How to quickly improve your credit…

In this market, FICO scores are so important. I have situations where borrowers need their score to go up a few points to qualify for a specific program. A few things you can do is this; check your credit card accounts and see what your limit is and what your balance is. If you can get your balance to below 50% of the high credit limit, it will help your score by a few points, if you can get it to 30% of the high limit, it will even further. Also, do not pay off collections that are older, because they may report with an “Last Date of Activity” with a current date from when you paid them off and that will look like it is a new collection. If you are able to pay down the revolving accounts, get a letter from the creditor so it can be submitted to the bureaus. Once they are submitted, we can do a credit supplement, which asks the bureaus to up date your score in 3-5 business days, as oppose to the normal 30-60 days. If you need a bigger improvement, it may require someone to go over your entire credit report to help and it could take a longer period, probably in the 45-90 day time frame.

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FHA streamline

HVCC Update...

The HVCC rule has been in effect for 3 weeks and now the early reports is that it SUCKS!! I have spoken to a wide range on individuals involved; borrower’s LO’s, underwriters, processors, managers, account executives and they all think this rule is horrible!!! The rules came out with very little research and study as to the guidelines, rules, and circumstances for all parties involved, except for the AMC’s. Amc’s are Appraisal Management Companies. The general process for most banks is that the appraisal is ordered thru a secured website and they charge the borrower’s credit card. They are adamant about receiving payment. Once they receive payment, that is when the problems arise!! The AMC’s let their appraisers bid on the job, so in some cases, the appraisal is being done by the cheapest appraiser, not the best qualified. They post guidelines that they will contact the borrower with 2-4 days to scheduled and have the appraiser back to the borrowers within 5 business days…what a joke. Some appraisals are taking 2 weeks to get scheduled, and god knows how long before they come back to the borrower. This is causing a big problem, because a lot of borrower’s have rates that are locked in, and a bank will not underwrite a loan without an appraisal. When the lock expires, someone has to pay for an extension. Of course, AMC’s could care less, since like I mentioned earlier, they receive payment upfront. AMC’s don’t bother to look at location or type of home, again, they are looking for the cheapest labor possible, because that way they can keep more of the money that they charged the borrower. On 2 occasion, an AMC has sent an appraiser from Baltimore to Olney, and that appraiser used Baltimore pricing and adjustments for a 700k SFH in Montgomery county. An experience appraisal with 20 years in the industry, said it was one of the worst appraisals he has seen in his career. Of course the appraiser from Baltimore did not care about doing a good job, since he was already paid. The only benefit this rule is having is for the AMC’s!!


SIGN THE HVCC PETITION

What is a subordination?

Subordination is when a borrower has 2 loans, and you are only doing a refi on the first, therefore leaving the second mortgage in place. When the market was booming, banks were giving out second all day long. These days, there are very few banks that will offer a second, and the ones that do, are very strict guidelines. Back in the heyday, 80/20 loans were one of the popular items. Well now, those seconds are hurting borrower’s chances of doing a refi. What you are seeing is borrowers trying to do a refi on their first mortgage, and subordinate the second. The way it works is, your broker would request the subordination requirements from the second mortgage holder. The requirements are usually; 1003 (which is a residential mortgage application), title work, the subordination worksheet completely filled out, and an appraisal, plus a fee between $150-$250. If an appraisal is not available, the banks will usually take an AVM. An AVM is an automated valuation model. It is a computer generated appraisal.

What we are seeing these days is, banks processing subordinations are taking as long as 60 days!! This is where you need to be careful regarding your lock on the first. The first mortgage could be approved, waiting only on the subordination approval, but if the second bank takes 30, 40 or 60 days, your rate that is locked on the first may expire. You would then need to buy an extension or if you got lucky and the rates were the same or lower, you could re-lock it at the same rate or better. I think this is very risky. If you have a second, you need to seriously look at a 45 day lock or even a 60 day, depending on which bank holds the second. We are seeing this with the new HARP program. The HARP program is the one letting people borrow up to 105% of the loan-to-value, and they will NOT let you payoff the second. You must subordinate a current second mortgage. Here is a caveat that I don’t like…the HARP program says you can have a second mortgage with an unlimited CLTV, Combined-loan-to-value. What no one says is that the second bank never agreed to an unlimited CLTV. They will review each subordination and decide whether to approve it or decline it. If it is declined, your refi is done. The bank doing a refi on the first mortgage will not approve the loan with a subordination declined.

FHA Streamlines---A recap of streamline guidelines…

This has been the hot product over the last year, and I wanted to remind borrowers of some of the great advantages…In such a tough market, the biggest advantage is that FHA streamlines do not require an appraisal. I can’t tell you how crucial that is since most homes have dropped significantly in value. Another one is that income and assets are not required. Banks will require a “mortgage only” credit report to show your payment history has been on time. Some banks will even accept a 1 x 30 on a mortgage. That is having 1 late payment over 30 days. The underwriting is pretty smooth, because of the previous 2 reasons.

Some people always ask why brokers prefer to close at the end of the month, and with FHA, it is because they charge a monthly interest. As you are aware, whenever you do a refi, there is a 3 day waiting period before the loan funds. If a FHA loan funds early into the next month, FHA will charge a full month’s worth of interest, which defeats the purpose of the streamline. On streamlines, the borrowers are normally asked to bring a month’s payment to the settlement. Ex., if the loan close on April 24th, the borrowers will NOT make a May first payment, there next payment will June first at the lower rate.


Also, when the home was purchase or refied, there was an upfront MIP (Mortgage Insurance Premiun). When a streamline is done, you will receive an MIP refund that is applied as a credit at settlement. The MIP refund is calculated by FHA. Streamlines need to show a net tangible benefit to the borrowers. Ex. Would be lowering your rate, going from an ARM to a FIX rate, or going from 30 years down to 15 tears.

Finally, some borrowers have helped their relatives to qualify for a home purchase by also going on the loan and title. Streamlines also apply to Non-Occupant Co-Borrowers. The process is still the same as a regular streamline.

HVCC rule | Home Valuation Code of Conduct

A lot of people may not know, but there is a new that is going to change the mortgage process. It is the HVCC rule, the Home Valuation Code of Conduct. It is set to be implemented on May first, but some banks have already started applying it as of April 19th.

The rule says that loan officer and/or mortgage brokers will be not be allowed to order appraisals, they will need to be ordered thru the banks and an appraisal management company. Banks will require the borrower to pay for it upfront, without any idea of the current value of the home.

If the value is not there, the borrower will not qualify and will be out his $350-400. Also, if the borrower decides to try a different bank for any reason, he will need to order a new appraisal thru the new bank. This does not apply to FHA loans, with the exception of one bank we currently work with.

This was created to help borrowers, but I personally believe it will hurt them. There will be a lot of money being spent on appraisals that do not work, and borrowers will be very upset. I don’t think the time was put into this process to see all of the ramifications it will have. A lot of banks are sending their fees and process; to let us know how we can do it, will all banks putting it into effect next week.

I had hoped the Mortgage Brokers Association would go thru with their lawsuit against this rule, but when they dropped it last week, it was a very disappointing day.