Fannie Mae Allows Liquid Assets in Lieu of Income

BY LINDA IVANOV for Mortgage Capital Associates | Sept 18 2012, 8:30AM

 

In a move to help more borrowers qualify for refinancing, Fannie Mae has released new guidelines governing its Refi Plus program. Borrowers and lenders have expanded alternatives for documenting income. Certain liquid financial reserves will now be accepted as verified income. This alternative will apply to loans where the new payment will increase less than 20 percent. The Refi Plus program is available for Fannie Mae to Fannie Mae refinances.

Accepted documentation can come from liquid reserves such as bank accounts, money markets, stock accounts, retirement savings accounts, or certificates of deposit. These assets must be documented with at least one recent statement. The new Selling Guideline also addresses streamlined verification of qualifying rental income for investor owned property.

Read full article at MCA's Living Well blog>>

 

Wells Fargo Loses Mortgage Loan Discrimination Suit: Pay Up!

(Source: Associated Press)

WASHINGTON (AP) — Wells Fargo Bank will pay at least $175 million to settle accusations that it discriminated against African-American and Hispanic borrowers in violation of fair-lending laws, the Justice Department announced Thursday.

Wells Fargo, the nation's largest residential home mortgage originator, allegedly engaged in a pattern or practice of discrimination against qualified African-American and Hispanic borrowers from 2004 through 2009.

At a news conference, Deputy Attorney General James Cole said the bank's discriminatory lending practices resulted in more than 34,000 African-American and Hispanic borrowers in 36 states and the District of Columbia paying higher rates for loans solely because of the color of their skin.

Cole said that with the settlement, the second largest of its kind in history, the government will ensure that borrowers hit hard by the housing crisis will have an opportunity to access homeownership.

Read full article here>>

The part of the settlement for $125 million deals with mortgages that were priced and sold by independent mortgage brokers through Wells Fargo's wholesale channel. The financial institution said that it is discontinuing financing mortgages that are originated, priced and sold by independent mortgage brokers through the mortgage wholesale channel.

"Through our separate decision to no longer fund mortgages through independent mortgage brokers, we can control how that commitment" to serving home ownership needs "is met on every mortgage that Wells Fargo makes," said Mike Heid, president of Wells Fargo Home Mortgage.

Market Mixed for First-Time Buyers

(Source: Mortgage Capital Associates)

Market conditions are mixed for first time buyers who traditionally purchase nearly half of the homes for sale. They are not stymied by lost equity of an existing home that keeps others sitting on the sidelines. Yet they face stiff competition from cash flushed investors and bidders with bigger down payments who are scooping up available inventory.

There is plenty of incentive to press forward for the first-time buyer. The inventory of foreclosures and stressed properties is still significant. New construction is picking up in some regions of the country. Rents are on a steady incline. According to a recent study, it is cheaper to own in 98 of 100 top metro areas. For a buyer determined to make the transition from renter to owner their dream can become a reality in today’s market.

Best advise, get prequalified before you head out to make an offer. Rates are low right now and holding steady, but getting a loan can be difficult. It is well worth the time and effort to optimize your creditworthiness by paying down unsecured debt, delay purchasing a new car and forego impulse buys. Aggressively save toward your down payment. Do your research. Study your loan application to reveal any unforeseen issues.

Now you are ready to secure the best rates, lowest points, and most affordable closing costs. It may take longer and require more effort to find the best mortgage loan in today’s market. Considering a FHA loan option? You might face the toughest challenge. In today’s market FHA buyers with low down payments are being pushed aside. On the seller’s side, FHA loans often require more home repairs before closing, making these offers less attractive. Look at your options to secure a conventional loan to strengthen your offer.

Getting prequalified will significantly boost your ability to make a strong offer on that new home. Your goal is to make your offer as streamlined as possible for the seller. Capture the deal you want by being prepared.

The market is ripe for first time buyers despite tight credit and an uncertain economy. Ask yourself, “Is it the right time for me to buy a home?” If the answer is yes, visit our website to learn the requirements for completing your loan application. Mortgage Capital Associates can help you make informed decisions about your home loan options.

Harvard's State of Housing Report Says Home Construction Now Adding to GDP

(Source: Mortgage News Daily)

Steadier job growth and improving consumer confidence are now boosting home sales and home prices may finally find a bottom this year according to the latest State of the Nation's Housing report released this morning.  The report, produced by the Joint Center for Housing Studies of Harvard University, says further that stronger home sales should pave the way for a pick-up in single-family construction over the rest of 2012.

Conditions, however, will keep this recovery "subdued."  The backlog of nearly 2 million loans in foreclosure means that distressed sales will remain elevated and will keep a downward pressure on prices and another 11.1 million homeowners are underwater on their mortgages, dampening both sales of new homes and investment in existing units.  While vacancies have been declining the report notes, they still remain well above normal, holding down demand for new construction in many markets.

What the for-sale market needs most, the authors say is a sustained increase in employment.  This might in turn bring household formation back to normal levels.  The depressed pace of homebuilding has been a major factor in hiring and pulled down growth in the gross domestic product (GDP) from 2006 to 2010.  Since the beginning of 2011, however, both home construction and home improvement spending have made a positive contribution to GDP in four out of five quarters.

Read full article>>

Investors Increase Commercial, Multifamily Mortgage Holdings

(Source: Mortgage News Daily) 

Three of the groups that most heavily invest in commercial and multifamily mortgages increased their outstanding balance of such debt in the first quarter of 2012 according to data released this morning by the Mortgage Bankers Association (MBA).  The level of all commercial/multifamily debt increased by $8.1 billion or 0.3 percent to $2.373 trillion compared to a total in the fourth quarter of 2011 of $2.365 trillion.  The multifamily portion of that debt now totals $818 billion, up $6.9 billion or 0.8 percent from the previous quarter total of $811.4 billion. Read more >>

Mortgage application: a borrower's guide

By Marcie Geffner • Bankrate.com

Highlights

• When it asks for your two-year job history, it means two years. At least.
• The section on monthly income can get kind of tricky. You might need help.
• In the assets section, the lender wants to know if you have saved money.

A mortgage application serves a simple purpose: to help the lender decide whether to lend money to the borrower. But the industry standard Uniform Residential Loan Application, also known as Fannie Mae Form 1003, is more complicated than that straightforward intent might suggest.

This section-by-section summary should help you figure it out.

Section 1: Type of Mortgage and Terms of Loan. This section, which describes the loan program for which the borrower wants to apply, is "generally not something the consumer is going to be able to complete," explains Greg Cook, a loan consultant and first-time homebuyer specialist at Guild Mortgage Co. in Temecula, Calif. Instead, the loan officer will fill in the details.

Section 2: Property Information and Purpose of Loan. Most homebuying loan applicants haven't identified the property they want to purchase. That means parts of this section will be marked "to be determined," Cook explains. Borrowers will need to indicate who will own the property and how title will be held. They'll also have to disclose the source of their down payment (e.g., cash, gift, first-time homebuyer program).

Section 3: Borrower Information. This section asks for the borrower's and co-borrower's full names, birth dates, addresses, telephone numbers, Social Security numbers, marital status and other details. All of it, Cook says, should be "a no-brainer" for borrowers.

Section 4: Employment Information. This section enables the lender to contact the borrower's employer (or employers) to verify the length and terms of employment.
A two-year job history typically is a minimum requirement, according to Jay Dacey, a mortgage broker at Metropolitan Financial Mortgage Co. in Minneapolis. That means specificity is crucial. "If you get lazy and two years was really one year and 10 months, then all of a sudden the whole loan could be messed up," he warns.

Section 5: Monthly Income and Combined Housing Expense Information. The left side of this section is used to determine whether the borrower has the financial ability to repay the mortgage. Cook says this information often "requires some tweaking" because lenders calculate income differently than most borrowers perceive it.

Virtually all lenders require you to sign Internal Revenue Service Form 4506-T, which authorizes the lender to request a transcript of your tax returns.

One potential glitch for self-employed borrowers early in the year is that last year's earnings can't be used for loan qualification purposes until the lender can obtain verification of a current tax return from the IRS, Dacey explains. It takes four to six weeks for the IRS to process and verify a Form 4506-T.

The right side of this section discloses the so-called payment shock the borrower will experience as he or she transitions to new, often higher monthly housing costs.
"If someone has been living with Mom and Dad, paying zero rent, and is taking on a $1,500 payment and hasn't been able to save any money, that's a signal to the lender to look closer," Cook says. "If they're paying $1,200 in rent and the new house payment is $1,400 and they have a down payment and good credit scores, the lender is not so worried."

Section 6: Assets and Liabilities. Assets refer primarily to savings, checking, and retirement accounts and other investments. "If you have demonstrated an ability to save and it's your own money in the deal, it makes lenders feel better," Cook says.
Retirement savings typically aren't counted at 100 percent, Dacey explains, due to investment volatility and early withdrawal penalties and taxes. As a general rule, retirement savings are marked down to 60 percent or less, he says.

Liabilities can be listed from the borrower's credit report, Cook says. Alimony and child support payments also must be disclosed, so the lender can evaluate the borrower's financial obligations.

The separate Schedule of Real Estate Owned gives the lender a snapshot of the borrower's other properties, if any. This section is especially important for move-up buyers who intend to keep their current home as a rental.

Section 7: Details of Transaction. Cook says borrowers are "never going to fill out" this section because the details depend on the terms of the loan origination. Still, read it carefully.

Section 8: Declarations. This section is the last chance for borrowers to "own up," to use Cook's words, to any financial hiccups they've experienced such as a bankruptcy, foreclosure or lawsuit. "Tell your lender everything," he advises. "If it can be fixed, we can fix it up front. If it can't be fixed, there's no sense getting into escrow on a house you're never going to close on."

(source: Bankrate.com)

Mortgage Rates Tumble to Record Lows Five Weeks Straight

The 30-year mortgage loan rate fell to an average 3.75 percent on May 31st, according to Freddie Mac's recent Primary Mortgage Market Survey®, the lowest rate since long-term mortgages began in the 1950s. Regional rates vary between 3.70 and 3.75 with fees and points averaging 0.7 to 0.9. 

(source: Freddie Mac)

 

Noteworthy, the 10-year U.S. Treasury bond rate hit a dramatic new record low on Thursday at an unprecedented 1.54 percent, sharply lower than 1.62 percent the day before, beating out the previous mark of 1.55 percent set in November 1945.

 

(source: U.S. Department of the Treasury)

Market watchers predict this is not just a temporary dip. Mortgage rates have been below four percent since December and had been steadily dropping. Projections are for these historic rates to remain low over the coming weeks due to several key economic factors.

So what is driving mortgage rates to such historic lows? Renewed uncertainty about how Europe will resolve its sovereign debt crisis is coupled with a volatile stock market. Investors are scrambling to put their money into secure instruments such as mortgage-backed securities. 

Mortgage rates have dropped steadily tracking the yield on 10-year U.S. Treasury bonds, which are benchmarks for mortgages and corporate bonds. The bond yield fell for nine straight weeks through mid-May, the longest stretch since the late 1990s.

What does this mean for you, the borrower? Unprecedented low rates provide the ideal incentive for first time buyers to enter the housing market, current homeowners to refinance, or relocating families who need to purchase a new home. The window of opportunity is real and timely. Traditionally, summer months herald the peak move season of the year for families, since most schools are out of session and relocation is less disruptive for children.

~~ Linda Ivanov, author

Mobility Challenges? Veterans Get Help to Remodel Homes

America's Disabled Veterans

Are you a serviceman or woman returning to your family home as America’s commitments in Iraq and Afghanistan wind down? Do you face mobility challenges as a result of injuries sustained in the line of duty? Many mortgage lenders help veterans across America to achieve a barrier-free living environment and independent living that meets their specific needs. They can structure a VA remodeling loan to help you reconfigure your residence to ease the daily challenge. 

Remodel Bathroom

Install Accessible Ramp

Whether you need special ramps, wider door frames, accessible bathtub or a physical therapy area, you can get help finding an affordable monthly payment. Perhaps you need to relocate the main bedroom to a ground floor level, adding or upgrading a bathroom. These, and many other projects, can make your home accessible and comfortable throughout. Major remodeling can be a budget buster, but with a low interest VA remodeling loan, your project can become reality.

Add accessibility features in kitchen

Backed by a VA guarantee, you can qualify for a low rate for the most flexible options in the industry. Eligible borrowers are not required to make a down payment or pay private mortgage insurance. Your credit score has no impact on your rate for this type of loan. If you’re a veteran who is eligible for a VA loan you can borrow as much as 90% of your home equity and use it for home improvements. 

Perhaps your home has lost value while you were on active duty and you do not have enough equity to fund the accessibility upgrades? A great option is to apply for a Temporary Residence Adaption grant offered by the Department of Veterans Affairs. This one-time grant is designed to help veterans injured in the line of duty to adapt their home to suit their particular disability. A mortgage lender can supplement this grant with a VA remodeling loan to help you take on a big project. You must act now to take advantage of this grant program, which ends December 31, 2012.

Qualified veterans take advantage of a VA Remodeling Loan for your home upgrades. Investigate this opportunity today!

~~ Linda Ivanov, author