Freddie Mac’s Home Affordable Refinance – Relief Refinance Mortgages

June 22, 2010 by 2 Comments

I've written about Fannie Mae's HARP program a few times here at Mortgage Porter, but I've neglected to write much about Freddie Mac's version.  This is partly due to the fact that when the Home Affordable program began, loans securitized by Freddie Mac required that you had to go back to your mortgage servicer: THIS IS NO LONGER TRUE.  In addition, Fannie Mae has a much larger market share than Freddie so I've been helping more Seattle area home owners who have lost equity with Fannie's program.   I'm pleased that Freddie Mac has expanded this program (Open Access) to not force home owners to return to the mortgage servicer which means, I can probably help you if your mortgage is owned by Freddie Mac (or Fannie Mae). 

Freddie Mac's program offers "borrowers who are current on their mortgage payments the ability to refinance to improve their financial situation when home values have declined…"   If you are behind on your Freddie Mac owned mortgage, you may qualify for the Home Affordable Modification.  I do not do loan mods.

Here's some information about Freddie Mac's Home Affordable "Relief Refinance" (if  you're mortgage is owned by Fannie Mae, click here).  Although some of these guidelines are similar to Fannie Mae, there are some differences.

In order to qualify for this program, your mortgage must be securitized (owned) by Freddie Mac prior to June 1, 2009 and be in first lien position.   To see if Freddie Mac owns your mortgage, click here.

The loan amount is limited to the mortgage balance plus the lesser of $5,000 or 4% of the current balance.  And the maximum cash back a borrower may receive is $250.   For example, if your current mortgage balance is $400,000, the most your new loan amount could be is $405,000.  You may find that you either need to bring cash in to close (typically a mortgage payment) or price the mortgage with zero points (while Congress still allows this as they're trying to ban rebate pricing). 

For King, Snohomish and Pierce counties, the maximum loan amount is $567,500 for a single family dwelling. 

This program is available for primary residences, second homes and investment properties.

If your original mortgage did not have private mortgage insurance, the new mortgage will not have private mortgage insurance even if your current loan to value is over 80%.

There must be a benefit to the borrower, such as a reduction in interest rate, replacing an adjustable rate mortgage with a fixed or a reduction in term.

Borrowers must be current on their mortgages with no "30 day late payments" in the last 12 months.

Second mortgages must be subordinated (they cannot be included or paid off with the refinance).  Most second mortgage lien holders are cooperating–but it is their call on whether or not they will permit the subordination to take place.

A full appraisal is required and loan to values up to 125% are permitted.

Income and employment are verified.  Minimum credit score is a 620.

The Home Affordable Refinance Program is scheduled to end in June 2011 2012.   If you're interested in a rate quote for your mortgage, at no obligation, to see if refinancing makes sense for your Washington state home, please contact me.

NOTE:  This post has been updated to reflect the extension of the HARP refi.

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

Happy Father’s Day

June 20, 2010 by Leave a Comment

Dad I think I'm telling my Dad a secret or perhaps, wishing him a Happy Father's Day.  Or perhaps I'm whispering "It's Janette's birthday!" 

I believe this photo was taken at my Grandmother's home in the Renton Highlands…and that my sisters are both wearing my hanad-me-downs.  We all loved dressing up.  This photo must have been celebrating Father's Day or Dad's birthday.

Happy Fathers Day to all the Dads and a very Happy Birthday to my baby Sister, Janette (pictured in the pink dress).  

Filed Under: Current Affairs, Just for Fun

How to Shop for a Mortgage Originator When They Won’t Provide a Good Faith Estimate

June 17, 2010 by Leave a Comment

I just received this excellent question on a post I wrote at Rain City Guide about why Loan Originators are hesitant in issuing a Good Faith Estimate without all the required information:

…I am a new buyer with a question regarding the GFE. I am brand new to this world, so I apologize if this is a dumb question.

I read that I should shop around to a few banks and get a GFE to see who can give the best deal. I was pre-qualified by my personal bank but my Loan Officer denied me a GFE. She stated she cannot give me one until my offer is accepted for a home.

How am I supposed to shop around for the best deal, if they won't give me a GFE until I've found a home & been accepted? My intent of the shopping around is to be ready when the home comes along.

I've been meaning to write a post about how to select a mortgage professional since my original articles on this topic are a little out of date with the introduction of HUD's Good Faith Estimate at the start of this year.

Currently, if a mortgage originator issues a good faith estimate without the property address (when someone is shopping for a home), the addition of a property address does not create a "changed circumstance".  The only time a mortgage originator can issue a new or revised Good Faith Estimate after the initial GFE is if there is a qualified "changed circumstance".   Since the 2010 GFE has certain liabilities associated with various fees that are quoted, a mortgage originator is at risk for having to shell out hard earned cash if there are differences between the Good Faith Estimate issued and the HUD-1 Settlement Statement at closing.  I say "currently" because I do hope that HUD recognizes this significant flaw and that they correct this soon because a home buyer does not have their future home address will be hard pressed to obtain a Good Faith Estimate from any mortgage originator–which defeats the purpose of why HUD created this document!

So how can a home buyer "shop" for the person who is going to help them with one of their largest debts secured to where possibly their most significant asset?   Here's what I recommend:

  • Ask for a rate quote sheet or work sheet.  Lenders may have different names for this but HUD does allow us to provide rate quotes as long as they do not look like a good faith estimate.   If you are going to do this–it's imperative that you do in a short amount of time and provide each LO the same criteria as rates are a moving target.  Currently we're experiencing 2-3 rate changes per day. 
  • Determine if your mortgage originator is licensed or registered and if this is important to you.  Licensed Mortgage Originators are held to higher standards per the SAFE Act than Registered (bank or credit union) Mortgage Originators. If you visit www.consumeraccess.com you can verify a license and see your mortgage originators history.
  • Consider what type of mortgage company the mortgage originator works for.  What this boils down to is do they have in-house underwriting?  Where are the decisions on your loan going to be made?  Is the processing down in a far away "processing center" or does the processor work in the same office with the loan originator.   There are differences between correspondent lenders, mortgage brokers, mortgage banks and credit unions.
  • Google your possible mortgage originators.  A Google search may reveal rants or raves about the person you're considering to help you.  You may learn more about the mortgage professional.  Just enter their name into the search box–you might have to add the word "mortgage" if their name is common.
  • Is the mortgage originator or their company affiliated with a builder (the seller) or real estate agent's office?   If the mortgage originator is a builder's site agent, they may be naturally more incentized to look out more for who feeds them the most business–which isn't you.  If they are cozied up in the real estate agents office, make sure they are committed to not disclosing information that you may not want the real estate agent to have (for example, the maximum amount you may qualify for).   If you're comfortable with not having someone intendant of attachments to work with, then this point may not be a huge issue…but it is something to think about.

These are just a few suggestions to help you select your mortgage originator.  Mortgage rates and closing costs are important, but there are other considerations to factor as well. 

If I can answer your questions or help you with a mortgage for a home located in Washington state, please contact me.  I've been originating mortgages for the past ten years and I'm happy to help!

Filed Under: Good Faith Estimate, Mortgage

Refinancing Guidelines Need to Loosen Up for Housing Recovery

June 15, 2010 by 2 Comments

This subject has been gnawing at me for a while and I’m actually surprised I haven’t written about it here before.  In order for the housing market to really start recovering, I believe that the underwriting guidelines need to relax.  Whoa–you say, isn’t that what got us into this mess in the first place?  Well, I’ll argue that it was more of folks being able to buy more than they could afford (via stated income) that drove up prices and put them into homes where they could never afford the the payments over folks who used home equity by consolidating debts or doing who knows what with the cash (hopefully they banked it…in a safe place).

Helping someone keep their home by taking advantage of the lower interest rates prevents a foreclosure or short sale.  Yes, we have the Home Affordable Refinance Programs (HARP) thanks to President Obama–but many don’t qualify and many who do are not taking advantage of this temporary program.   FHA Streamline refinances now require an appraisal OR no closing costs can be financed–how is that better for American home owners during this time? 

If it were up to me, I would make it possible for home owners who have demonstrated they pay their mortgage and debts on time and who have documented steady employment to have their appraisals waived and closing costs financed so they don’t have to dip into their hard earned savings to finance their refinance.  Now this does happen sometimes with Fannie Mae’s HARP program…but not with Freddie Mac (which requires an appraisal and limits closing costs) and not with FHA.

Why penalize home owners who’s property values have plummeted because their neighbors sold their homes via short sale, lost it due to a legitimate foreclosure or plain walked away from their obligations?  Why punish home owners who have been making their payments and who qualify on every other point EXCEPT the appraised value?  If their payment is being reduced, it helps stabilize the neighborhood and reduces the risk of default for the mortgage servicer.  Loan to values need to be eliminated on rate-term refinances where a tangible benefit for the home owner exists.

We also need to eliminate the securitization factors of when Fannie or Freddie bought the existing mortgage for it to be eligible for a HARP refi.  I recently had a client where it showed on Fannie Mae’s site that he indeed has a mortgage owned by Fannie Mae–it was not until we received an error message trying to underwrite it through DU (the automated underwriting system) that we called Fannie Mae to discover that the loan had been securitized (purchased by Fannie Mae) one day too late to qualify (March 1, 2009).  This person’s loan closed in December 2008, was sold the the bank and then took months for Fannie Mae to purchase.  This means this upside-down home owner does not qualify to reduce his payment by $250 per month.  Imagine what the $250 a month would do for him and/or the economy.  It gives him some probably needed monthly financial wiggle room and he just might spend a little more which helps our economy too.  (Loans need to be purchased/securitized by Freddie Mac no later than May 31, 2009 to qualify).

These are just a few thoughts that have been a bee in my bonnet… or worse!   Don’t get me started on home owners with existing mortgages that have private mortgage insurance hitting a brick wall when trying to do a HARP refi (most pmi companies are not cooperating) or not being able to include second mortgages (even “purchase money”) in a HARP refi.   Or how FHA insured loans will soon be more expensive for borrowers seeking to refinance or purchase with the increase of the annual mortgage insurance premium.

Please contact your elected officials in Congress if you have had issues with obtaining financing…they are making originating loans tougher and tougher as I write this post. 

I’m afraid it’s going to get worse before it will get better.  Many people who need help and who would qualify for the refinance with exception of the appraisal…are not able to get it.  Many don’t want to risk the cost of the apprasial (around $500) to attempt a refinance in these economic times.

Filed Under: Rant, Refinance Tagged With: , , ,

King County Assessor’s Office Adds Photos of Properties

June 12, 2010 by Leave a Comment

The King County Tax Assessor’s office has recently added photos to your tax records–including historic photos if they’re available.  These photos are from a home I owned in South King County on North Lake (by Weyerhauser’s corporate office) from 1999 – 2005.  It’s pretty cool to see the home when it was a classic funky lake cabin back in October of 1967.

 AuburnOldHouse
Where the camper and carport is in this photo was  my son’s bedroom and my office when I lived there years ago.  Below you can see they added a bedroom and my future office became the garage.

 AuburnOldHouse_001

Here’s the now picture they have of this view (the lake is on the other side):

 AuburnNow 

To see what photos King County has of your home (and it never hurts to review your tax records) visit this site: http://info.kingcounty.gov/Assessor/eRealProperty/default.aspx and find your property by entering your address or tax parcel number.  If you need help finding your tax parcel number for your home in King County, please contact me. 

Once you locate your property, click the “My Property Detail” tab and scroll down.  You should see more photos and floor plans, if they’re available. 

  Moreof~1
Note: the above photo is not from the county…just one from when we lived in the home.

No guarantee how the photos will be…but it’s fun checking them out and they’re free.  You may also be able to order photos from of your home from the Washington State archives if your home was built prior to 1930 which may have a better quality (not taken for tax purposes).

Hat Tip to West Seattle Blog via Twitter

Filed Under: Just for Fun Tagged With: ,

The House of Representatives Passes FHA Reform Increasing FHA Mortgage Insurance

June 11, 2010 by 2 Comments

Yesterday I was interviewed by Alan Zibel with the Associated Press about the passage of House’s FHA Reform bill which, among other things, would increase the annual FHA mortgage insurance premium.   The Senate still needs to pass their version of the bill but there is no doubt in my mind that we are going to see FHA loans become more expensive for consumers.  Congress is wanting this bill in order to “improve the financial safety and soundness of the FHA mortgage insurance program”. 

HR 5702, or ”FHA Reform Act of 2010″, gives HUD the power to triple the current annual FHA mortgage insurance premium (which is paid monthly).  HUD will offset this cost by reducing the upfront mortgage insurance premium which was increased to 2.25% in April of this year.  HUD will offset the increase in the annual monthly mortgage payment by reducing the annual premium to 1.00%.  HUD feels this is helping home owners increase their home equity by 1.25% since a majority of FHA borrowers finance the upfront mortgage insurance premium.

Currently, the annual mortgage insurance premium for an FHA loan with 3.5% down payment is 0.55% (if you’re putting down 5% or more, the premium is slightly reduced to 0.5%).  HR 5702 will allow HUD to increase the annual premium up to 1.55%.  To calculate how much this would impact your monthly mortgage payment, take the loan amount and multiply the annual premium; then divide by 12 months. 

This is how upfront (UFMIP) and annual mortgage insurance pencils out on an FHA insured mortgage today based on a loan amount of $300,000 and an estimated rate of 5.00% (this morning’s rate is much lower).  Since we’re dealing with future figures, I thought 5 was a nice round number for comparison sake.

  • 2.25% UFMIP x 300,000 = $6,750 = principal & interest payment (UFMIP + loan amount) = $1,646.70
  • 0.55% annual MIP x 300,000 = $1,650 divided by 12 months = $137.50
  • PIMI (principal, interest & mortgage insurance) payment: $1,646.70 + $137.50 = $1,784.20

HR 5702 would allow HUD to almost triple the annual premium while reducing the UFMIP.  Worse case scenario, it could look like this based on the same criteria in my last example:

  • 1.000% UFMIP x 300,000 = $3,000 = principal & interest payment = $1,626.57.
  • 1.55% annual MIP x 300,000 = $4,650/12 months = $387.50
  • PIMI payment = $1,626.57 + $387.50 = $2,014.07

A increase in payment of $229.87 for the same loan even with the reduced upfront mortgage insurance premium!  Based on using an interest rate of 5%, $229.87 per month equals $42,800 in loan amount–meaning that if the borrower only qualified for the PIMI of $1784.20; their loan amount (borrowing power) has been reduced by $42,800.

According to Alan Zibel of the Associated Press, the annual mortgage insurance premium will start off at a lower 0.9%: 

FHA officials want to raise that fee to 0.9 percent, though the bill would give them the power to hike it as high as 1.5 percent.

Even with the annual premium at 0.9%, the monthly mortgage payment (PIMI) would increase to $1,851.57.  (300,000 x 0.9% = 2,700/12 = $225 monthly mortgage insurance plus 1% UFMIP payment of $1,626.57).  This would increase the payment by $67.37 per month based on my example.

Based on HUD Commissioner David Steven’s testimony in March, their goal is to be “more in line with GSE and private mortgage insurers’ pricing”.  

Often times, I’ve recommend FHA loans over conventional mortgages requiring private mortgage insurance because even though FHA has annual and upfront mortgage insurance, the pricing and overall payment has been lower (plus many FHA loans are presently assumable).  

In my opinion, making FHA more like a conventional mortgage will impact many borrowers for the worse and delay the recovery in the housing market further.

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

Who Does Your Loan Originator Really Work For?

June 8, 2010 by Leave a Comment

Photo credit Sarah G... via flickr I often wonder how a consumer can truly trust a mortgage originator who sits in a housing development or a real estate office.  Yes, it's convenient when you're checking out that new home and the loan originator that works with the builder or real estate company just happens to be sitting there waiting for you or the next person who'll walk through their door.  Is that the best option for you?

HUD is questioning this with regards to builders with in-house lenders and if this arrangement is a RESPA violation.  It is harmful to consumers if the closing costs or rates are increased to compensate for what the lender may have to shell out to be that builder's preferred lender. Often times, you may find that the builder has built any cost to bribe you to work with their lender by increasing the sales price of the home.  RESPA violations aside, I've always felt that if you work with the builder's lender, you're providing your personal information to the "seller" or the more specifically, the employee of the seller.   The loan originator may be employed by a bank, but when they're constantly fed by the builder…where do their loyalties rest?

I feel the same way about loan originators who work as "joint ventures" with real estate companies.  They may be paying rent inside your real estate agent's office or just be on their preferred providers list with some sort of business arrangement.  I believe most of the big real estate brokerages in the Seattle area have an arrangement made to steer you to their lender, title or escrow company.   When a loan originator, title rep or escrow officer are constantly fed or partially owned by a real estate company–where are their loyalties?  If you only want to get approved for a $400,000 sales price, and can afford to much higher–do you think the LO who's shacked up with the real estate agent will let that agent know when they press the LO for more info on you?

Yes, you pay for their origination, title or escrow fees, but who are these people really work for.  Shouldn't you have more of a choice?   Some real estate agents will tell you that there isn't much difference in rate or fees–which they may truly believe; however, it may not be accurate. 

I "work for" Mortgage Master Service Corporation.  I'm paid by the consumer when we close a mortgage transaction together.  My business is dependent on my clients referring me to people they know who need a mortgage in the greater Seattle area.  I also have clients who find me from reading my blogs.   I am not part of any joint venture or arranged business agreements.  I'm not paid based on volume, quotas or selling a certain type of program.

Bottom line as a borrower in one of the largest transactions you may ever make in your lifetime, it is your responsibility to make sure you have the right team working for you.  Do as much research as possible before you've entered into a real estate contract.

Photo credit:  Sarah G… via Flickr

Filed Under: Escrow and closing, Mortgage, Opinion, Rant, Real Estate Agents

Memorial Day

May 31, 2010 by Leave a Comment

Freedom of speech and freedom of action are meaningless without freedom to think. And there is no freedom of thought without doubt. ~Bergen Evans

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Spirit, that made those heroes dare
To die, and leave their children free,
Bid Time and Nature gently spare
The shaft we raise to them and thee.
~Ralph Waldo Emerson

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Never in the field of human conflict was so much owed by so many to so few. ~Winston Churchill

~

Mortgage Master Service Corporation is closed today in observance of Memorial Day and to honor those who have made the ultimate sacriface for our country.  

Filed Under: Current Affairs
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