Utah Mortgage Pro

Housing and Economic Recovery Act of 2008

This act has been making its way through the House and the Senate very rapidly and was signed into effect today by George W. Bush

Here is the best summary I have found of what it will mean to those in the real estate and mortgage industry.  For any questions you may have on any of these items give me a call at 801-655-5111.

H.R. 3221, the “Housing and Economic Recovery Act of 2008,” passed the House on July 23, 2008, by a vote of 272-152. On Saturday, July 26, 2008, the Senate passed the bill by a vote of 72-13. The President signed the bill on July 30, 2008. The bill includes the following provisions:

• GSE Reform – including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).

• FHA Reform – including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The downpayment requirement on FHA loans will go up to 3.5% (from 3%). The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
  
  
• Homebuyer Tax Credit - a $7500 tax credit that would be would be available for any qualified purchase between April 9, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan).

• FHA foreclosure rescue – development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.

• Seller-funded downpayment assistance programs – codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008.

• VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.

• Risk-based pricing – puts a moratorium on FHA using risk-based pricing for one year. This provision is effective from October 1, 2008 through September 30, 2009.

• GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.

• Mortgage Revenue Bond Authority – authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.

• National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing.

• CDBG Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.

• LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient.

• Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.

For the most part a very positive set of legislation.  The only real big losers today are the first time home buyers who have been able in years past to take advantage of Down Payment Assistance with an FHA loan.  This assistance was paid for by the seller and then gifted to the buyers for their down payment.  As of October 1, 2008 those arrangements will not be accepted.  So long Nehemiah!!!

The $7500 tax credit repayable over 15 years sounds interesting.  It raises the question in my mind, "If I have a borrower who needs the money today to close on their house but tax credits are given with a filed tax return how does that work?"  And if you have to buy the home to receive the credit it becomes the chicken and the egg, you can't have one without the other.  I will look into it for every one and I will be ready with the appropriate answers so bring on the first time home buyers in Utah.  Give me a call today 801-655-5111.

Stetson Lowe - The Mortgage Insider

www.utahloantips.com

Funny Clip of the day

 

Wachovia - Huge Loss - Wholesale Shutdown, or is it?

Today Wachovia reported a nearly 9 billion dollar loss for the second quarter of 2008, it simultaneously reported that it was closing its wholesale operations effective July 25, 2008.  This is the second "Major" Bank to recently announce its plans to stop originating mortgages through Mortgage Brokers on the wholesale side, Bank of America being the other.  However a close look into B of A's recent acquisition of Countrywide will quickly show you that they are lending more then ever through Mortgage Brokers as Countrywide is still one of the largest wholesale lenders in the Nation (formerly the largest), thereby making B of A one of America's largest wholesale lenders by default.

A closer look into Wachovia Corporation will show that they own a plethora of subsidiary lending institutions one of which being Vertice.  Here is an email I received today from a Vertice account rep; "Dear Broker/Partner,
VERTICE IS OPEN FOR BUSINESS , so you are OK to LOCK n LOAD your loans with us .  PLEASE SEE VERTICE ANNOUNCEMENT BELOW ...We thank you for your continued business.  Our current turn times are 4-5 days on initial UWing, 24-48 to clear conditions once ALL have been received and less than 24 hrs for docs out.  OUR PRICING IS STILL VERY ATTRACTIVE and we look forward to closing some of your loans.  Have a super selling day@!"

Kind regards, 
--- ------
Account Executive
C#1-***-***-****
EFAX#:1-***-***-****
---.------@wachovia.com  
Vertice Lending, a division of Wachovia Securities

Notice this lender reps email address is even a Wachovia email address and it says right on his signature line that Vertice is a division of Wachovia Securities.

I am not sure what it accomplishes for these lenders to claim they are exiting the wholesale market when they in fact have their feet firmly planted in the wholesale soil.  My feeling is that it is an attempt to create a diversion a smoke screen if you will from the embarrassing and down right shameful announcement of an 8.86 billion dollar quarterly loss.

Wachovia was already back on its heals from a horrible purchase they made in 2006 of Golden West Financial Corp otherwise known as World Savings.  This is the lender that started and just recently was still bragging in my office about their pick a pay product.  This is the loan that allowed people to pay less then interest only payments on their mortgage, thereby allowing the borrowers to add to their principal balance each and every month.  Wachovia liked this loan product so much and they must have fallen in love with World Savings business model to the tune of 25 billion!  That is what they paid for a lender that may have single handedly come up with one of the worst loan products ever produced.  The pick a pay loans or (option arms) as they were called in the mortgage business allowed people to neg am (add to their principal balance) up to 120 or 125% of the appraised value.  That is when values were holding strong and the market was at fever pitch. 

World Savings reps were still selling this loan as recent as a few weeks ago and were marketing it as their "portfolio" product.  When I questioned them on how they could sleep at night knowing they were selling such a risky product they proceeded to spout of well rehearsed statistics of how few of he loans were in default (currently) and how very few had hit the reset limit of 125% of the appraised value.  I said that is because they are using the appraised value of when people got into the loans, in CA for example some property values have gone down by more then 25% which means there are tons of these borrowers that should be resetting to principal and interest at 125% of the value of their home.  I am sure that is going to go over well to have people's payments increase by 1000's the borrowers already extended to the max using the minimum payment to qualify for a home they had no business buying.

Through an inside contact a Wachovia today I was told that most employees will be paid 2 months paid vacation and 6 months severance pay, at least the company is stepping up to the plate with their compensation package. 

From The Mortgage Insider this is Stetson Lowe saying Good Night.

Stay tuned tomorrow for more insider information on WAMU and their 3.3 billion dollar Q2 loss.

Here is a quick video on the Wachovia announcement.  If you have any comments on todays post please leave us your comments.

What is a Mortgage Planner?

Lately I have been asked the question over and over, "What is a Mortgage Planner Stetson and why should I use you (a mortgage planner) for my next Mortgage transaction."  To answer that question for every one who is asking I have written the following post.

What to Look for In a Mortgage Planner

By Stetson Lowe

Nowadays, it seems as though there are almost as many types of people offering home loans as there are  home loans themselves! So before it comes to choosing between different home loans, you need to choose between different loan providers.

That being the case, here are a few considerations for what to look for in a mortgage planner. These relate to whether they are really a mortgage planner or just a broker, what services they offer, what loans they can source, their level of responsiveness, and their fees.

The first thing to take note of is whether a given professional is a mortgage planner or a mortgage broker. Mortgage brokers focus on matching people with loans. While they aim to recommend the most appropriate loan for someone, they don't really consider the “big picture”. Mortgage planners, on the other hand, consider a borrower's home loan in the context of their overall financial plans. On that basis, a mortgage planner will consider your current situation and aims, as well as your future likely circumstances and goals, in order to select and assist in structuring the most appropriate loan for you.

As a practical matter, you'll want a mortgage planner who can source the types of loans that are likely to suit you. If you have general needs, then someone with access to a broad range of loan products may be suitable. If your needs are very specific – for instance you are self-employed and may not qualify for the typical home loan – someone who focuses on sourcing loans for people like you is likely to be better. 

You should also seek to work with a mortgage planner who is responsive and accessible. Put it this way, if they're not there to answer your questions or assist with matters that are worrying you... they probably won't be of much use to you!

Equally, you want someone who will provide guidance and explain everything to you in plain English. Buying a home can be challenging, especially as you're unlikely to understand all of the jargon and complexities associated with real estate and banking. Therefore, it's a good idea to find a planner who will take the time to explain these things to you.  Buying a home is one of the biggest decisions you will make in your life and you need to be clear on the commitment you are making.

A good mortgage planner should not require you to pay any unusual fees. Most planners will typically charge a commission (usually a percentage of the value of the loan) and may also charge extra fees for conducting an appraisal of the home you want to buy. They will also pass on other costs such as the closing costs and a down payment for the home.

That said, it's not generally wise to simply go with the person offering the lowest fees. They may not provide the level or range of services you need... which, long term, may end up costing you far more than the slightly higher fee charged by an expert mortgage planner.

To sum up, when looking for a good mortgage planner keep in mind these factors: are they really a planner, or just a broker? Will they source the kind of loan you need? Are they open and responsive? And are their fees appropriate for what they're offering?

I hope that helps answer the question What is a Mortgage Planner? 

The Mortgage Insider - Stetson Lowe

Fannie - Freddie Video / Inflation reachs 17 year high

Today bond investors worst nightmare's were realized when an economic report was released showing inflation at it highest rate since 1991. This sent bond investors to sell sell sell. In the massive sell off of bonds we saw a huge repost worse to long term mortgage rates throughout the afternoon. Will it be short lived? That is the million dollar question. With the feds hands tied by the crumbling economy the main tool used to tame inflation "raising the feds interest rates" is simply not an option. The markets need the cheap money to continue to function and provide some vibrance to the economy. If you are looking to close a loan in the next 30 days I would lock. If you are still weighing the pros and cons of purchasing or refinancing right now it may be time to jump down from the fence and get things moving.

Heres a good report on the in's and out's of whats going on with Fannie and Freddie

Until next time,

The Mortgage Insider - Stetson Lowe - www.UtahLoanTips.com

Like Clockwork

It was 1 week ago today that I posted last and the title of that post was "Fannie - Freddie getting crushed".  I posted about the 2 mortgage giants and there roll in the mortgage market and subsequently the economy.  I ended the blog with "I smell another big huge government bailout."  Was it that predictable that in less then a week 7/13/08 the Fed unveiled a plan to shore up the 2 800 pound gorilla's? 

The Announcement

Yesterday Sunday the 13th of July the Fed came forward with a plan to open up their wallets to Fannie and Freddie once again and increase their credit line with the Federal Reserve.  This will allow fannie and freddie to be more liquid and increase stability in the secondary market.  Already today we have seen the results of this announcement as there was a huge turn out at Freddies auction for short term (2 Month) bonds.  The bid to cover ratio was 50% greater the it has been for the last 3 months.  Yields actually decreased slightly which is good for mortgage rates.

The Effect

The over all effect of this plan should be calming to the real estate markets and bond investors which have been jumpier then cow in a slaughter house.  I would look for rates to ease over the next 2-3 weeks as the market digests this new found security.  Keep an eye out for more bad news and additional write downs in the banking sector.  One of my Trader contacts predicts the mid-size regional banks i.e. (Indy Mac, National City) to continue to be slammed with the liquidity crisis.  He says to look for more and more of these banks to file bankruptcy.  I hope the FDIC can shake the rust off and get ready to go to work here for the next few years, sounds to me like they are going to be Busy.

To get all the Insider Information before it hits, check back often.  Email me your mortgage questions anytime day or night at stetsonlowe@gmail.com

Stetson - The Mortgage Insider

UtahLoanTips.com