The Fed has announced plans to halt the purchase of Mortgage Backed Securities (MBS) starting at the end of March. They will then monitor the economic impact and reserve the right to enter back in if market conditions warrant it.
MBS are bonds issued for the purchase of mortgage notes and the purchase of the MBS by the Fed has helped to keep interest rates low. If the sale of MBS drops, rates will eventually rise. The goverment is counting on private investors to enter back into this market and pick up the slack.
The first time home buyer tax credit is due to expire in April. The tax credit helped fuel the housing market so this will have a negative affect as well. There is some talk of a possible extension again but nothing firm has been decided.
Most analysts expect there to be a rise in interest rates at least for the short term, as much as 1% or even more, resulting in a negative impact on an already shaky economy. The housing market is one of the major driving forces of the economy and if rates rise this could very well cause home prices to drop as less potential buyers will be able to qualify or afford the higher mortgage payment.
The feeling is, if this scenario were to play out the Fed would have no choice but to step back into buying MBS. But how much damage will have already been created and how long will it take for the economy to regain any lost ground?
In my opinion, until the job market picks up and unemployment drops significantly this economy will be on life support and the Fed would be wise to stay in the MBS market until that occurs.
Fasten your seat belts, we could be in a for a bumpy ride.
Thursday, January 28, 2010
Wednesday, December 9, 2009
FDIC's Plan to help Stop Foreclosures
The head of the FDIC, Sheila Bair, has come up with a sensible plan to help stop foreclosures. Bair is going to be asking lenders to cut the principle on $45 billion dollars in mortgages acquired from seized banks. Under the average loss sharing agreement the FDIC pays as much as 80% of losses on residential mortgages while the lender acquiring the mortgage from the failed bank is only responsible for 20%. "I think we’re going to gain by reducing re-default rates or delinquencies with people walking away,” Bair said. “We’ll obviously lose by providing loss-share for principal writedowns.
We’re looking now at whether we should provide some further loss sharing for principal write downs,” Bair said. “Now you’re in a situation where even the good mortgages are going bad because people are losing their jobs".
Principle reduction hopefully would give homeowners a better reason to stay and not just walk away which results in foreclosure.
This should also help to stabilize housing prices.
We’re looking now at whether we should provide some further loss sharing for principal write downs,” Bair said. “Now you’re in a situation where even the good mortgages are going bad because people are losing their jobs".
Principle reduction hopefully would give homeowners a better reason to stay and not just walk away which results in foreclosure.
This should also help to stabilize housing prices.
Friday, October 16, 2009
$8000 Tax Credit Extended for Some Miltary Personnel
Mortgage News Dailey (MND) has reported that Congress has passed bill HR 3590 which will allow Veterans a one year extension on the $8000 tax credit for first time homebuyers which will terminate November 30th. The Vet must be currrently serving overseas or has been deployed outside the country for 90 days in the last calendar year.
There is a still an ongoing debate about extending the tax credit for everyone and even removing the "first time home buyer" requirement.
Click on the Headline above and you will be directed the MND site for further details.
There is a still an ongoing debate about extending the tax credit for everyone and even removing the "first time home buyer" requirement.
Click on the Headline above and you will be directed the MND site for further details.
Thursday, September 17, 2009
New Underwriting Guidelines-Here we go again!
In the last several weeks lenders have been instituting a new policy.
Once a loan is submitted to a lender it typically takes about 5-7 business days for an underwriter to review the file and then provide a list of conditions they require (no matter what you give them they ALWAYS ask for something). The loan officer then collects the necessary documentation and resubmits it to the underwriter for sign off.
Going forward the underwriter will no longer review the resubmitted conditions on a loan until they have all the conditions, everything they requested which will also now include the TITLE. Typically once the loan has been underwritten and the Loan Officer receives a conditional approval the title is ordered. Now it must be ordered as soon as you take an application or you will lose valuable time in underwriting.
There can also now be a problem with Earnest Money Deposits. Here is a scenario.
The buyer makes an offer which is accepted. The buyer then writes a check (or two, if one was presented with the Offer to Purchase and one with the signing of the P & S) for the earnest money deposit.
It was always necessary to provide a copy of the cancelled check(s) before closing, verifying it came from the buyer's account and has cleared. Because of the new guidelines just instituted the buyer would now have to know when the check(s) were deposited because they will have to go to their bank as soon as possible and get a printout showing the check(s) has actually cleared. Since the underwriters will no longer review conditions until they have them ALL, including the Earnest Money Deposits checks having cleared, this can affect the closing date.
Realtors should consider having the buyer get one certified bank check for the down payment, have the bank print out a statement showing the withdrawal was made from the buyer's account, and make a copy of it, all at the same time. In this way your buyer will not have to wait to get proof any check cleared before the loan can be resubmitted.
On FHA loans get the HUD Amendatory form signed by everyone as soon as possible. This is also a standard condition on FHA loans so this can also potentially delay your closings.
Any documentation you need to obtain from the buyer or seller should be done as quickly as possible.
Loans are now taking a ridiculous amount of time to close and anything you can do to speed up the process should not be overlooked.
Once a loan is submitted to a lender it typically takes about 5-7 business days for an underwriter to review the file and then provide a list of conditions they require (no matter what you give them they ALWAYS ask for something). The loan officer then collects the necessary documentation and resubmits it to the underwriter for sign off.
Going forward the underwriter will no longer review the resubmitted conditions on a loan until they have all the conditions, everything they requested which will also now include the TITLE. Typically once the loan has been underwritten and the Loan Officer receives a conditional approval the title is ordered. Now it must be ordered as soon as you take an application or you will lose valuable time in underwriting.
There can also now be a problem with Earnest Money Deposits. Here is a scenario.
The buyer makes an offer which is accepted. The buyer then writes a check (or two, if one was presented with the Offer to Purchase and one with the signing of the P & S) for the earnest money deposit.
It was always necessary to provide a copy of the cancelled check(s) before closing, verifying it came from the buyer's account and has cleared. Because of the new guidelines just instituted the buyer would now have to know when the check(s) were deposited because they will have to go to their bank as soon as possible and get a printout showing the check(s) has actually cleared. Since the underwriters will no longer review conditions until they have them ALL, including the Earnest Money Deposits checks having cleared, this can affect the closing date.
Realtors should consider having the buyer get one certified bank check for the down payment, have the bank print out a statement showing the withdrawal was made from the buyer's account, and make a copy of it, all at the same time. In this way your buyer will not have to wait to get proof any check cleared before the loan can be resubmitted.
On FHA loans get the HUD Amendatory form signed by everyone as soon as possible. This is also a standard condition on FHA loans so this can also potentially delay your closings.
Any documentation you need to obtain from the buyer or seller should be done as quickly as possible.
Loans are now taking a ridiculous amount of time to close and anything you can do to speed up the process should not be overlooked.
Tuesday, August 11, 2009
Appraisal Issues. The HVCC and the MDIA
Here is the latest on appraisals. Because of the new HVCC (Home Valuation Code of Conduct) dreamed up by the geniuses in congress, on conventional loans (this does not apply to FHA or VA loans) we are no longer allowed to contact the appraiser in any way shape or form.
Now each lender has established accounts with appraisal management companies (AMC's). As a mortgage broker we must now obtain the borrowers credit card info for payment and then go to the lenders website to put a request to order the appraisal.
The AMC is nothing more than a middle man who receives an order from the lender and then in turn contacts one of the appraisal companies on it's approved list and passes the order on to them. This of course adds an additional cost to the consumer as the AMC must get their piece of the pie. A typical appraisal that once cost $300 can be as high as $400.
Now once the appraisal is ordered the appraiser makes an appointment and completes the appraisal. It usually takes 3-5 days to complete the appraisal but depending on the appraisal company it may take 2 weeks just to make the appointment. When the appraisal is completed it is send back to the AMC who does their own in house review. If they have any issues it goes back to the appraisal company for changes. When the changes are completed it is sent back to the AMC who then forwards it on to the lender.
Now the lender reviews it and if they want any corrections it goes back to the AMC and the whole process starts again.
It gets better! Suppose the original lender has rigid underwriting and it 's a problems getting the loan approved. If the loan is sent to a new lender they might not accept a transfer of the appraisal from the first lender. That means a new one has to be ordered AND the borrower will have to pay for another appraisal!
Now on top of that we have a new law called the MDIA or Mortgage Disclosure Improvement Act!! For any loan including VA and FHA loans, an appraisal can no longer be ordered until the application is sent to the lender. The lender must then send a form to the borrower to sign which is then sent back to the lender. At that point the appraisal can be ordered through the process stated above for conventional loans. Some lenders have designed a list with a few forms that they will accept in lieu of the whole application in an attempt to speed up the process. But the bottom line is things are going to take even longer. I strongly recommend you set any closing for a minimum of 45 days going forward which you probably should already been doing. anyway
I think these guys just like to sit around and see what new acronyms they can think up.
Now each lender has established accounts with appraisal management companies (AMC's). As a mortgage broker we must now obtain the borrowers credit card info for payment and then go to the lenders website to put a request to order the appraisal.
The AMC is nothing more than a middle man who receives an order from the lender and then in turn contacts one of the appraisal companies on it's approved list and passes the order on to them. This of course adds an additional cost to the consumer as the AMC must get their piece of the pie. A typical appraisal that once cost $300 can be as high as $400.
Now once the appraisal is ordered the appraiser makes an appointment and completes the appraisal. It usually takes 3-5 days to complete the appraisal but depending on the appraisal company it may take 2 weeks just to make the appointment. When the appraisal is completed it is send back to the AMC who does their own in house review. If they have any issues it goes back to the appraisal company for changes. When the changes are completed it is sent back to the AMC who then forwards it on to the lender.
Now the lender reviews it and if they want any corrections it goes back to the AMC and the whole process starts again.
It gets better! Suppose the original lender has rigid underwriting and it 's a problems getting the loan approved. If the loan is sent to a new lender they might not accept a transfer of the appraisal from the first lender. That means a new one has to be ordered AND the borrower will have to pay for another appraisal!
Now on top of that we have a new law called the MDIA or Mortgage Disclosure Improvement Act!! For any loan including VA and FHA loans, an appraisal can no longer be ordered until the application is sent to the lender. The lender must then send a form to the borrower to sign which is then sent back to the lender. At that point the appraisal can be ordered through the process stated above for conventional loans. Some lenders have designed a list with a few forms that they will accept in lieu of the whole application in an attempt to speed up the process. But the bottom line is things are going to take even longer. I strongly recommend you set any closing for a minimum of 45 days going forward which you probably should already been doing. anyway
I think these guys just like to sit around and see what new acronyms they can think up.
Wednesday, July 8, 2009
New Conventional and FHA Guidelines
Here we go again! There are several more changes in the works in the mortgage pipeline.
We have one lender who will not take any loan if the borrower has a credit score under 660. FHA states the minimum is 620 but the lender says 660. Another lender will only take an FHA loan if the borrower has a credit score of at least 640.
If you read my last blog it stated how big the price adjustments are already for Fannie and Freddie loans if the borrowers credit score is under 740
This is the mortgage business in 2009
1st Metropolitan Mortgage saw the handwriting on the wall and that is why we are in the process of becoming a direct lender within the next several months. We will have our own in-house underwriters and this will also help in our turn around time.
Many lenders are making changes to FHA, Fannie Mae and Freddie Mac loans. Usually when one lender adopts one of these guidelines, they all follow.
CONVENTIONAL LOANS
We have several lenders who have stated that on any Freddie or Fannie loan with less than 20% down payment or equity they will only go to a DTI (debt Ratio) of 41%. This will result in a great many loans no longer being eligible for financing. With the size of the loans as well as the taxes and insurance today many borrowers will not qualify for conventional financing.
FHA
One lender has set the max DTI on FHA to 45-50. If the DTI is over 45 there will need to be a compensating factor.FHA
We have one lender who will not take any loan if the borrower has a credit score under 660. FHA states the minimum is 620 but the lender says 660. Another lender will only take an FHA loan if the borrower has a credit score of at least 640.
If you read my last blog it stated how big the price adjustments are already for Fannie and Freddie loans if the borrowers credit score is under 740
NO CONSISTENCY
As you can see there is no consistency from one lender to another which makes it very difficult to foresee what is needed. This also very much applies to other underwriting parameters. What one lender accepts another lender will rejectThis is the mortgage business in 2009
THE END OF MORTGAGE BROKERS?
The politicians in their infinite wisdom are in the process of trying to eliminate mortgage brokers altogether. Of course this will be a huge benefit to the banks with the big lobbyists and we all know what that means.1st Metropolitan Mortgage saw the handwriting on the wall and that is why we are in the process of becoming a direct lender within the next several months. We will have our own in-house underwriters and this will also help in our turn around time.
Tuesday, June 23, 2009
Exisitng Home Sales and the HVCC
The June 23, 2009 figure for Existing Home Prices indicates vaues have fallen to 4.77M which is lower than the anticipated 4.82M. This is good news for mortgage bonds which is in turn good for interest rates but bad for the economy as a whole.
In associated news, the NAR (National Association of Realtors) has reported a 5% cancellation in purchase contracts resulting from a meriad of problems with the new HVCC appraisal law since it's inception May 1st. Low property valuations, long turn around times and increased fees have all resulted from the HVCC (Home Valuation Code of Conduct). This has also affected refinance transactions. Appraisal management companies have been using inexperienced appraisers and appraisers not familar with specific markets which has contributed to the problem.
If you read my earlier post you will see that this is pretty much what I forecasted would happen. This bill is unnecessary for reasons I mentioned in the earlier post.
Pressure is being brought to bear to have this bill overturned. You may have been lucky enough not to have been affected by this yet, but you will be. Click on this link http://www.hvccpetition.com/ and sign the petition to help overturn the HVCC.
In associated news, the NAR (National Association of Realtors) has reported a 5% cancellation in purchase contracts resulting from a meriad of problems with the new HVCC appraisal law since it's inception May 1st. Low property valuations, long turn around times and increased fees have all resulted from the HVCC (Home Valuation Code of Conduct). This has also affected refinance transactions. Appraisal management companies have been using inexperienced appraisers and appraisers not familar with specific markets which has contributed to the problem.
If you read my earlier post you will see that this is pretty much what I forecasted would happen. This bill is unnecessary for reasons I mentioned in the earlier post.
Pressure is being brought to bear to have this bill overturned. You may have been lucky enough not to have been affected by this yet, but you will be. Click on this link http://www.hvccpetition.com/ and sign the petition to help overturn the HVCC.
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