BluefoxToday blog : Eleanor Thorne 919-649-5057 Cary Mortgage Loans NMLS #67179 (First Financial Services, Inc)

On February 15, 2010 The Federal Housing Administration adopted new appraisal guidelines that include "geographic competency" requirements.  Effective June 30, 2010 Fannie Mae adopted similar requirements, a move that we think is important.

The HVCC ruling came from NY Attorney General Cuomo and it is intended to protect appraisers from coercion from lenders.  Since May of 2009, large banks have been using the HVCC  (Home Valuation Code of Conduct) as a way to create "revenue" centers.  Because the ruling prohibits lenders to SPEAK to an appraiser (or email, txt whatever) Big Banks set up "companies" that collect (for instance) $450 for an appraisal, and then pay the appraiser $275.  Appraisal Management Companies (AMC)are at times, because of their size, working against the system.

Many appraisers refused to do this... and subsequently the Large Banks "hired out" people from 100's of  miles away (or more) to do appraisals.  My theory is "you get what you pay for..."

In the June 30th memo, Fannie Mae and Freddie Mac agreed that the new rules for appraisals adopted last year need some additional "guidance."

The HVCC does NOT bar Realtors, or other authorized third parties, from requesting that appraisers correct factual errors in their reports, or provide additional information or explanations about the basis for their valuations.

Fannie Mae put lenders on notice that they can only use appraisers who are knowledgeable about the area in which they are being asked to value property, and who have the ability to access records on recent sales in those markets.

Fannie Mae also clarified previous guidance to lenders on the selection and use of comparable sales, saying appraisers must consider a property's condition when choosing to use foreclosure sales or short sales as comps.

The current Financial Reform Bills being debated in Congress create a Consumer Finance over site unit that will blend current National Predatory lending requirements and HVCC - so the CURRENT appraisal system will be out the window on November 1, 2010... but it's unlikely that whatever replaces it will be much better.

If you are interested in purchasing a home in North Carolina, or refinancing a home in Raleigh, please call Steve and Eleanor Thorne, FFSi 919-649-5058.  We know the rules, and we have the best mortgage interest rates available!  We are still closing USDA Home Loans!

For the last 18 months most lenders have added additional "Quality Control" in the mortgage process between Underwriting and Funding.  Many of those same Investors require the tax transcripts pulled prior to the loan being submitted for Underwriting, and they perform additional Automated Appraisal Valuations on each file - again as a Quality Control measure... trying to get rid of Fraud.

In an Announcement earlier this month, Fannie Mae made it clear to Lenders that they need to do more to determine "Undisclosed Liabilities."  In particular, Fannie suggests the following:

• Refreshing a credit report just prior to closing may uncover additional debt or credit inquiries.
  
• New vendor services are becoming available to provide borrower credit report monitoring services between the time of loan application and closing.
  
• Credit inquiries listed on the credit report should be investigated to determine whether the borrower did in fact open additional debt resulting in repayment obligations. In some cases, it is possible to obtain a direct verification with the creditor associated with the inquiry.

Okay - for the most part I think the extreme measures we are going to are warranted.  They are a pain, time consuming, and add to the overall cost of processing a loan... but I get it.

But can you imagine having to actually verify if credit was issued from every inquiry? 

So a week before closing, the borrower shops for a sofa, a refrigerator, a lawn mower... and it will show up on the final credit report pulled the day before closing... and we'll have to WAIT to see if Lowe's actually issued credit to them?  OUCH!

We ALL need to be talking to borrower's about this important, and possibly problematic change in the system! For more information on Credit Inquiries click here.

If you are looking for a mortgage in NC - please call Steve and Eleanor Thorne 919.648.5058 First Financial Services.

A little birdie told us last month that USDA Rural Economic was going to run out of money... and Wells Fargo, and probably some other banks too, stopped taking any USDA Home Loan Applications. (click here for more details)

At the time... we were using about 100 million dollars in USDA Home Loans a Day from the line, and at that rate, it looked like we would run out by April 17th, 2010.

Once they ran out, we were told... the program might change, or maybe there would be a next Tax Credit Extension... or maybe Congress would just give them more money - "Who Knew?"

We continue taking USDA Home Loan Applications - because the current numbers look like this:

April 6, 2010 USDA Guaranteed Rural Housing Funds Utilization Data

Total FY10 Allocation  $13,533,663,697

YTD FY10 Obligations  $10,888,061,403

* $2,645,602,294

Total Available Funds $2,548,636,600

That's right - there's still at least $2.5 BILLION available for funding.

If you have questions about getting a USDA Home Loan - call us!  Steve and Eleanor Thorne 919-649-5058

The Federal Housing Administration is currently insuring more than 3 of every 10 loans originated... and they see that as a risky proposition!

Because of that, FHA is expected to announce changes today, in an effort to protect the American Taxpayer (who backs the default insurance on this program!)!

Expected changes include:

• Raising the Upfront Mortgage Insurance Premium (UMIP) from the current 1.75% to 2.25%.  This means that when you borrow $100,000 on a FHA mortgage loan, and additional $2250 will be added to the mortgage that you pay back... so your $100,000 mortgage just turned into $102,250.  If you move, part of that Mortgage Insurance is refunded - so it's not a bad deal! (Click here for more details on how FHA "PMI" works!)
• Changing the amount a Seller can contribute to Closing Costs.  Currently a Seller can contribute 6% toward closing costs to a transaction.  This is expected to change to a maximum of 3%.

There are news reports that the minimum credit score for FHA is also going up... however, the reality is that 580 has been the minimum credit score that is offered by Lenders for years! 

The REALITY is that you really need a 620 credit score to get best priced mortgage offerings!

IMPORTANT TO NOTE! FHA has changed it's rate on MIP (now) FOUR TIMES in the past 2 years. Because of this you could see MULTIPLE posts online saying MIP is 1.5, or 1.75, or based upon your credit score! These are all TIME SENSITIVE pieces of information... if you are CURRENTLY looking for a FHA mortgage, you should consult with a mortgage professional!

If you or your clients are considering a FHA mortgage loan to finance a home purchase, please call Steve and Eleanor Thorne, First Financial Services, 919-649-5058! 

We offer the very best mortgage rates available and have the ability to pre-qualify you over the phone in about 20 minutes! 

This is a GREAT time to purchase a home in the Triangle!

If you are looking for a new home, you are probably aware that your Credit Score is a CRITICAL item in determining your interest rate and possibly how much house you can buy / qualify for!

We talk to people every week who receive a copy of their credit report, see some derogatory remarks from 2005 and immediately start writing dispute letters.

This might not be your best strategy (each case is different of course), because the credit score is really an indication of what you are about to do.  It tries to PREDICT what your credit behavior is going to be based upon RECENT activity.

So what happened 3 years ago, is not really as important as what happened 18 months ago!  If it is a MEDICAL COLLECTION - there's a possibility it won't have to be paid... most judgments and liens will have to be cleared before you can get a mortgage.

If you are considering a purchase, and want to know more about your particular credit report and circumstances, to get pre-qualified...  call Steve and Eleanor Thorne, First Financial Services, 919-851-3031 x 104.

The Borrowers' Right to Inspect Closing Documents Act of 2009 H.R. 4229 is currently in the House Finance Committee for Review.

But it brings a HUGE question to mind:

"Are we ready to make mortgage lending so precise that we can meet 8 different disclosure dates within each transaction?"

THREE DAYS BEFORE CLOSING???  Mandatory?  Seriously?!?!

Maybe this is another job creation effort by Congress?  Most mortgage companies are so lean, that in order to meet Realtor expectations of closing in 20/30 days (or less), almost ALL mortgage companies would need to hire an extra person for every 10 transactions (IMHO)... or maybe we just need to get REALLY efficient?

I'm trying to figure out where those 3 days are going to come from!  I just made a list of places that might be spots in our office where we might be able to squeeze a few hours -but for the most part underwriting is what sucks up time.  And if you think about the fact that an underwriter can only really look at a new loan every 45 minutes to an hour - you can see why it takes a while to get through there...

I don't know how we will all change systems to adjust to this latest twist (if it passes) - but I can tell you this much about Mortgage Lending in 2009 and 2010...

Mortgage Lenders deserve an AWARD for being the most flexible industry on the PLANET!

DARN... DARN... DOUBLE DARN!

We have a TON of customers closing in the next 10 days who think they are going to:

a) move in next week

b) use USDA Home Loan Financing for their 100% (no money down) financing

c) GET THE $8000 Tax Credit

Well, guess what BOMB just hit MY Email this morning?!?!?

FROM: Single Family Housing Guaranteed Loan Program, Washington DC

The President has signed the Agriculture Appropriations Act for fiscal year (FY) 2010. Since October 1, 2009 we have operated under a Continuing Resolution (CR) with carryover funds from FY 2009 and funds allocated under the CR.

Once the bill is signed into law a lapse of three to four weeks occurs before program levels receive funds under the bill from the Office of Management and Budget (OMB).

Due to a high demand for purchase funds, it is anticipated CR and FY 2009 carryover funds for PURCHASE transactions will be exhausted by October 27, 2009, if not sooner. Refinance funds under the CR and carryover from FY 2009 remain available.

During the lapse of funding for purchase transactions, Rural Development will continue to process and issue Conditional Commitments “Subject to receipt of Congressionally appropriated funds.” Business will be conducted as usual.

Once appropriated funds for FY 2010 become available for purchase transactions, you will be notified. Thank you for your continued support of the Guaranteed Loan Program.

Well, this puts a "kink" in those plans!  Anybody want to guess how many people just lost $8000???  This is a GOOD reason for them to extend the Tax Credit!

If you are considering a purchase in Wake Forest, Johnston County, Durham, Apex, Holly Springs, Fuquay Varina or anywhere else in NC, and you want to use the USDA Home Loan /Mortgage program - please call Steve and Eleanor Thorne, Professional Mortgage Planners, 919-649-5058

I've just spent several hours reading about the Economy and here's what I've come up with (Sorry it's so long):

The Fed Released the Beige Book, on October 21, 2009.  It begins with this statement:

"Reports from the 12 Federal Reserve Districts indicated either stabilization or modest improvements in many sectors since the last report, albeit often from depressed levels. Leading the more positive sector reports among Districts were residential real estate and manufacturing, both of which continued a pattern of improvement that emerged over the summer. Reports on consumer spending and nonfinancial services were mixed."

Well, that's not too surprising - First Time Homebuyers are finally deciding to purchase with the end of the Tax Credit nearing.  Further in the report it says:

"Most Districts reported that housing market conditions improved in recent weeks, primarily from a pickup in sales of low- to middle-priced houses. Contacts reported that sales were boosted by the government's tax credit for first-time homebuyers... Sales of higher-priced homes were very slow... Moreover, real estate agents in the Boston and Cleveland Districts were uncertain about the future of home sales once the tax credit expires. Availability of financing continued to be a concern for potential buyers..."

What is it that normally causes people to purchase homes?  JOBS.  When people feel secure about their JOB, they will then purchase homes!  Dr. David Altig, Senior VP and Research Director at the Atlanta Fed, points out on October 21, 2009 that we have a PROBLEM with Jobs and Unemployment, on a scale that we've never seen before!

Underneath the usual total unemployment numbers are the reasons an individual is unemployed: You are on temporary layoff; you quit your job; you have reentered the labor market and have yet to find a job; or you are entering the job market for the first time and have yet to find a job. Or, finally, you have been permanently separated from your previous employer, who has no expectation of hiring you back.

The last category is the dominant reason for unemployment at this time. That might not seem surprising, but it actually is. Never, in the six recessions preceding the latest one, did permanent separations account for more than 45 percent of the unemployed. The current percentage stands at 56 percent as of September and appears to be still climbing

 "The number of people receiving paychecks will drive the demand for houses and apartments, and the recovery will begin when unemployment stops rising." said, Jay Brinkmann, Chief Economist for the Mortgage Bankers Association,in Testimony on Tuesday.

The Obama Administration is (obviously) aware of all of this, and Congress is Holding Hearings to extend the Tax Credit...  But the question remains, with a HUGE deficeit, do we NEED to extend the Tax Credit?

I thought a report by the Carnegie Endowment was interesting.  It looked at Housing as a Percent of GDP, and weather a Gradual Rise in the Housing Market would impact GDP, Consumer Confidence (which most feel is tied to Consumer Spending and Job Growth).  In otherwords, is the Housing Market a CRITICAL ingredient in creating a healthier Economy? YES!

"Looking forward, even moderate improvements in the housing market will provide a significant boost to the global economy."

Besides the Tax Credit, there are other factors effecting the small movements in the Housing Market.  Obviously having historically low interest rates helps folks qualify.  The Federal Government purchase of Mortgage Backed Securities is slated to END in March, 2010.  When this happens:

"Analysts at Barclays Capital in New York forecast mortgage rates will be slightly over 6% by the end of March."

Coincidentially, Credit is becoming Tighter at the end of March, according to Fannie Mae Guidelines... and there are reports that the number of foreclosures entering the market will continue to rise.  So again, IS THE TAX CREDIT EXTENSION NECESSARY??

"Senate Banking Committee Chairman Chris Dodd said, "We still need to use every tool at our disposal" to help the housing market. Dodd, D-Conn., has joined Sen. Johnny Isakson, R-Ga., in sponsoring a bill that would extend the credit until June 30 and expand it to people who already own homes."

It will conservatively cost 1 BILLION dollars a month to Extend the Credit.

The IRS says the level of FRAUD is "Disturbing."  The IRS opened 107,000 civil cases related to the credit and identified 167 criminal schemes at an additional cost of over a HALF A BILLION $$!!

An interview of Tim Geithner by CNBC Anchor, Maria Bartiromo went like this:

BARTIROMO: You look at what happened with the cash for clunkers deal. We went from horrible to great to horrible again. The first-time homebuyer credit. So what happens when the stimulus is gone?

Sec. GEITHNER: ... We're not going to make the mistake many countries made in the past of putting the brakes on too early and creating risk that we have a, you know, weaker recovery with even higher levels of unemployment going forward.

I guess I weigh in like this.  I study the Four Bad Bears.  I think if the "Collective They" allow the Tax Credit to Expire, Raise rates (through a change in Policy) and make it even more difficult to purchase because of tightening Credit Score Guidelines - we're looking at a "W" in the recovery - and we'll be looking more like the 1929 - 1932 Era.  Housing is an important part of the Recovery.  If we had a great JOBs Picture - I'd feel differently.