Archives for November 2009

Happy Third Birthday, Mortgage Porter

It's hard to believe that I've began writing on blogs three years ago today.   I honestly didn't expect anyone to read what I had to say about mortgages.  It almost began more as free therapy since I had to get what was bothering me about the industry off my chest.  And thanks to the current mortgage landscape, I still have plenty to write about and there are so many forums with social media.

Three years ago, I  had plugged away on Mortgage Porter until I was invited to be a contributing author at Rain City Guide, where I still post today.  I write for a few other blogs now and then too.  Social media has evolved during this time.  I also enjoy "micro-blogging" in 140 characters or less on Twitter, where I post the rate quotes I'm providing Washington State consumers, various mortgage factoids and personal odds and ends.  Facebook has become a place where I stay connected with family, friends and clients.   My blogging and participation in social media has brought me so many great opportunities including being recognized by peers with the Washington Association of Mortgage Professionals 2009 Jim Fitzgerald Distinguished Service Award and being a panelist at RE Blog World in Las Vegas.

And it all started with this blog post…go figure! 

Thank you for reading, commenting and for those of you who have selected me to be your mortgage professional.  I'm honored.

Happy Thanksgiving

There is so much to be thankful for.  If I were to write it all down, I simply wouldn't know where to begin or end.  

Mortgage Master Service Corporation will be closing at 2:00 p.m. today to start celebrating the Thanksgiving holiday.  Our office will reopen for business as usual on Monday, November 30, 2009.  

King County's recorders office is closed today.

The bond market will be closed tomorrow and closing early on Friday (11:00 PST).

Happy Thanksgiving to you!

Tax Credit for Home Buyers who have Owned a Home

I was asked this question by one of my friends on Facebook:

"I was listening to one of your videos from last Monday and you mentioned something about a tax credit for people who has owned their homes for the past 5 out of 8 years… Do you know what that is all about yet?"

When the first time home buyer tax credit was extended with the "Worker, Homeownership, and Business Assistance Act of 2009", Congress added a few goodies, including increasing the qualifying income limits and allowing folks who have owned a home out of the past 5 out of 8 years to participate with a tax credit of up to $6,500.   This tax credit has been pegged as one for a "move-up" home buyer, however it just needs to be a primary residence–it does not need to be larger or more expensive than the last residence.  In the Act, these home owners are referred to as "long-time residents of the same principal residence".

One does not have to sell their current residence in order to qualify, from the IRS:

If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home to use as your principal residence.

The IRS uses this example for occupying your home in the last five out of eight years:

The requirements are that you must buy, or enter into a binding contract to buy, the replacement principal residence after Nov. 6, 2009, and on or before April 30, 2010, and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive-year period during the eight-year period that ended on the date the replacement home is purchased. For example, if you bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009.

The tax credit is only valid for homes priced under $800,000.   I'm not sure why they put this limit on the sales price when there are all ready income limits and limits to the amount of the tax credit in place.   The upper end of the housing market can really use some help.

Qualifying adjusted gross income limits have been raised for first time home buyers and repeat home buyers to $125,000 for single people an up to $225,000 for married couples for the full tax credit.

If after 36 months from purchasing the home, if it ceases to be the residence that you occupy (you've sold the home or converted it to a rental, for example), the tax credit may be required to be repaid.

I don't recommend buying a home just because of the tax credit.  There are costs to owning a home that will present themselves long you've enjoyed your $6,500.   If you are counting on receiving the tax credit, do visit the IRS's site and make sure you will actually qualify by completing the proper form.  I remember meeting with one of my clients who was buying her first home, when we reviewed the tax form together and she discovered she barely made too much money to qualify, she was disappointed.  She did go through with her purchase and she loves her home…but knew before getting too far into a purchase transaction that she was not going to qualify for the $8,000 first time home buyer tax credit (she would now with the increased income limits).

Check out this FAQ for the Repeat Homebuyer Tax Credit for more information. 

The Last Word: Page 3 of the Revised HUD-1 Settlement Statement

If we mortgage originators had more flexibility of when a good faith estimate could be revised for our clients, I would be applauding the last page of the revised HUD-1 Settlement Statement.  On this page, the borrower actually get to compare the closing costs on the good faith estimate directly to the those shown at closing on the estimated HUD-1 Settlement Statement side by side.  My beef is that we are very limited by HUD's grey definition of "changed circumstances" which allows us to issue an updated good faith estimate.

The page 3 of the HUD-1 also breaks the fees into the various tolerance levels.   The first section has the fees that cannot increase.  If the HUD-1 fees in the right column are higher than those in the Good Faith Estimate column on the left, the mortgage originator will have to refund the difference.


The next section has the fees where HUD will allow an accumulative variance of up to 10%.

Followed by the last section where the tolerance does not apply.   The fees shown in the section below can change from the good faith estimate.


Page 3 of the HUD-1 Settlement Statement concludes with a summary of the loan terms.  Hopefully none of these terms (or fees) are a surprise to the borrower, their mortgage originator should have explained the details fully well in advance of the signing appointment. 


Ideally, mortgage companies will provide loan documents a few more days in advance than what is taking place with our current GFE/HUD and RESPA guidelines…this means longer transaction times for consumers.   I also highly recommend that consumers obtain a copy of their estimated HUD-1 Settlement Statement two days before their scheduled signing appointment.

I've always recommended that borrowers bring their good faith estimate with them to their signing appointment, maybe now they won't need to!

Overdraft Protection and Your Credit Score

I have to admit, a lot of my content for the articles I write come from my clients or other home owners who have really good questions.  When I can't find an answer ready to refer them to here at Mortgage Porter, it's time to write a post!   Here's a great example of a question I recently received from one of my refi clients:

"I have a question about a possible impact on our credit score, which you may have some insight into.  We have been meaning for some time to get overdraft coverage on our checking account for "just in case" and today, we got that lined up.   However, I'm reading over the documents from our bank this evening and it looks like they just issued us a credit card.  Is this something that would play poorly on our FICO score?"

Overdraft protection is often a new credit card issued from your bank that is attached to your bank account.  Because this is "new credit" it will impact credit scores.

According to Linda Ferrari's book "The Big Score – Getting It and Keeping It"

"New accounts will lower your overall account age and diminish your length of credit history for a period of 3-6 months, so be sure to have cushion in your score.  Even if you've used credit for a very long time, opening a new account can lower your credit scores."

How much your score is impacted is hard to say–it depends on your overall credit picture.  If you're someone with perfect credit and 800 scores, your credit score may be barely impacted.  However, if you are someone with pretty good credit (around 720) BEFORE the new debt (over-draft protection) and you're considering a refinance or using a mortgage to purchase a home, you might have just dipped your credit low enough to have been impacted by higher mortgage loan rates.

Overdraft fees can add up quick and due to recently regulations by the Fed preventing banks from charging overdraft fees on certain transactions (ATM/debt cards) which will go into effect July 1, 2010, banks are sure to offer overdraft protection to help make up for lost revenue.

The Federal Reserve Board on Thursday [November 12, 2009] announced final rules that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.

If you are considering adding overdraft protection to your bank account, do find out what type of account it is: a line of credit (or credit card) or maybe it's attached to your savings account.   If you are considering a mortgage (or other type of financing where credit scores are considered) you may want to delay obtaining overdraft protection until after your transaction has closed to avoid having your credit score dinged.

Late Night Friday Fun

Please don't count on this type of entertainment from me… I just had to share this incredible video from Seattle's Shorecrest High School with one of my favorite tunes "Hey Ya"  

Hat tip to West Seattle Blog via Gabby Cat

2010 Conforming Loan Limits for Washington State

Fannie Mae along with FHFA have announced that the 2010 conforming loan limits will be the same as 2009.   FHA's 2010 loan limits will follow from HUD:

However, as noted in FHFA's announcement, high-cost area loan limits are derived from median home prices estimated by the Department of Housing and Urban Development (HUD).  HUD has a 30 day appeals period where requests for indiviual area median home price increases are evaluated.  FHFA will issue a subsequent announcement if any invididual high-cost area loan limit is increased as a result of HUD's apppeals process.

Conforming Loan Limits for 2010

1 Unit – $417,000

2 Unit – $533,850

3 Unit – $645,300

4 Unit – $801,950

NOTE:  The following Washington counties do not have "high-cost area loan limits": Adams, Asotin, Benton, Chelan, Clallam, Columbia, Cowlitz, Douglas, Ferry, Franklin, Garfield, Grant, Grays Harbor, Island, Kittitas, Klickitat, Lewis, Lincoln, Mason, Okanogan, Pacific, Pend Oreille, Spokane, Stevens, Thurston, Wahkiakum, Walla Walla, Whatcom, Whitman and Yakima.

High Balance Loan Limits for Washington State

King, Pierce and Snohomish Counties

1 Unit – $567,500

2 Unit – $726,500

3 Unit – $878,150

4 Unit – $1,091,350

Clark and Skamania Counties

1 Unit – $418,750

2 Unit – $536,050

3 Unit – $648,000

4 Unit – $805,300

Jefferson County

1 Unit – $437,500

2 Unit – $560,050

3 Unit – $677,000

4 Unit – $841,350

Kitsap County

1 Unit – $475,000

2 Unit – $608,100

3 Unit – $735,050

4 Unit – $913,450

San Juan County

1 Unit – $593,750

2 Unit – $760,100

3 Unit – $918,800

4 Unit – $1,141,850

Fannie Mae also announced a loan limit for second mortgages:

For second mortgage loans, the loan limit for 2010 is $208,500…. Furthermore, the sum of the original loan amounts of the first and second mortgage loans may not exceed the applicable loan limit for first mortgage loans based on the location and the number of units of the subject property. These loan limits apply whether or not Fannie Mae owns or has an interest in the first mortgage loan.

When I began my mortgage career back in 2000, the conforming loan limit for a single family dwelling was $252,700. 

December’s Recorder’s Office Closures for King, Pierce, Snohomish and Kitsap Counties

December 23, 2009 – Snohomish County closing early at 3:30 pm

December 24, 2009 – King and Snohomish County closed.

December 25, 2009 – Christmas (all offices closed)