FHA Making Promised Changes to Mortgage Insurance Premiums

August 5, 2010 by Leave a Comment

UPDATE August 10, 2010:  HUD just announced they are delaying the changes to FHA mortgage insurance until case numbers issued on or after October 4, 2010.

Federal Housing Commissioner David Stevens has issued a "Special Edition" press release confirming that FHA mortgage insurance will be adjusting  on all case numbers beginning next month.  

"It is our intention that effective on September 7, 2010, FHA's upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortizing terms greater than 15 years…"

Currently upfront mortgage insurance on an FHA insured loan is 2.25%.  Effective on new case numbers September 7, 2010 October 4, 2010 and later, the new upfront mortgage insurance premium will be 1.00%.   On a $400,000 loan the 2.25% premium pencils out to $9,000 which is typically financed (added to the FHA base loan amount); in a month the upfront premium will be reduced to $4,000.

At first, this sounds great–however, there's a trade-off.  The annual mortgage insurance (paid monthly) is increasing to 85-90 basis points (currently it's 50-55%).   An increase of 0.3% of the annual premium will increase the monthly payment (based on  a $400,000 loan amount) to $300 (0.90 x $400k =$3,600/12) from $183 (0.55 x $400k =$2,200/12) an increase of $116.47 per month.

Using an interest rate of 4.25% and a based loan amount of $400,000; it looks like this:

FHA Case Number BEFORE September 7 October 10, 2010:

$400,000 plus $9,000 = $409,000 amortized for 30 years at 4.25% = principal and interest of $2012.03 plus the annual mortgage insurance of $183 = $2,195.03

FHA Case Number issued September 7 October 4, 2010 and after:

$400,000 plus $4,000 = $404,000 amortized for 30 years at 4.25% = principal and interest of $1,987.44 plus the annual mortgage insurance of $300 = $2,287.44.

The new FHA mortgage insurance premiums have an increase in payment of $92.41 based on this example.   This impacts both purchases and refinances using FHA insured mortgages.

Stevens acknowledges that this is "short notice" however this shouldn't surprise anyone who's been a subscriber to The Mortgage Porter, this has been in the works.   A mortgagee letter is expected to follow soon.

Mortgage Master Service Corporation is a Direct Endorsed HUD approved lender.  I've been originating FHA insured loans for over ten years.  If I can help you with your mortgage needs on a home located in Washington, please contact me.

Filed Under: FHA, Mortgage Insurance

The Cash-In Refi

August 5, 2010 by Leave a Comment

You’ve probably heard of a “cash-out” refinance where a home owner is taking equity out of their home for home improvements, debt consolidation or if they’re paying off a second mortgage that was not obtained when they purchased their home.   A “cash-in” refinance is a fairly new term and something I’m seeing first-hand due to the current insanely low mortgage rates.

Freddie Mac reports that “in the second quarter of 2010, 22 percent of homeowners who refinanced tehir first-lien home mortgage lowerd their principal balance…this ties the record for the third highest “cash-in” share since Freddie Mac began keeping records on refinancing patterns in 1985.  The revised cash-in share in the first quarter was 18 percent.”

“Cash-in” means that the home owner is bringing funds to escrow for closing.  Their loan amount is not high enough to cover closing costs and prepaids.   Sometimes home owners, with a healthy savings, will opt to pay for closing costs separately instead of financing it into the new loan but a majority of home owners opt to have the cost added to their payoff amount, thus increasing their original principal balance.   Some are deciding to plunk down enough cash to reach a certain loan amount or loan to value to obtain an improved interest rate.  For example, a Seattle area homeowner with a current loan balance of $575,000 might decide to use $10,000 towards her loan amount to obtain a high balance conforming mortgage rate instead of a higher non-conforming/jumbo rate.  (Current loan limits in King, Snohomish and Pierce County for a single family dwelling for high balance is $567,500).  UPDATE 1/1/2012: Loan limits currently $506,000 for conventional and $567,500 for FHA (and may change following years).

Some home owners are doing this because of loan to value issues–not because they have an extra grand or two burning a hole in their pocket.  I’ve had a few clients who have paid off and closed their home equity lines of credit to qualify.  Or perhaps they have an appraisal come in slightly lower than expected, exceeding the allowed loan-to-value guidelines.  For example, if a home owner in Bellevue was anticipating a minimum appraised value of $380,000 for his home to finance his Home Affordable Refinance loan amount of $399,000 with a 105% loan to value yet his appraisal comes in at $376,000; he could have his loan amount adjusted to 105% loan to value at $393,750, bringing in $5,250 to closing. 

Funds for closing will need to be documented, just as they would a mortgagae being used a home purchase, with statements from the accounts the funds came from.

Frank Nothaft, Freddie Mac Vice President and Chief Economist states:

“Interest rates on fixed-rate mortgages are at 50-year lows, making refinancing attractive if borrowers qualify, and similarly rates on savings instruments like CDs are also very low, which makes the choice of paying down mortgage principal very attractive to borrowers with extra cash reserves.”

I’m happy to review your current mortgage scenario at no obligation to help determine if refinancing makes sense for you.  The only catch is, your property needs to be located in located in Washington state since that’s where I’m licensed.

Filed Under: Refinance, Underwriting and Qualifying Tagged With: , , ,

Disclosure Periods: Three Days Counted Three Different Ways

August 3, 2010 by Leave a Comment

Anyone who's refinanced a home they live in probably remembers having to wait a couple days after signing before their loan can close.  This is called the Three Day Right of Recsission.  Thanks to all our new guidelines over the past year, we now have waiting periods triggered if your rate changes (for better or worse) with MDIA and once you receive your appraisal thanks to HVCC.   All of these waiting periods are for three days and each one is counted differently–go figure!   Here's a quick overview.

Home Value Code of Conduct. (HVCC) On residential transactions where there is an appraisal, we are required to provide the borrower a copy of the appraisal three full days before signing.  This is very similar to the right of recession where it's "postal days" that are counted.  A rush transaction can be put into a pinch if the appraisal is received late.   Receive the appraisal on a Friday, and the earliest the borrower can sign is Wednesday.

Three Day Day Right of Rescission:  This applies to refinances of a primary residence and is triggered the day of signing.  Three, what I like to call "postal days" must pass after you sign before your transaction can fund.  So if you sign on Monday, the earliest the loan can fund (close) is Friday; sign on Tuesday, the earliest your mortgage can fund is Monday.  

Mortgage Disclosure Improvement Act:  MDIA has two waiting periods: how soon a mortgage originator can collect funds after an application–depending on how an application is taken AND a redisclosure period if your APR (annual percentage rate) changes by an 0.125% for fixed rates and 0.25% for an adjustable rate.   The redisclosure period is also three days however the first day starts after the redisclosure and the earliest a borrower can sign is on the third day.  Most Seattle area real estate contracts have language providing an automatic extension of the closing date should closing be delayed due to MDIA (this is different than your rate lock extension).

Lately I've been renegotiating rate lock commitments for my clients, and even when I'm improving their rate, I need to redisclose and trigger the MDIA waiting period.  If it's a refinance, I need to be especially careful of not causing a lock extension if we run out of time due to the MDIA disclosure AND the Right of Rescission time period.

What was done "for the best interest of the consumer" has caused some transactions to be delayed.  It's important to be aware of the various timing factors that may be involved with your transaction.  Delaying your appraisal or not being able to get to your signing appointment in time with a refinance can wind up costing in the form of an extension fee when you factor all the timing periods…which everyone wants to avoid (and is why I like to lock a little longer when possible).

If I can help you with a mortgage on a home located in Washington state, please contact me.  Click here if you would like a rate quote for your home located in Washington.

Filed Under: Appraisals, Mortgage, Refinance

The West Seattle Grand Parade

July 25, 2010 by Leave a Comment

I must confess, I love parades.   And for me, the West Seattle Grand Parade is at the top of my list.  Not only is it in my home town, it features JP Patches, Seafair Pirates, marching bands, drill teams and Miss West Seattle HiYu with her court.  

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This year, my step-daughter, Kelsey, is a candidate for Miss West Seattle HiYu which makes the parade extra special.

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Here are more of my photos from yesterday’s West Seattle Grand Parade.

Filed Under: Seattle Tagged With: ,

Moms-to-Be CAN Qualify for a Mortgage

July 23, 2010 by Leave a Comment

My Mom and Me Recently the New York Times published an article stating that expectant mothers were being denied mortgages partially due to guidelines such as Fannie Mae's Lender's Quality Initiative.  I'm not sure if this was a case of bad reporting or a bit of fear from the lenders part of LQI, where loans may possibly be denied at closing if the loan application changes.   HUD has announced they are investigating this as discrimination against expectant mothers and new parents.

From HUD's Press Release:

"…FHA requires its approved lenders to review a borrower's income to determine whether they can reasonably be expected to continue paying their mortgage for the first three years of the loan.  FHA-insured lenders cannot, however, inquire about the future maternity leave.  If a borrower is on maternity leave at the time of closing, lenders must document the borrower's intent to return to work, that the borrower has the right to return to work, and that the borrower qualifies for the loan taking into account any reduction of income due to their leave.  Meanwhile, HUD is currently reviewing Fannie Mae and Freddie Mac's underwriting guidelines to determine if they satisfy the Fair Housing Act, including income verification of persons taking parental or disability leave…"

The New York Times article references a mother from Washington State who's mortgage was almost denied due to her maternity leave:

Elizabeth Budde, a 33-year-old oncologist who lives in Kenmore, Wash. She nearly lost her mortgage after a loan officer learned she was home with her newborn.

With stellar credit and a solid job, Dr. Budde said she had been notified via e-mail that she was approved for a loan on June 15. But that note prompted an automatic, “out of the office” e-mail reply from Dr. Budde’s work account, which said she was out on maternity leave.

The next day, Dr. Budde received a second e-mail message from the lender, this time denying her loan approval. Since “maternity leave is classified as paid via short-term or temporary disability income,” the e-mail message said, it could not be used because it would not continue for three years.

The message also said the lender could not consider her regular, salaried income because she was not on the job. “I was really shocked,” Dr. Budde said. “At the time, they didn’t know how I was getting paid for my leave.”

In the case of this new mom, her base salary would have sufficed for her loan approval to not be in jeopardy had she disclosed this to the mortgage originator assuming this mortgage originator knew their underwriting guidelines.  (Sounds like this mortgage originator either didn't know her guidelines or her lender has very strict underwriting overlays, in my opinion).

It's assumed there are no changes to your loan application between the time of application and closing.  If you have changes to your employment, income, assets or credit during your transaction, you need to let your mortgage originator know as soon as possible.  Verification of employment (VOE's) are performed prior to closing (funding) and in some cases, credit may be re-verified.   LQI (Loan Quality Initiative) requires that lenders do pre-funding reviews to make sure that the loan application is accurate prior to funding.  Per Fannie Mae:

The pre-funding review process should include controls or checks that test the accuracy of the loan data to ensure the information obtained is correct (e.g. borrower identity, employment, financial information, property information).

Anyone, man or woman, planning on taking any leave from their employment during their loan transaction should let their mortgage originator know. 

Photo: My brand new Mom (with me). 

Filed Under: Underwriting and Qualifying

Give Yourself a Raise – Refinance with Lifetime Low Mortgage Rates

July 23, 2010 by Leave a Comment

If you own a home and have an interest rate in the 5% range, it could be worth while to check with a local mortgage originator to see if refinancing makes sense for your personal scenario.

Here are some things to consider:

  • Most mortgages are full doc now.  You need to be able to show your income.
  • Conventional mortgages may allow expanded loan-to-values with the HARP program (home affordable refinance).  
  • If your original conventional mortgage has an 80% loan to value and you're upside down now, you may qualify for programs without private mortgage insurance at today's low rates.
  • FHA and VA streamline refinances are available without appraisals.
  • Minimum credit score of 620 with Mortgage Master Service Corporation.
  • Refinances available for owner occupied, investment and vacation homes.
  • Refinances can be used to reduce your interest rate, reduce your mortgage term, consolidate mortgages or pay off debts.

Not everyone situation qualifies for a refinance, but you won't know unless you take a few moments to check it out.   Why not see if you can put some extra cash into your monthly budget?  If your property is located in Washington State, I'm happy to provide a rate quote at no obligation to you.   You can also see what rate's I'm quoting live by following me on Twitter (you can unfollow me anytime).

Filed Under: Refinance

Take a Sunday Drive to Alki Point Lighthouse in West Seattle

July 18, 2010 by Leave a Comment

The Alki Point Lighthouse in West Seattle is open to the public on weekends from Memorial Day through Labor Day. 

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Here's the panoramic view from the top! 

It's an amazing bit of Seattle history and a beautiful place to visit.  Established in 1887, the current tower was first lit in 1913, the lighthouse will be celebrating her 100th birthday in a couple years.  

Come check it out before Labor Day!   Here are more of my photos of the Alki Point Lighthouse in West Seattle.

Filed Under: Seattle, Sunday Drive - Neighborhood Tours

Garden Glass Art

July 17, 2010 by 1 Comment

Our Seattle home is situated very close to our both neighbors.  In fact, the view out our dining room window are the grey shingles of our next door neighbor’s house.  My husband and I started keeping an eye out for glass art to create a garden.  Last weekend, at the West Seattle Summerfest, we spied a booth, Simply Qwirky, selling beautiful yard art made from vintage looking glass plates.

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They really brighten up the view and add a little whimsey.   I’m told the artist, Julie and Carline, are typically at the Fremont Sunday Street Market.  Below is more of their pretty flower glass plates from the West Seattle fair last weekend.

 Qwirky

Filed Under: Just for Fun, Seattle Tagged With: ,
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