100 Days Remaining for the Home Buyer Tax Credit (and my 1000th Post)

January 20, 2010 by Leave a Comment

Fthbtax 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. 

Filed Under: First Time Home Buyer, Legislation, Real Estate, Residential Purchase, Weblogs

FHA Making Good on their Word for a Tougher 2010

January 20, 2010 by Leave a Comment

Late last year, HUD gave us all a warning that they were going to toughen up on FHA guidelines in January.  I'm still waiting for the Mortgage Letter with all the nitty-gritty details to be issued which will be issued tomorrow, January 21, 2010.  The changes to FHA are said to go into effect this Spring (wonder if it will be after the home buyer tax credit has expired).

FHA is going is going to increase the upfront mortgage insurance premium from 1.75% of the loan amount to 2.25%.   I'm currently helping some home buyers relocate to Des Moines, Washington.  They're buying a home with a sales price of $395,000 and the (currently available) minimum 3.5% down payment.  Here's how this would impact their mortgage scenario based on:

  • this morning's FHA rate for a 30 year fixed (as of 8:00 a.m.) at 4.875% (5.515% APR)
  • base loan amount of $381,150

UFMIP (upfront mortgage insurance premium) rate of 1.75% = $6670 (base loan amount x 1.75%).  381,150 + 6670 (since it is being financed) = $387,820.  Amortized for 30 years at 4.875% = principal and interest payment of $2,052.38. 

UFMIP rate of 2.25% = $8575 (381,150 x 2.25%).  Base loan amount plus 8575 = $389,725.  Amortized for 30 years at 4.875% = principal and interest payment of $2062.46.

With this scenario, based on a purchase price of $395,000, the difference in payment is ten bucks. 

FHA is increasing the minimum credit score to 580.  Now before you get in a dither, please know that most lenders, including Mortgage Master, will not go lower than 620 for a mid-credit score with FHA because of bank underwriting "overlays". 

FHA is also decreasing the allowable Seller Concessions from 6% to 3% of the sales price.  This will have little impact on my transactions–typcially 3% of the sales price is more than enough since the contribution can only go towards actual closing costs, prepaids and reserves.   Unless the seller was going to pay for the upfront mortgage insurance premium too…

It's my understanding that FHA is requesting to increase the annual mortgage insurance as well.  They actually had risked based pricing of mortgage insurance approved back in the summer of 2008 which was then put under a moratorium which quietly expired October 2009.  I'm sure they need to revamp the levels of risk since back in the summer of 2008, FHA was insuring loans with much lower mid-credit scores than what they (or lenders) would accept today.

HUD's Press Release from this morning.

So take a deep breath as the FHA belt continues to tighten and stay tuned to the Mortgage Porter…I'll keep you posted.

Filed Under: FHA, Underwriting and Qualifying

Mortgage Master is closed today in honor of MLK Day

January 18, 2010 by Leave a Comment

In honor of Martin Luther King Day, Mortgage Master is closed and will reopen for business on Tuesday, January 19, 2010 at 9:00 a.m.

Filed Under: Current Affairs

Will the Nationwide Mortgage Licensing System Impact How Consumers Select a Mortgage Originator?

January 16, 2010 by 2 Comments

Nmls 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?

 

Filed Under: Legislation

The Fed is Getting Tougher on Credit Card Companies

January 15, 2010 by 2 Comments

In a press release earlier this week, the Fed announced they have approved the final rule amending Reg Z regarding credit cards which will go into effect on February 22, 2010.   The new rules set tougher guidelines on credit cards, especially with regards to protecting consumers against rate changes and how they are billed.  

No interest rate increases for the first twelve months.  There are some exceptions such as if you have a variable rate tied to an index; if your rate is an introductory rate (which in that case, your rate must be fixed for a minimum of 6 months); and if you're more than 60 days late on your bill.

Increases to your interest rate can only be applied to your new balance.  Your old balance will keep the lower rate.

Payments will be applied towards the highest interest rates first when you pay more than the minimum payment.  (Some exceptions may apply).

Statements must be mailed or delivered at least 21 days before your payment is due.  Your due date should always be the same day of the month unless it falls on a weekend, in which case your due date will be the following business day.

Charges you make "over the limit" may be restricted (not allowed) unless you give your credit card company permission.

If you're under 21, you may need a cosigner such as a parent, to obtain a credit card.  Guess those credit card companies will have to stop preying on college students unless Mom or Dad agree to cosign.

No two-cycle (double-cycle) billing.  According to the FOMC's site "credit card companies can only impose interest charges on balances in the current billing cycle.

When your rate or fees are going to change, you must be notified 45 days priorto the change taking place.  You will have the option to refuse the change, however this probably means that your canceling your account.  If you do refuse the change, and your account is canceled, the creditor can impose higher payments by requiring to pay off your account in five years.  NOTE: Canceling your account may be damaging to your credit scores.  Should you get a notice that your rate or terms are changing and you don't agree with it, you are probably better off (as far as your credit score is concerned) paying off the card by applying more principal than canceling it with the creditor.

New monthly statements will show you how long it will take you to pay off your credit card making minimum monthly payments as well as what your monthly payment would need to be if you wanted to pay off your card in three years.

I applaud the new credit card rules.  Since their not going into effect until February 22, 2010 you may want to keep an eye on your interest rates…with just over a month before they take place, sly credit card companies may try to sneak a few changes in before things get tougher. 

Filed Under: Credit Scores and Reporting, Debt Restructuring, The Fed - FOMC

Changed Circumstance: When a Good Faith Estimate CAN be Re-Issued

January 12, 2010 by 31 Comments

EDITORS NOTE: Effective on loan applications dated October 3, 2015 and later, the Good Faith Estimate has been replaced by the “Loan Estimate” which has some similarities to the retired Good Faith Estimate, including requiring a “changed circumstance” for it to be re-issued. 

Most Mortgage Originators have a distaste for Good Faith Estimate now required to be used by HUD due to a term called “changed circumstance”.  A changed circumstance is the only time that a mortgage originator can re-issue a good faith estimate (unless the estimate has expired) and the only items that can be modified are those impacted by the circumstance that changed.

According to the RESPA changed circumstances is defined as:

(1)(i) Acts of God, war, disaster, or other emergency;

(ii)  Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided. This may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE;

(iii)  New information particular to the borrower or transaction that was not relied on in providing the GFE; or

(iv)  Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problems.

(2)  Changed circumstances do not include:

(i)  The borrower’s name, the borrower’s monthly income, the property address, an estimate of the value of the property, the mortgage loan amount sought, and any information contained in any credit report obtained by the loan originator prior to providing the GFE, unless the information changes or is found to be inaccurate after the GFE has been provided; or

(ii)  Market price fluctuations by themselves

HUD adds in their RESPA FAQs (as of December 30, 2009):

None of the information collected by the loan originator prior to issue the GFE may later become basis for a “changed circumstance” upon which a loan originator may offer a revised GFE, unless the loan originator can demonstrate that there was a change in the particular information or that it was inaccurate, or that the loan originator did not rely on that particular information in issuing the GFE….

According to HUD’s RESPA FAQ 8ii, simply issuing a good faith estimate with a TBD address (or no address) is not cause for a “changed circumstance” and if a mortgage originator does issue a GFE, remember, we are presumed to have all the information necessary to create a loan application per HUD.

If a mortgage broker issues a GFE based on one lenders products and origination fees, but places the loan with another lender–the mortgage broker may wind up having to eat the difference in fees if they are higher.

Examples of things that *could* be considered a changed circumstance (after a good faith estimate is issued)  according to HUDs FAQs:

  • GSE (Fannie/Freddie), FHA or mortgage insurance program changes prior to the GFE being issued IF the mortgage originator did not have notice of those changes (good luck proving that).
  • The property address provided by the borrower is not correct.
  • Parties are added or removed from title.
  • the loan does not close by the closing date in the original purchase and sales agreement provided to the lender.
  • Additional appraisal, pest or other inspections requried.

The fees in Block 1 of the Good Faith Estimate cannot change with a changed circumstance unless it is the loan amount that changed and a portion of the “origination charge” is a percentage of the loan amount.  If after a GFE is issued and a changed circumstance, or borrower requested change happens, which impacts pricing (for example, a low appraisal), the change must be reflected in Box 2 of the Good Faith Estimate, which will then reflect the “adjusted origination charges”.

Changed circumstances is another great example of the best of intentions with potentially terrible outcomes for borrowers.  Many mortgage originators will be weary to issue the new good faith estimate because of all the RESPA regulations it carries.  In addition, banks and wholesale lenders are making their own layer of guidelines on top of the “what could trigger a changed circumstance”.   Originators run the risk when issuing a revised GFE of the bank/lender balking at it down the road–especially if the borrower winds up going into default.  This is just another opportunity for banks/lenders to find cause for a “buy back”.

I’m hoping by reading my articles about the new GFE, you can see why some lenders are a little leary to issue them as freely as we did pre-2010.

An important reminder that this, as well as all of my posts are my opinion only and are not intended as legal advice nor do they replace your mortgage compliance department.

 

Filed Under: Good Faith Estimate Tagged With: ,

From the Fed: Mortgage Excerpts from December’s FOMC Minutes

January 8, 2010 by Leave a Comment

If your little heart desires, you can read the entire FOMC Minutes from the December 15-16, 2009 meeting.  I'm posting bits and pieces that relate to mortgage interest rates, which have been artificially low due to the Fed's purchase of MBS (mortgage backed securities) and home buying/selling.

In particular, they noted the risk that improvements in the housing sector might be undercut next year as the Federal Reserve's purchases of MBS wind down, the homebuyer tax credits expire, and foreclosures and distress sales continue. Though the near-term outlook remains uncertain, participants generally thought the most likely outcome was that economic growth would gradually strengthen over the next two years as financial conditions improved further, leading to more-substantial increases in resource utilization….

In the residential real estate sector, home sales and construction had risen relative to the very low levels reported in the spring; moreover, house prices appeared to be stabilizing and in some areas had reportedly moved higher. Generally, the outlook was for gains in housing activity to continue. However, some participants still viewed the improved outlook as quite tentative and again pointed to potential sources of softness, including the termination next year of the temporary tax credits for homebuyers and the downward pressure that further increases in foreclosures could put on house prices. Moreover, mortgage markets could come under pressure as the Federal Reserve's agency MBS purchases wind down….

Accordingly, the Committee affirmed its intention to purchase $1.25 trillion of agency MBS and about $175 billion of agency debt by the end of the first quarter of 2010 and to gradually slow the pace of these purchases to promote a smooth transition in markets. The Committee emphasized that it would continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.  A few members noted that resource slack was expected to diminish only slowly and observed that it might become desirable at some point in the future to provide more policy stimulus by expanding the planned scale of the Committee's large-scale asset purchases and continuing them beyond the first quarter, especially if the outlook for economic growth were to weaken or if mortgage market functioning were to deteriorate….

Bernanke has stated that there is a lot of uncertainty of what the effect of the Fed no longer purchasing MBS will be and that the FOMC will continue to watch the economy and decide if they'll actually be done with their purchase program in March or if they're going to continue. 

What we do know is where mortgage rates for the Seattle/Bellevue area are currently and what options with mortgage programs are available now (HUD has been talking about tightening up FHA this month).  I've been talking to clients who I encouraged to refi a few months ago when rates where slightly lower and FHA still had an attractive streamline (with no appraisal required and closing costs financed)–rates are higher and benefits to that program are gone.  For refinancing, it may not pay to be patient.

March should be interesting with the end of the home buying tax credit looming and the FOMC nearly phased out of their support of our artificial low mortgage rates.  

Filed Under: The Fed - FOMC

A Few Minor Adjustments

January 6, 2010 by 2 Comments

I think I've somehow managed to lose my Feedburner feed, where my readers receive what ever articles I write on Mortgage Porter directly to their email.  So I'm looking at using this as an opportunity to revamp what I use for my feed and I could use your help.

Please comment below if you are a Mortgage Porter subscriber and let me know if you have received this post via:

  • Feedburner
  • Feedblitz
  • Mailchimp
  • other

Thanks so much for your help! 

Filed Under: Web/Tech, Weblogs
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