FHA Single Family Mortgage InsuranceStarting Monday July 14, 2008, for the first time EVER, credit scores will determine loan terms on an FHA Loan Details are
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All premiums are shown in basis points - 0.01% | |||||||
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| 90.01% - 95% | |||||||
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FreedomWorks, American Conservative Union, Americans for Tax Reform , Citizens Against Government Waste, Club for Growth, Competitive Enterprise Institute, and the National Taxpayers Union have come together to urge the Senate to say NO to the Housing Economic Recovery Act, commonly known as the Dodd-Countrywide bailout bill.
Here’s an excerpt from their letter:
“The Dodd plan creates a new housing trust fund that will collect more than $530 million a year through a new levy on Fannie Mae and Freddie Mac. The trust fund in turn makes these funds available to politically active community groups like ACORN outside the normal appropriations oversight.
“In addition, the Dodd plan creates a new $300 billion facility that allows mortgage lenders to cherry-pick their worst performing loans and roll them into the FHA, shifting 100 percent of the loan liability to the taxpayer.”
http://www.freedomworks.org/uploads/dodd-frank-coalition.pdf
The THREE HUNDRED BILLION DOLLAR BAILOUT went to the Senate Floor today and advanced in the Senate with overwhelming support.
I'm thrilled that they are shouting we don't need more taxes so that Countrywide and others are empowered to keep doing business as usual . . . (I say Countrywide because from all appearances Countrywide will be one of the prime beneficiaries of this bill due to the overwhelming business it did in the sub prime market.)
The Housing Economic Recovery Act, if passed, will, after adding $300 billion to the taxpayer’s burden, probably send those banks' worst loans to the FHA, which, you guessed it, will create another FIVE HUNDRED MILLION DOLLARS IN TAXES ON GSE's. (GSE's are Federal Home Loan Banks, Freddie Mac, Fannie Mae, Ginnie Mae, Federal Farm Credit Banks, Federal Agricultural Mortgage Corporation.)
These same issues are supported by findings released earlier this week by the Congressional Budget Office’s (CBO) scoring of legislation.
"Mortgage holders would have an incentive to direct their highest-risk loans to the program," the agency noted.
But the Congressional Budget Office thinks the FHA plan might only have a modest impact.
Despite up to $300 billion in loan guarantees, CBO's analysis of the Senate bill projects demand for only $68 billion through 2011.
"CBO estimates that approximately 400,000 loans would be guaranteed under this legislation with an average loan amount of $170,000 each. Thus, CBO estimates that FHA would require about $68 billion in loan commitment authority through 2011 to implement the program. "(The legislation would authorize FHA to provide up to $300 billion in loan guarantees under the new program)
AND "...35 percent of the loans refinanced through the program will eventually default anyway."
CBO estimates that enacting this legislation would increase revenues by about $8.0 billion over the 2009-2018 period, net of income and payroll tax offsets. Over that period, we estimate that direct spending from those proceeds would total about $7.2 billion. The additional revenues would thus exceed direct spending by an estimated $800 million." Read the full text of the CBOs findings
So they've figured out how to arrive at a surplus in the budget, rather than a deficit by creating this whole new way of life for originators, lenders, sellers, servicers . . . How about we just SPEND LESS MONEY?? Isn't that what you do when you don't have it? You spend less.
Where do revenues come from for the federal government? Regardless of who writes that last check, ultimately, revenues come from taxpayers . . .
These bills are NOT going to improve the quality of life for most people . . . they will help lenders, who knew they had a parachute when they made these risky loans (REMEMBER THE S&L BAILOUT - they were bailed out with tax dollars).
And it will help people who probably shouldn’t have gotten a loan in the first place and may not pay it back even after this second chance.
Write your representatives.
Stand Up and Be Heard, or you’re going to be paying for it for the rest of your life.
And, sadly, so will your kids.
Effective July 19, the FHA will expand the FHA Secure program twofold:
It is estimated that FHASecure has helped 150,000 borrowers refinance since the program was launched and that these new guidelines will help as many as 500,000 homeowners.
I've gotten through Christmas, new baby, new year's, groundhog day, and lots of political rhetoric about the mortgage mess, and essentially my business remains in a state of near madness . . . I've read dozens of books about the economy, wall street, the mortage business, and I've stayed with my conclusion that the problems we're involved in now are the result of greed, or a lesser vice, that being the American urge to consume . . . at the bottom of the food chain: homeowners in problem mortgages, I think probably they just wanted to do the best they could for the families (don't we all?), and for the top: Wall Street Bankers who created the funds for "exotic mortgage products", they just wanted to make money. It is what they do, and they did it well.
As you probably know, we've gotten back to stern guidelines for owner occupied properties - FHA, the original sub-prime mortgage is making a comeback (and well it should! 520 credit scores and a 97% mortgage for 6.125, 30 years fixed!! Why would you go anyplace else with that score??)
Mega Jumbo ltvs are down, although those loans still get done.
Conventional rates are lower than they've been in . . . three years? 05 saw rates like this, in the 5's. And while we talk about 18% in 1981, I get the impression that people who were born in the 80's don't really believe it!
If you're in an ARM, now is the time to refinance, rates are so good, you probably should move now. If you're in a loan that is in default, there are options for you - exercise them! No one should be losing a house right now with so many options to save them.
Talk about conflicting agendas in the government:
The FHA Reform Bill is moving right along:
Passed full House by a vote of 348-72
Passed Senate Banking Committee by a vote of 20-1
Public Comments in the Senate closed October 22, 2007
Expected to pass the full Senate in November, 2007
President's signature expected in November, 2007
FHA commissioner confirms rapid implementation
Benefits of the FHA Reforms include Elimination of the audited financials and net worth requirements for BROKERS; Brokers can post a surety bond in lieu audited financials; Loan limits in high cost areas increased to at least $417,000; Minimum downpayment reduced to 1.5% or lower.
Ironically, moving through the same system, is Bradley Miller's Bill, H.R. 3915 the "Mortgage Reform and Anti-Predatory Lending Act of 2007, which will send Brokers the way of the dodo and dinosaur and is due to be voted on November 6.
The FHA is making it easier for Brokers to become approved to do their loans, which makes it appear that they would want us to stay in business and perhaps work to refinance the mortgages that everyone considers questionable for the borrower . . .
And Sen. Miller wants to legislate underwriting guidelines. I guess his group feels they are better at underwriting mortgage loans than the industry (perhaps being a politician does that for one), and so they want to make their underwriting guidelines law. And, they wants to re-arrange the way the market works, eliminating indirect pay to Brokers.
Too bad I'm not registered to vote in North Carolina.
Bank of America, Citigroup Inc., Countrywide Financial Corp., Fannie Mae, Freddie Mac, First Horizon National Corp., GMAC ResCap, HSBC North America Holdings Inc., JPMorgan Chase & Co, National City, Option One Mortgage, SunTrust Mortgage Inc., Washington Mutual Inc., and Wells Fargo & Co. have signed up for HOPE NOW, a Bush administration initiative designed to assist homeowners who may be facing foreclosure.
The plan is that HOPE NOW will do national direct-mail to reach at-risk borrowers, with instructions to contact their lenders or a mortgage counselor to work out a repayment plan or restructuring of their mortgage to prevent foreclosure.
They also want to expand counseling capacity to make it easier to communicate with loan servicers.
I'm guessing picking up the phone and calling to ask if there is a way to restructure is too constricting, and that's why more people aren't doing it.
In September, FDIC Chairwoman Sheila Bair spoke at the Lied Center of the University of Nebraska Lincoln campus. The subject was money and financial responsibility.
Speaking of Mortgage responsibility she said, "... Regulators need to make sure that borrowers have what they need to fully understand the terms of the loan. And borrowers need to make sure that they fully understand the loan before they sign on the dotted line.”
I've read that she has pushed loan servicing companies to engage in wholesale conversions of adjustable-rate mortgages into fixed-rate loans where possible when borrowers are in danger of default.
Chairwoman Bair said, "Frankly, I'm frustrated that the servicing restructuring has not reached the level that I had hoped it would. We have a huge problem on our hands. We can't just sit here doing this kind of case-by-case, laborious restructuring process with all these millions of subprime hybrid ARMs."
Unfortunately, mortgages are labor intensive and consist of legal documents that have to be revised, approved, signed and then recorded. I agree that they could be converted to fixed rate products, but I don't see a quick or easy way of doing it.
Now the bad news ~~~~~
From a press release on Representative Brad Miller's website:
"Representative Brad Miller, North Carolina, and Rep. Linda Sánchez, California, ... introduced legislation that will prevent hundreds of thousands of Americans from losing their homes in bankruptcy."
Essentially, they want to give bankruptcy judges the authority to rewrite mortgages that are included in bankruptcies.
Quoting the press release again: "According to the Center for Responsible Lending, a non-partisan, consumer advocacy group, the Miller proposal could help prevent up to 600,000 people from losing their homes in the next 24 months." That's 25,000 bankruptcies a month. Handling that paperwork will keep a lot of people busy for a long, long time . . .
Rep. Miller goes on to say:
"Responsible lenders who made loans on reasonable terms have nothing to worry about in bankruptcy court, but predatory lenders will end up with the loans they should have made in the first place" That's because responsible lenders don't have any customers who would take unfair advantage of any law that he can put on the books, I'm guessing.
Rep. Sánchez comments: "As the subprime crisis heats up, it's high time we write legislation to help America's working families instead of helping the opportunistic lenders who took advantage of them. I look forward to moving this legislation swiftly through the Subcommittee on Commercial and Administrative Law."
On 10/4/2007 when this bill was forwarded to the Committee, it's sponsors had grown to 14:
Rep Cohen, Steve [TN-9] - 9/25/2007
Rep Davis, Artur [AL-7] - 9/26/2007
Rep Delahunt, William D. [MA-10] - 9/26/2007
Rep Ellison, Keith [MN-5] - 9/25/2007
Rep Frank, Barney [MA-4] - 9/20/2007
Rep Gutierrez, Luis V. [IL-4] - 9/27/2007
Rep Johnson, Henry C. "Hank," Jr. [GA-4] - 9/25/2007
Rep Lofgren, Zoe [CA-16] - 10/4/2007
Rep Maloney, Carolyn B. [NY-14] - 9/20/2007
Rep Miller, George [CA-7] - 9/27/2007
Rep Nadler, Jerrold [NY-8] - 9/25/2007
Rep Sánchez, Linda T. [CA-39] - 9/20/2007
Rep Sánchez, Loretta [CA-47] - 9/27/2007
Rep Watt, Melvin L. [NC-12] - 9/20/2007
Having written about the pawn shop mentality of some borrowers (If I don't pay for it, the bank will get it back), I'd like for these legislators to interview oh, fifty of their constituents who have loans going into default. And, if they're really interested in the truth, they could interview the loan officers who did the loans, and review the loan files that those borrowers presented when they applied for the loans.
This is America, where we want it all (and to quote my favorite refrigerator magnet) we want it delivered. Credit is so-o-o easy. Every college student in America is offered a new charge card a week (I know it is true, I have two living in my house and I shred their mail most days because COLLEGE STUDENTS DON'T NEED CREDIT CARDS.)
I bought my first house in 1971. Yeah, I'm over 50. I made a $3,000 downpayment on a $13,000 house! That's a 23% downpayment. I was 20. Can you count on one hand the number of people you know who have made a 23% downpayment on a house? Can you calculate how long it would take the average American to accumulate a 20% downpayment with the price of housing in this country?
I have clients in Europe who have always made 20% downpayments. They are buying houses here with 25% downpayments. Talk about having skin in the game . . . but we've come to expect that we can buy everything NOW and pay later. So for all those people with ARMS, it is later, and it is hard to keep that deal we made when we signed the loan docs.
Think I'm heartless? I HAVE AN ARM. The payment adjusted (upward) $700 in August. No, I don't like it, its not comfortable, but I've got to grin and bear it til I finish the renovation on my house and get another mortgage. I knew it was coming for three years . . . And so did everyone else who has one.
Dave Ramsey, where were you when we needed you??
While the FHA Secure program is going to help people in default because their arms reset, I wonder about those people who took a second job, or a second and third job, and are eating cornbread and beans in order to make their mortgage payments rather than let them go into default . . . When is someone going to let them refinance for some relief?
More on the FHA Secure program:
"It's not the government's job to bail out speculators or those who made the decision to buy a home they knew they could never afford," said President Bush. "Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders or a little help from their government."
Homeowners must have 3% equity in their home and demonstrate that the original loan was being paid on a timely basis until it reset in order to qualify under the FHA Secure Program. Previously, the FHA would not guarantee refinances on loans with delinquencies. The loan must be within standard FHA loan limit guidelines, but the administration apparently supports legislation to raise the limits. The FHA plan is to charge slightly higher mortgage insurance premiums to address the additional risk
The FHA estimates that 500,000 of 2+ million arms set to adjust could go into foreclosure. Even with the 80,000 borrowers the FHA will bail out, it still estimates it will only assist about 250,000 with its current FHA programs.
Bush also indicated support for a Democratic bill pending in Congress that would temporarily alter tax law to allow homeowners to forego paying taxes on forgiven debt in loans being restructured by financial institutions. This could turn into a nightmare to manage . . .
In a previous press conference, Bush opposed helping consumers outright out of foreclosure. “We must show an enormous empathy," Bush said, but he didn't think the feds should give financial aid. "If you mean direct grants to homeowners, the answer would be `No, I don't support that,'" said Bush.
Sen. Charles Schumer suggested in a news conference this is a shift for an administration that favors the free market. "The president has gotten out of his ideological straitjacket and seen that in times of crisis, one of the jobs of government is to help," said Schumer.
What else could he do? Sit back and watch the homeless population explode?
In an interview David Bach did with Bankrate.com, he discusses the cost of mortgage refinances. (David Bach is the author of the Automatic Millionaire series of books, and is, not incidentally, a former senior vice president at the Wall Street investment firm Morgan Stanley.)
"You have to factor in all the closing costs for a refinance. There is no such thing as a no-cost loan. The loan documents, the HUD-1 settlement statement details it all."
And my favorite: "...There are more good mortgage loan people out there than bad. It's a very regulated industry."
You can read the full article at http://www.bankrate.com/
As an FHA lender, we are happy to become part of the solution for the ARMS that are resetting and are in default.
In a press release issued by the Federal Housing Administration on Friday, the headline read BUSH ADMINISTRATION TO HELP NEARLY ONE-QUARTER OF A MILLION HOMEOWNERS REFINANCE, KEEP THEIR HOMES
The contents are highlighted here:
President George W. Bush announced on 8/310/7 that the FHA will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately.
Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing…
This is huge! Imagine, there were no options a week ago and now there is a refinance, that can include defaults and even go above FHA lending limits. Unprecedented!
In many cases homeowners may be permitted to include mortgage payment arrearages into the new loan amount, subject to existing geographical mortgage limits and the loan-to-value limit shown below. Before Friday, only borrowers who were current on their existing loan were allowed to re-finance into an FHA-insured mortgage.
Highlights of the FHASecure Initiative:
Additional Information about the FHASecure Initiative:
What May be Included in the FHASecure Mortgage Amount:
FHA will permit the inclusion of the existing first lien, any purchase money second mortgage, closing costs, prepaid expenses, discount points, prepayment penalties, and late charges.
FHA will also permit arrearages (principal, interest, taxes and insurance) to be added into the new loan amount. Subordinate Financing under the FHASecure Initiative:
If the new maximum FHA loan is not enough to pay off the existing first lien, closing costs and arrearages, the lender may execute a second lien at closing to pay the difference. The combined amount of the FHASecure first mortgage and any subordinate lien may exceed the applicable FHA loan-to-value ratio and geographical maximum mortgage amount. If payments on the second are required, they must be included in qualifying the borrower. If payments are deferred, they must be so for no less than 36 months to not be considered in the qualifying ratios.
If you have an ARM that has reset and you can't make the payments, this may be your chance to recover!
We're licensed in Florida, Georgia, Alabama, South Carolina and Tennessee. Send me an email at traci@tracigregory.com and we will see if this will work for you! You may read the entire press release at: http://www.hud.gov/news/release.cfm?content=pr07-123.cfm.
I read all the broker bashing going on . . . how lenders and greedy brokers encouraged borrowers to buy houses they couldn't afford and sign up for payments they couldn't make and about the bailout programs states are putting in place to keep people in their homes and I think back to conversations I have had with borrowers over the last few years.
One in particular comes to mind, my client, a well educated and successful business owner, with great credit and lots of assets had completed an application for an investor purchase.
Noting the $20K a month figure he had put in the salary block, with his hand, I asked "Did your income tax return last year show $240,000 in taxable income?"
"No" he said, somewhat indignant.
"Well, was your gross income before deductions $240,000?"
"No," he says, getting more agitated. "Where are you coming up with that?"
"Well, if we multiply $20,000 X 12 months, my math says that is $240,000 . . . Right?"
"Uh, yeah, but this is a stated loan."
"A stated loan?"
"Yeah, a stated loan."
"But, Mr. Borrower, a stated loan means you state what YOU made last year . . . Not what Will Smith netted on a slow Saturday night."
"Well, what good is it if I have to state what I make?" (I'm guessing this is as opposed to what Will Smith makes . . . )
"You can state your income, and not have to prove it with income taxes, but you have to state YOUR income. Not what you wish it was, or what it might be, or what you think will get you this loan . . . You state your income, truthfully."
Well, he didn't want to do that and I didn't want to not to do that so we agreed to disagree and I haven't done his loan . . . But I can't count the times I've said, "No, if you're not going to live there, you can't have an owner-occupied rate," or "No, having another home in the same subdivision is NOT a second home, even if you do put your ex-wife and children in it," or, "You know, I'd really like for you to have this house" (and I'd really like to close this loan since I've wasted so much time on you) "but what you are suggesting is loan fraud, and I'm not willing to risk jail so you can . . . (fill in the blanks)"
Everyone is responsible . . . Lenders did take loans that met criteria that appeared to be sufficient to cover their exposure and wasn't; borrowers did take loans they wouldn't be able to afford in two years because their wives wanted in a house, and their children needed a good neighborhood. Speculators in the real estate market jumped on the property bandwagon and drove it away, because they could, and because they wanted to.
Because Americans believe in having it all and having it now, and the credit industry (all of it, not just mortgage lenders) encourages the spend, spend, spend mentality and think about it tomorrow, Scarlet irresponsibility.
I've NEVER been a Chicken Little. I'm the extreme optimist . . . but this meltdown, that started out as the "sub-prime" meltdown, and has turned into the CEO of Countrywide mortgage predicting that the major 10 lenders in the country will go to five major lenders soon;
Australian funds that are tallying their losses because they bought real estate securities in the US;
Lenders scrambling to keep people out of foreclosure with forebearance contracts and payment plans and then they go into foreclosure, only it is three months later than they should have.
Massachusetts setting up a $250 million fund to help 1,000 homeowners. . . New York, $100 million to help 500 homeowners?
So now it is My meltdown. I don't worry about my job anymore, or even about my industry.
Now I'm worried about my country
