fret for too long, as this is not the end all-be all. 100% Financing is alive and well.

For years (at least 20) there has been a 100% financing loan available called the USDA Guaranteed Rural Housing Loan. That's right, the United States Department of Agriculture. It's called the guaranteed loan because like its FHA counterpart, the loan is made by the bank and guaranteed (insured) by the USDA (although the USDA does make direct loans). And you don't have to be a farmer, own a cow, or live on 20 acres to be eligible. Most Lenders and banks did not want to bother with this loan because there are income as well as geographic restrictions to this loan. Also, it was much easier to just use FHA and a seller funded DAP. Well, those days are over, at least for now.

Realtors and lenders alike have been scrambling to find an alternative to FHA financing with nothing down, and right now, this is it. It does come with several caveats though. Here's the breakdown, in a nutshell:

1. This is an income sensitive program. You can not make more than 115% of the HUD median income for the area (county) you are trying to purchase in. Many borrowers will not exceed this limit. For example, a married couple with one child can make upwards of $70,000.00 per year and still qualify. (referring to Pasco County Florida) Not bad for a low income program.
2. This program also has geographical restrictions. The program is intended for homes in rural areas, but you would be surprised to see what qualifies as rural. Many suburban areas qualify. You can check the property's eligibility by going to this link: http://eligibility.sc.egov.usda.gov/eligibility
3. The program is for primary residences only; sorry, no second homes.
4. Fixed Rate only - 30 Years.
5. 102% Maximum financing - 100% of purchase price plus 2% guarantee fee.
6. Maximum 6% seller contribution allowed towards buyers closing costs.
   
7. No Monthly PMI.
8. Maximum loan amount = $417,000.
9. No cash reserves required.
10. Full Documentation Only.

As you can see, this program is not a cure all for your 100% financing blues, but this may be just what the doctor ordered for some of your borrowers who do qualify.


Posted by Joseph P. Mazzei at www.mymortgagebroker.blogspot.com

Tips For Avoiding Foreclosure

Are you having trouble keeping up with your mortgage payments? Have you received a notice from your lender asking you to contact them?

• Don't ignore the letters from your lender
• Contact your lender immediately
• Contact a HUD-approved Housing Counseling Agency
• Toll FREE (800) 569-4287
• TTY (800) 877-8339

If you are unable to make your mortgage payment:

1. Don't ignore the problem.

The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.

2. Contact your lender as soon as you realize that you have a problem.

Lenders do not want your house. They have options to help borrowers through difficult financial times.

3. Open and respond to all mail from your lender.

The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.

4. Know your mortgage rights.

Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and timeframes in your state (as every state is different) by contacting the State Government Housing Office.

5. Understand foreclosure prevention options.

Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the internet at portal.hud.gov/portal/page?_pageid=33,717348&_dad=portal&_schema=PORTAL .

6. Contact a HUD-approved housing counselor.

The U.S. Department of Housing and Urban Development (HUD) funds free or very low cost housing counseling nationwide. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance. Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339.

7. Prioritize your spending.

After healthcare, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses-cable TV, memberships, entertainment-that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.

8. Use your assets.

Do you have assets-a second car, jewelry, a whole life insurance policy-that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.

9. Avoid foreclosure prevention companies.

You don't need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD approved housing counselor will provide free if you contact them.

10. Don't lose your house to foreclosure recovery scams!

If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD approved housing counselor.

Posted by Joseph P. Mazzei at www.mymortgagebroker.blogspot.com

Hope For Homeowners - The New Housing Bill

Here are some of the details from the new housing bill:

The President has signed into law legislation that will allow HUD's Federal Housing Administration (FHA) to continue providing targeted mortgage assistance to homeowners. The Hope for Homeowners program will continue FHA's existing and successful efforts to provide aid to struggling families trapped in mortgages they currently cannot afford. Under the program, certain borrowers facing difficulty with their mortgage will be eligible to refinance into FHA-insured mortgages they can afford. The program will be implemented on October 1, 2008.

Sustainable, Affordability Homeownership

Hope for Homeowners maintains FHA's long-standing requirement that new loans be based on a family's long-term ability to repay the mortgage. FHA only allows owner-occupants to be eligible for FHA-insured mortgages. Borrowers must also meet the following eligibility criteria:

• Their mortgage must have originated on or before January 1, 2008;
• Their mortgage debt-to-income must be at least 31 percent;
• They cannot afford their current loan;
• They did not intentionally miss mortgage payments; and
• They do not own second homes.

Features of FHA-insured loans under the new program include:

• 30-year, fixed rate mortgage;
• Maximum 90 percent loan-to-value ratio;
• No prepayment penalties;
• $550,440 maximum mortgage amount;
• Extinguishment of any subordinate liens; and
• New home appraisals from FHA-approved appraisers.

HUD, Treasury, FDIC and the Federal Reserve will form the Congressionally-mandated Board of Directors and work together to establish additional program standards.

Voluntary Lender Participation

FHA will continue to offer lenders an alternative to foreclosing on borrowers. Similar to FHASecure's recent expansion, lenders will be encouraged to write-down the outstanding mortgage principal balances to 90 percent of the new value of the property. In many cases, reductions in principle will cost lenders less than the losses associated with foreclosure.

Market Stability and Liquidity

By continuing to slow the rate of foreclosures, this program will support FHA's existing effort to stabilize local housing markets. From September 2007 to June 2008, FHA has guaranteed more than $93 billion of mortgage capital.

Funding

FHA will insure up to $300 billion in new loans. Borrowers will pay an upfront premium of 3 percent of the original mortgage amount and an annual premium of 1.5 percent of the outstanding mortgage amount. Any additional costs incurred by FHA will be reimbursed by Fannie Mae and Freddie Mac.

Program Timeline

The program will last from October 1, 2008 through September 30, 2011. Since September 2007, FHASecure has helped more than 290,000 families obtain safer, more affordable mortgages. FHASecure is on pace to help 500,000 families by the end of the year.

Posted by Joseph P. Mazzei at www.mymortgagebroker.blogspot.com

Concession or Contribution -What's the Difference?

The words "concession" and "contribution" are used synonymously by professionals in our industry, but it is important to realize that they can have two totally different meanings when it comes to a real estate transaction. Allow me to explain.

Some closing costs and prepaid settlement costs generally are paid by the property purchaser, while other costs are the responsibility of the property seller. Other costs may be paid by either the property purchaser or the property seller. When any costs that are normally paid by the property purchaser are paid (indirectly or directly) by someone else, they are considered to be contributions. All contributions may be paid by any interested party to the property sale transaction, although limitations may be imposed on the amount of the contributions. These limits are usually based on the loan to value ratio of a particular loan as well as other factors; and can vary from 2-9% of the purchase price. When a buyer obtains a loan to buy a home and a seller or other interested party pays costs on behalf of the buyer, this is referred to as a "Financing Contribution" or "Seller Contribution". This is a common practice and does not affect the purchase price as long as the contribution is within lending guideline(s).

When a seller or other interested party gives something of value to a buyer as an inducement to purchase such as cash, furniture, vehicles, vacations, personal property, etc.; this is considered a "Seller Concession" and requires a dollar for dollar reduction in the sale price. For example, if the seller were to give a buyer a flat screen television worth $1000, the purchase price must be reduced by $1000. Some items may be left behind for the convenience of the seller, such as an expensive light fixture or chandelier, as long as the appraiser states in the appraisal that no personal property was used in determining the value of the home. Under some circumstances, "Seller Concessions" are permitted without reducing the purchase price, such as on a VA loan, but the concession is limited to 4% of the purchase price. This does not affect or limit the sellers ability to pay reasonable and customary closing costs for the buyer.

As one can see, there can be a distinct difference between a "contribution" and a "concession" when it comes to buying a home. A "concession" is usually associated with an interested party paying closing costs for buyer, whereas a "concession" is associated with an interested party giving something of value to induce a buyer to purchase the home.

Avoid Mistakes That Could Cost You Thousands - Part 2

Below is the continuation from the previous post.

6. Market Timing/Seasonal Selling

Just as a broker who continually follows the trends of stock, your real estate professional continually follows trends of your real estate market.They will know if the market cycle is poised to
net you the most money. Avoid believing that property sales are seasonal, property is always selling.

7. Refusing To Make Cosmetic Changes

The prospective home buyer's first impression is the most important. Hundreds of thousands of home sales have been lost to unkempt lawns, cluttered rooms, bad stains, unpleasant odors- all the seemingly little things. Imagine you were the home buyer and clean your place from top to bottom... military style.

8. Wasting Time with an Unqualified Prospect.

Your representative's responsibility is to screen a prospect's qualifications before valuable time is lost. Be sure to align your self with the right professional and eliminate negotiating with unqualified prospects.

9. Don't Test The Market

Never put your property online to sell unless you are serious. The right professional will find you buyers and if you are harboring indecision... you will blow the sale.

10. Believing You Are Powerless To Make A Difference

Be a part of the team! Take an active role with your real estate professional to see what you can do to facilitate your sale. Networking with professional peers and personal friends often results in the sale of a home. It's s surprising how many homes are sold this way.

11. Believing All Realtors, Brokers and Others Are The Same.

With all the intricate details and critical decisions to be made concerning your home sale, should you rely on anyone but an experienced real estate investment professional? Many friends and family members have been estranged as a result of failing to meet expectations. Your home sale is a time consuming, effort related, difficult task. Maximize your profit by utilizing an experienced real estate investment professional.

Avoid Mistakes That Could Cost You Thousands - Part 1

Selling your home can be an exhausting experience. Last minute walk throughs, inconvenient calls, price adjustments and the possibility of being stuck with two mortgages are real concerns. If you are not completely prepared you could end up losing hundreds, even thousands, of dollars in profit.

The difference between a profitable smooth transaction and a break even, miserable experience is often a fine line. In the majority of cases it comes down to the subtle know how of your professional. By utilizing the knowledge of well trained real estate professionals, you'll ensure the quick, profitable sale of your home. This report is designed to arm you with the knowledge to avoid 11 common mistakes that cost sellers serious money.

1. Refusing to Make Profit Inducing Repairs.

It always costs you more money to sell "as is" than to make repairs that will increase the value of your home. Even minor improvements will often yield as much as three to five times the repair costs at the time of sale. Your agent will be able to point out what repairs will significantly increase the value of your home. Seemingly small fix up jobs can have quite an impact.

2. Not Considering Other Financing Terms.

Cash is not always the most advantageous transaction. Income level, tax benefits and current legislation are all critical factors when considering purchase terms. Professional real estate agents are experts at home transactions and can lead you down the path that will give you the highest yield.

3. Not Provide Easy Access For Showing

Accessibility is a major key to profitability. Appointment-only showings are the most restrictive, while lock box is the least. However there are certain considerations to take into account: your lifestyle, time frame for the desired sale and the relationship with the person representing your interests. The more accessible your home is, the better the odds of finding a person willing to pay your asking price. You never know if the one that couldn't get a viewing was the one that got away. By developing a trusting relationship with an investor, he or she will show the home with your best interests in mind.

4. Priced Too Low/Priced too High.

One critical reason to find an experienced real estate investment professional is to make sure the property is priced appropriately for a timely and profitable sale. If the property is priced too high it will sit and develop the identity of a problem property. If its priced too low it could cost you considerable profits. The real estate market has subtle nuances and market changes that should be re-evaluated by your representative every 10-14 days to help maximize your return.

5. Relying Solely on Traditional Methods To Sell Your Home.

The real estate professional who is innovative and willing to offer new strategies of attracting home buyers will always outperform those who rely on traditional methods. demand around the clock advertising exposure, innovative lead generation methods and lead accountability. These services exist and should be offered on you home sale.

Secret #9 - (Actually more of a myth)

People tell me all the time that they can't qualify for a mortgage because they haven't been on their job for two years. I usually respond "what makes you think you have to be on your job for two years?". The usual answer is something like " that's what i heard' or "that's what the last mortgage broker told me". Well guess what. Its not true. Let me explain.

Underwriting guidelines say we must verify a two year job history. They do not say a person must be on the (same) job for two years. Lenders are more interested in income stability over job stability. If someone has only been on their current job for a year, and they are making more money now than from their previous job of three years, this is perfectly acceptable and is actually more favorable than being on the same job for two years and making the same money. Does that make sense? It should, cause that's what it (Fannie Mae guideline) says!!

Why is this important? Many people are either talked into waiting to purchase (or refi), or they are talked into a sub prime loan with a much higher interest rate and a prepayment penalty. Either scenario could cost someone dearly.

Is it Time To Buy?

Is it time to buy yet? You Betcha! Everything is on sale, and that's when i like to shop. Rates are still low, but have been steadily rising. I know a lot of people have been waiting for rates to come down further, but as i stated in an earlier post, i don't think they will. The economy is showing signs of recovery, and there are still plenty of affordable homes as well as loan programs out there. So if you are planning on buying a home, now is a great time.

Yield Spread Premium

What is Yield Spread Premium? It is the money the broker is paid on the back end of the loan by the lender. It is usually expressed as a percentage of the loan amount and should be disclosed on your good faith estimate and mortgage brokerage contract. The premium is usually earned in addition to any up front broker fees and is always paid at closing and disclosed on the HUD-1 Settlement Statement. Most lenders limit the amount of yield spread premium a broker can make, usually no more that 5% of the total loan amount.

Fed Cuts Rates

Scrambling to shore up the faltering economy, the Federal Reserve cut interest rates to the lowest point in nearly four years Wednesday as the nation teetered on the edge of recession.

Time to Refi?

Is it time to refinance yet? Many people are waiting for rates to come down before refinancing, but rates may not fall any further. Actually, rates have been going up. Will it continue?

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