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28 Jun 10 New Bill Could Boost FHA Loan Volume

FHA mortgage volume could get a boost from regulatory reform, because loans insured by government agencies are fully exempt from the bill’s risk-retention requirement.  The legislation finalized by the conference committee late last week would require loan originators to retain at least 5% of the credit risk in loans they securitize unless the assets meet a “qualified home mortgage” test. All FHA loans and loans from the Department of Veterans Affairs or the Rural Housing Service will automatically meet that test.  “FHA gets a pass,” said David Kittle, senior director of industry relations for IMARC, a mortgage fraud investigation company, and a former chairman of the Mortgage Bankers Association. “Does it give them an advantage? Well, sure. Anytime you are carved out of something that can be onerous for everybody else, then certainly you benefit.”

Certain — and possibly most — loans securitized through Fannie Mae and Freddie Mac will also be eligible for securitization without risk retention.  “I believe chances are very good that in the future almost every mortgage that Fannie and Freddie either buy or securitize will be qualified mortgages under the risk-retention provision,” said Glen Corso, managing director of the Community Mortgage Banking Project, a trade group.  But without an automatic exemption, lenders will have more hoops to jump through when they make home loans headed to Fannie or Freddie, giving FHA an edge.

How many hoops will ultimately depend on how a “qualified” mortgage is defined. Under the final bill, federal banking agencies, the Securities and Exchange Commission, and Federal Housing Finance Agency will draft rules establishing underwriting standards and allowable product features for these fully documented loans. Qualified mortgage loans also have to meet a new and tougher “ability to repay” standard in the bill along with a 3% limit on points and fees and a separate 2% limit on bona fide discount points. Regulators have the flexibility to set risk-retention requirements lower than 5% for residential loans that don’t meet the qualified mortgage test. Balloon, negative amortization, and most interest-only notes will be excluded from the definition but debt-to-income ratios and verification practices must be defined by regulators and could change.

The bill, as expected, gives little boost to a revival of the private-label securitization market. “Time and time again we keep hearing that we need the private sector to jump in, yet all the regulations that are being passed are keeping them out of the game, on the bench, on the sidelines,” said Sylvia Alayon, senior vice president of national operations at due diligence firm Capital Markets Assessment Corp. “We do need the private sector because many loans, like jumbo loans, can never be absorbed by the government agencies, and they represent a significant part of the market.” Still, mortgage veterans were relieved on Friday that the bill will not force them to retain risk on all securitizations, regardless of loan characteristics, as in the initial language they had lobbied against.  “It’s nice to win one,” said Lewis Ranieri, co-inventor of the mortgage-backed security.  Article was written by Paul Muolo and Sara Lepro.

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07 Aug 09 FHA Having Trouble Insuring Reverse Mortgages

The increase in FHA funding authority means the government is following the marketplace. FHA mortgages now represent some 35% of all new financing, up from about 5% just a few years ago when the program was crowded out of the marketplace by bad credit loans. It would be counterproductive to restrict the program when FHA loans enjoy great public confidence, especially FHA loans for borrowers with poor credit. In this economy we need home buyers, reason enough to encourage people to enter the marketplace.

Reverse Mortgages: what HUD calls home equity conversion mortgages (HECMs) — those reverse mortgage loans remain attractive for many senior borrowers, but have become troublesome for HUD to insure because of falling home values. While HUD asked Congress for $800 million to subsidize the reverse mortgage program this year, Congress in this bill is saying forget it. Instead of more money, the bill requires HUD “to ensure that the program operates at a net zero subsidy rate.” Given that reverse mortgage are amazingly risky to insure in a slow market what can HUD do to meet the net zero requirement? It can cut back on the number of reverse mortgages it’s willing to insure, it can reduce the maximum amount it will cover, or both. The bottom line: If you want an FHA-insured reverse home loan it might be best to get one before October 1st, the start of the new fiscal year.  Read the rest of the article at FHA Loan Pros.

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22 May 09 30-Year Mortgage Rates Creep Up

According to CNN Money, mortgage loan rates were mixed this week, with the average 30-year ticking higher, according to a report released Thursday. FHA rates remain low as new homebuyers are reconsidering their renting options as people know the mortgage rates won’t be this low forever.  With the tax deductibility incentives, many Americans renting are finally seeing some advantages to becoming a homeowner and making a mortgage payment.

The average thirty-year fixed mortgage rate jumped to 5.24%, up from 5.21% the previous week, according to Bank Rate’s weekly national survey. Even with the increase, mortgage rates remain at historic lows, the report said. Mortgage interest rates have plunged since late October, when thirty-year fixed home mortgage rates averaged 6.77%.

“The economy remains very weak, and those concerns are balancing out the worries investors have about the amount of government debt issuance,” the report said, because mortgage rates are closely tied to long-term Treasurys.

Six months ago, the average 30-year fixed home loan rate was 6.33%, meaning a $200,000 loan would have carried a monthly payment of $1,241.86.  With the average rate now at 5.24%, the monthly payment for the same size loan would be $1,103.17, meaning homeowners who refinance now would save $138 per month.

The average fifteen-year fixed rate mortgage fell to 4.74% from 4.76% the week prior.

The average jumbo mortgage rates for a 30-year fixed rate fell to 6.37%.  FHA mortgage rates rose slightly to 5.125% for the weekly average.

Adjustable rate mortgage loans were also mixed, the report said, with the average 1-year ARM falling to 4.94% while the 5-year ARM increased to 4.96%

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13 Apr 09 HUD Warns FHA Lenders in Mortgagee Letter

The Dept. of Housing and Urban Development recently released an important FHA Mortgagee Letter that is important for all mortgage brokers, lenders and finance companies that would like to continue originating FHA loans in their future.  In an effort to protect the public trust and the FHA Insurance Fund, HUD has vowed to ensure that mortgagees are accountable for their home loan origination practices. FHA expects each mortgagee to exercise the same level of care in originating, underwriting and servicing an insured FHA mortgage as it would for a loan in which the mortgagee would be entirely dependent on the property as security to protect its investment.   

When a mortgagee fails to comply with HUD’s policies and procedures, HUD will take the appropriate action.  For example, FHA mortgage brokers or lending companies that materially violate FHA program statutes, regulations and handbook requirements may be referred to the Mortgagee Review Board for appropriate sanctions, which may include termination of mortgagee approval.  For a mortgage broker in 2009, losing a FHA license would be like a barber have their scissors revoked.  It seems that brokers may start following the rules.

Read the original finance article from Jason Cardiff tips online > HUD Updates FHA Mortgage Letter and Cracks Down on Lenders. For more questions, you can go online to HUD.gov or for additional FHA resources, please call 1-800-CALL-FHA.

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25 Feb 09 Obama Mortgage Rescue Plan Rolls Out as Median Home Price Drop Below $300,000

While most real estate evaluators would agree that Obama’s mortgage rescue plan is likely to slow foreclosures for many homeowners, some financing experts question how much it can help in a high-cost regions such as San Diego where home values have fallen so sharply. For example, the rescue plan offers much-needed refinancing to borrowers who owe more than 80 % of the value of their homes. But homeowners would be ineligible for mortgage refinancing to a lower, more affordable rate if their first loan exceeds 105 % of their home’s current market value.

 

Home refinancing would be limited to loans guaranteed by Freddie Mac and Fannie Mae, the government-controlled secondary mortgage agencies.  “How is 105 % loan-to-value going to help people who are upside down by 20% to 50 %?” said Dave McDonald, president of the San Diego chapter of the California Association of Mortgage Brokers. 

 

Less critical was Dustin Hobbs, spokesman for the California Mortgage Bankers Association, who lauded Obama for coming up with a flexible program that could yield some positive results. Much will depend on the implementation, he said, especially the part of the proposal that aims to provide mortgage modifications for borrowers in danger of default or foreclosure. Obama is proposing to have the Treasury Department partner with financial institutions to reduce mortgage payments so that borrowers pay no more than 31% of their income.  Under the new mortgage rescue plan, mortgage rates could be reduced to as little as 2%; they now stand at about 5% for thirty-year, fixed rate home mortgages. “I would certainly hope that when they’re working on the implementation details, they’ll take into consideration that California is in a unique situation with so many borrowers in high-cost regions who are 15% or more underwater,” Hobbs said. 

 

FHA has attempted to stem the foreclosure crisis with their Hope for Homeowners program that was designed to reward lenders who write-down mortgages to 90% for borrowers with negative home equity and delinquent mortgage payments.  CFB mortgage advisor, Jeff Moran said, “Hope for Homeowners looks great on paper, but the FHA mortgage lenders have not wanted to touch them.”

 

Nonprofit counseling agencies approved by the federal housing department to work with financially struggling homeowners said they expect the plan will be able to avert foreclosures but caution that there are still those who may have to walk away from their homes. “Some individuals, though, may find there may not be a solution or option to prevent foreclosure. But in renegotiating with their mortgage lender or credit counselor, they can prepare for a new location for their family.”

 

Part of the strength of the Obama plan is creating clear loan modification standards, said Mark Goldman, a real estate instructor at San Diego State University. “So many of the programs that were supposed to help last year have really done nothing,” he said. “Now, they’re really putting pressure on the lenders, saying you cannot keep the rapid pace of home foreclosures and clearly it’s bad for everyone involved when the foreclosure news continues to worsen.”  The proliferation of foreclosures was reflected in DataQuick’s report, which showed that 1,232 of January’s 2,240 re-sales were foreclosure properties, compared with 340 of 1,038 re-sales in January 2008.

 

As President Barack Obama unveiled his plan to stem the tide of foreclosures, new figures showed distressed properties continuing to drag down San Diego’s housing market. MDA DataQuick reported yesterday that the county’s median home price fell below $300,000 last month for the first time in seven years depressed by reduced sales prices of foreclosed homes.

 

The January median of $280,000 was down 6.7% from December, the largest single month percentage decrease of the current slump. While home sales volume was up 34.7% from a year earlier, a record 55% of re-sales were homes that had gone through foreclosure in 2008. “I think for a lot of buyers in inland areas, this has become a bargain bonanza,” DataQuick analyst Andrew LePage said.

 

The Census Bureau and U.S. Department of Housing and Urban Development reported separately that construction of new homes and apartments nationwide dropped 16.8% last month to a seasonally adjusted annual rate of 466,000 units, the slowest pace for a survey that dates back to 1959, two years before Obama was born.

Meanwhile, DataQuick’s LePage said some neighborhoods – Lemon Grove, Oceanside and South Bay as a whole turned in record sales counts for any January since the company began tracking San Diego in 1988.  “All indications are that prices will continue to erode, but not everyone is waiting for the ultimate price bottom,” LePage said.  Mortgage interest rates remain incredibly low but the credit crunch continues with mortgage lenders continuing to offer tighter guidelines that prevent the average consumer from purchasing a new home or refinancing an existing property in an effort to avoid foreclosure.

 

As of January, San Diego County’s overall median had dropped 45.9% from the November 2005 peak of $517,500. The resale house median was down 44.3% from its $574,000 peak to $320,000, and resale condos were off 51.3% from their $400,000 peak to $195,000.  Among signs of an eventual recovery, however, is a continuing drop in the number of homes for sale.

 

According to the San Diego Association of Realtors, active listings yesterday totaled 15,108, down 18.1% from a year ago.   “There’s very little we can say positive about the economy or job market,” Dennehy said, “but we can certainly say this is an encouraging sign that qualified buyers are responding to the bargains available to the market and volumes are improving from last year’s levels.”  Read complete  UNION-TRIBUNE CA Housing Article article written by Roger Showley and Lori Weisberg

 

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