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December 9, 2011

Fannie and Freddie Lobbying for Payroll Tax Cuts

Category: Fannie Mae News,Freddie Mac News,Published Articles – admin – 3:52 pm

Just when you thought you heard enough of Fannie Mae and Freddie Mac in the finance home news, the government sponsored enterprises make headlines again. Congress and the Obama administration are turning to an unlikely source to pay for the proposed extension of the payroll-tax cut: mortgage-finance giants Fannie Mae and Freddie Mac. The revenue source proposed by both Senate Democrats and House Republicans would boost fees that Fannie and Freddie collect from lenders. But that is raising hackles in the real-estate industry. Builders, Realtors and lenders say it would amount to a tax that would be passed on to mortgage borrowers.

Fannie Mae and Freddie Mac do not originate home loans, but instead buy them from mortgage lenders. They bundle those loans into securities that are sold to investors, and promise to make investors whole if the loans default. To cover any defaults, Fannie and Freddie charge “guarantee” fees to lenders when they buy the home loans.

Lenders pass the home loan-guarantee fees on to borrowers in the form of higher rates. Last year, those fees averaged around one-quarter of one percent of the home loan amount. The Senate proposal directs Fannie and Freddie’s regulator to raise those fees by at least one-eighth of one percent over the next two years. The House proposal calls for an increase of one-tenth of one percent over the same period.

The proposal also would change who receives the fees. Instead of allowing those additional funds to flow to Fannie and Freddie, the plan would send them straight to the Treasury Department, which effectively owns the companies.

The provision wouldn’t have a significant effect on mortgage demand because home loan interest rates are at their lowest levels in decades, said Guy Cecala, publisher of Inside Mortgage Finance. Still, he added, “All you’re doing is putting another tax on the homeowner.”

The proposal is the latest example of how the open-ended federal stewardship of Fannie and Freddie is moving in new and unforeseen directions. The companies were taken over three years ago, and Congress and the White House have made no progress figuring out how to revamp them.  “It’s the precedent here that is troubling,” said Anthony Sanders, a professor of real-estate finance at George Mason University in Fairfax, Va. “This isn’t going to help Fannie and Freddie pay back what they owe and almost adds a permanency to Fannie and Freddie as a slush fund for Congress and the administration.”

An Obama administration official, along with a spokeswoman for Sen. Bob Casey (D., Pa.), who introduced the Democratic proposal, said raising the fees is consistent with the goal of attracting new sources of private capital back to U.S. mortgage markets. That’s because doing so would raise the cost of loans backed by Fannie and Freddie—currently the cheapest in the market —and allow non-government-backed sources of money to emerge.

Still, raising the home loan-guarantee fees could instead steer more borrowers to seek mortgages from the Federal Housing Administration if that agency didn’t take similar steps to raise its mortgage-insurance premiums. Many real estate groups have objected to the home loan-fee provisions because they say it’s largely unprecedented for revenues that Fannie and Freddie collect to be diverted for other purposes.

In a letter to lawmakers Thursday, the Mortgage Bankers Association, the National Association of Realtors, and the National Association of Homebuilders said it is “counterproductive” to direct revenue from Fannie and Freddie “for purposes unrelated to the safety and soundness of the housing finance system.”

Read the original WSJ article, > Fannie and Freddie Fighting for Payroll Tax Entitlements

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October 3, 2011

Are FHA Mortgage Programs Performing?

Category: FHA,Published Articles – admin – 10:14 am

According to Paul Miller of FBR Capital Markets, the largest home loan lenders and servicers could be hit with another government loan default fiasco.  It seems that even with the low FHA rates, borrowers are still making payments late and defaulting.

In the wake of the Federal Housing Finance Agency’s mortgage lawsuits against Bank of America, Citigroup, JPMorgan Chase and a dozen other lenders, the nation’s largest banks could be facing a wave of losses on insurance claim denials by the Federal Housing Administration, or FHA.  Miller cited “conversations with industry and Washington contacts,” there is “a growing concern over the risk that FHA mortgages pose to originators and servicers,” since the agency “only a $4.7 billion capital buffer against a $1 trillion portfolio, which translates into a reserves to insured loan ratio, or capital ratio, of 0.50%, well below the 2% mandated minimum.”

This means the FHA could be forced to tap into its credit line with the Treasury in order to continue paying out on FHA lenders and servicers’ claims.

Since “the FHA needs to avoid tapping into its credit line to prevent comparisons to Fannie Mae and Freddie Mac,” according to Miller, the agency has increased its mortgage insurance premiums and increased borrowers’ down payment requirements. If those measures fail to shore-up the FHA’s finances, the analyst said “the agency could turn to widespread claim denials in order to reduce losses to its insurance fund.”  Miller said that the FHA’s focus in its efforts to deny more claims “will likely be on missteps made in the hyper technical servicing process,” although “the possibility remains that the agency could be looking for any mistakes made throughout the loan’s life, therefore exposing the lenders to losses as well.”  While providing detailed loss estimates for the largest mortgage lenders and servicers, the analyst said that “until there is more widespread evidence of FHA claim denials, we believe that the risk is more of a headline risk than a capital concern.” Read the original FHA Mortgage Mess article.

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May 4, 2011

Best Practices for Home Loan Financing

Category: Published Articles – admin – 1:22 am

There are a few important steps you need to follow to make sure you are getting the best mortgage at the lowest possible home loan rate. Getting your income documentation ready and cleaning up your credit report should be top priorities befoes shopping online for home loan programs. Most lending companies will want your debt to income ratio to be below 30% after factoring in the perspective home purchase loan payment and housing expenses. Depending upon which home loan program you choose will dictate how much you will need for a down payment.

  • Conventional loans need 20% of the sale price
  • FHA mortgage programs require a 3.5% down payment
  • VA mortgages require no down payment

Read the original article online > Home Financing Tips for First Time Home Buyers.

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April 20, 2011

3 Tips for Getting the Right Home Loan Online

Category: Home Loan Market,Published Articles – admin – 2:01 am

Shopping for a home loan online has suddenly become an important step in getting the best mortgage on the market. Were you aware that consumers spend almost twice as much time researching the purchase of a car than they do a home loan?  Yet in the U.S., the average house costs five times more than the average automobile? A recent Zillow survey revealed that American consumers spend ten hours shopping for a car online, while only researching mortgage loan options for about five hours.  Home loan rates are near record lows, so you stand to save a significant amount of money my choosing the best mortgage for your situation.

As a result, people miss opportunities to get lower mortgage rates and better home loans costing them thousands of dollars over the years. To avoid losing out on your hard-earned dollars, here are a few tips to help you take control of the mortgage shopping process:

1. Get your home finances in order. Before you even start shopping for a home loan assess your finances. Determine what you can afford. As a rule of thumb, the total cost of your mortgage payment — including any taxes and insurance—should not exceed 30 percent of your take-home pay. You’ll also want to get a good ballpark estimate of your credit score. Your credit score impacts your interest rate as well as your eligibility to get a loan. Currently, one-third of Americans cannot get a mortgage because their credit score is below 620.  FHA mortgages

2. Pick the type of home loan that meets your needs. There two main types of home mortgages: Adjustable-rate mortgage (ARM) and the fixed-rate loan. ARMs have fixed rates for a short period (usually 3, 5 or 7 years) and then readjust. These mortgages are generally considered riskier because the interest rate and payments can increase when the loan adjusts. However, if you are only planning on living in your house for a shorter period, these loans may make sense for you, especially because you’re likely to obtain lower rates.

A home loan with a fixed rate is just that—the interest rate is fixed. Many people like this type of loan because the interest rate stays constant throughout the period of the mortgage. With both fixed and adjustable rate loans you can select various repayment periods. The most common term is 30 years, but if you can afford the higher monthly payments of a 20- or 15-year term loan, you will save money with the lower interest rate and quicker payoff period. The most important factors in selecting your mortgage type is the length of time you plan on staying in your home and your risk tolerance.

3. Take advantage of your 30-day window. There is no such thing as too many loan quotes. Borrowers may shy away from getting multiple loan quotes, fearing their credit will be impacted when multiple parties check their credit within a short period of time. However, you have 30 consecutive days in which multiple pulls of your credit score, or “rate shopping,” won’t affect your credit. With that in mind, take advantage of the 30-day window and get as many loan quotes as possible to get the best rates and terms. Note that in order to compare quotes apples-to-apples, it is important to get quotes from lenders around the same time as rates can change daily. It is always wise to double-check the rate you get from a single broker or bank to make sure you really are getting a good rate and that you find a lender that you trust.

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March 14, 2011

Home Equity Consolidation

Category: Published Articles – admin – 12:11 pm

Whatever you decide for your means of refinancing debt with a second mortgage, you will be glad to get rid of high rate credit cards with little harm done to your credit score.  You will need to make continual monthly payments on your debt consolidation loan to be rid of this debt soon as well.  Remember that most lending companies requiring 10 to 20% equity in home will be able to give you a great home equity rate if you fulfill good credit scores needed to qualify. Read the original article Consolidating Debt with a Home Equity Loan.

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Will Banks Continue Paying MSR’s?

Category: Published Articles – admin – 12:07 pm

The debate over loan officer compensation continues… If anyone thought the nation’s megabanks were going to take the “regulators’ medicine” with their mouths widen open, they thought wrong. I’m talking about the whole mess surrounding servicing fees, servicing standards and the big one: the servicing settlement with the AGs. The first piece of evidence is JPMorgan Chase selling off a large chunk of its MSRs to the servicing arm of IBM last fall. The next move is the story we broke over the weekend about a Wall Street firm offering a “sale-leaseback” option on MSRs.

What these two stories say is this: Okay, Mr. Regulator give us a hard time on servicing, and we’ll find a way to take it off balance sheet where your reach doesn’t extend. And then lastly, there’s the issue of the “Rising REITs.” Redwood Trust has completed two jumbo MBS deals. Provident Funding has filed with the SEC to raise $300 million via a REIT offering. Why are REITs looking so powerful these days? Answer: because they don’t have to answer to the Federal Deposit Insurance Corp. Article written by Paul Muolo.

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March 4, 2011

National Debt Commission Proposes Ending the Home Mortgage Interest Tax Deduction

Category: Mortgage Interest Tax Deductions,Published Articles – admin – 1:27 am

Real estate agents, lenders and homeowners are starting to get nervous about the Obama administration repealing the many tax benefits for homeownership, like the home mortgage interest deduction.  Among the tax expenditures the commission specifically targeted was the annual breaks that now flow to homeowners, including tax write-offs for lending costs on purchase loans, home refinancing and interest deductions on 2nd home loans, home equity and refinance loan transactions.  The commission was also considering property tax write-offs for $250,000 and $500,000 capital gains exclusions for single and married taxpayers, respectively, who sell their houses at a profit.

President Obama commended the broad goals of the commission but only included a minor reduction in mortgage interest deductions, a 28% deduction cap on write-offs by single taxpayers with incomes higher than $200,000 and married taxpayers earning more than $250,000 – in his own budget proposal for the upcoming fiscal year.

How Much More Would You Pay in Federal Taxes If Obama Repeals the Mortgage Deductions?

Obama’s budget proposal only called for ending home loan interest deductions for high-income taxpayers, but many believe it is only a matter of time before the President circles back for a complete overhaul that includes measures to end the tax deductions for homeownership as we know it. It’s no secret that Obama uses the national debt forum to promote the redistribution of wealth. 

We anticipate the legislative draft to be circulated to senators in March, already is controversial. For example, Senetor Charles Schumer (D-N.Y.) reportedly is demanding that Social Security changes be exempt from the plan. But members of the drafting group disagree and argue that, to be effective and fair, no major budget-related items no matter how politically sensitive can be omitted.  “Everything has to be on the table,” said Coburn. “There can be no sacred cows and pet priorities.” As to tax code changes, Durbin said that the only way to reduce the deficit is to “ensure that everyone pays their fair share . . . we need to look at the money we forgo every time we hand out a new tax break. These ‘tax expenditures’ cost the Treasury as much as we spend in appropriations each year with much less oversight.”

According to the latest estimates prepared by the congressional Joint Committee on Taxation, the 1st, second mortgage and home equity interest deduction will cost the government $99.8 billion in uncollected taxes this fiscal year and $107.3 billion in fiscal 2012. Homeowner property tax write-offs will cost $26.6 billion in uncollected taxes this year and $31.6 billion in 2012. The $250,000/$500,000 tax-free exclusions on capital gains for home sale profits are projected to cost the Treasury about $19 billion this year and $21 billion next year.  No one anticipates that these benefits could be eliminated or even severely slashed within a couple of years. And while housing trade groups have not yet spoken out about the plan being drafted in the Senate, they privately worry that, because of the sheer size of the national debt, leaders from both parties could conceivably join with the president to structure some form of grand debt reduction compromise that requires all special interests to chip in.  “We definitely take this seriously,” said Rob Dietz, an economist and tax specialist for the National Association of Home Builders. “We are going to have to continue to make the case for housing, and remind [Congress] just how important housing is to the economy.”  Read the original article published by Nationwide Lender calling the talk of ending the Mortgage Interest Tax Deduction as dangerous.

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March 1, 2011

FHA and Subprime Home Loans

Category: FHA,Published Articles – admin – 12:52 am

FHA home loans have become a trusted financing vehicle for borrowers with credit and equity obstacles. FHA mortgages are also popular with new homebuyers that cannot afford a big down-payment like conventional loan typically require.  After the subprime mortgage crisis in 2007, FHA loans are in fact one of the only ways to obtain subprime lending, as many lending practices were cut off as a result of the housing bubble. A subprime home loan offers new opportunitiesfor people who want a house but cannot afford one, but one of the only subprime loan techniques still in practice is the FHA loan, although it is certainly a safer practice.  Read the Original article > The Truth behind Subprime and FHA Loans

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February 4, 2011

Home Refinancing Myths

Category: Home Refinance Articles,Published Articles – admin – 3:01 pm

With the mortgage refinance rates so attractive, most homeowners are once again considering home refinancing, because lowering their monthly payments provides hard dollar savings that are hard to pass up. Home loan programs see guideline changes regularly, so we recommend that you discuss your refinancing needs and eligibility with a trusted loan officer before getting too excited.

  * Lower Loan Payments 

* Fixed Home Loan Rates

* Reduced  Years of Interest

* Fixed Rate Conversion

The Nasdaq blog recommends learning more about the finance myths before investing time shopping online and getting involved in the refinance process. 

Myth: Getting approved for a refinance loan will be as easy as getting your first home loan.

The first thing to remember is that each refinance is on a case-by-case basis. Because so many lenders have been damaged in the past few years with bad credit refinancing, the industry in general has tightened up its underwriting guidelines. In many cases your initial home loan may not have required a lot of documentation so you might be shocked by today’s requirements to refinance. While this may make things more difficult for some consumers, it’s much better for the mortgage industry. The general rule of thumb is that if you have credit issues or lack of equity in your home, you may find that you have difficulty getting approved for traditional fixed rate mortgage refinancing. 

Myth: If you were approved for a loan to buy a home, you will be approved for home refinancing

Unfortunately that is not always the case. In many instances, borrowers financed their home originally when lenders had minimal requirements.  Since Obama has been elected, mortgage lenders have tightened guidelines for refinance mortgage transactions. Years ago, borrowers could refinance without equity, but in today’s mortgage market, borrowers typically need equity to be approved.  HUD still offers a FHA refinance option that only requires 3.5% equity, but you would be required to pay mortgage insurance monthly, so it may not be worth it. 

It’s no secret that home refinancing can be an excellent way to save money, increase cash flow and get quick access to cash. With that being said, every refinance experience is not always a wise financial move so you need to know the facts before refinancing.  Read the complete Nasdaq article online.

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January 19, 2011

Cash Out Loan Choices

Category: Home Refinance Articles,Published Articles – admin – 5:10 pm

Lead Planet’s Bryan Dornan posted an intersting article on Nationwide today that discussed the best choices for cash out loans.  There are many new implications these days to consider when using your home to get quick access to cash. First and second mortgage guidelines have shifted significantly in recent years, so Dornan’s advice is worthy.

  • What your loan to value (LTV)?
  • What is is your credit score?
  • Is there a penalty for early payment on your home loan? 
  • How do you plan to spend the cash? 
  • Do you have a  home equity loan presently?

Read the original article written by Bryan Dornan > Refinance or Second Mortgage?

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January 11, 2011

Outlook for FHA Home Loans in 2011

Category: FHA,Published Articles – admin – 10:32 pm

In a recent article, the FHA Loan Blog revealed the fragile state that the mortgage industry is as Congress continues to push for stricter mortgage laws and tighter FHA guidelines.   If a borrower can document to a FHA loan company lowering their rate to a competitive level of today’s current FHA rates will increase the likelihood of them paying their mortgage on time, then the lender should approve the mortgage refinance and move on — Isn’t that what a modification is any way. HUD needs to wake up and make FHA refinancing more accessable for capable borrowers. Read the complete article, 2011 FHA Limits.

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August 11, 2010

California Home Loan Rates Decline

Category: California Home Loans,California Mortgage Rates,Home Mortgage Rates,Published Articles – admin – 5:33 pm

Nationwide reported that San Diego mortgage rates remained at record lows for new home buying and refinancing.   From Oceanside to Chula Vista, San Diego loan applicants continued to see significant home financing opportunities because of the low interest rates that were available locally to qualified borrowers.  Nationwide published a report indicating that 30-year fixed California mortgage rates ranged from 4.32% to 5%.  Southern California home loan rates continue to rescue many homeowners from rising adjustable rates and mortgage payments that many homeowners could no longer afford.

Lenders APR Rates
National Average 4.894% 4.75%
Wells Fargo 4.848% 4.75%
Nationwide Mortgage 4.615% 4.5%

Apparently VA mortgage rates were available at 4.125% for fixed loan terms.  And for those borrowers who were comfortable with an interest rate only fixed for 5 years (5/1 ARM), California FHA loans could be found at 3.75% for qualified loan applicants.  Read the original article on San Diego mortgage rates

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