Nehemiah President and Chief Executive Officer Scott Syphax said Monday that Congress is “all but certain” to pass the July 11th version of the Senate housing bill which includes a ban on down payment assistance programs or DAP’s or DPA’s. While Nehemiah is the largest of the DAP’s, there are several others who will also be affected.
At this point, we do not know what the timing of this will be. Will Congress give borrowers until a certain date to get their applications in progress? Our guess is that they will, but only time will tell. What is certain is that any borrowers who are in need of these programs should get their loans in progress now.
Once these programs have been eliminated, this effectively eliminates 100% financing in the US at this time. The only option would then be a 3% gift combined with an FHA loan of 97%. No funds from the borrower are required when using gift funds on an FHA loan. This gift could come from either a family member, or a community down payment assistance or community second mortgage program. Keep in mind that the community down payment assistance/2nd programs have very strict limits on income. For instance, in Georgia the limits on the Georgia Dream program are in the $50k range for the household, though exact figures depend on the number of household members.
This article provides more details:
http://www.sacbee.com/103/story/1099122.html
Another loan option of which most borrowers (and most lenders for that matter) are unaware is the ability to purchase a home or a condo for an elderly parent - as a primary residence. So, even though the borrower will not be residing in the property, we are able to structure the deal as a Primary Residence purchase through one of our lenders - and not as an Investment Property as most lenders would suggest. This gives the borrower the lowest possible interest rates and best terms on the purchase. AND - it is done without putting the parent on the loan.
Keeping the parent off of the loan is ideal as it takes the credit history of the elderly parent out of the equation *and* often it is in the best interest of those involved to not have assets listed in the elderly parents name, for medicare for example. This option allows the home to be purchased without putting the parent on title or on the mortgage.
This option - along with the FHA “kiddie condo” option below - is indicative of the type of extra effort we take here at Primacy Mortgage. This is the new “creative financing” - it’s your lender being knowledgable of every possible loan program and niche that lenders offer, so that you can benefit. Primacy Mortgage - Our Advice Makes a Difference.
Give us a call if you or someone you know wants to purchase a place for a parent!
This is a great program available through FHA that most borrowers are unaware of. The kiddie condo program is a fantastic way for parents to help their children purchase their first home. It requires a 3% down payment and uses the credit rating of a “blood relative” (parent, grandparent, sibling, etc) co-borrower to qualify for the loan. Both the “kiddie” and the relative take title to the home and are on the loan documents. This means that the loan will appear on the borrowers credit report and help them to establish a strong credit history.
Using the kiddie condo program, the borrower must occupy the property as a primary residence, but extra rooms could be rented out to help offset the cost of the mortgage. It’s a great way for a college student, recent graduate, or anyone who is unable to qualify for a mortgage on their own credit standing to buy a home, townhome, or condo with the help of a family member. Yes, that’s right, it doesn’t have to be a condo and it’s not just for kiddies.
The tax benefit for paying the mortgage interest can be divided between the borrowers and co-borrowers depending on how the expenses are paid.
Primary advantages of the program:
- 3% Down-payment required versus a much higher down-payment on an investment property
- Low FHA owner occupied interest rates versus much higher rates on an investment property
- Borrower is able to establish a credit history
Mortgage Crisis Hits Jumbo Loans Hard
One area hard hit by the mortgage crisis was Jumbo Loans. While the “Jumbo limit” was raised in areas of the country considered “high cost”, the Jumbo limit remains at $417,000 here in Atlanta. Loans over that amount have always had higher interest rates, but before the crisis the spread was only about .25%. After the crisis, the spread increased overnight and it’s now not uncommon to see rates of 8% for a Jumbo loan.
New Jumbo Loan Announcement
Primacy Mortgage is pleased to announce that we are working with a new Investor, and we are now offering unbelievable rates on Jumbo Loans. We are offering 5/1 and 7/1 Jumbo ARMs (rates is fixed for either 5 or 7 years), with rates in the low 5’s! On top of the incredible rates, the product offers several enticing features:
- Lowest Rates - 1% LOWER than anyone. While conforming fixed rates have dropped, Jumbo Fixed Rates are astronomically high, around 7.5%. Most lender’s FIXED-ARM rates average 6.625% or higher. Primacy Mortgage is now offering unbelievable rates on Jumbo Loans - in the low 5’s!
- Free Rate Lock - Rates are locked for 60 days … Most rate locks are based on a 30-day closing. For 31-60 days you pay a fee of roughly 0.25% of the loan amount.
- Free Continuous Rate Float Down - If interest rates drop … we’ll lower your rate. And we’ll continue lowering your rate each time they drop up until a week before closing. And it’s all for free … This removes the guessing about when to lock since you are guaranteed the best rate.
- Safest Initial Adjustment Cap - Most loans have adjustment caps of 2% … so your rate can never go up or down more than 2% each year. But here’s the trick … 90% of all FIXED-ARM’s have a 5% INITIAL Adjustment Cap. This means after the initial fixed period (5 to 7 Years) the rate can JUMP up by 5%. In one day your payment could double. Primacy Mortgage’s Jumbo Fixed ARM has a low 2% Initial Adjustment Cap in addition to the low 2% yearly cap. It doesn’t get any better.
- Interest Only Feature – For only a 1/8% increase in rate, you can choose an interest only feature and lower your payments by about 20%. There is never any negative amortization.
- Credit and Downpayment - This loan isn’t made for everyone … you must have a minimum 10% to 20% down payment (exact down payment requirement varies with credit score) and GOOD CREDIT … at least a 680 credit score.
- No Asset Verification – Regardless of whether you’re Refinancing or Purchasing a home you don’t have to provide any bank statements or asset documentation. So, no matter where your down payment is coming from there is no need to document it or even state it.
- Easy Qualifying Income vs. Debt Ratios – Income requirements have been eased to allow up to a 45% ratio … most lenders have reduced this to only 40% … With our lower rate and liberal debt ratio you can qualify for more home.
If you need to refinance your Jumbo loan, call us today to see how this new product may meet your needs.
If you are buying a new luxury home, you can save literally thousands with this product over the competitors offerings. Call us today to learn more!
Due to a lawsuit brought about in New York, a settlement was reached between the state of New York and the GSE’s (aka Fannie Mae and Freddie Mac) whereby the GSE’s would implement the Home Valuation Code of Conduct (HVCC) and in turn, the state of New York would drop their case against them.
What Will Change?
Appraisals have generally been handled at the point of sale - either by the mortgage originator or the realtor in any purchase or refinance transaction. This proposal seeks to completely remove both the loan originator and the real estate agent from the transaction. In fact, they are explicitly forbidden from having any contact with the appraiser who delivers the report.
It is my opinion that the proposed solution is well-intentioned and very easy to implement, but it is not well thought out. There are other, far superior solutions which exist, but the GSE’s appear to be taking the easy road. There are many alternative ideas out there - including appraiser peer review, lender reviews of appraisers, and regulatory audits and reviews. Those solutions, while more cumbersome to implement, will provide a superior solution to the problem at hand and avoid driving many small businesses out of the real estate industry.
How Will This Impact Consumers?
- Consumers will no longer be able to easily shop their loan through a mortgage broker. Since the ultimate lender that they will use must order the appraisal from an appraisal management company of their choosing, that appraisal will no longer be usable at any other lender. Therefore consumers will be locked in very early in the process to a particular lender and will not be allowed to shop their loan unless they are willing to come up with another $300 to $500 for a new appraisal when they change lenders.
- Service levels will likely decline for a number of reasons. Many of the best appraisers out there have built their business on service and under the new system, service will simply be less important in the overall picture. The appraisers who remain will be held to a lower standard simply because the people who are directly impacted by their work (home buyer, mortgage originator, and realtor) are completely removed from the process.
- Mortgage rates will likely increase because of reduced competition. If passed, this ruling will likely force many or all mortgage brokers out of business. Brokers have been a significant competitor to the large banks for the past 20 years and without that competition in place, rates will almost certainly increase in the long term.
How will this impact real estate agents?
- Agents are banned from any form of communication with the appraiser. No more discussing additional comps that may have been overlooked.
- Agents’ role as primary coordinator of the transaction is severely diminished
- Power is shifted away from agents and toward the large lenders who will be the sole point of contact for the buyer on many key pieces of the transaction
What can be done?
There is a brief window where you can register your opinion with the GSE’s:
Comments may be sent to Fannie Mae by clicking here, and Freddie Mac by clicking here.
On April 22, 2008, Freddie Mac announced that the maximum number of financed property limit will be changed from 10 to 4. The rule goes into effect on August 1st, 2008 and has a number of implications to investors. First, if an investor was planning to take advantage of some of the excellent deals on foreclosures that exist here in the Atlanta, Georgia market, they need to act now. Second, if an investor was planning to refinance an existing investment property with an agency loan and they own more than 4 properties, this new ruling will prohibit them from refinancing as of August 1st. Again, the time to act is now.
While this news would have been a non-issue a few short months ago, there are currently very few options for real estate investors today outside of the two main agencies - Freddie Mac and Fannie Mae. Fannie Mae is expected to follow suit and reduce their max property rule to match Freddie Mac’s.
You can read the entire bulletin here:
There has been a tremendous amount of confusion over the past several months with Fannie Mae, Freddie Mac, and the mortgage insurance companies making sweeping changes regarding 100% financing. Since we have sort of stabilized for the time being, I wanted to give a quick overview of what is and is not still available.
A conventional loan with 100% financing on one mortgage is gone. The mortgage insurance companies will no longer insure any loans over a loan to value of 97%. We are one of the few lenders who can still do 100% financing on a conventional loan in the form of an 80/20 piggyback, however, this is limited to borrowers who have a credit score of 720 or higher. Additionally, the number of lenders who will do the first mortgage dwindles every day, and I expect that this program will also be down to a 97% maximum CLTV in the very near future.
The one bright spot in terms of 100% financing is on government loans. VA loans continue to be eligible for 100% financing, of course only those few borrowers with a VA Certificate of Eligibility are able to qualify for this loan. On FHA loans, the guidelines technically require a 3% down payment, but through downpayment assistance, we are able to get around this and do 100% financing in most cases - assuming the appraised value comes in high enough to support it.
Finally, on investment properties the majority of the mortgage insurance companies have given us a stay of execution on the proposed rule of no mortgage insurance on investment properties. Therefore, we can continue to do investment properties in Atlanta with an LTV of up to 90% for borrowers who have a minimum credit score of 680. However, we have inside information that indicates that on or around May 1st, many of the MI providers will eliminate mortgage insurance on investment properties nationwide. This could change, but I would not bet against this happening.
As it has been for the past several months, the key to navigating this ever-changing market is to be sure that you are working with a mortgage professional who is staying on top of all of these changes and watching out for your interests.
On March 4th, 2008, Primacy Mortgage received full approval to originate FHA loans from the Department of Housing and Urban development. We are proud to display the HUD logo as fewer than 10% of mortgage brokers in operation today have the honor of being HUD approved.
With this approval, we are now able to originate some of the most aggressive loan programs available today. These include the FHA 97% purchase loan, the FHA 97% rate and term refinance, the FHA 95% cash out refinance, FHA streamline refinances, the FHA Secure refinance program, as well as the various FHA renovation options (203-k, 203 streamline-k).
The Federal Reserve cut short term interest rates for the 6th consecutive time yesterday. This follows unprecedented action from the Fed over the weekend where they bailed out Bear Stearns. Rate cuts are often assumed to be good for mortgage rates, but this is often not the case.
Why Did They Cut Rates?
The Fed is trying to stimulate the economy and improve consumer confidence in Wall Street. Our economy is feeling the impacts of a slow housing market coupled with very tight credit markets. By effectively increasing the money supply, the Fed is trying to improve things somewhat.
How Will This Impact Mortgage Rates?
Remember that mortgage rates are not directly impacted by the Fed. In fact, Fed rate cuts are considered inflationary which is bad for the bonds which do directly impact mortgage rates. The bottom line is that there are a huge number of issues which affect mortgage rates each day, and short term interest rates are just one of them. The past couple of Fed moves have actually resulted in higher mortgage rates.
If you are looking to purchase a home or refinance, rates are still historically very low.
Over the past 25 years, the Federal Reserve has used basically a single tool to impart their desired effect on the economy. Short term interest rates. When the economy slowed, they dropped rates effectively increasing the money supply. When the economy got too hot, they raised rates. For the most part, it worked.
Ben Bernanke has shown that he is not afraid to venture into uncharted territory when what was working, no longer works. Yesterday, the Fed set up the Term Securities Lending Facility. The simple explanation of this is that banks can now use mortgage backed securities as collateral - which should help open up credit markets somewhat.
How does this affect American home owners?
We all know about the subprime meltdown and the coinciding decline in housing prices. A result of all of this has been that money for lending to both businesses and consumers has become very hard to come by. Up until the past few weeks, this has been limited to so-called Jumbo, Alt-A, and sub-prime loans. That is, non-conforming loans. If we continue to see tightening in the credit markets, there will continue to be fewer and fewer borrowers qualified for a mortgage, and this will worsen what is an already ugly housing market. Let’s hope Mr. Bernanke’s bold move pays off.
