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October 31, 2012

Home Loan Limits with Fannie Mae

Category: Fannie Mae News,Home Loan News,Published Articles – admin – 10:23 am

Money News published a good report on conventional loan amount limits with respect to Fannie Mae. Both government sponsored companies are looking to protect taxpayers as many new mortgage lenders have engaged to do business with them. This is also helping many of the largest banks realize more revenues, but Fannie Mae has been forced to set 2013 loan limits on conforming mortgages at a conservative level to minimize risks. It is no secret that the Federal Reserve has committed a significant amount of money and resources in an effort to stimulate the housing sector in the United States.

Will 2013 Loan Limits Stay High on Fannie Mae Mortgage Products?

Fannie Mae, has begun limiting how many mortgages annually it will guarantee or buy from certain firms. Limited competition in the industry and a lack of capacity to meet demand is helping JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon get “very high” home loan margins. That’s frustrating central bankers such as William Dudley, the Federal Reserve Bank of New York president, who said this month that rates on 30-year mortgage refinancing were higher than they could be after the Federal Reserve said it plans to acquire $40 billion of mortgage securities a month. “More direct access to Fannie would end up in more mortgage companies getting a better price and consumers would benefit,” said John Robbins, head of Bexil American Mortgage Inc., who founded two lenders later sold to banks now part of JPMorgan and Wells Fargo & Co. “The problem is, if you’re Fannie you just can’t let all these companies have unlimited access. You don’t want to give a high-speed, temperamental race car to someone who just got a driver’s license.”

Fannie Mae and Freddie Mac were seized by the government that year and have received $137 billion of aid since then, enabling them to finance about two-thirds of new loans. Even with steps to reduce their dominance, including increases to how much they charge for mortgage guarantees, there are few signs of progress. “Reform is not going to happen next year and probably not until 2015,” said Isaac Boltansky, a Washington-based policy analyst for Compass Point Research & Trading LLC.
The future of Fannie Mae and Freddie Mac has been on the backburner this year amid a presidential election and a recovery in housing, including higher prices, home sales and construction. That’s being driven in part by the Fed’s policy of buying mortgage bonds to push down borrowing costs. The Obama administration also adjusted rules to allow more borrowers to tap record-low rates. Refinancing applications soared to a three-year high with 30-year mortgages reaching 3.36 percent this month, straining staffs of lenders, which held rates higher than they could offer in part to reduce demand.

Fed Governor Elizabeth Duke said this month the economy needs more small lenders and that new regulation may drive more out of business. These firms historically have been willing to give more consideration to good borrowers with unusual situations that bigger lenders don’t want to deal with, she said. “You need to make sure you can still make the irregular loan, the one that doesn’t fit exactly in a box,” Duke said.

Regulators are writing rules such as national servicing guidelines that will be relatively more costly for smaller lenders to comply with, said Robert Bostrom, who served as general counsel for Freddie Mac for five years through 2011.“There’s just not enough capacity in the marketplace,” said Bostrom, who is now at law firm SNR Denton. “And we all know who’s going to end up paying for it: the consumer.” Read more: Fannie’s Mortgage Limits Help Banks 


July 5, 2012

How AIG Is Hurting the HARP Refinance Program for Homeowners

Category: Home Affordable Loans,Home Loan News – admin – 6:53 pm

With all of the media buzz on the HARP loan program you would think that our housing sector would be rebounding sooner than later. You may not want to get too excited because not all reports on HARP home loans are positive. Yes, the HARP helps with high LTV loans for underwater homeowners but not everyone who the program was intended to help is being approved. Business Week published an article worth reading the underscores some of the obstacles that HARP lenders in 2012 are having with the government initiative. American International Group Inc., also known as AIG has a mortgage-insurance unit that maintains policies that may be preventing California homeowners from refinancing their home loan under the HARP 2.0 program. Business Week reported that at least 3 U.S. senators wrote a letter requesting that AIG remove their policies that are hindering HARP lenders in California from approving certain homeowners from refinancing their property in the state. According to the letter written by senators Barbara Boxer of California, Robert Menendez of New Jersey and Herb Kohl of Wisconsin, all Democrats, United Guaranty Corp. is the only mortgage insurer that hasn’t removed barriers to a “mortgage refinance” in conjunction to the HARP 2.0 program.

The unit of the bailed-out insurer is unwilling to offer the same protections on defective loans that competitors are granting to aid the Home Affordable Refinance Program, Bloomberg News reported in November. President Barack Obama has said expanding HARP will make cheaper credit available to more homeowners with mortgage rates near record lows. “United Guaranty’s policies are harmful both to your customers and to the taxpayers,” the senators wrote in the letter. “This is particularly troubling given that United Guaranty is a subsidiary of American International Group, which itself has benefited from taxpayer assistance.”

According to Business Week, United Guaranty has participated in Home Affordable Refinance Program since 2009 and refinanced more than $5.3 billion worth of mortgages, the firm said in an e-mailed statement. The statement revealed that “United Guaranty’s review of new servicer loans in no way interferes with borrowers’ ability to take advantage of HARP refinancing or other modification plans that assist families in measures to retain their houses.”

Read the original Business Week article about the insurance companies hindering the refinance plan.


December 9, 2011

HARP Loan Guidelines

Category: Government Loans,Home Loan News,Loan Relief Articles – admin – 3:41 pm

Home Affordable Refinance Guidelines:  This loan program is designed for underwater borrowers who have demonstrated an acceptable pay history, but due to overall real estate market decline cannot refinance their homes per current industry guidelines. The new Home Affordable Refinance Program can be used for the following:

• Pay off the current unpaid principal balance on existing first mortgage (current 2nd-mortgage must be re-subordinated).

• Refinance and pay off closing cost, prepaid items and points.

• Available products: DURP15 & DURP30.

Borrower Eligibility:

• A borrower on existing mortgage may be removed; however, documentation to reflect the remaining borrower has been making the payments from their own funds in the prior 12 months period will be required. Borrower to be removed must also relinquish ownership. If borrower is being removed due to death, 12 month pay history is not required.

• A borrower may be added to the new loan as long as the existing borrower is retained. The addition of a non-occupying borrower is not allowed.

Loan to Value/Combined Loan to Value

• NEW! Fannie Mae has recently removed all LTV/CLTV restrictions.

• Investment loans- maximum 80% LTV/CLTV.

Property/Occupancy Restrictions:

• Primary Residence , second homes or investment properties

• 1-4 unit dwellings, Condos and PUD’s.

• No Manufactured Homes.

Appraisal Requirements:

• DU to determine appraisal requirement. Property Inspection Waiver and 2075 available.

• Must comply with Appraisal Independence. (Discuss affordable home refinance guidelines with loan officer)

• If property is located in a natural disaster area, FCM will require a full 1004 appraisal.

Home Mortgage Insurance:

• ORIGINAL LTV’s <= 80%: mortgage insurance will be waived by DU

• NEW! FCM will now allow any existing Fannie Mae loan with an LTV>=80%: which includes mortgage insurance to have insurance transferred by FCM. Insurance must be written from one of the following companies to be eligible for transfer: o Radian


November 15, 2011

Could Larger Home Loan Limits Help Us Escape the Housing Crisis?

Category: FHA,Home Loan News – admin – 5:18 pm

Under heavy pressure to crush the housing crisis, many lawmakers are considering the loan limits for FHA financing. Many FHA lenders in California, Colorado, Virginia, New York and Washington have expressed their concerns regarding the pool of borrowers that would no longer be able to access FHA for purchase mortgage and home refinance options. Most lenders who originate FHA loans in these high cost states agree that higher loan amounts who help many areas that were devastated by housing crisis. The movement to reinstate higher FHA limits is in full-swing in House and the Senate.  However it doesn’t appear that government sponsored enterprises like Fannie Mae and Freddie Mac would not be included in the measure or spending bill.

The loan limits fell from a maximum $729,750 to $625,000 on the first of October earlier this year. This affected 600 US counties for FHA, but less than half of that for Fannie Mae and Freddie Mac. FHA is not a lender rather an insurer of home loans for approved lending companies. It is currently the only low down-payment finance option left in the mortgage industry as they only require a 3.5% down-payment from perspective home buyers. The VA does offer 100% financing but it is only available to military borrowers.

Now the FHA market-share could expand even more because it would likely take over some of the share presently held by Fannie Mae and Freddie Mac. In a phone interview today, FHA commissioner Carol Galante said, “This is a scenario that has never happened in the past in which FHA has higher loan limits than Fannie Mae and Freddie Mac. According to mortgage analyst Brian Chappelle at Potomac Partners It could increase FHA volume by 10%.  “The higher loan limits would help raise FHA reserves if the defaults don’t increase. Every recent audit has said larger loan amounts perform better than smaller loan amounts says Chappelle. “If it wasn’t for the FHA loans insured in 2009-2011 FHA would already be needing taxpayer assistance.”


September 16, 2011

Will the Obama Bail Out More Homeowners with a New Refinance Program?

Category: Home Loan News – admin – 11:53 am

In the wake of looming foreclosures and loan defaults, the Obama Administration is once again considering extending federal aid to help struggling homeowners get quicker access to affordable mortgage refinance loan solutions. President Obama proposed to expand access to home refinancing has reignited a debate about the appropriate role for government in supporting the real estate sector. Some economists argue that the best way to spur the recovery is to stop intervening, let matters run their course, and allow home prices to normalize naturally. Mortgage refinancing guidelines have tightened dramatically over the last few years, so many struggling homeowners want to refinance but are unable to qualify.

The new initiative, briefly mentioned by the president in his jobs speech last week, seeks to help homeowners to refinance their mortgages at lower interest rates with hopes to stimulate consumer spending and boost economic growth.  Anthony Sanders, professor of real estate finance at George Mason University, says it’s a mere extension of The Home Affordable Refinance Program, which has helped only a small number of homeowners. In his view, the initiative is unlikely to have any significant stimulative effect on the economy.

Some argue that government efforts to help struggling homeowners would alleviate labor mobility, which has been hampered by the housing woes.  But Stijn van Nieuwerburgh, associate professor of finance at NYU Stern Business School, says labor mobility has not been a big issue. “All areas in the U.S. are affected, and it is not the case that there are abundant jobs anywhere.” A recent research from Chicago Federal Reserve also found no evidence that people’s reluctance to sell their homes in declining market to relocate for a new job has contributed to high unemployment.  Read the complete CNBC article.


September 14, 2011

Ailing Home Sales Hurt by Underwater Mortgages

Category: Home Loan News – admin – 12:32 pm

According to real estate data specialist CoreLogic, 75% of the 10.9 million homeowners with underwater mortgage owe more than their homes are worth. The company said Nevada had the highest share of underwater mortgages at the end of the 2nd quarter, with 60% of borrowers underwater, followed by Arizona 49%, Florida 45%, Michigan 36% and California 30%. According the Lead Planet, 20% of refinance leads in 2011 are submitted by underwater homeowners. (See the Lead Planet article at www.LeadPlanet.com/refinance-leads.html )

The average underwater mortgage share for the top five states has declined over the past year, from 41% to 38%, primarily as a result of foreclosures, CoreLogic said.  Negative equity not only restricts loan refinances, but also home sales, CoreLogic said. Unfortunately these underwater homeowners have been unable to refinance into the record low conforming and FHA rates because their negative equity disqualified them from loan eligibility.

In unveiling a new jobs creation plan on September 8th, President Obama said his administration will work with federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4%. The administration hasn’t yet put forward a formal plan. But the day after President Obama’s address to a joint session of Congress, Fannie Mae and Freddie Mac’s regulator confirmed it’s been “reviewing the mechanics” of the existing Home Affordable Refinance Program to identify barriers that prevent eligible borrowers from mortgage refinancing.

Helping homeowners who are more deeply underwater could cost Fannie and Freddie and therefore taxpayers — hundreds of millions of dollars. Private investors in mortgage-backed securities (MBS) guaranteed by Fannie, Freddie and Ginnie Mae would stand to lose billions.


June 10, 2011

Underwater Home Loans Sinking US Housing Market

Category: Home Equity Financing,Home Loan News – admin – 4:48 pm

According to CoreLogic nearly 22.7% of all U.S. homeowners were in a negative equity position with their mortgages at the end of the first quarter of 2011, down slightly from 23.1% in the 4th quarter of 2010.  In a report released Tuesday, CoreLogic states that some 10.9 million borrowers have underwater mortgages and another 2.5 million borrowers were in a near-negative equity position, which the housing data and analytics company defines as having less than 5% positive equity.

The current CoreLogic report does not attach a total dollar value to negative equity statistics but an analysis of the distribution of negative equity based on fourth-quarter 2010 numbers was published by the company last month which put the aggregate national net equity at $750 billion.  The percentage of underwater mortgage loans has only fallen 4 basis points since that time.While the drop in housing prices caused much of the negative equity, equity extraction was also a key driver.  Borrowers with home equity loans were twice as likely to suffer negative equity as those with only one lien.  18% of borrowers without home equity loans were underwater while 38% of borrowers with 2nd mortgages were in a negative position.  A total of 4.5 million negative equity borrowers have equity loans or other second mortgage liens.

Many borrowers in negative equity are still able and willing to make their mortgage payments, Mark Fleming, CoreLogic’s chief economist said.  “Those in negative equity and impacted by an income shock of some kind, such as a job loss, divorce, or death, are much more likely to be at risk of a home loan default or a short sale.

Loan default rates rise with the level of negative equity but not necessarily with the number of outstanding loans.  At a low level – a CLTV under 5% – the default rate is slightly above 2% with multi-lien properties defaulting at a slightly higher rate than single lien properties.  Above the 115% CLTV level where the default rate is 4 %, single lien properties begin to default at a fractionally higher rate than multiple lien properties.  Once the combined loan to value reaches 125% the default rate soars, reaching 12% at 150+ % CLTV with single lien properties marginally higher than those with 1st and 2nd mortgage loans.

The negative position of individual borrowers is significant.  The average underwater borrower owes $65,000 more than his property is worth.  Understanding the significance of the underwater mortgages is significant because it underscores the housing crisis and gives us a clear signal that we are nowhere near escaping the housing depression.


January 24, 2011

How the Dodd-Frank Mortgage Bill will Affect Broker Compensation

Category: Home Loan News,Mortgage Industry News – admin – 5:24 pm

As many loan professionals are already aware, April 1st is the date that the Dodd-Frank mortgage reform bill kick in and significantly change the way brokers and loan officers are compensated. Clearly the compensation plans for loan originators will see drastic changes any day. We wanted to remind industry insiders that this bill was created to help U.S. consumers. Clearly there was very little thought to how these changes will impact the mortgage and real estate industry.  According to a spokesman for Real Estate News, “Many loan companies have already started to let loan officers go.”

  The compensation for mortgage brokers will change as well on 4/1/2011.  Home loan brokers will not be able to be paid from the mortgage lender and the borrower.  Some insiders believe that these changes could impact the mortgages rates being hiked. In the end, the borrower could be charged more points and fees to achieve a specific interest rate.New subsection 129B(c) [1] prohibits yield spread premiums (“YSPs”) from being paid to or received by mortgage originators. Compensation paid to a loan originator in the form of YSPs or “other similar compensation” may not result in a loan officer’s total compensation to vary based on the terms of the loan, other than the amount of the principal. Incentive payments based on the number of home loans originated within a specified period of time are not considered YSPs.

This new loan origination provision also restricts attempts to structure the payment of compensation to home loan originators in another form that could have the same effect as YSPs, which is to steer consumers to higher priced loans. A mortgage originator may not receive any origination fee, whether or not a YSP, except from the consumer, and any person who knows that a consumer is directly compensating a loan originator may not pay an origination fee. (Bona fide third party charges that are not retained by the creditor, mortgage originator, or an affiliate of the creditor or mortgage originator are not considered origination fees). If the loan originator receives no “compensation” directly from the borrower and the borrower pays no upfront discount points or origination points, then the loan originator may receive and any person may pay an origination fee.

Presumably, these mortgage loan restrictions are based on the assumption that, ultimately, the origination fee comes out of the consumer’s pocket, and these payments would tend to steer a consumer to higher priced loans or otherwise increase the cost of the loan. But as the mortgage originator is entitled to compensation, this provision assures that the originator is allowed to be compensated, only once. Section 129B also provides that the Board may, by rule, waive or create exceptions to this provision.

Other Prohibitions for Loan Origination

Section 129B further directs the Board to write regulations to prohibit:

  • loan originators from steering a consumer to obtain a loan that the consumer lacks a reasonable ability to repay;
  • originators from steering a consumer to obtain a loan that has predatory characteristics (such as equity stripping, excessive fees, or abusive terms);
  • loan originators from steering a consumer from a “qualified home loan” for which the consumer is qualified to a loan that is not a qualified home loan;
  • abusive or unfair lending practices that promote “disparities” among equally creditworthy consumers based on race, ethnicity, gender, or age;
  • home loan originators from mischaracterizing a consumer’s credit history or the available loans or mischaracterizing or suborning the mischaracterizing of the appraised value of the property securing the loan; and
  • if a loan originator is unable to suggest, offer, or recommend a loan that is not more expensive than the loan for which a consumer qualifies, discouraging a consumer from seeking a loan from another loan originator.

Read the entire Dodd Frank Mortgage Reform


January 21, 2011

BofA Stock Falls from More Bad Home Loan News

Category: Home Loan News – admin – 1:43 pm

The Mortgage News Post reported less favorable financial news today as, Bank of America Home Loans announced higher than expected home loan defaults. The Bank of America Corp., the largest U.S. bank by assets, reported a $1.24 billion fourth-quarter loss as costs mounted for refunds, write-downs and litigation tied to delinquent home mortgages.  The home loan lender increased the amount set aside to cover bad credit mortgage units for the second time in less than a month and added $1.5 billion for legal expenses.   Brian T. Moynihan, 51, who started as chief executive officer a year ago, booked $12.4 billion in 2010 impairments on credit-card and home loan units purchased by predecessor Kenneth D. Lewis. The 2008 acquisition of Countrywide Financial Corp., then the largest U.S. home loan originator, has saddled the bank with lawsuits and demands to buy back bad credit home loans.   The bank said earlier this month it agreed to pay Fannie Mae and Freddie Mac $2.8 billion to settle or preclude disputes over home loans, triggering a $3 billion fourth-quarter provision. The sum was expanded to $4.1 billion, Bank of America said today, citing outstanding and future mortgage buyback claims.


January 13, 2011

2011 Home Loan Program Trends

Category: Home Loan Market,Home Loan News – admin – 1:07 pm

The last few years have been pretty stagnant for emerging home loan trends, but many mortgage professionals expect 2011 to present new opportunities for home purchase loans and refinancing.  Congress passed a financial reform law last year that will go into effect in March that is supposed to curb mortgage fraud and reduce the home loan costs for consumers.  The reality is that due to this reform bill, home loan origination costs are expected to arise and unfortunately the increased costs will passed down to the consumers thus nullifying one of the primary goals of the Dodd-Frank bill.

  The question that consumers and loan officers across the country all want to know is “Is the era of the best home loan rates behind us?  No matter what anyone tells you…nobody knows which direction rates are going. Timing the market is very difficult so getting approved for a loan that saves you money, should be a priority for homeowners & first time home-buyers alike.

FHA Home Loans – First time home buyers will continue to flock towards FHA mortgages for the simple fact that they only have to come up with 3.5% for a down-payment compared with 10 to 20% for conventional home loans.  If a borrower needs a bad-credit mortgage, they will need to come up with 5-10% for a down-payment, according to revised FHA guidelines.  There will likely be less FHA refinance transactions in 2011 than 2010 because the trend for higher home loan rates seems to have kicked in.

VA Home Loans – VA home financing will be continue to flourish in 2011 throughout the military community, because as home prices become more affordable, the program for VA home loans will continue to be the most aggressive home loan programs in the industry. VA refinancing will remain popular as the VA streamline programs will help the veterans who didn’t refinance last year uncover some savings with lower monthly payments.

Conventional Home Loans – Conforming loan limits appear safe for 2011, but conventional loan guidelines remain too tight for most Americans to seize the opportunity to realize record low home loan rates.  If rates exceed the 5% barrier in 2011, we anticipate that conventional loan origination to drop dramatically, but if the economy continues to sputter the low rates may c0me back in style.


November 18, 2010

Home Loan Rates Rise and Fall

Category: Home Loan News – admin – 11:59 pm

It’s been quite a ride this week for mortgage professionals trying to follow the rise and fall of home loan rates.  Making sense of the movements in home mortgage rates is difficult for those hoping to get ahead of the market in order to secure the lowest possible borrowing costs. Every day this week we have seen mortgage lenders make rate adjustments.


  • 4.125% FHA Rates
  • 4.25% VA Rates
  • 4.25% Conforming

Lenders reported a see-saw for interest rates this week.  Time will tell if rates will stay high.  Today was the other scenario, where MBS prices moved frighteningly downward for most of the session, effectively bringing lender mortgage rate quotes to their highest levels of the week, only to stage a moderately sized and exceedingly stable recovery back to the middle of the week’s range here in the final hour of trading. Multiple mortgage lender re-prices continue to be reported. The best 30 year fixed FHA mortgage rates are in the 4.125% to 4.50% range for qualified loan applicants.  The best 15 year fixed mortgage rates remain in 3.500% to 3.875% range.

Loan originators will only be able to offer these rates on agency conforming loan amounts to borrowers who are have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments, your loan quote will be higher. If you do not fall into the “perfect borrower” category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive.  A no point home loan does not mean a no cost mortgage. The 30 year fixed mortgage rates still include closing costs such as:  third party fees +  title charges  + transfer and recordation + escrows.


October 14, 2010

Home Mortgage Rates Make History

Category: Home Loan News,Home Mortgage Rates – admin – 5:22 pm

Just when you though interest rates had fallen to the bottom, home loan rates drop to a level not seen in since 1951. Freddie Mac found the latest drop in the 30-year rate brought it to a level that the FHA home mortgage loan programs have reported lowest FHA rates in almost 60 years.  Most mortgage industry insiders believe that the recent statements of the Federal Reserve signal additional possible downward pressure could be seen. Although Freddie Mac’s survey for 30-year loans started only in 1971, it has FHA data going back to 1948 showing long-term rates have been not only been at survey record lows, but lows that pre-date Freddie Mac’s formation in 1970 by decades.

Home Loan Rates Below 4% Nationwide!

Freddie Mac deputy chief economist Amy Crews Cutts commented that home mortgage rates could decline even further. She informed National Mortgage News that the  Fed officials’ recent indication that they’re open to the idea of purchasing more securities-likely Treasuries-has likely contributed to downward pressure on rates and may continue to.  But she warned that there also is the possibility that Fed officials may not take further action. “Sometimes they can simply say something and then they don’t have to do anything because they’ve gotten the market to move,” she said. If the Fed does buy more securities, it could put downward pressure on rates determined by the extent and speed of home buying factors that had not been discussed or signaled at press time.

During the week ending Oct. 14, the average 30-year mortgage rate fell to 4.19% from 4.27% the previous week and 4.92% a year ago. The 30-year interest rate has been below 5% for 23 weeks in a row. Average points on 30-year home loans, however, are higher than for any other loan product tracked by Freddie Mac except for one-year ARMs-which match it—at 0.8.