Archives for January 2010

If You are in any aspect of the real estate industry, you don’t want to miss this…


Both events are at the Seattle Center:

March 18, 2010 – Pacific Northwest Housing Summit  
March 19, 2010 – RE Barcamp Seattle

The panelist for the Summit continue to grow and we anticipate quite a turn out from across the country at both events.  Sponsorship opportunities are still available and start at $250.  

Of course there will be "tweet-ups" and social hours following both days.

Be there!  Follow both events on Twitter: @pnwhs #pnwhs and @REbarcampSEA #rebcsea

PS:  Space is limited to the first 700 registered attendees for the PNWHS…and there's a "sweet heart deal" for pre-registrations by Valentines Day.  


Claiming Your Home Buyer Tax Credit

April 15th will be here before we know it and many are preparing for filing their income tax returns.  If you are planning on claiming the home buyer tax credit (up to $8,000 for a first time home buyer or $6,500 for a repeat/long-time resident home buyer) there are some things you need to know as far as what the IRS will require.

First of all, you will not be able to e-file if you're claiming the home buyer taxUnclesam credit.  This is because the IRS is requiring supporting documentation due to all the fraud that transpired previously with the first time home buyer tax credit.  So along with Form 5405, you may also need to send the following when you submit your return to the IRS:

  • a copy of your HUD-1 Settlement Statement with signatures of both parties (your autographs and the Seller's).  In Washington State, this is something you receive from your escrow company.

If you're claiming the tax credit as a "long time resident" home buyer (meaning you've owned and occupied your previous residence for any 5 consecutive year period during the 8 year period ending on the purchase date of your new home), in addition the the Settlement Statement, you will also need to provide the IRS one of the following:

  • Form 1098 or Mortgage Interest Statement
  • Property Tax Records
  • Home owner insurance records

The IRS is requiring this documentation to prove you owned and occupied your home for a minimum of five out of eight years.  And per their instructions:

"These records should be for 5 consecutive years of the 8 year period ending on the purchase date of the new home."

Be sure to review the IRS Instructions for Form 5405 for more information and please consult with your tax professional to make sure you qualify.  My specialty is helping Washington State residents with their residential mortgage needs…not income taxes!

If you are considering buying a home and taking advantage of the first time or repeat (long time resident) home buyer tax, you only have about three months left.   You must have a binding contract (signed purchase and sales agreement) by April 30, 2010 which must close by June 30, 2010.

And the Fed Said…

It's no surprise that the FOMC is leaving the Fed Funds Rate unchanged…the big question is whether or not they are going to extend keeping mortgage rates artificially low beyond March, when the program is said to terminate.    And moments ago, the FOMC Statement confirms that the plans are still sticking to the end of March:

"To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter."

Many experts feel that the Fed's participation in buying mortgage backed securities, which mortgage rates are based on, has kept rates about one full point lower than what they would be with out their helping hand in the markets.

Following the release of this news, mortgage backed securities are deteriorating and I'm anticipating new rate sheets from the lenders we work with featuring pricing for the worse.

Get Updates from The Mortgage Porter via Email

I wrote earlier that I discovered I was having issues with the service I was using for sending updates from my blog via email…so I decided to make a switch.   What this means is that if you were receiving my posts via email, you may need to resubscribe.  It's real easy to do, just enter your email address in the upper right corner and  you'll receive an email to confirm your subscription.

You'll receive email updates whenever I write something…no new post, no email.  And you can unsubscribe at anytime.

100 Days Remaining for the Home Buyer Tax Credit (and my 1000th Post)

Fthbtax My apologies for the home buyer tax credit clock I've added to the left side bar of my blog ticking away the time remaining for home buyers tax credit.  It's not my style, I don't like to pressure folks and I really don't like telling someone that they missed an opportunity. 

Whether you are for or against our home buyer tax credit it is something that many home buyers, first time and "move-up" home buyers, will take advantage of.   Unlike the first tax credit that was passed where the home buyer had to pay it back over 15 years, this is a "tax credit".  This credit repaid if you sell your home within three years. 

The available tax credit for first time home buyers (those who have not owned a home in the last 36 months) is up to $8,000.   For the "move-up" or "long-time resident" (you don't have to be buying a bigger home to qualify), the available tax credit is up $6,500.  The long-time resident is defined as someone who has owned their home as their primary residence for the last three out of five consecutive years.  The tax credit for both first time and long time residents is for the purchase of a primary residence (owner occupied).

Income limits were raised for transactions closing after November 6, 2009 to up to $125,000 modified adjusted gross income (MAGI) for taxpayers and $225,000 for joint filers.  The credit is reduced up to those with MAGI above $145,000 for single and $245,000 for joint.

Homes with a sales price of over $800,000 are not eligible (too bad–the Jumbo market needs all the help it can get). 

In order to qualify for the tax credit, home buyers must be in contract to purchase a home by April 30, 2010 (100 days away as of today)* with a closing date no later than June 30, 2010 (no summer vacations for escrow officers in June).   Home buyers will need to file IRS Form 5405 and be sure to include a copy of their HUD-1 Settlement Statement.

Members of our Armed Forces serving outside of the United States have been granted an extra year for the tax credit.  They must be in contract by April 30, 2011 and close prior to June 30, 2011.

Check with your tax advisor for more information.

Special note: this is my 1000th article posted at Mortgage Porter!  Thanks again for your continued support and readership. 

FHA Making Good on their Word for a Tougher 2010

Late last year, HUD gave us all a warning that they were going to toughen up on FHA guidelines in January.  I'm still waiting for the Mortgage Letter with all the nitty-gritty details to be issued which will be issued tomorrow, January 21, 2010.  The changes to FHA are said to go into effect this Spring (wonder if it will be after the home buyer tax credit has expired).

FHA is going is going to increase the upfront mortgage insurance premium from 1.75% of the loan amount to 2.25%.   I'm currently helping some home buyers relocate to Des Moines, Washington.  They're buying a home with a sales price of $395,000 and the (currently available) minimum 3.5% down payment.  Here's how this would impact their mortgage scenario based on:

  • this morning's FHA rate for a 30 year fixed (as of 8:00 a.m.) at 4.875% (5.515% APR)
  • base loan amount of $381,150

UFMIP (upfront mortgage insurance premium) rate of 1.75% = $6670 (base loan amount x 1.75%).  381,150 + 6670 (since it is being financed) = $387,820.  Amortized for 30 years at 4.875% = principal and interest payment of $2,052.38. 

UFMIP rate of 2.25% = $8575 (381,150 x 2.25%).  Base loan amount plus 8575 = $389,725.  Amortized for 30 years at 4.875% = principal and interest payment of $2062.46.

With this scenario, based on a purchase price of $395,000, the difference in payment is ten bucks

FHA is increasing the minimum credit score to 580.  Now before you get in a dither, please know that most lenders, including Mortgage Master, will not go lower than 620 for a mid-credit score with FHA because of bank underwriting "overlays". 

FHA is also decreasing the allowable Seller Concessions from 6% to 3% of the sales price.  This will have little impact on my transactions–typcially 3% of the sales price is more than enough since the contribution can only go towards actual closing costs, prepaids and reserves.   Unless the seller was going to pay for the upfront mortgage insurance premium too…

It's my understanding that FHA is requesting to increase the annual mortgage insurance as well.  They actually had risked based pricing of mortgage insurance approved back in the summer of 2008 which was then put under a moratorium which quietly expired October 2009.  I'm sure they need to revamp the levels of risk since back in the summer of 2008, FHA was insuring loans with much lower mid-credit scores than what they (or lenders) would accept today.

HUD's Press Release from this morning.

So take a deep breath as the FHA belt continues to tighten and stay tuned to the Mortgage Porter…I'll keep you posted.

Mortgage Master is closed today in honor of MLK Day

In honor of Martin Luther King Day, Mortgage Master is closed and will reopen for business on Tuesday, January 19, 2010 at 9:00 a.m.

Will the Nationwide Mortgage Licensing System Impact How Consumers Select a Mortgage Originator?

Nmls Soon consumers will be able to access the NMLS to gain information about mortgage loan originatorsThe SAFE Actrequires that all residential mortgage originators be registered on the NMLS system (LO's who work at banks are only registered and LO's who work at non-depository mortgage companies are held to a higher standard with clock hour requirements).  The public will be able to access the National Mortgage Licensing System and Registry's data (NMLS Consumer Access) beginning January 25, 2010.  I'm wondering if it will have any impact on how a mortgage professional is selected.

Most of the data available is what you would expectsuch as contact and employer information, job title and of course the LO's NMLS Unique ID number.  The NMLS will also reveal the employment for the past ten years and legal names the individual has used since they were 18 years old.  

I'm actually very proud of my resume.   My ten year anniversary at Mortgage Master will be on April 1, 2010.  If you look further back, you'll see that I worked 14 years in the title and escrow industry and changed employers about every five years.  How will a consumer view a mortgage originator who has made several moves over the last ten years?  Will the NMLS show if a mortgage company went out of business or why the mortgage loan originator left the company (if it was voluntary or not)?  I don't have an issue with the employment data being available, although 10 years is a long time.  Most of us have our information plastered all over the internet on sites like LinkedIn or Facebook anyhow.  Consumers should know if a mortgage originator has been in the business 10 days, 10 months or 10 years. 

I am remarried and I changed my name with both of my marriages.  So if you look back on my record, when I was 18 my last name (maiden) was Christopherson; I married in my early 20's and became a Witt and I married again (on April fools four years ago) and became a Porter.  Will a consumer think I'm not a good mortgage originator because I've had more than two names (I divorced once)?  What if I was unlucky in love and married 5 or 6 times?  Does that make a difference?  Will the new system reflect if a name change happened because someone was widowed?   This will impact women more than men since men tend to not change their names for purposes of marriage.  I understand that the NMLS is disclosing this information due to fraud…but will this information impact a consumers selection?

It will be interesting to see if a home buyer or person in need of a refinance utilizes this information (or if spammers do).  Data that I think would be useful (but does not appear to be included) would be the percentage of types of loans originated–does the LO have experience with FHA loans, jumbos or new construction?  How about the performance of the mortgages the LO has originated?  Information that would help consumers get an idea of a mortgage originators expertise and skills instead of how many times they've been married or job hopped.

Your thoughts?