Mortgage Blog

I would like to update you on what is happening out of Washington on the following:

Status of Tax Credit: Things are looking good!

While a final deal was not reached over the last couple of days, there are some encouraging signs that a deal is very likely. It seems to be more a question of "when" rather than "if".

The latest proposal (which is still subject to change) would extend the tax credit until April 30,2010 and also expand it to “move up” buyers.

Details of the revised homebuyer credit reportedly are as follows:

· Credit is changed to 10% of sales price up to $7290

· For first time homebuyers, the income level to qualify is $ 75,000/150,000.

· For "move up" buyers the income level to qualify is $ 125,000/250,000.

· For "move up" buyers, they must have been residing in their primary residence for 5 years.

· The credit runs from Dec. 1, 2009 to April 30, 2010.

· Sales contracts signed as of April 30, 2010 would have 60 days to close.

Extension of Temporary Higher Mortgage Limits

It appears that we are also getting closer to extending the current temporary increase in FHA & GSE mortgage limits for another year. Hopefully, this legislation will also be passed in the next week or so.

FHA Condominium Changes

FHA maintains that they will be publishing the condominium letter shortly (we have been hearing this for about the last week). They held meetings with some of the major trade groups this week and have advised the following:

• FHA concentration will go to 100 percent in established projects, 50 percent in new projects.

• Pre-sale will be lowered to 30 percent

• Owner occupancy remains at 50 percent

• Commercial space will remain 25 percent but FHA will do waivers as requested

• FHA will eliminate "spot loan" approval. They maintain this will not be a problem.

Declining Markets Policy

As suspected, FHA should be eliminating the second appraisal requirement for properties above $417,000 in declining markets.

Randy Reed 303.524.9191

CMPS, CML

This is not a Halloween joke and yes it is just the hard cold reality that we do live in a very scary industry right now. As of this morning one of the largest investors in mortgage back securities, is now requiring a 640 FICO score on all FHA loans. This will more than likely trickle down to the rest of the industry and other investors will probably follow suit quickly.

With the change of across the board debt-to-income limitations of 45% starting Dec 12th 2009, (that by the way is not a specific to any one mortgage company that is a Mortgage Industry change) along with this recent announcement, now is the time to tell EVERYONE you know to get under contract now. Don’t let them wait for a better deal because that "better deal" is at this very moment not tomorrow or 1 month from now when they may not even be able to borrow money!!!

I do have some alternative methods by the way to combat all these things. Call me for details and let my 20 yrs of experience walk you through some "adaptive" changes we used to do all the time back in the "good old days"! Its not ALL bad folks, we will get through all this, you just have to work w/ the right people.

Randy Reed

303.809.LOAN(5626) cell

303.524.9191 office

I wanted to provide you with an update on what is happening in the mortgage industry. Please read through this completely as this DOES and WILL affect current and future business. Don’t let ANYONE say, “I am going to wait and see if I can get a better deal” because chances are they will have a more difficult time (like its not hard now) to even GET financing!!! Get them closed now before it’s too late…

Effective December 12, 2009 new debt-to-income limits will be at 45% per Desktop Underwriting (DU - computerized approvals)!!!

Additional changes and upcoming guidelines:

* FHA is changing how long an appraisal is good for and stays with a property from 6 months to 4 months.

* FHA Condo Project Approval: Effective date currently is 11/1/09 and it might be pushed to 12/1/09. FHA is reviewing the announcement which caps the maximum number of financed Condos in a complex from 30% to potentially changing that up to 100% on existing and new projects could go up to 50%! This is big news because the announcement they made about 1 month ago, would have completely destroyed the nations Condo markets. Spot approvals still look like they will be going away so getting project approvals will definitely take longer and it will be more expensive to actually get a Condo closed going with FHA financing.

* 5 yrs from foreclosure, in order to qualify for new loan a minimum 680 FICO w/ a 10% down, no 2^nd home or investment property will be permitted w/ in 7 yrs of a foreclosure, no cashout refinances for those who have a foreclosure in the last 5 yrs.

* If a borrower has a Deed-in-lieu (not short sales) within 4 years from date listed on credit report can not obtain financing.

* CHFA is tightening credit guidelines and will be taking a closer look at borrowers who have credit scores below minimum guidelines (620). Even though they will go to 580 on a FICO they will be more critical on low credit scores along with debt-to-income ratios over 45% but chances are they will require ratios at or below the 45% requirement which is what the rest of the industry will be moving towards starting on December 12, 2009!!!

This is a letter I wrote to the Federal Reserve in response to them discussing changes recommended from our elected officals in Washington, called R1366. This new proposal eliminates what is known as Service Release Premiums (SRPs) to mortgage lenders when origianting new mortgages. SRPs are traditionally a huge part of the income generated from mortgage originations. If R1366 is adopted, investors to Mortgage Back Securitites would no longer provide SRPs to the mortgage community. This essentially would destroy not only how mortgages are generated but more importantly would wipe out the traditional mortgage loan origiantor as we know it today. Here is my comment submitted on 10-5-2009:

I am a 20 year mortgage banking professional. When I first heard about our government talking about R-1366 last year, my initial response was, are you kidding me? This proposal would literally destroy the mortgage industry and completely devastate our economy in a way that the average homeowner would find it even more difficult than it already is to borrow money for their homes. Why do you ask? By changing the way Mortgage Back Securities are exchanged and managed in today’s current system, you will narrow the ability of any investor in MBSs to receive any type of return enough to justify the investment. Our government can not control the free open-market financial system. As much as you may think you can, the fact of the matter is, if you do this, you will cripple institutional investments in MBS. Ultimately, the average working US citizen would no longer be able compare and shop for the best mortgage because and you would have created a Mortgage Monopoly as it will be the local “Banks” that would be the only “game in town”. Interest rates will actually be higher for the consumer since those institutions offering mortgages will have a higher over head to conduct business, will build their profit margins into interest rates, and the quality of service and advice given to the consumers will be no different than driving up to a fast food restaurant and saying, “Give me a # 1 please without any lettuce” and getting the response from the order taker, “sorry we cant do that any more – it all comes prepackaged nowadays”. We have and always should be (mortgage providers) advisors to our clients for their biggest asset (home) which has the biggest liability (mortgage) and if you eliminate individuals such as myself to conduct business, we will just become order takers – not professionals who provide quality advice and superior service for those in need of a mortgage.

The mortgage industry, financial institutions, and investors in MBSs, have all made changes which began over 2 yrs ago to control things that quite honestly fixed the mess that our Federal Reserve gave the “ok” to Fannie Mae and Freddie Mac over a decade ago which allowed bundling of MBS of lower quality B paper in A paper trades. That was our government’s doing – not ours. Stop trying to control free trade and limit the ability of US Citizens to work through the toughest time economically of our country’s history and work more towards actual improvements of economic growth. Concentrate on job growth not job loss (that’s what would happen by the way) if you pass R-1366. If R-1366 becomes a reality, you will destroy approximately 70% of the mortgage industries ability to produce. Our industry helped us get out of the tough economic times after 911 and we are providing the same thing this year. Just look at the impact mortgages have done this year vs any other year to our overall GDP (Gross Domestic Product).

Now is the time to act as true representatives of what is ultimately best for our nation in the LONG run not just another governmental change that is reacting to something from years past and quite honestly, just isn’t how things are today. We, as an industry, have already made changes corrective measures. It is definitely harder to get financing today than it ever has been before in the history of mortgage lending.

I understand you are trying to make things more evident to the consumer and even out the playing field for them, but quite honestly – it already is. Have you personally tried to get a mortgage lately? If you haven’t then I say you should be required before you recommend any new changes to our financial markets to PERSONALLY get a mortgage before you make changes that will impact every single homeowner in America. You’ll know instantly why people like myself are so important to your success in buying or selling a home!!!

There are fewer people in my industry than there were 20 yrs ago, homeowners need and want experienced people handling there mortgage loan(s), they honestly could care less if I get paid more from one investor to another when I go sell my note to them. All that matters to the consumer is quality service at a fair price – the product is the product, in my business it is all about service and removing SRPs from the equation will devastate the industry to where the “good guys” in my industry will get out!!! We, investors, and you have eliminated the bad apples in the mortgage industry.

Now is the time to do something by stabilizing our mortgage environment – not make it more difficult or nearly impossible for people to borrow money into future by allowing R-1366 become a law. Stop R-1366 in its tracks!

Sincerely,

Randy Reed