Tag Archives: fannie mae

Real Estate

Home Affordable Refinance Program Plan A Boost To Borrowers, Banks

 

The Obama administration announced broad outlines of the revised Home Affordable Refinance Program on Oct. 24. Fannie Mae and Freddie Mac issued guidance last week that filled in most of the details.

  • HARP 2 greatly reduces or eliminates the risk-based fees Fannie and Freddie charge on many loans and virtually eliminates the chance that lenders will have to pay for losses on loans that go into default if they made underwriting mistakes. It also vastly streamlines the underwriting process.
  • Although lenders can begin taking applications Dec. 1, it could take several months before the new loans are made. Fannie Mae said it won’t begin buying certain types of refinanced loans until March.
  • To qualify, the existing loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. The loan balance must be more than 80 percent of the home’s market value. The loan must be current for the past six months, with no more than one late payment in the past 12 months. Those who previously refinanced through HARP are ineligible.
  • The new program improves on the existing HARP refi program by letting borrowers refinance into a new fixed-rate loan regardless of how much is owed. The existing program caps the new loan at 125 percent of the home’s market value.
  • Homeowners also can refinance into a new adjustable rate loan that has a fixed rate for at least the first five years, but in this case the new first mortgage cannot exceed 105 percent of the home’s value.
  • In most cases, borrowers won’t have to pay for a new appraisal (Fannie or Freddie will use their automated in-house appraisals) or have any particular debt-to-income ratio or credit score.
  • Borrowers who refinance through their existing loan servicer generally won’t have to document their income or assets or have a particular credit score or debt-to-income ratio. The lender will only have to verify that one borrower on the loan has a job or other source of income, but not the amount of income.
  • Homeowners who refinance through a new lender will have to meet additional underwriting requirements, but not as many as people who are refinancing through traditional routes.
  • Borrowers can have a second loan on the house of any amount and still qualify, as long as the holder of the second mortgage resubordinates it to the new loan. Most of the big lenders have agreed to do so, but there is no guarantee they or others will.
  • If borrowers have mortgage insurance on the existing loan, they must maintain it, but they should be able to transfer that insurance to the new loan at the old premium rate, according to Freddie Mac. The big mortgage insurers have agreed to allow this, but again there is no guarantee all will.
  • There are still many questions about the program, such as what interest rates banks will charge, whether they will impose additional fees or underwriting requirements beyond what Fannie and Freddie require, and whether investors will be willing to buy securities backed by these new HARP 2 loans.

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Real Estate

U.S. Lowers The Size Of Mortgage It Will Guarantee

September 30, 2011
The current conforming loan limit, which determines the maximum size of a mortgage that the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac can buy or guarantee – is set to expire Friday, Sept. 30.

 

  • Beginning Oct. 1, the conforming loan limit will decline to $625,500, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum.
  • Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.
  • Under the new GSE loan limits, Monterey County would see the greatest drop in the loan limit at $246,750, followed by San Diego ($151,250), Sonoma ($141,550), Solano ($140,500), and Napa ($137,500) counties.
  • Under the new FHA loan limits, Monterey County would see the greatest drop in the loan limit at $246,750, followed by Merced ($201,450), Riverside ($164,650), San Bernardino ($164,650), Solano ($157,300), and San Diego ($151,250) counties.
  • The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) estimates that more than 30,000 California home buyers statewide will be impacted by the change to the conforming loan limits.
  • In anticipation of the conforming loan limit decline, some banks already have stopped accepting conventional and government applications for loan amounts that exceed the new permanent loan amounts.

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John J. O’Dell Realtor®
Real Estate Broker
O’Dell Realty
9530) 263-1091
jodell@nevadacounty.com

Real Estate

Mistakes Housing Investors Make


With traditional investments delivering low returns, some are considering buying rental housing.  However, potential investors should do their homework and avoid the following common mistakes.

Making sense of the story

  • Investing in real estate right now can be profitable, if everything goes as planned.  Rents are increasing in many areas, and more properties may be coming on the market.
  • Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae’s and Freddie Mac’s inventories of foreclosed homes into affordable rentals.
  • Traditionally, investors rented out properties for 1 percent of the purchase price per month.  However, according to one property management firm, today, some investors are receiving as much as 2 percent of the purchase price.
  • While it may be true that in some areas home prices are relatively low, that doesn’t mean the property can be rented out.  Homes in deserted subdivisions aren’t any more appealing to renters than they are to buyers.  The same is true for less-attractive properties or those in less-desirable school districts.
  • Prior to purchasing a property, investors should also factor in closing costs of 3 percent to 6 percent, the costs to fix up the place and maintain it, and the holding costs.
  • Investors become landlords, and as such, need to keep in mind that, just like homeowners, tenants may not always be able to pay rent.  Evicting tenants can take several weeks.
  • It’s also important to remember that owning a rental is not the same as owning a home.  An owner may put up with flaws in a home that a renter wouldn’t tolerate.  Additionally, many states and communities have strict laws for landlords, even for those who own only one property.

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John J. O’Dell Realtor® GRI
O’Dell Realty
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Real Estate

Mortgage Rates Are Great, If You Can Qualify!

Interest rates are near historic lows and home prices are affordable; however, many borrowers are finding they must have nearly pristine credit records and hefty down payments to get the best rates.

  • Since 2009, credit standards have become much tighter.  For borrowers, this emphasizes the importance of paying close attention to credit scores.
  • New rules unveiled last week, the result of last year’s Dodd-Frank financial-services legislation, require banks and other lenders to disclose to consumers the scores used to determine interest rates charged borrowers, or to deny credit, making it easier for borrowers to see how their credit scores affect the interest rates they pay.
  • The FICO credit scores on loans that banks are giving out and that are backed by government agencies Fannie Mae and Freddie Mac show the new reality.  Currently, the two agencies essentially finance 75 percent of all mortgages by purchasing the loans from banks, thus shaping how much it costs to borrow.
  • FICO scores range from 300 to 850.  Prior to the decline in home prices, a score of 700 to 725 was considered solid and, a borrower could expect to be approved for a “conventional” mortgage at the lowest rates.
  • From 2003 to 2006, 82 percent of Fannie Mae mortgages were for borrowers with a score between 700 and 750, but so far in 2011, only 13 percent of Fannie Mae mortgages carry that score, and just 1.7 percent have a score of 700 to 725.  This year, 75 percent of Fannie Mae mortgages are for FICO scores of 750 to 755, up from less than 5 percent before 2005.
  • These trends demonstrate the importance of understanding credit scores and ensuring credit reports are accurate.  Consumers can check their credit report at AnnualCreditReport.com.

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Thinking of buying or selling? Call or email:
John J. O’Dell Realtor® GRI
O’Dell Realty
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jodell@nevadacounty.com

Real Estate

Banks Stop Accepting Certain Mortgage Applications

 

In anticipation of the expiration of current loan limits on Sept. 30, 2011, Bank of America has decided to stop accepting conventional and government applications for loan amounts that will exceed the permanent loan amounts.  The deadline to submit loan applications was July 1.

According to an email from Bank of America, conventional loans that exceed the permanent loan limits will now be required to use non-conforming programs.

Barring Congressional action, the maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will decline to $625,500 beginning Oct. 1, 2011, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum.  The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee.  Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

 

 

Thinking of buying or selling?
For all your real estate needs, call or email:

John J. O’Dell Realtor®
Real Estate Broker
O’Dell Realty
9530) 263-1091
jodell@nevadacounty.com

Real Estate

New Loan Limits Would Hurt Home Sales


Unless Congress takes action, the current loan limits will expire on Sept. 30 and the cost of a mortgage could rise significantly, especially in high-cost areas such as California.

  • More than 30,000 California families could face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011, according to analysis by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
  • The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee.
  • Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.
  • C.A.R. and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher conforming loan limits.  As a result of C.A.R.’s and NAR’s efforts, in 2008, Congress temporarily raised the conforming loan limits from $417,000 to $729,750 and has extended them annually through fiscal year 2011.
  • To see the impact the lower limits would have on various regions throughout the state, go to the click here

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John J. O’Dell Realtor® GRI
Real Estate Broker
O’Dell Realty
(530) 263-1091
jodell@nevadacounty.com

Real Estate

Fees For Home Mortgages Increase

Grouse Ridge, Nevada County, CA
Grouse Ridge, Nevada County, CA

For the first time since 2009, Fannie Mae and Freddie Mac are raising risk fees charged to lenders on loans they buy for resale to investors.  Fannie and Freddie also are adding risk fees to more loans offered to borrowers with exemplary credit.  Although lenders could absorb the cost, most are expected to add the fees to loan costs.

MAKING SENSE OF THE STORY

  • To avoid a fee or to receive a discount, most borrowers will need FICO scores of 740 or better and down payments of at least 25 percent.
  • The fee increases likely will affect most loans with terms longer than 15 years that are sent to Freddie beginning March 1, and to Fannie beginning April 1.
  • The most notable aspect of the fee increase is that the fees are being added to more loans to borrowers with higher credit scores.  With few exceptions, risk fees previously hadn’t applied to borrowers with FICO scores of 740 or higher.

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Real Estate

New Online Help From Fannie Mae


Since the start of the housing downturn, the number of Web sites and foreclosure-prevention companies claiming to offer help to struggling borrowers has greatly increased.  While some of the businesses are legitimate, others are fraudulent and offer services that consumers may be eligible to receive free of charge.

  • This month, Fannie Mae – the government-sponsored entity that helps set lending standards for most mortgages—started a Web site, KnowYourOptions.com. The site contains elements distinguishing it from those aiming to prevent foreclosure.  All of the information on the site is available in Spanish or English.
  • KnowYourOptions.com provides video explanations of what users might accomplish in each of the tabbed section of the site.  In the “Take Action” section, for example,” struggling homeowners are advised that the first step to take in seeking help with their mortgage is to contact their mortgage company.
  • Other features of the site include contact information for mortgage companies and loan counselors, calculators to determine if the borrower is eligible for assistance, and information on commencing short sales or deeds-in-lieu of foreclosure.
  • Another helpful Web site for consumers is Hope LoanPort, which allows struggling homeowners and housing counselors to submit financial documents to mortgage companies and track the status of their efforts to avoid foreclosure. Hope LoanPort was created by Hope Now, a consortium of 12 mortgage companies and 250 counseling agencies.

To read the full story, please click here.

Real Estate

What the New Consumer Protection Bureau will do for Home Buyers

Part of the financial reform bill signed into law by President Obama includes the creation of a Consumer Financial Protection Bureau, which will write new rules and monitor problems and abuses in areas such as residential real estate settlements, credit scores, “truth in lending,” and equal credit opportunity.

KEEP THIS IN MIND

• Before the Bureau can begin implementing new laws to assist consumers, the president must nominate a director for the Bureau and the Senate must confirm the nominee. While this may take time, mortgage industry leaders say some of the core changes promised by the legislation either already are in effect or should be soon.

• Treasury Secretary Timothy F. Geithner has until Sept. 19 to designate a transfer date when key legal and regulator authorities shift from agencies such as the Federal Trade Commission and the Dept. of Housing and Urban Development (HUD), to the new consumer bureau. Once that takes place, the Bureau will begin implementing the new laws.

• One of the earliest and most widely anticipated changes expected to take effect impact home appraisals. By law, the agency must create new interim rules on appraisal accuracy and independence to replace the Home Valuation Code of Conduct (HVCC) rules imposed by Fannie Mae and Freddie Mac in 2009. Many in the real estate industry, as well as home buyers and sellers, report HVCC standards led to low home valuations that, in some instances, derailed home sales transactions.

• A national hotline system also will be developed that will allow aggrieved mortgage borrowers and others to issue complaints and alert the Bureau to unfair and deceptive practices.

• Rules requiring mortgage loan officers to verify mortgage applicants possess the ability to repay the loans they’re seeking also is high on the list.

To read the full story, please click here:
LA Times

Real Estate

1 In 5 Default on Mortgages They Can Afford to Pay

A new report estimates that nearly one in five mortgage defaults through the first half of 2009 were “strategic,” where borrowers who appeared to have the capacity to pay their mortgages stopped doing so.

The research follows on an earlier report by Experian and Oliver Wyman that first aimed to quantify the share of mortgage defaults that are “strategic.” Strategic defaulters are defined as those who miss six straight mortgage payments without missing multiple payments on auto loans and other consumer debts for the six months after they first fell behind on mortgage payments.

The report finds that the share of borrowers who strategically defaulted through the first half of 2009 is unchanged from the end of 2008. Still, the absolute number of strategic defaults in the first half of 2009 increased 53% from the year ago period.

Government-sponsored mortgage purchaser Fannie Mae is trying to encourage distressed homeowners to find alternatives to foreclosure by banning those who walk away from getting new loans for seven years.

Troubled borrowers who do not try in good faith to work out a deal, but have the capacity to pay, are targeted by the policy announced June 23, 2010.

“Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting,” said Terence Edwards, executive vice president for credit portfolio management.

A strategic default occurs when a homeowner stops making payments on a mortgage despite being able to do so. It has become increasingly common in communities where housing values fell sharply and homeowners are “underwater,” or owe more than their houses are worth.

Fannie Mae said that in locations where the law allows, it also plans to take legal action to recoup outstanding mortgage debt from borrowers who strategically default. The company plans to instruct its servicers to monitor delinquent loans facing foreclosure and recommend cases to pursue for such judgments.