FHA Mortgage Insurance Increasing in 2013

November 27, 2012 by Leave a Comment

Last week I shared with you part of HUD’s plan to no longer allow FHA mortgage insurance premiums to terminate to help improve their financial stability. This would be effective for loans guaranteed by HUD in 2013. 

HUD also announced in their report to Congress, their plans to increase the MIP (mortgage insurance premiums) paid on FHA insured loans by an additional 0.10 basis points (or 0.1% of the loan amount). From HUD’s press release:

In 2013, enact an increase of 10 basis points or 0.1 percent to the annual insurance premium paid by borrowers on new FHA loans. This premium increase is expect to add $13 per month for the average borrower and will strengthen FHA’s capital position without limiting access to credit for qualified borrowers.

In the greater Seattle area (King, Pierce and Snohomish Counties), the FHA loan limit (as of today) for a 1-unit single family dwelling is $567,500.  An increase of 0.1% for this loan amount would cost an FHA borrower an additional $47.29 per month.

If you are considering an FHA mortgage for your refinance, I highly recommend you do so as soon as possible while your mortgage insurance premiums may still be cancelled instead of for the life of the loan AND before the mortgage insurance premiums are increased.

If your home is located anywhere in Washington state, where I am licensed to originate mortgages, I can help you! 

Filed Under: FHA, Mortgage Insurance Tagged With: , , ,

Mortgage Rate Update for the week of November 26, 2012

November 26, 2012 by Leave a Comment

Happy Cyber Monday! I hope you had a wonderful holiday weekend with family and friends. 

Here are some of the scheduled economic indicators that may impact mortgage rates for this week:

Tuesday, Nov. 27: Durable Goods Orders; Auto Sales; Consumer Confidence

Wednesday, Nov. 28: New Home Sales; the Fed’s Beige Book

Thursday, Nov. 29: Initial Jobless Claims; Gross Domestic Product (GDP); GDP Chain Deflator; Pending Home Sales

Friday, Nov. 30: Personal Consumption Expenditures and Core PCE; Personal Income; Personal Spending; Chicago PMI

It’s hard to believe that next week is December. As usual, the first Friday of the month will bring us the Jobs Report.

Remember, mortgage rates are based on mortgage backed securities (bonds). Investors will seek the safety of bonds when the stock market is not providing desired returns. Currently, the DOW is down 72 as I write this post (9:56 am). Concerns about Greece and the “Fiscal Cliff” seem to be helping all ready low mortgage rates remain at very low levels.

If you are interested in a mortgage rate quote for your home in Bellevue, Bellingham, Bainbridge Island or anywhere in Washington State, I’m happy to help you: click here.

You can see my live mortgage rate quote and other mortgage tidbits by following me on Twitter @mortgageporter or on Facebook.

Filed Under: Economy Tagged With: , , , ,

How soon can you buy a home after a Short Sale?

November 21, 2012 by 1 Comment

EDITORS NOTE 10/6/2014: Conventional guidelines have changed since the writing of this post. Conventional guidelines now require a 4 year wait period regardless of how much down payment a borrower has.

A Short Sale, also referred to as a pre-foreclosure, is when a home owner sells their home for a lower amount than what is owed on the property with mortgages (deeds of trust). In order for a short sale to take place, the lien holders on the property agree to being “shorted” on the amount owed to them for the deed of trust or mortgage. Short sales became more common over the past few years following the mortgage crisis. Washington state home owners hoping to avoid a foreclosure, opted to try the short sale route.

A question I am being asked more and more is: “Who soon can we buy our next home after having a short sale?”  The answer depends on a few factors.

FHA has a three year wait period for borrowers who were in default at the time of the short sale (or pre-foreclosure sale). If the borrower was not behind on mortgage payments and installment debts at the time of the short sale and for 12 months preceeding the short sale, there may be no waiting period.

FHA tends to be a popular option as the minimum down payment is currently 3.5% and FHA is more forgiving with credit than Fannie or Freddie.

Fannie Mae has various wait periods depending on loan to value:

  • 2 years with a minimum 20% down payment
  • 4 years with a  down payment of at least 10%
  • 7 years with standard down payment guidelines (varies depending on credit scores)

Freddie Mac has a 4 year waiting period.

Fannie Mae and Freddie Mac may consider “extenuating circumstances” which would allow a buyer to be considered eligible at 2 years.

VA currently does not offer guidance. Most underwriters may treat it as a foreclosure, which has a 2 year waiting period. Like FHA, if the borrower was on time with mortgage payments and other debts at the time of the sale and for 12 months proceeding, there may be no wait period.

USDA has a 3 year wait period.

NOTE: banks and lenders may have their own time frames that are longer than what is referenced than above. For example, many of the lenders we work with are not yet accepting buyers who have had a short sale two years ago. However, we do work with lenders who follow Fannie Mae’s guidelines.

The date of the short sale is based off of the date closed as disclosed on the final HUD-1 Settlement Statement from the closing of that sale. Potential home buyers should until three years have passed from that date before entering a purchase and sales agreement or a bona fide loan application.

Underwriters will scrutinize a borrowers credit history following a “derogatory” event, such as a short sale. Late payments on a credit report following a short sale and low credit scores will impact a borrowers odds of becoming “approved” with a lender. Lenders will want to see that the credit has been re-established with three to four credit lines in good standing with a two year history.

If you’ve had a short sale in the past few years and are considering buying your next home. I recommend contacting a local mortgage professional to review your credit report as soon as possible. There could be items disclosed on your credit report that you may want to deal with or perhaps you need to work on re-establishing credit. Starting early will help make sure that once your waiting period is over, you’re in a better position to become preapproved to buy your next home.

Please keep in mind that the information in this post are based on guidelines as of the date this article was published. Fannie Mae, Freddie Mac and FHA guidelines change often as do lender’s underwriting overlays.

If you are considering buying a home located any where in Washington state, I’m happy to help you. Click here if you would like me to provide you with a mortgage rate quote.

Filed Under: Buying after a short sale or foreclosure, Residential Purchase, Underwriting and Qualifying Tagged With: , , ,

FHA Mortgage Insurance to remain on loans FOREVER

November 20, 2012 by 11 Comments

HUD has announced in their Annual Report to Congress Regarding Financial Status of the FHA Mutual Mortgage Insurance Fund Fiscal Year 2012, their plan to revise the cancellation of FHA mortgage insurance premiums. This is set to go in effect on new FHA insured mortgages sometime in 2013. 

From HUD’s report:

Under a policy change made in 2001, FHA has been cancelling required mortgage insurance premiums (MIPs) on loans for which the outstanding principal balance reaches less than 78% of the original principal balance. However, FHA remains responsible for insuring 100% of the unpaid principal balance of a loan for the entire life of the loan, such loan life often extending far beyond the cessation of the MIP payments. As written, the timing of MIP cancellation is directly tied to the contract mortgage rate, not the actual loan LTV. The current policy was put in place at a time when it was assumed that home price values would not decline, but today we know that LTV measured by appraised value in a declining market can mean that the actual LTVs are far lower than amortized mortgage LTV, resulting in higher losses for FHA on defaulted loans. Analyses conducted by FHA’s Office of Risk Management projects lost revenue by approximately $10 billion in the 2010-2012 vintages as a result of the current cancellation policy. The same analyses also suggest that 10%-12% of all claims losses will occur after MIP cancellation. Therefore, beginning with new loans endorsed after the policy change becomes effective later in FY 2013, FHA will once again collect premiums on FHA loans for the entire period during which they are insured, permitting FHA to retain significant revenue that is currently being forfeited prematurely.

With FHA running out of funds, they are having to take measures to protect this mortgage program. You can also expect to see mortgage insurance premiums (upfront and annual) to increase in addition to FHA mortgage premiums remaining on the life of the loan. 

What does this impact you?

If you currently have an FHA mortgage, your mortgage insurance premium that you pay monthly is still set to drop off (cancel) once your principal balance reaches 78% of the loan to value and a minimum of 60 mortgage payments have been made. 

However, if you currently have an FHA mortgage in the mid-to-high 4% range and you have been considering an FHA streamlined refinance, you need to act quickly. 

If you are considering buying a home and you are planning on using FHA for financing, be prepared to have the FHA mortgage insurance remain on the loan until you either sell the home or can refinance to  a conventional mortgage.

If you are interested in buying or refinancing a home anywhere in Washington state, I’m happy to help you!

Filed Under: FHA, Mortgage Insurance Tagged With: ,

Mortgage Rate update for the Week of November 19, 2012

November 19, 2012 by Leave a Comment

mortgageporter-economyCan you believe Thanksgiving is this week? I’m in a bit of shock that the holiday season is upon us. Mortgage Master Service Corporation will close on Thursday, November 22, 2012 and reopen on Monday, November 26, 2012.

Here are a few of the scheduled economic indicators that may impact mortgage rates this week:

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Filed Under: Economy, Interest Rates Tagged With: , ,

HUD’s Net Tangible Benefit Requirement is Hampering FHA Streamline Refinances

November 18, 2012 by 1 Comment

HUD has a requirement that in order for a borrower to do a streamline refinance their  existing FHA mortgage, their scenario must have a “net tangible benefit”. FHA streamline refinances are popular today because they do not require an appraisal and FHA mortgage rates are very low.

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Filed Under: FHA Tagged With: , , ,

Ben Bernanke says mortgage underwriting standards are too tight

November 16, 2012 by Leave a Comment

In his speech at Operation HOPE Financial Dignity Summit yesterday on the challenges of the housing market and mortgage lending, FOMC Chairman Bernanke expressed concerns that mortgage underwriting has become “overly tight”. 

“…Some tightening of credit standards was an appropriate response to the lax lending conditions that prevailed in the years leading up to the peak in house prices. Mortgage loans that were poorly underwritten or inappropriate for the borrower’s circumstances ultimately had devastating consequences for many families and communities, as well as for the financial institutions themselves and the broader economy.

However, it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery.’

Borrowers who have recently purchased a home or closed on a non-streamlined refinance would most likely agree with Ben Bernanke’s views on underwriting guidelines. And for the most part, I do too. Today’s home buyer will often find every aspect of their income, assets and credit scrutinized. For example, Form 4506 (which was once used primarily for stated or no-income verified loans) is now pulled on every mortgage in process to obtain a copy of the tax transcripts for the the past two years. Any discrepancies between the 4506 and income supplied must be addressed, which often leads to the borrowers having to provide complete tax returns instead of just their W2’s. If a borrower has deposits on their bank statements that are not easily identified, they can expect to show proof of where that deposit came from. Credit reports may disclose information that the borrower may need to address as well beyond the good old “inquiry letter”. Now they disclose information about activity associated to a borrowers address that may or may not relate to the borrower. Don’t get me wrong, loans are closing however the process for some can require a great deal of patience and paperwork.

“When lenders were asked why they have originated fewer mortgages, they cited a variety of concerns, starting with worries about the economy, the outlook for house prices, and their existing real estate loan exposures. They also mention increases in servicing costs and the risk of being required by government-sponsored enterprises (GSEs) to repurchase delinquent loans (so-called putback risk).”

“Putbacks” are also referred to as “buy-backs”. And buy-backs tend to roll down hill to the source that originated the mortgage, including  banks and correspondent lenders like Mortgage Master Service Corporation. This happens when the loan (borrower) is not performing. The lender will go over the loan documents with a fine tooth comb to try to find fault in the underwriting so they can justify sending the loan (forcing a buy-back) to the originating lender. This is why many borrowers are having to over-document their finances.

The Federal Reserve’s Senior Loan Officer Opinion Survey on Bank Lending Practices indicates that lenders began tightening mortgage credit standards in 2007 and have not significantly eased standards since.

Ben Bernanke and the Fed cannot control the underwriting guidelines and overlays that banks have for mortgage lending. I certainly do not want to see the loose underwriting of the subprime era return. However I do agree that for the most part, underwriting has become pretty tight and I would welcome more “common sense” for well qualified borrowers.

Mr. Bernanke needs to brush up on Frank Dodd and how it will continue impact the mortgage industry and underwriting guidelines.

Your thoughts?

Filed Under: Opinion, The Fed - FOMC, Underwriting and Qualifying Tagged With: , , ,

Mortgage Rate update for the week of November 13, 2012

November 13, 2012 by Leave a Comment

mortgageporter-economyMortgage rates continue to provide many the opportunity to reduce their mortgage payments or to qualify to a home at extremely low rates. With the re-election of President Obama, it’s also likely we will see expansion of the Home Affordable Refinance Program to HARP 3.0 as well as the governments prolonged purchasing of mortgage backed securities, manipulating mortgage rates at these historic low levels.

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Filed Under: Economy, Interest Rates Tagged With: , , , ,
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