Archives for August 2012

VA Loan Limits from August 6, 2012 to December 31, 2012

VA has issued Circular 26-12-7 increasing loan limits for VA loans closed through the end of the year in the following Washington state counties:

King, Pierce and Snohomish: $498,750

San Juan: $470,000

All other counties remain at $417,000

This means that in King County, a qualified Veteran can finance a home with zero down with a sales price up to $498,750.  With that said, some lenders are still reviewing this recent change and are evaluating whether or not they will recognize the new increase or keep loan limits are their current level. 

Any sales price/loan amount above this amount is considered a “VA Jumbo”.  VA does not have a loan limit for VA jumbos, however most lenders have “overlays” limiting loan amounts for VA Jumbos.  VA Jumbos allow the Vet to buy a home with reduced down payment. A simple formula to estimate the minimum down payment required is sales price minus loan amount x 25% = minimum down payment.

Right now, as of publishing this post, I’m quoting 3.375% for a sales price of $400,000 (apr 3.557) with zero down payment. The seller can pay closing cost and prepaids up to 4% of the sales price. There is no mortgage insurance, however VA loans do have a funding fee which can be financed.

If you are selling a home, please consider buyers who are preapproved for VA financing. It’s a great program benefiting those who have served our country.

Why getting a mortgage is more challenging today

Typically when I hear media say that it’s difficult or impossible to get a mortgage, my hair stands up on the back of my neck. Often times, they’re misstating mortgage programs and saying something like “you need 30% down payment and 760 credit scores to buy a home” which simply is not true. However something that I cannot argue is that it is more challenging to go through the mortgage process today.

The process is tedious as borrowers are asked to provide more supporting documentation to prove they’re qualified for the mortgage. I’m not saying this is a bad thing. If you’re a long time reader of my blog, you know I was never a fan of stated income mortgages. However it’s to a point where home buyers and home owners wanting to refinance are having to do things like document and prove where a large deposit from a month ago came from…even if they have plenty of funds for the transaction. Underwriters are calling for additional documentation.

This is partly happening because of tougher guidelines to make up for the sins of the subprime era of mortgages. Loosey goosey underwriting guidelines allowed just about anyone to obtain a mortgage with no regard to if the borrower would actually be able to make the mortgage payments. 

What’s also impacting guidelines are buy backs. Fannie Mae and Freddie Mac are pushing back loans that are not performing back to the banks.  If that loan was not originated by a bank (for example, a correspondent lender, like us), the bank will try to force the originating lender to buy back that loan. This is one reason why many banks prefer working with correspondent lenders over mortgage brokers – correspondent lenders have skin in the game.  From Reuters:

Historically, Fannie Mae and Freddie Mac have taken banks at their word when they said loans were eligible. If later there were problems (because the borrower’s income was not properly verified, for example), then Fannie Mae and Freddie Mac could ask banks to buy back the mortgages at face value and absorb any losses.

Those repurchase requests are increasing as Fannie and Freddie apply more scrutiny. Both companies have hired more staff to comb through loans and determine which can be sold back to banks.

In the second quarter, outstanding repurchase requests at Fannie Mae grew by 20 percent to $14.6 billion from the first quarter, according to a filing last week.

In order for a bank or lender to have a fighting chance in not buying back the loan, they need to be able to show they had a complete and strong loan package with all of the borrowers supporting documentation to illustrate they qualified for the mortgage program.

You’re probably thinking that this sounds pretty fair. If a loan is not performing, then the originating lender should have to buy it back and deal with the losses. Banks are arguing that some loans that are not performing may be caused by the economy (loss of employment) and not due to the quality of the loan. A lender has to consider what are the odds the borrowers will be able to make the mortgage payments in the future.

As Fannie and Freddie increase scrutiny on mortgages and force more buy backs, banks will lend to fewer borrowers and toughen up guidelines. It’s already happening – just ask any HARP 2.0 borrower who’s trying to go back to their bank to refinance. Odds are, unless the refi has no pmi or lpmi, the bank may refuse it. Some banks have turned their backs on FHA streamlined refi’s as well.  Many banks are “cherry picking” mortgages…and with all the current volume, they can easily afford to. 

NOTE: If your bank has turned down your HARP 2.0 or FHA streamlined refinance on a home located anywhere in Washington, I’d love to see if I can help you. We work with several lenders who offer HARP 2.0 mortgages – even if you have LPMI. We are also still doing FHA streamlined refinances on Washington homes as well. One of the benefits of working at a correspondent lender is that we have several lenders to work with – we are not limited to one set of programs and guidelines. Click here for a mortgage rate quote. Okay… commercial over.

Watch for guidelines to continue to become tougher and expect to be asked for more and more documentation from your lender if you are considering a mortgage… we still have the Consumer Financial Protection Bureau fine tuning “the ability to repay”.  More mortgage fun coming your way soon!

With a little patience and cooperation with providing requested documentation to your mortgage professional, you will survive the mortgage process with success.

The Family Opportunity Mortgage Refinance

Cheerful woman with family standing in back yard

I’ve written about the Family Opportunity Mortgage for purchases where certain circumstances allow one to obtain a mortgage for a family member who is either a student in college, a disabled adult child or an elderly parent. The Family Opportunity Mortgages allows financing to be treated as a primary residence instead of an investment property as long as the scenario meets certain guidelines.  The Family Opportunity Mortgage is a Fannie Mae/Freddie Mac program that is also available for refi’s! [Read more…]

What may move mortgage rates the week of August 13, 2012

As I prepare this post (7:15 am) mortgage rates are much the same as what I was quoting on Friday: VERY LOW!  You can check out what mortgage rates I’m quoting for my Washington clients by following me on Twitter @mortgageporter.

The following are economic indicators scheduled to be released this week which may impact mortgage interest rates.

  • Tuesday, August 14: Retail Sales and Producer Price Index (PPI)
  • Wednesday, August 15: Consumer Price Index (CPI) and Empire State Index
  • Thursday, August 16: Initial Jobless Claims, Housing Starts, Building Permits and Philadelphia Fed Index
  • Friday, August 17: Consumer Sentiment Index

Remember, mortgage rates are based on mortgage backed securities (bonds). When the stock market is doing well, investors will trade the safety of bonds for the risk of a higher return with stocks, which causes mortgage rates to trend higher. Watch for signs of inflation with the economic data scheduled to be released this week as that may also impact mortgage rates for the worse. Unplanned events, such as what’s going on in the Euro-zone may also impact mortgage rates.

If you would like me to provide you a mortgage rate quote for your home located anywhere in Washington state, please click here.

I’m going to have a painting on exhibit at Bumbershoot!

You may or may not know that I started painting earlier this year for a new hobby. Most of my paintings have been on black velvet. I was thrilled when I was asked by Marlow Harris if I would contribute an Elvis painting to the Elvistravaganza! exhibit at Seattle Center. 

My painting of Elvis getting ready to enjoy a peanut butter, bacon, banana sandwich is not quite finished yet. I just thought I’d share where I’m at with him right now. I’ll post an update when I’m finished with him.

This event takes place during Bumbershoot, Labor Day weekend, at the Seattle Center. Elvistravaganza celebrates the 50th anniversary of when Elvis filmed “It Happened at the Worlds Fair”.

Come check out the exhibit during Bumbershoot. You’ll find a whole lot of Elvis at the Seattle Center Pavilion. 

Freddie Mac HARP 2.0 refis to get a little easier

Last week, Freddie Mac issued a press release stating they plan on improving the guidelines for Freddie Mac’s HARP 2.0 program – Refi Relief and Open Access (more commonly known as HARP 2.0).  Freddie Mac HARP refi’s have proven to be more challenging to successfully process and close than Fannie Mae’s HARP 2.0 refi program.

At Mortgage Master Service Corporation, we are closing both Fannie Mae and Freddie Mac HARP 2.0 refinances. We have fewer lenders who offer Freddie Mac’s program due to their current program guidelines. This announcement from Freddie Mac is a big relief!

From Paul Mullings, Senior Vice President and Interim Head of Single Family at Freddie Mac:

“Once implemented the changes will give lenders a new measure of certainty and ease when they help borrowers with Freddie Mac owned- or guaranteed- mortgages take advantage of today’s historically low mortgage rates. This will help us build on the success of the HARP 2.0 and Relief Refinance Mortgage programs of helping more than 1.3 million Freddie Mac borrowers…”

This means that if you have been previously turned down for a Freddie Mac HARP 2.0 refinance, you may have another shot in a couple months.

Watch for an announcement around mid-September with more details to follow.  To stay informed, subscribe to my blog!

UPDATE September 18, 2012: Click here to check out  the improvements to HARP 2.0.

National Mortgage Originator Magazine’s Top 25 Most Connected Mortgage Professionals

I’m honored to be included as one of National  Mortgage Originator’s 2012 Most Connected Mortgage Professionals. This list includes mortgage originators from across the country to use social media in their mortgage practice.  My mug somehow made it on the cover!

Social media has been a very important part of my career. It allows me to share information about mortgages ranging from basic information that consumers should now before obtaining a mortgage to current underwriting trends and ever-changing program guidelines.

Thanks again to my readers! I don’t write “The Mortgage Porter” for recognition or awards, I do this to help share information with consumers. Thanks again for reading, subscribing and sharing the content of my blog.

Tis the Season for Vacations

Many families are squeezing in a vacation during the remaining days of summer. I can’t blame them, I’m just back from one myself! If you are in the mortgage process, it’s critical that your let your mortgage originator know of any vacation (or business travel) plans. 

If you’re going to be in a spot where you can receive important documents and respond to emails, it may not be a huge issue. If you’re going off the grid, it may impact your rate lock commitment if your loan is currently locked. Your mortgage originator will need to price out a long enough lock period for your loan (if you’re locking) or you may opt to float and not lock in the current rates available.  And of course, if you run out of time with your lock, the rate lock commitment may be extended

Another factor is signing your final loan documents. Escrow companies can email (I do not recommend sending final docs via email) or send your loan documents via something like FedEx or UPS. This can be a bit risky as well as if a signature is missed or something is not notarized properly, your transaction may be delayed.

The more notice you can provide your mortgage originator about vacation or business travel, the more time they will have to prepare your options for the mortgage process.