The Home Affordable Refinance Program Extended to Next Summer

May 29, 2010 by Leave a Comment

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. 

Filed Under: Fannie, Freddie and FHFA, HARP - Home Affordable Refi, Refinance

Mortgage Buybacks and How It Impacts You

May 13, 2010 by Leave a Comment

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.

Filed Under: Fannie, Freddie and FHFA, Mortgage

Can I Convert My Existing Home to an Investment Property to Buy My Next Home?

April 27, 2010 by 13 Comments

EDITORS NOTE: These guidelines have changed. If you’re buying a home in Washington state, please contact me for current guidelines.

This is a common question I’m asked these days…mostly because many home owners don’t have as much equity as they would need in order to sell their current residence.  With home prices being at their lowest in years, many want to take advantage and buy their next home and simply rent out their current residence.

[Read more…]

Filed Under: Fannie, Freddie and FHFA, FHA, Investment Property, Residential Purchase, Underwriting and Qualifying, USDA Tagged With: ,

2010 Conforming Loan Limits for Washington State

November 13, 2009 by Leave a Comment

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. 

Filed Under: Fannie, Freddie and FHFA

What Will Conforming and FHA Loan Limits be in 2010?

October 14, 2009 by Leave a Comment

Currently, the Seattle area has a "high balance" loan limit of $567,500 for single family dwellings with both FHA and conforming mortgages through the end of this year.

Do you remember when the 2009 loan limit's were announce?  In 2008, our loan limit was $567,500 when the "conforming/FHA jumbo" was created.  Since loan limits are typically based on median home prices, when 2009 loan limits were announced for Seattle, Tacoma and Everett, they were reduced to $506,000.   Congress passed legislation that rolled loan limits in certain (not all) high cost areas back to the 2008 limits which took months for the GSEs to implement and lenders to adopt. 

My point is, don't assume that $567,500 will be the loan limit for the Seattle/Bellevue area in 2010.   It's quite possible that based on current home values, the loan limits could be reduced.   If you are in need of a "high balance" mortgage, waiting may cost you having to use your cash reserves or not being able to finance your home as you had planned.

Filed Under: Fannie, Freddie and FHFA, FHA

How Much Home Can I Afford?

October 8, 2009 by 2 Comments

This is a common question from first time home buyers.  When working with home buyers who are just beginning the process, after discussing credit and other information, I like to ask in return:

  • What type of monthly mortgage payment would you be comfortable making?
  • How much money are you planning on using for a down payment and closing costs.

To me, it’s better to solve for your potential sales price rather than finding a home or getting your heart set on a certain sales price first before knowing what you actually qualify for.

For example, Seattle Sally has saved up $75,000 and would like to use $40,000 towards a home purchase.  She has been paying anywhere from $2,200 – $2,000 a month for rent and would like to keep her payment around $2000. 

NOTE: Rates quoted below are from October 2009 and are outdated. If you would like a current mortgage rate quote for your home located in Washington, please contact me.

Beginning with a conventional scenario, a payment of $2038 (principal, interest, estimated property taxes, estimated home owners insurance and private mortgage insurance) with about $40,000 for down payment and closing costs would produce a sales price of $325,000.  This is based on a 30 year fixed rate of 4.625%* (apr 4.790).

A sales price of $365,000 with a 10% down payment and the sellers contributing towards closing costs would produce a payment of about $2283.

The only issue I would have with the conventional financing is that private mortgage insurance is that these days, pmi underwriters are picking all mortgages to pieces.

FHA would provide a total payment of $2076 with about $40,000 for down payment and closing costs and a sales price of $325,000.  This is based on a rate of 4.875% (apr 5.400).

If we have the seller pay most of the closing costs and prepaids, a payment of $2287 would produce a sales price of $365,000 with Sally bringing in approx. $38,000 for down payment and closing.

One thing to consider, beyond more forgiving underwriting, with FHA is that your mortgage will be assumable.  Imagine having a rate of 4.875% a few years from now when rates will most likely be much higher.  If you are a seller competing with other similar home on the market, and you can offer an assumable mortgage at a tempting rate–this will be a serious advantage.   Once inflation happens, mortgage rates will be much higher.

If Seattle Sally’s credit score comes in lower than expected (this is all based on very preliminary information) FHA may become a better option as well.  

*rates quotes are as of 1:30pm on October 8, 2009 and are based on mid credit scores of 740 or higher.  Rates can and do change often.  Follow me on Twitter to see live rate quotes.

For your personal rate quote on a home located anywhere in Washington, click here.

Filed Under: Fannie, Freddie and FHFA, FHA, First Time Home Buyer, Mortgage Insurance, Residential Purchase Tagged With: , , , , ,

Good Faith Estimate Part 3: Escrow Account Information

August 31, 2009 by Leave a Comment

This next section of HUD's new Good Faith Estimate covers the escrow account, also known as the reserve account. (Click the graphics for a larger picture).

GFEEscrow

According to HUD's New RESPA FAQs, the block you see above does not include the taxes or insurance (the escrow/reserves portion of the payment). 

"…the first block is for the monthly amount that will be owed for principal, interest and mortgage insurance only.  Additional information on charges relating to the escrow account is in Block 9 on page 2 of the GFE."

This section primarily addresses whether or not there is an escrow reserve account.  Borrowers may elect to waive their reserve account when they have conventional finanancing and at least 20% equity in their home.  Most lenders charge a fee of 0.25% of the loan amount should a borrower elect to pay their own taxes and insurance.   Having an escrow reserve account when a home owner has enough home equity is generally not "required" as stated on the new GFE, however the home owner will receive either a slightly better rate or lower cost opting to have taxes and insurance included in their payment.

Hop on over to "Your Charges for All Other Settlement Services on page 2, Boxes 9 – 11 of the GFE to see how much will be collected to initiate your escrow reserves (boxes 9 and 11) account and prepaid interest (box 10).

GFEreservespp

Our current good faith estimate (below) shows the escrow reserve account with a detailed account of how many months of taxes and insurance are due verses the dumbed down lumped version of the new GFE.

GoumazReservesPP

The current (soon to be retired) GFE includes taxes and insurance in the mortgage payment–even if the borrower has elected to waive the reserve account (pay taxes and insurance on their own) since borrowers are qualified based on the entire mortgage payment due (principal, interest, taxes and insurance).

Is this easier to understand so far? I don't think so…but I would love to hear from you.

Filed Under: Fannie, Freddie and FHFA, Good Faith Estimate

More Upcoming Changes to Underwriting

August 29, 2009 by 2 Comments

I originally wrote this post at Rain City Guide back in June of this year.  Fannie Maes tougher guidelines will go into effect in just a few days on September 1, 2009.  You can read the original post and comments by clicking here. 

Fannie Mae issued Announcement 09-19 amending some very basic underwriting guidelines that will not only impact conventional financing; it will apply to FHA insured loans that are underwriting using Fannie Mae’s DU.   You can read the entire announcement by clicking  here.

Here are some of the changes:

  • Credit documents will be valid for 90 days instead of the current 120 for existing construction.   The age of the document is measured from the date of the document to the date the Note is signed.
  • IRS Forms 4506 or 4506-T is required at application and at closing.  This is due to fraud (misrepresentation of income).
  • Age of appraisal is reduced from 6 months to 4 months.
  • Trailing Secondary Wage Earner Income is eliminated.   Now with a relocation, only the income of the spouse with actual employment may be considered.  Previously, it was possible to use the relocating spouse’s income from their employment prior to the relo without having an actual job.
  • Verbal Verification of Employment required within 10 days of signing the Note for employment income and within 30 days for self-employed income.  (Our company has always performed a verbal VOE prior to funding).
  • Stocks, bonds and mutual funds now valued at 70% instead of 100% to be used as reserves.   Due to market volatility, Fannie Mae is devaluing your portfolio.   This means that if you provide your mortgage originator with a stock, bond or mutual fund statement showing an ending balance of $10,000; the figure used for qualifying and on the application will be $7,000 (70% of the value).   Stock options and non-vested restricted stocks are no longer eligible to use as reserves.
  • Retirement accounts valued at 60% instead of 70% to be used as reserves.  

Fannie Mae’s effective dates are to follow…if the loan is manually underwritten, this applies to applications dated on or after September 1, 2009.   However, expect to see lenders and banks to adopt these guidelines early.

Filed Under: Fannie, Freddie and FHFA, Underwriting and Qualifying
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