Archives for May 2010

Memorial Day

Freedom of speech and freedom of action are meaningless without freedom to think. And there is no freedom of thought without doubt. ~Bergen Evans


Spirit, that made those heroes dare
To die, and leave their children free,
Bid Time and Nature gently spare
The shaft we raise to them and thee.

~Ralph Waldo Emerson


Never in the field of human conflict was so much owed by so many to so few. ~Winston Churchill


Mortgage Master Service Corporation is closed today in observance of Memorial Day and to honor those who have made the ultimate sacriface for our country.  

The Home Affordable Refinance Program Extended to Next Summer

NOTE:  This program has been extended thru June 30, 2012 DECEMBER 2013.

Fannie Mae and Freddie Mac's Home Affordable Refinance that allows homeowners upside down with their home equity to refinance has been extended until next summer.  From Fannie Mae:

This program is for borrowers who have demonstrated an acceptable payment history on their mortgage but, due to decline in home prices or where mortgage insurance is not available, have been unable to refinance to obtain a lower payment or move to a more stable product.

…lenders may continue to apply for the HARP flexibilities to loans originated under Refi Plus and DU Refi Plus provided the note date is on or before June 30, 2011…

This program has been very helpful for Washington homeowners who are interested in reducing their mortgage payment or refinancing out of their adjustable rate mortgage.  This is not a loan modification–this is a refinance.

NOTE: the following guidelines are for mortgages that are securized by Fannie Mae.  I'll follow up with a post on those owned by Freddie Mac — which I can help you with too.

In order to qualify, the home owner's mortgage that is being refinance must be owned by Fannie Mae.  This isn't something that most home owners know since you don't write your mortgage payment to Fannie Mae, but you can check to see if Fannie is the investor on your mortgage by clicking here.  To be eligible, the existing mortgage must have been owned or guaranteed by Fannie Mae prior to March 1, 2009.

Fannie Mae has made some recent adjustments to the HARP program including allowing the removal of borrowers as long as the remaining borrower(s) can demonstrate they have been making the mortgage payments from the own funds for the prior 12 months (except for in cases of a borrower passing away).  If a borrower is removed from the mortgage via a HARP refinance, Fannie will also require that the borrower is no longer on the title to the home.

Here are some other key points about the Home Affordable Refi (DU Refi Plus):

  • Maximum loan to value is 125%.  There is no "combined loan to value" limit.
  • Existing second mortgages must be subordinated (second mortgage lien holders review and decide IF they are going to allow the mortgage to be subordinated).  No new subordinate financing (second mortgages) are allowed.
  • Second mortgages or HELOCs are not allowed to be paid off with a HARP refinance. (I WISH they were).
  • If your original mortgage was at 80% loan to value, your HARP mortgage will not have private mortgage insurance if your current LTV is over 80%.
  • Fannie Mae High Balance/Jumbo mortgages are eligible.Loan limits in the King, Pierce and Snohomish County area are up to $567,500 for a single family dwelling (however the mortgage being paid off must be owned by Fannie Mae–see above). 
  • Available for primary, second homes and investment properties.
  • Appraisals may not be required depending on the response from the automated underwriting findings.  With that said, I recommend planning on having an appraisal…I've seen very few come through with an appraisal waiver option.
  • DU Refi Plus (HARP) has price hits (aka LLPA) based on your credit score and loan to value.
  • Borrowers are only permitted a maximum of $250 cash back on a Fannie Mae HARP refi

Borrowers must still qualify for the mortgage.  Documentation may be reduced to one paystub and a verbal verification of employment for salaried employees or one year tax returns for commissioned or self-employed borrowers.

Various lenders or banks may have their own underwriting guidelines or "overlays" with regards to credit scores or debt-to-income ratios. 

With a HARP refinance, the home owner does NOT have to go back to the mortgage servicer (the bank the borrower makes their mortgage payment to).  

If I can help you with a refinance for your home located in Washington State, please contact me.   I'm happy to review your options, including HARP or possibly FHA (which will allow including a second mortgage with a refinance) at no obligation to you. 

Mechanics Liens and Title Insurance Owner’s Policies

Did you know that it’s no longer standard practice for the Additional Protection Endorsement to be included on an Owners Policy?  This endorsement protects buyers from mechanics liens.  A mechanics lien can pop up for a certain period after closing when labor has been performed or materials delivered. 

I actually received several mechanics liens on one of my new construction homes in Federal Way when the builder did not pay all of his subcontractors.  Because I had this endorsement (which at that time was, for the most part, issued automatically) the title company protected me from the liens; determining which ones were valid and paying them.  I believe they bought my shower doors! 

This video is full of important information about mechanics liens and what home buyers in Washington need to be aware of, especically if they’re buying acerage or waterfront property.  The Talon Group’s Chief Title Officer Tim Daniels, provides some excellent advice for consumers and industry professionals…it’s simply too good not to share!

How Many DOT Employees Does It Take to Put Up a Sign?

And on a Sunday…P5230011

Mortgage Buybacks and How It Impacts You

I was invited by Amtrust Mortgage to hear a presentation by Jackson Nafziger on "A State of the Industry Update".   My biggest take away from yesterday's event in Seattle was the huge amount of buy backs (aka repurchasing) of loans that are taking place.  A "buy back" is when a lender is forced to repurchase the loan from Fannie Mae or Freddie Mac typically because it's not performing.  It's reported that in 2009, over $30 billion in troubled mortgages were repurchased.   From 2008 to 2009, this is an increase of 320%!   According to the seminar, Bank of America/Countrywide, led the buy-back pack in 2009 followed by Chase/Washington Mutual, Citigroup and Wells Fargo. 

If you're considering a mortgage to purchase or refinance home, be aware that it's a different process than it was just a few years ago.  I still help people obtain financing on their homes every day.  My point is to be prepared for more paperwork (even the Good Faith Estimate has gone from 1 to 3 pages) and tougher underwriting guidelines.  

What can you do to help improve your mortgage process?

  • Select your mortgage professional and get preapproved early.  This allows you to create a game plan, if needed, such as working on your credit or funds for closing.
  • Be prompt in providing documentation or information that your mortgage professoinal requests.
  • Be prepared for the process to take possibly take a little longer.  Everything is being scrutinized from your bank statements to your appraisal.

The mortgage loans that are being originated today are of a much higher quality than recent years past. 

If you have a question about today's mortgage process or are interested in a home loan for a property located in Washington, I'm happy to help.

Dear HUD

The 2010 Good Faith Estimate was created to protect consumers and allow them to have a meaningful tool for selecting a lender.   This GFE has been very controversial and an interesting challenge for all of us to adapt to.  I've done my best to embrace it since my only other choice is to find a new career.   HUD has been fairly responsive with issuing many FAQs to help us better understand their intentions and to guide us with this document. 

Here are three suggestions I would like HUD to consider when they issue their next RESPA FAQs:

Allow adding an address from a TBD (preapproval) to become a "changed circumstance".   Currently a home shopper may have a challenging time having a mortgage originator provide a GFE without a property address as adding an address does not constitute a "changed cirmcumstance".   HUD does not prevent a LO from providing a GFE in this case, however they do warn that if a LO does indeed provide one, they're doing so at great risk.  A "changed circumstance" is what allows a LO to re-issue a Good Faith Estimate, without a qualified "changed circumstance", we're violating RESPA.  A mortgage originator who issues a GFE without the property address is currently on the hook for fees that exceed the tolerances.  

This is why LO's are offering "work sheets" instead of GFEs for home-shoppers.  Yet a majority of the third page of the Good Faith Estimate is all about shopping lenders and the home buyer cannot effectively use the document for this until they have a purchase and sales agreement.  In my opinion, this doesn't leave you much time for selecting the professional who will be assisting you with one of your largest debts and assets.

Treat the owners title insurance premium the same as you do excise tax/transfer tax.   If it's customary for the owners title policy to be paid for by the Seller, do not require to have it disclosed on the Good Faith Estimate.  In Washington State, this is not the case.

Yesterday, I was reviewing my GFE for the second time on a 1 million dollar purchase and I just caught that I forgot the seller paid owners title insurance policy fee of $2,000 on the GFE.  It was a simple error that would have meant that I would be out those funds (which would benefit the Seller–not the buyer).  It's the first time I've come that close to forgetting to add that fee…I am human and I'm hearing of other fellow mortgage professionals who are having to eat that fee.  

In addition, the owners title policy fee makes our closing costs look much higher than what they truly are.  It really makes no sense disclosing a fee a buyer does not pay AND to have a mortgage originator responsible for a fee that has nothing to do with the proposed mortgage.

Forgiveness when a mortgage originator makes a human mistake.   Mortgage originators across the country are having to pay for the seller's title policy or the FHA upfront funding fees (2.25% of the loan amount) if they issue a Good Faith Estimate making an honest mistake.  I'm not talking about a slime-ball LO who's doing "bait and switch"…I'm talking about an exception for when and if a human mistake was made. Most mortgage originators are not paid enough to pay for a 2.25% funding fee mistake…there's not that much revenue in our income.   Perhaps this could work with a time limit, such as 1-2 business days?

Dear HUD, if you're listening…I'm doing my best to adapt to the 2010 Good Faith Estimate.  I think these three tweaks would be helpful for consumers and mortgage originators alike.  April 2, 2010 was your last revision to the FAQs, I'm hoping your next revisions will address these issues.

Happy Mother’s Day

I let you guess which one is me.  Happy Mother's Day.

West Seattle Community Garage Sale Day is Today!

WSgaragesale If you love rumaging through garage sales, you’re in for a treat.  The West Seattle Blog has organized the 6th annual West Seattle Community Garage Sale with about 200 homes participating.  Click the map for a updated printable version.

They couldn’t have picked a nicer day for the sale with sunny skies and temps in the upper 60s.

This event is today only, May 8, 2010, from 9:00 am to 3:00 pm.  Come on out to West Seattle, visit the garage sales and stick your toes in the Puget Sound along Alki.   Have a great day!