The SAFE Act was enacted in July 2008 to help create a national standard for residential mortgage originators. This is a fantastic idea EXCEPT that if a mortgage originator works for a depository bank, like Bank of America, Chase, Citi or Wells Fargo (just to name a few) they are excluded from licensing. Mortgage originators working for a bank will only have to be registered…and yes, there is a difference.
100 Days Remaining for the Home Buyer Tax Credit (and my 1000th Post)
January 20, 2010 by Leave a Comment
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.
Will the Nationwide Mortgage Licensing System Impact How Consumers Select a Mortgage Originator?
January 16, 2010 by 2 Comments
Soon consumers will be able to access the NMLS to gain information about mortgage loan originators. The 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?
Tax Credit for Home Buyers who have Owned a Home
November 24, 2009 by Leave a Comment
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.
What a Relief! The Home Buyer Tax Credit is Extended
November 7, 2009 by Leave a Comment
Whether you are for or against the tax credits created by our Congress and President Obama trying to recover our housing industry, you could hear a huge sigh of relief from professionals in the mortgage, escrow and real estate industry on Friday when President Obama signed the extension for the first time home buyer tax credit which was set to expire at the end of this month.
If you've been reading my posts for the last few months, you know I've been trying to warn potential home buyers eying that credit of what a short month November is for closing real estate transactions–with or without the tax credit. The November 30th deadline did spur on some last minute transactions for first time home buyers. Many mortgage companies issued memo's to borrowers regarding the tax credit stating they would not be held liable in the event the transaction did not close in time. Now, if the transaction closes on December 1, and the borrower qualifies for the credit, the home buyer won't be robbed of the credit…which could be up to $8,000. Whew!
Speaking of relief, check out this vintage Alka Seltzer commerical singing about passing bills in Congress.
Not only was the first time home buyer tax credit extended to April 30, 2010, Congress added a tax credit for existing "long time residents" (defined as owning a home during the last 5 out of 8 years) buying another home of up to $6500. In addition, income limits for the tax credits have been dramatically increased.
I will be providing more details soon about both of these tax credits for home buyers at Mortgage Porter soon!
Domestic Partners, Real Estate and Mortgage
November 6, 2009 by Leave a Comment
In May of this year, Governor Gregoire signed legislation providing registered domestic partners in Washington State the same rights as married couples, which has been confirmed by the passage last week of Ref 71. In our State, domestic partners are defined as either same sex couples or where at least one partner is over the age of 62 (they do not have to be of the same sex).
From E2SSB 5668:
"It is the intent of the legislature that for all purposes under state law, state registered domestic partners shall be treated the same as married spouses. Any privilege, immunity, right, benefit, or responsibility granted or imposed by statute, administrative or court rule, policy, common law or other law to an individual because the individual is or was a spouse, or because the the individual is or was an in-law in a specified way to another individual, is granted on equivalent terms…"
When a couple registers as a domestic partner and if one or both partners (or spouse) owns real estate where they reside, they are now subject to community property issues as Washington is a community property state.
From the Washington State Bar Association (regarding community property):
Under this system, all property acquired from earnings during marriage (such as real estate, automobiles or household goods) belongs equally to husband and wife, even when only one is employed.
Similarly, both husband and wife are personally liable for certain types of family expenses, even if both did not agree to the particular obligation….
Moreover, neither may give community property without the consent of the other. Finally, neither may sell, convey or encumber real property (land) without both parties signing appropriate documents.
Recently I was helping a man with a refinance whom I thought was "single". He was the sole person on loan application and did not indicate that he had a partner. The title company discovered that he and his partner registered as domestic partners with the State of Washington.
With regards to the refinance, this meant that my client's partner would need to either be approved on the mortgage as well or have to sign a quit claim deed and acknowledge the transaction to be in compliance with state laws. NOTE: Please seek legal counsel before signing legal documents that may impact your rights.
As of today, November 6, 2009, there are 6,311 domestic partnership registrations in Washington. If you and your partner have a registered domestic partnership–CONGRATS! If you have a registered domestic partnership and you are involved in a real estate transaction; be sure to inform both your mortgage originator and real estate agent. One cannot buy or sell or mortgage/encumber real estate with out the other's consent…just like being married.
Have You Been Burned by a Bad Appraisal from HVCC? Take Action Today!
September 15, 2009 by 6 Comments
NAMB, the National Association of Mortgage Brokers, has a call to action that many people beyond the lending industry may feel strongly about: HVCC. The Home Value Code of Conduct is a controversial act that was created to not allow mortgage originators to be involved with the selection of an appraiser. Overall, the results have been a mess. Instead of punishing the few, the masses are taking the hit with many appraisals being done by those who will take the lowest bid and/or who are not familiar with the neighborhood where the appraisal is being done…while the Appraisal Management Companies, the channel where many appraisals are ordered, are taking about half of the appraiser's fee for placing the order–guess what? Most of the AMC's are owned by banks and title companies. AMCs are unregulated! HVCC is wrong and bad for consumers.
I have no issues with an appraisal that comes in lower than expected as long as it was done properly.
What can you do about HVCC?
Members of Congress are back in session and they need to hear from you–their constituents. HR 3044 is a bill that would put an 18 month moratorium on HVCC (the Home Valuation Code of Conduct). Please contact your Congressman today and ask them to co-sponsor HR 3044. I just sent an email to Congressman Jim McDermott…it took me less than 5 minutes.
And please be sure to sign this petition.
Feel free to share this post with your friends, family and co-workers…especially if they have been impacted by HVCC.
Review of HUD’s New Good Faith Estimate: Part 1
August 26, 2009 by Leave a Comment
UPDATE August 31: HUD just issued their 2nd revision to the RESPA FAQs…let's hope the third time is a charm.
As I mentioned in a previous post, I'm going to be doing a series to review the Good Faith Estimate that will be mandetory on new residential transactions effective January 1, 2010.
The top of the new form is not earth-shattering. It includes contact information for the mortgage originator and the borrowers' name, property address and the date the GFE was prepared. An improvement would be to have the estimate also include the actual time it was prepared as well since we are averaging 3-4 new rate sheets per day.
HUD created this new GFE so that consumers could shop by rate and fees, ignoring the qualifications of the mortgage originator. On the top of the form, they encourage you get three quotes.
We'll delve deeper into the "shopping cart" in a future post. Can you imagine if HUD also encouraged borrowers to compare the expertise and track-record of the mortgage originator?
The section "Important dates" is on the top half of the new Good Faith Estimate.
Item 1 is suppose to let consumers know how long their rate quote on said estimate is good for. There is no way to guarantee how long a rate is good with a quote unless the borrower is locking at that instant–infact, rate changes can and do happen while you're trying to lock in a rate. Mortgage originators do not have crystal balls to know when or if the next rate change is coming.
Item 2 is suppose to give the consumer a date for how long the closing costs are good for. Again, this is assuming the mortgage originator has some magically control over third party services, such as the appraisal, title and escrow. We have no way of knowing for certain if rate increases or reductions are planned by the various companies that are involved with putting together a real estate transaction. The estimate can only be reflective of what fees are at the moment in time that GFE is prepared.
Item 3 is just intended to disclose the lock period. The most common lock periods are 30, 45 and 60 days. Without a closing date on a purchase, you do not know the lock period. Some borrowers may decide to float (not lock) and home buyers without a signed around contract do not know what the agreed to closing date is.
Item 4 provides the consumer with a drop dead lock date. I don't have an issue with this. Consumers should know how long they can float should they decide to gamble the markets with mortgage rate.
Per HUD's New RESPA Rule FAQs, which they've all revised just 7 days after it was first issued, Good Faith Estimates expire after 10 business days:
If a borrower does not express an intent to continue with an application within ten business days after the GFE is provided (or such longer time period specified by the loan originator), the loan originator is no longer bound by the GFE.
I'm assuming this does not apply towards interest rates where the rates may be the same or we could have experienced 30 rate sheets within the said 10 business days. I'm also concerned about this language as the loan originator cannot guarantee that certain loan programs and underwriting guidelines will be available within any time period. Unless the borrowers information (credit, income, assets) and the mortgage world has not budged in ten days, I'm not seeing how a mortgage originator can be bound to the GFE.
I do stand by my good faith estimates, however until an application is made, all supporting information is provided and the rate is locked, there cannot be any guarantee. There are too many moving parts and uncertainty. Mortgage originators will need to state clearly to the consumer the rate is based on x, y and z and as long as all of these hold true, your estimate is "binding" for 10 business days assuming the rates are the same at that moment, underwriting guidelines have not changed and the program is still available (as I'm writing this post, I'm receiving notice from one of the lenders I work with that they are no longer offering the 40 year amortized mortgage). Do you see an issue here?
Watch for my next post in this series where we continue reviewing the first page of HUD's new Good Faith Estimate.
Recent Comments