HAFA

The Home Affordable Foreclosures Alternatives Program is the newest way the Treasury Department is trying to help homeowners. This program works with the HAMP program. The HAFA went into effect on 04/05/2010 and it goes until 12/31/2012. The biggest advantage with HAFA, is that it will be a quicker approval process for short sales. It will give borrowers a pre-approval on short sale terms before they list they property, including the minimum acceptable net proceeds.

HAFA will use the borrowers financial and hardship information already on file, previously submitted for any loan modification request. It also requires borrowers to fully release from first mortgage debt. It gives financial incentives to the borrowers, servicers and investors. The borrowers can receive up to 3k in relocation assistance; the servicers can receive $1500 to cover costs; and the investors can receive up to 2k, who allows up to 6k, to be distributed to junior liens on a 1-for-3 match.

HAFA allows a few more options to try and avoid foreclose homes on the market. It also applies to properties that are giving back to the back in, Deed-In-Lieu. Whether it’s a short sale or a DIL, the servicer must forfeit the right to pursue a deficiency judgment against the borrower.

With the time consuming process short sales have been taking, having a program determine the net price they will accept, will make these transactions close quicker and try to stabilize the market faster.

DC Area Mortgage Banker
Montgomery County Homes, MD

Qualifying Income

I have noticed a lot of individuals claiming a lot of “unreimbursed employee” expenses on their taxes. This helps lower their gross income and in turn and usually increase their refund. What a lot of borrowers don’t seem to realize is that doing this, hurts them when it comes time to qualify for a mortgage. The number that is claimed under, “unreimbursed employee” expenses, (form 2106), is calculated as a percentage, and deducted from their gross income, over a 2 year period. As an ex., if you claim 20% of your income as “unreimbursed employee” expenses in 2008, and you did not claim any in 2009. You would need to use a 10% deduction over that 2 year period. You would also need to apply that same percentage of 10%, to your current YTD earnings for 2010.

I have seen some taxes recently where the percentage is super high, well over 30%. I actually have a couple that because they claim such a huge deduction; they cannot qualify for the home that they want to buy.

Even though you may be a W2 employee, banks are using a form called 4506T. That is a form, once signed by the borrower, giving the banks permission to request a copy of your tax returns for the last 2 years. It is very important to let your loan officer or mortgage broker review all of your documents in the pre-approval process.

DC Area Mortgage Banker
Montgomery County Homes

FHA Changes

There are some important FHA changes coming up in the next 10 days everyone should be aware of. According to the FHA Mortgagee Letter 2010-02, as of April 5, 2010, the up front MIP will go from 1.75 to 2.25. That applies to all purchase and refinance transactions. For you to be able to use the 1.75 Upfront MIP, a borrower needs an FHA case number before April 5th. That can take more than 24 hours, so I recommend if you need to generate one, to proect yourself, it should be done ASAP.

The annual mortgage insurance premiuns will not change. For loans with terms over 15 years, they will still be .55 for LTVs equal to 95% or higher. It will be .50 for loans with an LTV of under 95%. On loans with terms of 15 years or less, there is no monthly MI for LTVs equal to or under 90%. The monthly MI for LTVs over 90% is .25.

There are more changes coming down the pike. These three big changes are expected to go itno affect in early summer, 2010.

There will be new down payment and credit score requirements. Borrowers with scores below 579, will need to put down 10% of any FHA transaction. Borrowers with scores of 580 and aboce, will still need the current 3.5% down. You should also be aware, that a lot of lenders are implementing a minimum of a 640 score and the lenders that will go to scores in the 500s, increase the rate because of the increased risk factor based on the borrowers. Just because FHA allows 3.5% down with a 580, does not mean your bank or broker will offer the same. You need to inquiry about the specifics, once you receive your score.

One of the great nenefits to FHA is that they allow up to 6% in seller concessions. That is money requested from a seller to use to pay for closing costs and prepaid items and sometimes, used to buy the rate down. FHA will be changing that from 6% to 3%. That also is expected to be implemented in early summer, 2010. FHA feels that the 6% seller concession has been abused and caused an increased in defaulted loans. As a buyer, you need to know that sometimes 3% will not cover all of your costs. If that applies to you, you will not only need the 3.5% down, and put could potentially need another 1 or 2% to close on your purchase.

The last change being discussed is the an increase enforcement on FHA lenders. “This will allow legislative authority to withdraw and terminate originating and underwriting approvals for lenders nationwide, based on performance”. This is from the HUD release 10-016, January 20, 2010.

The three changes described aboce are in a “comment period” through the Federal Register.


MD Mortgage Banker
Montgomery County Homes

Multiple Mortgages

According to Fannie Mae and Freddie Mac rules, you are maxed at 4 financed properties. If you own a fifth, you will not get financing from a Fannie Mae and Freddie Mac direct seller. That does not mean you cannot get financing for a fifth, or additional property. What it means, is that you have to find a lender that offers portfolio products. Portfolio products are loans that they lend their own money on, and possibly also service. Since the bank is lending their own money, they can be a little more flexible on the guidelines when it comes to the number of maximum properties.

Lenders with portfolio products may offer rates a little higher, and different adjustments and hits to the rate, based on LTV, FICO and terms, just like Fannie and Freddie.

Also, on cash out refis, the owner must have owned the home for at least 6 months.
Please check with you loan officer about the properties with high loan-to-values and secondary financing. There are tighter restrictions on them, and therefore, Freddie and Fannie may not be an option, in those situations.

Another point to keep in mind, it applies to 4 properties, NOT 4 mortgages. If you own 4 properties, 1 primary residence and 3 investments, and each home has 2 mortgages, that will still be considered having 4 financed properties.

Sr. Mortgage Broker
Fairfax, VA Homes

New GFE and HUD-1

As of the first of the year, there are new regulations from RESPA. RESPA has created a new Good Faith Estimate and a new HUD. They were created to try and protect the consumer more. I am in full support of protecting the consumer and educating them. The issue is, these forms are not conforming. Banks are asking for different forms or additional forms, thus making the process more complicated than simple. Also, there is a lot of confusion from the governing agencies, the lending banks and the brokers. The idea behind it, is good, the process is showing to be mediocre. Even though regulatory and government agencies brag about how they are helping the consumer, it actually may end up costing the consumer, because of delays, problems with locking rates in, and even more confusion.

Some of the issues that have come up are; the proper disclosure of yield spread premiun for brokers, the true cost for the borrowers, and the pass-thru fees.

I believe down the road, things could show a benefit, but there needs to be a conforming process, so all parties involved can be on the same page, and receive the same training.

We have gone from a market-place with very little regulation, to a market with over-the-top regulation. I am in favor of the regulation, because I strongly believe it gets rid of the individuals who do not belong in the industry.

MD Sr. Mortgage Broker
Fairfax, VA Homes

Buying a Condo? Lenders now requiring HO-6 coverage

This is for new condo buyers. Previously only some condo owners bought renters insurance. Renters insurance is to cover the contents of your property, and its actually very affordable. The condo fee payment you make every month covers the structure, the maintance of the building and the amenities.

Previously banks did not require renters insurance or HO-6 (as the insurance companies call it), for your condo purchase or refi. The change you will see, is that banks are now requring HO-6 coverage to be approved for your condo purchase. The policy is usually a couple of hundred dollars a year. Most banks will let you pay for it at settlement, and then you get billed for it annually.

It has always been a great idea to have, but now you will see it as a requirement, not an option. Most insurance carriers can give you a quote without seeing an appraisal. They usually generate that from baisc information about the property and the loan amount. This will apply to all condos, no matter which loan product you use.

Alex Echeandia Sr. Mortgage Broker, 301-881-8900 x208
Fairfax County Homes

House approves HR 4173!

This Bill was passed in the House and now will go to the Senate for their approval. 4173 proposes multiple changes. First is an increased in cunsumer protections, by creating the CFPA, Consumer Financial Protrection Agency. Secondly would be to end taxpayer bailout for large financial firms. Thirdly would be to let the SEC rein more power in to protect investors from people like Madoff and firms like Stanford Financial.

It will also outlaw any predatory mortgage lending practices. It would make the process for mortgage lending to show a true benefit to the borrowers while ensuring the borrowers ability to repay the loan. This legislation outlaws alot of the practices that were prevelant in the subprime boom.

Sr Mortgage Broker
Fairfax Homes