BluefoxToday blog : George Souto NMLS# 65149 FHA, CHFA, VA Mortgages Connecticut

Freddie Mac rolled out this week it’s outlook for the U.S. Economy for 2012.  Freddie Mac is predicting that our economy will grow by 2.5% during the upcoming year, and that the already record low Interest Rates will continue to stay at record low levels.

Freddie Mac is also predicting that the activity in Housing will increase, but it just at a modest rate.  According to Frank Nothaft , Chief Economist for Freddie Mac  “While the headwinds remain strong going into 2012, there are indications the economy and the housing market are gaining ground, albeit slowly,”  

It looks like we are likely to close off 2011 with rates at about 4% with no points on a 30-year fixed-rate mortgage.  It would be unheard of, but is it possible for Interest Rates to drop below 4%?

Nothaft also feels that the recent changes to the Home Affordable Refinance Program will increase refinance by more than $100 billion in refinanced loans.  Here I am prone to disagree with Mr. Nothaft for the simple reason that many people do not have much equity in their homes, and in several cases homeowners are underwater when it comes to the present value of their homes.  We will have to wait and see if the Home Affordable Refinancing Program will have an impact, but even if it does $100 billion is a very optimistic figure. 

Last of all the Rental Market is predicted to continue to grow as Buyers continue to be very cautious, because of job security, and feeling that prices and Interest Rates will continue to go down.

Hopefully some of these predictions will come true, and 2012 starts to turn things around in the Real Estate Industry.

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Who To Call For Your Mortgage Needs In Connecticut:

George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308  gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

One of the first questions that existing FHA Borrowers who are interested in purchasing another house is “can they purchase the new house with a second FHA Loan, if they want to keep the first house as an investment and rent it out? The answer is yes under certain circumstances.

First of all FHA does not do investment loans, FHA is a owner occupied loan, meaning that the house must be the Borrower’s Primary Residence, which means that the Borrower must live in the house for the majority of the calendar year.  Further the Borrower must take occupancy of the house within 60 days from the Closing of the loan, and continue to occupy the house for at least one year.

Because FHA is intended to be an owner occupied loan, and to prevent circumvention of the intent of the loan, “FHA will not insure a mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties”.

Having said that, FHA will allow for exceptions that fall within certain circumstances, in order to determine if the Borrower is eligible for an exception the Underwriter must first take into consideration:

• The length of time the Borrower owned the previous
• The circumstances that the Borrower wants purchase another property

Once the Underwriter has taken the above into consideration, an exception may be granted for the following reasons.

• The Borrower is relocating
• The Borrower is establishing residency in an area outside reasonable commuting distance from his/her current principal residence

 Note: 

• If the borrower later returns back to the location of the first house he/she Is not required to re-establish primary residency In that, also 
• The relocation does not need to be employer mandated to qualify for this exception.
• The Borrower may be eligible for another home with an FHA-Insured mortgage if the number of his/her legal dependents Increases to the point that the present house no longer meets the family's needs
• The first FHA mortgage has a Loan-To-Value (LTV) of 75% or less, based on the outstanding mortgage balance and a current appraisal
• The Borrower vacating the property, but the property will continue to be occupied by a Co-Borrower.  Example: A couple is divorcing
• The Borrower is a Non-Occupying Co-Borrower on a property that he/she purchased with a family member and the property is the principal residence for the other family member

If a Borrower with an Existing FHA Mortgage cannot meet one of the exceptions listed above, then the Borrower MUST:

•  Pay off the existing FHA Mortgage on the first residence, or
• Terminated ownership of that residence.

So as you can see there are several ways that a Borrower can have multiple FHA Mortgages at the same time as long as the Borrower meets one of the above exceptions, and is not trying to circumvent the rules in order to purchase an investment property.

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Who To Call For Your Mortgage Needs In Connecticut:

George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308  gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage. 

After almost two years since the new Good Faith Estimate (GFE) and Truth In Lending (TIL) have gone into effect, Washington is coming to the realization that everyone in the Lending Industry came to the minute that the revised forms were unveiled.  The Lending Industry has been stating for almost two years that these forms do not do what they were meant to do.  In fact these two forms not only fall short of what they were intended to do, they may even be accomplishing the opposite.

The reasoning behind the new GFE & TIL was to bring about more transparency.  So the new GFE went from a one page document to a three page document, and the TIL from a one page document to a two page document.  The TIL may have actually moved closer to accomplishing the intent of the document, but it still fell short, but at least it was a step towards more transparency.  The GFE on the other hand was a completely different story.  Here are some of the reasons why:

• No where on the form is the Loan Program Listed (it was on the old form)
• The total monthly payment (principal, interest, taxes, insurance, & MI) is not disclosed.  Only the principle, interest, and if applicable, MI are disclosed.  Borrowers want to know what their total monthly payment is going to be and not just the principal, interest, and MI (the total payment was disclosed on the old form)
• Many of the fees are not individually disclosed, but grouped into one total (they were all individually listed on the old form).  Example:
• Lenders Fees are combined and given as one total
  
• Title Insurance and Attorney Fees are combined and given as one total.
• Escrow for Tax and Insurance are combined and given as one total.

So now Washington has finally come to the realization that if they want more disclosure and transparency, that they need to talk with, and listen to the advice of those who work with these document daily.  The new effort is to combined the GFE and TIL into one document, and to clearly state, and provide the transparency that was intend with the present documents. 

The drafting of this new document is underway, with hope to roll it out in the near future.  I for one am looking forward to seeing what it looks like, and will reserve judgment until I see it.  But if the points that I made up above are address and correct, this documents will make a marked improvement to finally start to provide the transparency that is long over do in the Lending Industry.

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Who To Call For Your Mortgage Needs In Connecticut:

George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308  gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

CNN Money recently came out with their list of the 10 best cities to buy a rental property. I personally was surprised by the list, because I was thinking that the 10 best cities to invest in rental property would be the cities that have been least effected by the declining Real Estate Market that we have been in.  But what I expected and what was on the list was very
different, it was the opposite.

The 10 best cities to invest in rental properties happen to be among the cities that are in market areas that have been hit the hardest.  The 10 cities named by CNN Money are:

• Las Vegas NV
• Detroit, MI
• Warren, MI
• Orlando, FL
• Bakersfield, CA
• Tampa, FL
• Phoenix, AZ
• Fort Lauderdale, FL
• Rochester, N.Y.
• Stockton, CA

As you can see, Florida one of the State that is on everyone's list as one of the States that has been hit the hardest in the present economic market, has three cities in the top ten. 

I see this a s encouraging, and maybe it will motivate some investors to start investing money back into these communities.  This also shows me that even in what might seem to be a dark situation, that a silver lining can be found.

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Who To Call For Your Mortgage Needs In Connecticut:

George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308  gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

A topic that just not seem to go away is "Strategic Defaults"  This past week there was a blog written by Lenn Harley about a new "Strategic Default Credit Model"that I have not heard about before, but is apparently being put in place by some Lenders.  This new Credit Model is raising concerns and even some outrage from some of the Realtors that commented on Lenn's blog.

First let's get one thing clear about the definition for "Strategic Defaults" which is nothing more than the politically correct word for stiffing the Lender, and not honoring the Promissory Note that was signed at the time that the Mortgage was given,  A "Strategic Default" is when someone who does not have any financial hardship paying their mortgage decides to just walk away, but not until they have lived there for months without paying a penny, before the Lender forecloses on them.  IT IS NOT someone who defaults on their mortgage because of a financial hardship, like losing their job, or health issues.  These people generally want to keep their home, but can no longer afford the monthly payments do to a situation that is out of their control. Now let's get back to the "Strategic Default Credit Model". 

This new Credit Model is suppose to be a "scoring tool", that Lenders would use in doing a credit review, or to identify potential "Strategic Default" risks.  In Lenn's blog she list six things that Lenders using this new Credit Model would be looking for: 

• "Borrowers who have recently opened new credit prior to stopping mortgage payments."
• "Borrowers who are a fairly recent home buyer/owner."
• "Borrowers with negative equity."
• "Borrowers who appear to be good money managers."
• "Borrowers who stay within the limits of their credit card accounts."
• "Borrowers who pay credit card bills on time."

The concerns that are being raised about this new Credit Model oddly enough are not because the actions of the people who are doing "Strategic Defaults", and bring about the creation of new guidelines and procedures that are going to impact innocent homeowner negatively.  This is where the blame should and needs to be placed.  But instead it is being placed on the evil Lender who are reacting unreasonably in there efforts to not get stuck with more defaults than they already have on their books.  

What I found almost comical is that a couple of the people that commented on Lenn's blog, who have defended "Strategic Defaults" in the past as somehow a smart thing to do, and even an honorable thing to do, are now whining about this new procedure that apparently some Lenders are now putting in place because of "Strategic Defaults".  These same people also criticized me back in August of last year, when I wrote a couple of blogs warning of ramifications that would be imposed as more and more  "Strategic Defaults" are done.

Back then I warned that innocent people were going to be hurt by those who are doing "Strategic Defaults", and sure enough we are seeing more and more guideline changes, and now new proceedures like this new Credit Model.  This will most likely not be the last of what Lenders will put in place to try to prevent "Strategic Defaults" from happening.

A question seems to be how will Lenders use this information?  I don't know, but I feel pretty safe in saying this, it will end up making it harder for people who had nothing to do with "Strategic Defaults" to  obtain new Mortgages.  This is what happens when bad behavior creates a need for a reaction.  It generally always brings about an over reaction from those trying to correct the bad behavior.

Those who are defending these people doing "Strategic Defaults" as some kind of hero, need to look at them for what they really are the villains in this whole situation.  But I am a realist, I know that the blame will be put on the evil Lenders, for trying to prevent more of these "Strategic Default" from happening.

Let me close by thanking Lenn for writing about this new "Strategic Default Credit Model", because if she had not, I probably still would not know about it.  So thank you Lenn even though we are most likely going to disagree about much of what I wrote.

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Who To Call For Your Mortgage Needs In Connecticut:

George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

Recent reports from the Inspector General are indicating that as many as 47,000 fillings to the IRS for the First Time Homebuyer Tax Credit may have been fraudulent.  If correct this would represent approximately $513,000,000 of taxpayer money that was awarded to Homebuyers that did not really qualify for the First Time Homebuyer Tax Credit.

The Justice Department began an investigation this past February to track down fraudulent claims from across the country.  As a result of this investigation several tax preparers have been sued nationwide, and six major lawsuits have be filled to stop what they are referring to as "Taxation Lapse Preparers"  from "fraudulently claiming a first-time home customer taxation credit and a earned-income taxation credit."  I expected that the First Time Homebuyer Tax Credit would have generated fraudulent activity, but never did I think that it would have reached this level.  This type of fraudulent activity is unacceptable, and I hope that everyone that is caught is prosecuted to the full extent of the law.

The First Time Homebuyer Tax Credit generated business for me, and I for one saw it as a positive program, but I had hoped that it would have started more of a spark in the Real Estate Industry than it did.  I am sure that we will be hearing more about this as these lawsuits progress, and more fraud is unveiled.

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Who To Call For Your Mortgage Needs In Connecticut:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

If you have been in sales for any length of time I am sure that all of you have seen the title "Key To Success" or one very similar to it many times.  I don't profess to know the "Key To Success", but I have been in sales long enough to know if you are unable to do two things, then it is very unlikely that you will ever achieve real success.

Before I get into what those two things are, I am in no way discounting all the other things that we need to do to succeed.  We need to be:

• Accessible
• Follow through
• Return calls quickly
• Have a positive attitude
• Knowledge of our product
• Confidence

And the list could go on and on.  As can the list for the tools that are out there to help use succeed, like:

• Contact Management Programs
• Sales Classes
• Computer programs that make our job easier
• The Internet (and all that goes with it)

And again this list could go on and on.  But there are two things that no matter how many techie toys you have or classes you attend, or sales approaches you have learned, or any of the above things that I have mentioned, if you are not able to do these two things, the likelihood for success is very, very small, and most likely not at all.

Those two things are "Persistence", and the ability to "Get Yourself Up When You Fall Down".  A sales person can not give up at the first or second NO that they hear.  And more importantly a sales person has to be able to get up when they fail.  These two things don't cost any money, and can't be taught.  These two things have to be part of our nature.  That does not mean that we can't have our own personal pity party every once and a while.  But the successful sales person does not party for long.  The successful sales person gets up, learns from the failure, and moves on.

These two things may sound simple, but they are the hardest thing to do if they are not part of who you are.  In my opinion it is possible to succeed without any of the things I previously mentioned, but if you are not "Persistence", and don't have what it takes to "Get Yourself Up When You Fall Down". than all of the toys, classes, programs, or Internet is not going to get it done for you.

Do you have what it takes to be "Successful"?

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Who To Call For Your Mortgage Needs In Connecticut:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage. 

Fannie Mae announced last week it's new Loan Level Price Adjustments for  (LLPA) for all loans that are Rate Locked on and after Monday January 17th.  The revised Level Price Adjustments will also apply to conventional conforming loans locked prior to January 17th that request a rate lock extension with a new rate lock expiration date greater than February 18, 2011.  

This means that if a Borrower is purchasing a home with a Conventional Mortgage that will be backed by Fannie Mae, and they have a Credit Score of 740 or higher, and are making a downpayment of 20% to 24.09% they will be assessed .25 points on their loan by Fannie Mae.  That to me is what I would call over the top, and unreasonable.

A Borrower that has a Credit Score of 740 or higher is a great borrower, one that manages his/her money extremely well.  Furthermore they are not making a minimal downpayment, they are putting down 20 to 24.09%.  To penalize such a Borrower with points is something that I fail to understand.

This is one more reason why FHA continues to be the Loan Product of choice for most borrower.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

FHA must be hearing the outcry because this week FHA Condominium Expiration Dates Were Extended.  This is a much needed and positive move on the part of FHA in my opinion. 

The reality of what was going to happen once Condominium Complexes started to come off the FHA Approved Condo List did not begin to hit home until the dead line was upon us, and Condo's that had been FHA Approved no longer were.  Condominium Owners that were trying to sell their Condo's were not happy with their Condo Management Firms that they had not Re-Certified the Complex, and now the number of possible Buyers for their Condo had be slashed.

Even though FHA has extended the expiration dates, they have only done so for a short time, and there is no indication that they will consider doing this again.  Below are the extension dates based on five-year time periods.  Notice that Condominium Complexes with original approval dates from 1972 -1985 are only being extend to the end of the year.

Initial Project Approval Dates           Current Expiration Date        New Expiration Date

1972 - 1980                                          December 7, 2010                 December 31, 2010

1981 - 1985                                          December 7, 2010                 December 31, 2010

1986 - 1990                                          December 7, 2010                 May 31, 2011

1991 - 1995                                          December 7, 2010                 July 31, 2011

1996 - 2000                                          December 7, 2010                 August 31, 2011

2001 - 2005                                          December 7, 2010                 September 30, 2011

2006 - 2008 (Sept)                               December 7, 2010                  March 31, 2011

A large part of the reason why FHA was so willing to extend the dates was because of their own work load.  FHA was beginning to see a substantial increase of requests for Certification and Re-Certification and they needed the extension to ease their work load.  Lenders and/or other interested parties are encouraged to begin the approval or re-certification process as early as possible so as to not run up against this deadline crunch again.  As I stated earlier, another extension is unlikely.

The new updated dates were posted on the FHA Connection databases on December 7, 2010.  The links are: 

Condominium look-up page: https://entp.hud.gov/idapp/html/condlook.cfm

FHA Connection: https://entp.hud.gov/clas/index.cfm

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

This past week William Walton asked me if I would post a blog on Assuming A Mortgage.  William has been getting some questions on what is involved in  Assuming A Mortgage and wanted to see what is involved in doing that.

First of all an Assumption of a Mortgage is in the simplest terms:

An agreement between the buyer and seller where a buyer takes over a seller's mortgage and becomes responsible for making the monthly payments.

This can be a big advantage to both the Buyer and the Seller.  The Buyer purchases the house without incurring some of the closing costs involved in the purchase of a home, and the Seller is likely to get a higher selling price for his house.  Also the Buyer assumes the mortgage at the Seller's existing interest rate.  Another advantage to the Buyer is that the Buyer will pay off the house faster because he/she is already a number of years into the existing mortgage. This leaves one to wonder with these advantages why do we not see more Buyers assuming mortgages?  The answer is a simple.

1. A Buyer can't just take over a Sellers mortgage, they still have to qualify for the existing mortgage, and go through the same application process, minus an appraisal.
2. Just because a Buyer assumes a mortgage and takes over the payments does not mean that the Seller is no longer liable for the mortgage (I will come back to this point later)
3. Many Buyers do not have the necessary money to be able to pay the Seller the difference between what they own on the existing mortgage and what the Seller is selling the house for.  For example the Seller is selling the house for $200,000 and still owes $150,000 on the existing mortgage.  This means that the Buyer will need to come up with $50,000 to give to the Seller, because the bank will not allow the additional $50,000 to be added to the existing loan.
4. It does not make any sense for a Buyer to assume a mortgage that has a higher interest rate than the rate that they can obtain a new mortgage at.  This is one of the main reasons why we do not see Mortgage Assumptions today.  But when interests rates are higher than then the interest rate on the existing mortgage, then it makes sense to do it.  I am a good example of this.  When I purchased my home in 1981, interest rates were 15%.  The Seller that I purchased my house from had a CHFA Mortgage on the house for 7.75% and he had only owned the house for two years.  I assumed the mortgage by giving him the difference between what he was selling the house for and what he owed ($7,000), and my monthly payments were half of what they would have been.
5. Not all mortgages are assumable.  For example government loans like FHA, CHFA, and VA are usually assumable, but conventional loans usually are not.
6. This one ties in to #5, even if a loan is assumable, not all Lenders or Investors are willing to allow it.  Just because FHA allows their loans to be assumed, does not mean that the Lender will allow the transfer in ownership, even if it appears that the new Buyer is a good risk.  Also the bank does not make as much off of the transaction on a Mortgage Assumption as they would on a new purchase (lower closing costs and lower interest rate)

Before I close this blog I want to go back and explain the second reason that I gave for why we do not see more mortgages being assumed.  You have basically two categories of Mortgages Assumptions:

1. The first is the Buyer assumes the Sellers mortgage and the Seller is released from all the liabilities, obligations and responsibilities that they have related to the mortgage.  This one is simple and a no brainer  if the market conditions are right.
2. But the second is not such an easy decisions for the Seller.  This is because even though the bank allows the Buyer to assume that mortgage, they do not release the Seller from the liabilities, obligations and responsibilities related to the mortgage.  That means that if the Buyer defaults on the mortgage, guess who is still liable.  You guessed it, the original holder of the mortgage.  This is a big risk on the part of the Seller and one that most Sellers are not willing to take no matter how much the Buyer is willing to pay them for the house, or how long the house has been sitting on the market.

Even though Mortgage Assumptions are rare these days, I would expect that Mortgage Assumptions will become a much bigger part of the home buying process once interest rates start to rise again.  I hope this has helped explain what is involved in Assuming A Mortgage, and why a Buyer and Seller may or may not agree to do one.  I would advise any Seller  who is entertaining allowing a Buyer to assume his/her mortgage, that they first check their Truth In Lending Statement, Note, or Mortgage to see if it is assumable.  Then contact their Lender to see if they allow a Buyer to assume their mortgage, and  if they will continue to be liable for the mortgage or not.

Again I hope this was helpful, and please feel free to ask questions if something is not clear.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.