Changes to Mortgage Insurance Premiums

This information was just released by HUD, regarding FHA, and in particular FHA’s Mortgage Insurance Program requirements.

FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent. FHA will increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points or 0.05 percent, to the maximum authorized annual mortgage insurance premium. These premium increases exclude certain streamline refinance transactions.

FHA will also require most FHA borrowers to continue paying annual premiums for the life of their mortgage loan. Commencing in 2001, FHA cancelled required MIP on loans when the outstanding principal balance reached 78 percent of the original principal balance. However, FHA remains responsible for insuring 100 percent of the outstanding loan balance throughout the entire life of the loan, a term which often extends far beyond the cessation of these MIP payments. FHA’s Office of Risk Management and Regulatory Affairs estimates that the MMI Fund has foregone billions of dollars in premium revenue on mortgages endorsed from 2010 through 2012 because of this automatic cancellation policy. Therefore, FHA will once again collect premiums based upon the unpaid principal balance for the entire period for which FHA is entitled. This will permit FHA to retain significant revenue that is currently being forfeited prematurely. Read FHA’s new MIP Mortgagee Letter 

Short Sale Soundoff: Fannie, Freddie change Requirements for Short Sales

Fannie Mae and Freddie Mac announced changes to their servicing requirements for short sales. Please be aware of the following key changes for all parties involved in a short sale. These changes apply to all Fannie Mae and Freddie Mac short sales, with an offer and without an offer.

Title Transfer requirement change:

• The buyer is prohibited from selling the property for any sales price for a period of 30 days from the date of the deed.
• After a 30 day period, and until 90 days from the date of the deed, the buyer is further prohibited from selling the property for a sales price greater than 120 percent of the short sale price.

Note: The above restrictions will run with the land and are not personal to the grantee.

Relocation Assistance:

• The borrower may be entitled to an incentive payment of $3,000 from Fannie Mae / Freddie Mac to assist with relocation expenses following successful completion of a short sale unless:
• The borrower is required to contribute funds or execute a promissory note.
• The borrower has Permanent Change of Station (PCS) orders and receives a Dislocation Allowance (DLA) or other government relocation assistance.
• The servicer has knowledge that the borrower is receiving relocation assistance from another source other than the servicer.

Note: If the borrower receives relocation assistance from a source other than Fannie Mae, Freddie Mac, or the servicer, the difference in the relocation assistance amount up to the $3,000 incentive maximum may be provided. If the borrower will receive relocation assistance from a source other than Fannie Mae, Freddie Mac, or the servicer and the amount is equal to or greater than $3,000, no relocation incentive will be provided.

Things to Avoid while going through the Real Estate Loan Process

We’re often asked by my clients what are the “top things buyers should not do during the loan process.” Linda Hulberg at Western Bancorp put together this article with some of the most common mistakes made. Thanks, Linda, for those great words of acvice!

Here’s what Linda has to say:

Don’t go shopping for a car. If you must visit the showroom, at least don’t give anyone your social security number. This enables the dealer to check your credit. Each credit inquiry lowers your credit score even if you do not buy a car. Lenders are increasingly using credit scores to assist in mortgage credit decisions and to price an individual’s loan. High credit scores are good. Low scores aren’t.
Don’t respond in the affirmative to “you are pre-approved for a credit card” mailings. A credit inquiry will result with the same impact as above.
Don’t incur ANY new debt. This increases your debt-to-income ratio, reducing the amount you can borrow.
Don’t file for divorce. This is not advice from Dear Abby. Once you file for divorce, most lenders will not make a mortgage loan until the final decree, setting forth settlement terms, is recorded.
Don’t move money designated for down payment from one account to another. If you do, keep a detailed paper trail. Lenders may request it.
Don’t fail to keep records of any stock liquidation for down payment. Same reasoning as above.
Don’t change the source of your down payment. If your loan application states down payment is from sale of stock, do not simply deliver a cashier’s check into escrow from your bank account. Any change in source of down payment may require the loan to be underwritten again.
Don’t leave town without telling your loan agent and leaving a contact number. You may be needed for a decision or to provide additional documentation. And of course you will need to be available to sign loan documents.
Don’t quit or change your job. Lenders typically call your employer just before the loan records to verify you’re still there. If your employer says you are no longer there, the lender will stop the loan from recording.
Don’t forget to make the payments on any of your present loans or credit cards. This is obvious, but once in a while a buyer forgets, putting the loan (and escrow close) in jeopardy.
Don’t fail to inform your loan agent of any changes to the transaction. Last minute changes such as holdbacks, seller credits or termite work can create havoc with closing dates.
All is not lost if a buyer does a “don’t.” We can minimize or eliminate permanent damage to the transaction, even though delays and stress can occur.

Financing Woes in Today's Transactions

John Thompson, Intero Vice President, had some trouble with a recent transaction that many real estate agents, as well as home buyers are experiencing. Read all about it here.

Mortgage Market Update

Team Patereau's in-house mortgage agent at Intero Real Estate, Dario Liberati, brought us up to date on the mortgage market. Here's his report:

Last week mortgage bonds had their worst one day performance since October, losing an astounding 206 bps. So what happened and what's next?

The main culprit for the selloff is SUPPLY. The Treasury has literally been printing money by way of Treasury auctions to pay for the massive spending. These hundreds of Billions of dollars of new Bond supply have to be absorbed by the market. The additional supply literally weighs on the entire Bond market and drags prices lower.

Also, when you think of SUPPLY, consider all the refinancing we have been doing and that those loans have been bundled, packaged and sold on Wall Street. This additional SUPPLY has now started to hit the secondary market as those loans are now getting sold. While the Fed has been a buyer, they simply cannot buy enough to balance all the selling.

Economics 101: Anytime supply exceeds demand, prices will move lower. As prices move lower, yields rise. That rise in yield will attract new buyers as they get a higher return on their investment. This is how the market finds balance.

Mortgage bonds have lost a staggering 363 bps since last Thursday. All locked loans are getting closed at a great rate. The new market must unfold to settle at its price.

Rates are better today than at close last Friday, and are still at ALL TIME LOWS!!! Don’t give up hope. Buyers, buy your homes. Values are still in the purchase and prices may not be this affordable in the near future.

Buyers Welcome!

Real estate transactions are happening in Gilroy. Inventory is moving downward and neighborhoods are filling up. As an example, the last two homes in our immediate neighborhood have gone into contract.

With sales comes financing - and there is money to loan for residential purchases. The caveat is that it's not easy to qualify for it.

There's a lot of info out there about what it takes to get a residential real estate loan today, with the significant and first thing being that a buyer has to have money - a down payment. After that, buyers have to prove that they can make the payments, and that's the part that's taking a great deal of time. Very few escrows close in 30 days anymore.

Here's an article on what lenders look for nowadays.

Team Patereau has had success in guiding buyers through transactions this year. We have good lenders to refer our buyers to, and we help them every step of the way. Contact us as the first step in your journey to purchase a new home.