The World of Mortgage Blog - According to Kimberly and Cathy

Interest Rate Chart!

We hope this chart can provide food for thought for anyone wondering if now is a good time to get off the fence regarding a home purchase or refinance.

Click Here for the 200 Year Historical Rates On 30-Year Fixed-Rate Mortgage Chart.

(Feel free to share and use this with customers.)

Please give us a call or email if there's anything we can do for you!

Current Timeframes To Lend AFTER Foreclosure, Bankruptcy, Short Sale

Conventional:

Foreclosure:    (Home was given back to the bank – No owner participation) Wait 7 years if they had NO extenuating circumstances, as measured from completion date of foreclosure

Wait 3 years if they had extenuating circumstances* AND 10% Down Payment.  Primary home purchase and limited cash out refi.  No non-owner or second homes purchase or refi allowed.

Short Sale:  (Home was sold but price couldn’t cover the amount owed)  Also known as a Deed in Lieu of Foreclosure.  Wait 2 years with 20% Down Payment, OR wait 4 years with 10% Down Payment, OR wait 7 years for less than 10% Down Payment.  Potentially can wait 2 years with extenuating circumstance* and 10% Down Payment

Bankruptcy 7:   (Client doesn’t pay back any of the debts owing)  Wait 4 years,  Potentially wait 2 years with extenuating circumstances

Bankruptcy 13: (Client pays back all the debts owing on a monthly scheduled payment plan)  If discharged (paid all the debts in full) it’s only 2 year wait, if dismissed (not completed the pay back of all debts) then wait 4 years before purchase of new home.

FHA: 

Foreclosure:    (Home was given back to the bank – No owner participation)

Wait 3 years

Short Sale:      (Home was sold but price couldn’t cover the amount owed)   Also known as a Deed in Lieu of Foreclosure

If buyer has had no mortgage late payment leading up to short sale or no other late payments on revolving/car/installment debts leading up to the short sale AND they are did not take advantage of a declining value market, they can be approved right away.  Other wise, they have to wait 3 years OR have extenuating circumstance to purchase before 3 years.

Bankruptcy 7:   Wait 2 years with logical reason for Bankruptcy and have reestablished credit

Bankruptcy 13: Need to show they have 12 month history of bankruptcy payments on time, qualify with Bankruptcy payments in debt to income ratio AND the Bankruptcy judge must give permission to purchase a new home in writing.

VA:

Foreclosure:    (Home was given back to the bank – No owner participation)

Wait 2 years

Short Sale:      (Home was sold but price couldn’t cover the amount owed)   Also known as a Deed in Lieu of Foreclosure

If buyer has had no mortgage late payment leading up to short sale or no other late payments on revolving/car/installment debts leading up to the short sale AND they are did not take advantage of a declining value market, they can be approved right away.  Other wise, they have to wait 3 years OR have extenuating circumstance* to purchase before 3 years.

Bankruptcy 7:   2 years with logical reason for bankruptcy and have reestablished credit

Bankruptcy 13: Need to show they have 12 month history of bankruptcy payments on time, qualify with Bankruptcy payments in debt to income ratio AND the Bankruptcy judge must give permission to purchase a new home in writing.

                                                                     

**Alert Your Clients To A Potential Increase In Loan Costs From Fannie Mae And Freddie Mac!

We were alerted this morning that Fannie Mae and Freddie Mac will be worsening their base pricing by approximately .50 effective for loans with settlement dates on or after April 1, 2012.  This change is a result of the Temporary Payroll Tax Cut Continuation Act of 2011 which directs Fannie and Freddie to increase their fees.  Both agencies said that they will monitor these changes and they may announce plans for additional pricing changes in the future.

While April 1 is over 2 ½ months away, keep in mind that banks and mortgage companies be incorporating these increases into their pricing modules at various speeds over the next 30 days.   SO….  If you have a buyer that is wondering whether or not to lock in and protect an interest rate now or float it for a while to see if it will improve – use this knowledge the help them make an informed decision.    

This change will be applied to Conventional loans and High Balance loans only.   These changes do not apply to Jumbo,  FHA, VA or USDA products.

Mortgage Market Forecast for 2012

Happy New Year to you and your family!

 

Many of you are familiar with Barry Habib of the Mortgage Market Guide – he provides us daily updates on the stock and bond market as well as events happening around the whole that impact mortgage rates.  It helps us tremendously in our efforts to guide our clients in interest rate lock/float decisions.  The following is a summary of his forecast for 2012.  If any of you would like more information we’re happy to talk through this in greater detail.  His forecast is 8 pages long…we’ll try to be a bit more brief.  J

 

Events that will likely affect interest rates in 2012

€        The European Debt situation – This is an enormously important issue for the world in general but it’s specifically interesting for us in the real estate/mortgage industry as it could have a significant impact on mortgage interest rates.  As The European nations continue to struggle, our mortgage interest rates benefit.  As Barry put it in the forecast, “we’re still the cleanest shirt in the dirty laundry”.  As a result, investors looking for a safe place to put their money are flocking to our bonds.  This helps mortgage rates.

€        Unemployment Rate - He forecasts that unemployment will continue “north of 8% throughout 2012” with more gains in the private sector offsetting losses in government jobs.  With little change in this rate, it won’t be a driver of interest rates for 2012.

€        Quantitative Easing 3 (QE3): The Fed is considering another round of QE under the guise of helping to boost the housing market.  When QE2 was announced (in 2010), rates went down on the rumor but once the program started actually went up.  The current rumor is that there is a 50/50 chance of this happening in the spring - So, rates should currently be benefiting by this rumor for another several months. 

€        The Housing Market forecast:

• o        Delinquency rates have declined and they will continue to do so. 
• o        Home prices will likely decline modestly (1 to 2%) in the first ½ of 2012 and then recover in the 2^nd 1/2  
• o        Rental/Investment properties will make up a larger portion of the market in 2012

 

Interest Rate Forecast

€        He sees interest rates moving ‘a leg’ lower in the first part of 2012 as QE3 rumors swirl

€        These lower rates, as we talked about above, would likely quickly reverse after QE3 actually gets implemented.

€        If the Fed doesn’t do QE3, rates will continue to be attractive through the first part of the year, moving a bit higher towards the end of 2012 as the economy picks up.

€        Rates may dip down near 3.5% and rise somewhere in the mid-to-high 4’s in 2012 but not likely higher than that unless inflation starts to spike higher. 

 

We find this whole topic fascinating, but understand that not everyone does…so we’ll leave it there.  If you’d like have a deeper understanding of how any of the issues above may affect the real estate/mortgage market give us a call. 

 

FHA 90 Day Flipping Rule Extended

FHA has officially extended the Waiver of the Ant-Flipping regulations through December 31, 2012.  Here are the formal details……

 

FHA Extends Waiver of Anti-Flipping Regulations Through 2012: | Fri, 23 Dec 2011 07:42
In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Acting Federal Housing Administration (FHA) Commissioner Carol J. Galante will extend FHA’s temporary waiver of the anti-flipping regulations.

With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, FHA temporarily waived this regulation through January 31, 2011, and later extended that waiver through the remainder of 2011. The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The extension is effective through December 31, 2012.  The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers. The Waiver continues to be limited to sales meeting the following conditions:

-   All transactions must be arms-length (meaning  not related to the seller), with no identity of interest between the buyer and seller or other parties participating in the sales transaction (meaning mortgage and realtors)

-   In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value…..meaning proof of work order receipts.

 

Mortgage Year End Wrap!

Some facts of interest pertaining to mortgage: 

1)       Washington State Housing Finance Commission did sign a new contract with a bank servicer.  Evergreen continues to offer and close on State Bond Down Payment Loans.

2)       Don’t forget the benefits of using the MCC Mortgage Credit Certificate Program.  This give the buyer 20% of the interest they paid on their mortgage back to them at tax time.

3)       FHA 90-day Flipping Rule was only extended till 12/31/2011.  To date, we haven’t received confirmation from FHA that they will extend in to the 2012 year.  This means that if you have an FHA offer, the seller has to be in title of the home for 90 days BEFORE the contact is written up.  We’ll keep you informed of changes.

4)       Investment Purchased are picking up – approximately 35% of the sales.  Couple of reminders:  Buyer must put at least 20% down payment, coming from their OWN money (no gift funds allowed).  Seller can only pay a maximum of 2% toward buyer closing costs.  Buyer must have 6 months reserves on their properties after closing.  If buyer doesn’t have experience with being a landlord, then the buyer must qualify with the full house payment of the rental purchase.

Wishing you prosperity in the 2012 Year!

Tax Credit for First Time Home Buyers

We received a ton of emails from our realtors this past week on how the MCC First Time Buyer Tax Credit Program Works. Many buyers are looking for that extra benefit to purchase, aside from interest rates at record low 4% range. MCC is a program offered through the Washington State Housing Finance Commission (WSHFC). Individual loan officers must be licensed to offer the program, and many haven’t taken the required courses because the loans do require a little more work.

Many of you are aware of WSHFC (nick named State Bond) which offer an assortment of down payment assistance to first time buyers. The MCC program stands for Mortgage Credit Certificate. It gives the buyer a DIRECT TAX credit of 20% of the interest they paid on their mortgage toward a credit of what they owe the IRS.

Example:

Let’s say they finance $200,000 at 4.25%. That’s a standard deduction of $9000 of interest paid for the year on schedule A of the tax return.

Under this MCC program the borrower gets 20% of that $9000 as a tax credit ($1800). This would, of course, be a direct credit against their tax bill. The remaining 80% of the interest deduction/payment goes on the Schedule A.

The true benefit to the borrower: The tax credit is a more direct dollar benefit than a tax deduction reducing a borrower’s taxable income.

Here are the basic details:

€ Must be a first time buyer (if they haven’t owned a home in the past three years they are considered a first time buyer.) If they buy in a ‘targeted area” – as outlined by State Bond - they can also not be qualified as a first time home buyer.

€ Max Sales Price of $475 King and $395K in Pierce County

€ Income Limits based on household size: $97K for 3 people in King, $90K for 3 people in Pierce

€ State Bond will charge the buyer a $695 non-refundable fee on their HUD 1 to originate loan

€ Program can be used with Conventional, FHA, VA

****YOU CAN NOT use the MCC program with the State Bond Down Payment Assist Program. Buyer must have their own funds for down.

Reminder on Condo Financing AND Quick update on 'near-term' Interest rates

Just as a reminder:  Watch for the following requirements on Condos for financing on Conventional and FHA loans

• Needs under 15% delinquency on condo dues  (30 days+)
• Watch that not more than 10% of the units are owned by one entity
• Watch that not more than 20% of the project is commercial in nature
• No litigation can be pending (accept if it’s in connection with individual owners to collect HOA dues)
• 70% of the units must be sold or under contract as an owner occupied (or 2^nd home) status on a new project/conversion
• Association must have at least 10% of budget in reserves for capital expenditures and deferred maintenance.
• Needs 51% owner occupancy (or 2^nd home)

 

Quick Interest Rate summary from Barry Habib at Mortgage Market Guide:

While he doesn’t anticipate interest rates will be moving much higher in the near-term because of the uncertainty in Europe and the prospects of additional Mortgage Bond buying (QE3), he doesn’t see interest rates moving lower either.  Inflation, the enemy of low mortgage rates, is elevated and if it continues to creep higher it will limit any improvement in home loan rates. 

New FHA Loan Limits & Realtor $1000 Bonus on Freddie Mac Prop

Happy Thanksgiving!

Our team is working this holiday so call on the 24 hour access line 206.774.7594 if you need help.

Couple of items to share:

• Freddie Mac is offering a realtor bonus of $1000 for any home sold where Freddie Mac is the seller.  This is for sales between Nov 15 and March 15, 2012.
• FHA/HUD is in the process of raising their loan limits above the $506,000 current balance.  For the King/Snohomish areas it’s likely to be raised back to the $567,500 limit.  Once this has finalized, we’ll send you written confirmation of the actual loan limits.

Solutions for Recent "Tightening" in Conventional Loan Underwriting Systems

Happy Thanksgiving to you and your family.  Our entire team appreciates the opportunity we have each day to support you in helping people with their home purchases.   

Quick update on a trend we’re seeing… (and some options to keeping the transaction together)

Within the last month Fannie Mae’s underwriting system (DU) has tightened up on their underwriting guidelines.  This is affecting conventional loans with 5% - 10% down payment with high debt-to-income (DTI) ratios.  While you guys aren’t the lender and don’t necessarily know the nitty-gritty details of the loan, you may want to know some of the ‘fixes’ to this issue so if your transaction is affected you can keep things rolling forward.

 Switch to FHA – Rates are a slight bit lower, they allow higher DTIs and the loan has a provision for  ‘assumability’ for the future buyer (a nice bonus in a rising rate environment)

1. Change-up from your standard mortgage insurance options.  Evergreen has partnered with a couple of PMI companies that have some really creative mortgage insurance options that can lower a borrowers overall monthly mortgage payment.  This gets them back in the game!

 

Let us know if there is something we can help you with.  We’re a creative bunch…!

 

Speaking of which…we added our first two “Mortgage Minute” videos to our blog yesterday.  They are about “Should you Pay Points to Buy down your rate?” and “Three ways to Lower your Closing Costs”.