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Using the 203k program to purchase ‘dream homes’?

December 11th, 2009 11:59 AM

With more and more distressed properties hitting the market, mortgage lenders, including Wells Fargo, increasingly offer FHA Section 203k mortgages. The loans finance both home purchases and residential improvements, allowing buyers to purchase dwellings with possibilities and transform them into dream homes. At Wells Fargo, a mortgage consultant works with borrowers to select a home improvement vendor.

Lori Kramer, who purchased a home in Jacksonville, Fla., with a 203k mortgage, says, “In this market, where so many homes have been vacant for so long or gutted in some cases, this program could really change the way people are buying real estate.”

In many instances, homes are in prime locales but need some work; and experts say the 203k mortgage program lets average buyers snap them up.

Source: RISMedia (12/09/09)

Posted by Marcos Fullana on December 11th, 2009 11:59 AMPost a Comment (0)

Are fixed-rate mortgages the best loan?

December 18th, 2009 12:15 PM

The think-tank Center for American Progress is questioning the premise that a 30-year, fixed-rate mortgage is the best option for homebuyers.

The reason mortgage-backed securities looked so attractive to banks is that they solved the problem of a mismatch between low rates on mortgages and higher rates for deposits. Banks worried about getting stuck earning low rates on a mortgage for 30 years while having to pay higher rates on bank accounts to attract depositors. Their answer: unload their mortgages to investors and let them worry about the profitability of the loans. Those investors hedged their bets by purchasing interest-rate swaps and other derivatives. Now, even Fannie Mae and Freddie Mac are having a hard time getting a handle on what those hedges are worth.

In other parts of the world, variable rates are the norm. While borrowers face the risk of rates going up, lenders at least can ensure the rates they pay to depositors don’t outstrip what they receive in mortgage products. Homeownership rates in Canada and the European Union, where variable rate mortgages are the norm, are about what they are in the U.S.

And in any case, there are ways for borrowers to mitigate their interest-rate risk. They can take out loans with fixed initial periods, for example. For homeowners who typically hold their homes for seven years, a five-year fixed rate provides considerable security.

If the country persists in choosing fixed-rate mortgages, some observers say, lenders might consider the Danish model where mortgages are financed through the bond market rather than a separate securities market. That’s a system that has worked well for two centuries.

Source: The Wall Street Journal, James R. Hagerty (12/14/2009)

© Copyright 2009 INFORMATION, INC. Bethesda, MD (301) 215-4688

Posted by Marcos Fullana on December 18th, 2009 12:15 PMPost a Comment (0)

Establishing standards for registration and licensing of mortgage loan originator

December 18th, 2009 12:13 PM

The U.S. Department of Housing and Urban Development (HUD) announced publication of a proposed rule setting the minimum standards that states must meet to comply with the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act) in licensing loan originators. The proposed rule is posted in today’s Federal Register and on HUD’s website.

“By introducing nationwide standards of uniform licensing for loan originators, the SAFE Act is taking an important step in returning integrity and accountability to the residential mortgage loan market,” says FHA Commissioner David Stevens.

The SAFE Act was enacted into law on July 30, 2008, as part of the Housing and Economic Recovery Act of 2008. It’s designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of licensed mortgage loan originators. SAFE also mandates the creation of a Nationwide Mortgage Licensing System and Registry (NMLSR).

While states must enact licensing standards that meet the requirements of the SAFE Act, overall responsibility for interpretation, implementation and compliance rests with HUD. If HUD determines that a state’s licensing standards do not meet the minimum requirements of the Act, it’s required to implement and administer a licensing system for that state.

To comply with the Act, states must put in place a Loan Originator Licensing program that requires originators to take an education course, pass a test and undergo civil, criminal and financial background checks. States have until July 31, 2010, to have their loan originators licensed under the SAFE Act criteria, unless they already have them licensed under a different system. If already using a different licensing system, they have until Dec. 31, 2010, to bring them in line with the Act’s requirements.

The proposed rule:

• Addresses HUD’s criteria to determine whether a state has an adequate system for licensing and registering loan originators under the SAFE Act. The rule sets forth the statutorily imposed minimum requirements for a state to be in compliance.

• Outlines the requirements HUD would put in place if a state fails to implement the licensing system and HUD steps in to create one.

• Addresses enforcement authority to HUD, including: (1) summons authority for information on any loan originator; (2) the authority to appoint examiners to assist HUD; and (3) the authority to conduct cease-and-desist proceedings to any person violating any provision of the SAFE Act.

As part of the rule-making process, HUD is soliciting comments for 60 days on its proposal and the comments received will be considered in the development of a final rule. Comments should be submitted by mail or electronically as noted in the Federal Register posting.

The full rule in the Federal Register is available on HUD’s website at: http://www.hud.gov/offices/hsg/ramh/safe/safeprule.pdf

© 2009 Florida Realtors®

Posted by Marcos Fullana on December 18th, 2009 12:13 PMPost a Comment (0)

New FHA rules a mixed bag for condos

December 11th, 2009 11:59 AM

New guidelines from the Federal Housing Administration could increase sales in South Florida’s stalled condo market, making it easier, at least temporarily, to get FHA-backed mortgages.

The guidelines, which went into effect Monday, were written to address current market conditions and the glut of empty condominiums following the real estate bust.

Several of the policies, however, expire in December 2010, leaving some real estate experts to call the changes a mixed bag that will ultimately restrict sales.

Others contend the modifications are overall good for a market suffering from a lack of condominium financing.

Changes include reducing the number of units in a new condominium that must be owner-occupied, allowing condo boards to refuse buyers as long as it doesn’t violate the Fair Housing Act, and cutting the expensive requirement of having an attorney certify condominium documents before a sale.

“Palm Beach will definitely, definitely benefit from this,” said Grant Stern, president of Morningside Mortgage Corporation in Bay Harbor Islands, which does consulting work for developers. “It will allow local buyers to reenter the market with financing on good terms. It will also spur a lot of investor activity when they see the prices starting to creep back up.”

Most banks have shied from condo lending because the units are considered high risk. Those that still lend often want 20 to 30 percent down, a requirement that can eliminate the average buyer.

FHA-backed loans allow for smaller downpayments, but few condos are qualified for that kind of lending.

The Edge condominium at 300 South Australian Ave. in downtown West Palm Beach, which opened in 2007 with 307 units, is the only building in the 33401 area code approved for FHA financing, according to the agency’s Web site.

“Today, a new condo can be more affordable than paying rent, but people can’t buy because they don’t have the downpayment,” said Sarah Mazor, broker at Mazor Realty in Boca Raton, which specializes in new condo sales. “It slows down the market and the people who suffer are the middle class.”

Two big barriers to FHA financing have been a requirement that 51 percent of a condominium be owner-occupied, and a rule banning loans to buildings with “right of first refusal.”

The new temporary guidelines allow for 50 percent of units to be owner-occupied and doesn’t count units that are bank-owned, rented out, or vacant.

Allowing condos with “right of first refusal” access to financing is a permanent change.

Vicki White-Sklark, a government loan specialist with Sun Trust Mortgage in Sunrise, said she’s concerned about how new guidelines that tighten the approval process will ultimately restrict the market.

One change is that no more than 15 percent of total units can be more than 30 days behind on condo association fees.

Also, while other states are now allowed to independently approve FHA mortgages, Florida is still required to have projects submit applications to the U.S. Department of Housing and Urban Development.

“Right now, it’s a moving target,” White-Sklark said, about the guidelines. “I fully expect this to evolve over the next year as they realize the impact it’s going to have on the market.”

Posted by Marcos Fullana on December 11th, 2009 11:59 AMPost a Comment (0)

Bank of America to critics: Mortgage relief tops industry efforts

December 9th, 2009 12:51 PM

So far this year, Bank of America Corp. has sent more than 160,000 distressed homeowners into the Obama administration’s main foreclosure prevention program – the most of any mortgage player, the bank said Monday.

Citing the latest government data, the bank said it has provided about 20 percent of the industry’s trial home-loan workouts through the Making Homes Affordable Modification Program, or HAMP.

Including the trial loans and other efforts, the bank said it has provided mortgage relief to more than 600,000 homeowners since January 2008.

Its announcement comes less than a week after the Obama administration stepped up pressure on the mortgage industry to help struggling homeowners.

With deposits of $72.8 billion, Bank of America is the largest bank in Florida. It is also the second-largest in Central Florida, with deposits here of more than $8.9 billion.

The Obama administration said last week it would look more closely at both the pace and quality of the loan workouts companies are providing through Making Homes Affordable.

It also raised the possibility that companies could be penalized if their efforts are falling short of real foreclosure prevention.

Recent reports indicate that most of the 650,000 homeowners who have received help through the program are still stuck in its trial phase and haven’t received final approval.

Bank of America insisted it has moved aggressively to help troubled homeowners.

“At Bank of America, we remain focused on providing long-term solutions to help distressed customers sustain homeownership,” said Jack Schakett, the bank’s top credit loss mitigation strategies executive, in a written statement.

The bank did not disclose what overall percentage of distressed mortgage customers have been reached by its loan modification efforts.

Consumer groups and regulators say loan modifications by the industry are reaching only a fraction of the millions who are losing their homes in the foreclosure crisis.

Copyright © 2009 The Orlando Sentinel, Fla., Richard Burnett. Distributed by McClatchy-Tribune Information Services.

Posted by Marcos Fullana on December 9th, 2009 12:51 PMPost a Comment (0)

Democrats push more mortgage aid

December 9th, 2009 12:50 PM

House Democrats are seeking to tap the government’s massive bailout fund to help homeowners who have lost their jobs and are struggling to make their mortgage payments.

House Financial Services Committee Chairman Barney Frank (D-Mass.) on Monday signed on to a proposal by Rep. Maxine Waters (D-Calif.) that would channel $3 billion from the federal Troubled Assets Relief Program toward mortgage relief for jobless Americans. The measure would designate another $1 billion for a program that gives grants to state and local governments to purchase foreclosed properties and use them for more productive purposes.

“The combination of unemployment and foreclosures may be the greatest threat to our economic recovery,” Waters said.

The proposal is one of more than 100 proposed amendments to a sweeping financial regulatory reform package scheduled for consideration in the full House this week.

In addition, Democratic lawmakers are planning to use the regulatory reform bill to revive a provision that would allow bankruptcy judges to modify a homeowner’s mortgage, including lowering the interest rate or cutting the principal owed. The provision passed the House earlier this year but is fiercely opposed by the financial services industry and was voted down in the Senate.

The renewed efforts come in the wake of recent complaints by the Congressional Black Caucus about the Obama administration’s handling of the economy. Caucus members, alarmed by the particularly harsh toll that foreclosures and unemployment have wrought on minority communities, have pushed in recent weeks to provide more tangible help to ailing homeowners. The caucus has held numerous meetings with White House officials and delayed a vote on the regulatory reform bill to draw attention to its concerns.

The Obama administration’s foreclosure prevention program, known as Making Home Affordable, has faced pressure recently because lenders have moved only a small percentage of borrowers from the initial trial phase to a permanent loan modification. Data to be released by the Treasury Department this week will show that about 6 percent of borrowers enrolled in the program so far have moved from trial modification to permanent adjustment, according to two industry officials.

Treasury officials called a meeting with industry leaders on the issue Monday as part of a campaign to address the challenges borrowers face in receiving permanent modifications, Michael S. Barr, a Treasury assistant secretary, said in a statement. Mortgage servicers “are on notice that they must ramp up and provide sustained relief to struggling homeowners now,” he said.

Industry officials say the small percentage reflects hundreds of thousands of borrowers who have not provided enough documentation to prove they are eligible for the program. But housing advocates argue that many homeowners remain in limbo even after submitting documents multiple times. Treasury is scheduled to release detailed data this week showing which lenders have completed the greatest number of modifications.

Mortgage industry officials, meanwhile, are less than thrilled that the so-called “cramdown” provision, which would allow judges to modify loans, might get a second chance in Congress.

“We continue to think it’s a bad idea, especially given the market of uncertainty” the country is in, said Steve O’Conner, a senior vice president at the Mortgage Bankers Association.

The measures proposed by Frank, Waters and others would become part of a wide-ranging bill to overhaul the nation’s fractured financial regulatory structure. Frank’s committee in recent months has approved a series of measures, including bills to establish oversight of the vast derivatives market and create an agency to regulate credit cards, mortgages and other consumer loans. The bills, which passed separately through the committee, will be bundled into one piece of legislation for consideration in the full House. Debate on the inclusive bill is scheduled to begin Wednesday, with a final vote by week’s end.

Copyright © 2009 www.washingtonpost.com

Posted by Marcos Fullana on December 9th, 2009 12:50 PMPost a Comment (0)

Condo rules could shut out buyers, hit builders

December 9th, 2009 12:49 PM

New lending rules for condominium buyers are already forcing some developers to change or scrap plans for new projects for fear too many buyers will be shut out.

On Monday, the Federal Housing Administration started limiting the number of buyers in condo buildings that can get loans insured by the agency. The rules also put restrictions on buildings with poor finances, too many delinquent owners and a high number of rentals.

The tighter lending standards are designed to protect the financial health of the FHA. Roughly 18 percent of loans insured by the FHA are either delinquent or in foreclosure, and the agency’s financial cushion has dipped below the federal minimum.

But the move is a blow to condo buyers because the FHA has become a key source of mortgage financing. The agency insures roughly one in four new loans today because buyers need only a 3.5 percent downpayment.

“It is a huge debacle for us,” said Rene Oehlerking, marketing director for Salt Lake City developer Garbett Homes.

The company has canceled a 300-unit condo project, spending $300,000 to redesign it into freestanding homes. Most of the builders’ homes and condos this year went to buyers with FHA loans.

Garbett’s condo project didn’t pencil out with the new FHA rule that allows only half of a condo building’s units to have FHA-backed loans, with some exceptions. That number falls to 30 percent in 2011.

Another new rule requires at least 30 percent of units in new buildings be pre-sold before the agency insures any loans. That number will rise to 50 percent in 2011.

Projects in Florida, where the condo market has been devastated, will require special approval before FHA-backed loans can be made.

“Many of our developers won’t be able to pursue condominium projects because the risk is too great that they won’t be able to sell the units,” said David Ledford, senior vice president for housing finance and land development at the National Association of Home Builders.

Government officials, however, say the rules are necessary to ensure consumers are purchasing units in viable buildings and to help ensure that defaults on condo projects don’t rise too high.

“We believe that we have a balanced policy that is flexible ... yet will help us manage and mitigate the risk,” said Joanne Kuczma, director of the FHA’s home mortgage insurance division.

While the rules could be tough for builders, they will protect consumers because lenders will be forced to be more careful about which projects they fund, said Richard Vetstein, a real estate lawyer in Framingham, Mass.

“On the whole, it’s a good thing,” he said. “Financially sound condominiums make better investments.”

During the housing boom, the FHA was not a big source of condo loans, and the agency had not updated its condominium rules since the mid-1990s. When the new rules were released earlier this year, the lending industry lobbied aggressively to persuade the agency to loosen them.

“We worked very closely with them,” said Tamara King, director of loan origination at the Mortgage Bankers Association. Now that the rules have been relaxed, she said, “for the most part we are in support of the direction that they’re going.”

Critics, however, say the industry’s influence on the process shows that the agency is all too willing to bend to pressure from powerful interest groups, and say the condo loans will be highly prone to default and foreclosure.

“Rather than stopping the foreclosure mess, we’re actually adding more foreclosures to the mix,” said Edward Pinto, a financial consultant and an FHA critic.

For buyers, the new rules cinch already tight mortgage financing. Earlier this year both Fannie Mae and Freddie Mac slapped tighter restrictions on condo loans.

The new FHA rules are “going to create substantial confusion and turmoil,” for mortgage companies that make FHA loans, said Jack McCabe, a real estate researcher in Fort Lauderdale, Fla. “They have to be pulling their hair out right now.”

Posted by Marcos Fullana on December 9th, 2009 12:49 PMPost a Comment (0)

RESPA reform: HUD getting lenders onboard

December 8th, 2009 2:03 PM

In an effort to address industry concerns about new mortgage rules that take effect on Jan. 1, 2010, the U.S. Department of Housing and Urban Development (HUD) today announced a series of live interactive online presentations for the mortgage industry.

“We’ve been working overtime to answer questions and provide training to as many organizations as we can,” said HUD Assistant Secretary for Housing/Federal Housing Commissioner David Stevens. “On the eve of these new requirements, I want to accelerate our focus with a heavy dose of plain English and customer service to help the industry prepare.”

HUD issued its final rule to improve the mortgage settlement process on Nov. 17, 2008. While reform of the Real Estate Settlement Procedures Act (RESPA) is designed to aid consumers, the burden of compliance falls squarely on the mortgage industry.

The final major phase occurs on Jan. 1, 2010, when HUD requires lenders and mortgage brokers to provide consumers with a standardized Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. Closing agents also must also give borrowers a new HUD-1 Settlement Statement that clearly compares consumers’ final and estimated costs. The rule itself became effective Jan. 16, 2009, but it included a one-year transition period to give the mortgage industry time to incorporate the changes.

HUD expects some bumps along the way. It recently issued a note instructing its Mortgagee Review Board (MRB) to exercise restraint in enforcing RESPA’s new requirements for the first 120 days of 2010. During that time, HUD expects lenders to at least make a “good faith effort” to comply with the new RESPA rules. HUD has asked other federal and state enforcement agencies to exercise the same 120-day restraint.

© 2009 Florida Realtors®

Posted by Marcos Fullana on December 8th, 2009 2:03 PMPost a Comment (0)

30-year mortgages at new record low

December 8th, 2009 2:02 PM

The average interest rate for a 30-year mortgage dropped to a record low of 4.71 percent this week, pushed down by an aggressive government campaign to reduce borrowing costs.

The rate, published Thursday by Freddie Mac, is the lowest since the mortgage finance company began tracking the data in 1971. The previous record of 4.78 percent was set during the week ending April 30 and matched last week.

The Federal Reserve is pumping $1.25 trillion into mortgage-backed securities to try to bring down mortgage rates, but that money is set to run out next spring. The goal of the program is to make homebuying more affordable and prop up the housing market.

Despite the government support, qualifying for a loan is still tough. Lenders have tightened their standards dramatically, so the best rates are available to those with solid credit and a 20 percent downpayment.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders across the country. Rates often fluctuate significantly, even within a given day, often tracking yields on long-term Treasury bonds.

This week’s drop reflects a rush of investors into the security of government debt after concerns about financial trouble in Dubai drove investors to safe harbors. But rates climbed back later in the week, and analysts say they are likely to remain volatile.

“There are no guarantees that mortgage rates are going to stay at these low levels,” said Greg McBride, senior financial analyst at Bankrate.com.

And millions of American families have not been able to take advantage of them, particularly in the areas where home prices have fallen the most.

About 11 million households, or 23 percent of homeowners with a mortgage, owe more on their home loans than their house is currently worth according to First American CoreLogic, a real estate information company.

That makes refinancing difficult.

While the government has launched a program designed to help these “underwater” borrowers, only about 140,000 homeowners have used it so far.

In Orlando, mortgage broker Chris Brown says the low rates are a boon to first-time homebuyers who can qualify for a loan. But he says he isn’t getting much business from homeowners looking to refinance.

“Most of the people that could refinance probably have” done so, he said. “Rates have been artificially low for quite some time.”

The average rate on a 15-year fixed-rate mortgage fell to a record low of 4.27 percent, from 4.29 percent last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.19 percent, up from 4.18 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.25 percent from 4.35 percent.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.

The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans.

Buyers and homeowners who want to refinance are picking up their phones. Mortgage applications rose 2 percent last week from a week earlier, the Mortgage Bankers Association said Wednesday, driven by a more than 4 percent increase in purchase applications and a nearly 2 percent increase in applications to refinance existing loans.

Posted by Marcos Fullana on December 8th, 2009 2:02 PMPost a Comment (0)