Mortgage Lenders Nationwide

There are several factors that contribute to lack luster home loan activity in the summer of 2010.  Yes the tax credit for first time homebuyers expired on April 30th.  Sure that was a good incentive to drive first time homebuyers, but this is not the primary reason that home loan application volumes have been faltering the last few months.  If Forrest Gump was hear, he might say, “It’ the loan guidelines stupid.”  Read the original Nationwide Lender article > First Time Homebuyers Beyond Low Mortgage Rates.

Smart Home Financing posted a helpful article that compares the pre-approval to the pre-qualification.  Many first time homebuyers find themselves confused when discussing their needs mortgage needs with a lender or broker.  The mortgage pre-approval is a written letter that includes a loan decision from the underwriting department after a borrower completes the residential loan application.  A pre-approval letter is a great negotiating tool for home buyers because it lends them credibility and helps the seller make a decision on their perspective offer.

Many first time home buyers prefer FHA mortgage loan options because these loans only require a 3.5% down-payment.  For homebuyers with a military background we recommend VA mortgage programs because they require no down-payment.  VA home financing is available up to 100% even for first time homebuyers.  Read the original article online at the Smart Home Financing Blog > Pre-Qualification Versus Pre Approval Letter

Mortgage professionals will have to get used to a new “Good Faith Estimate” to be disclosed in 2010. The U.S. Department of Housing and Urban Development (HUD) has updated and re-released “Shopping for Your FHA loan: HUD’s Settlement Cost Booklet.”  A large share of content in the 49-page publication, which helps consumers comparison-shop mortgages, addresses the standardized Good Faith Estimate (GFE) and HUD-1 settlement statement forms that lenders must start using on Jan. 1, 2010.

HUD estimates that consumers could save almost $700 in costs and fees per mortgage loan on average as a result of the new requirement, which is one of several changes to the Real Estate Settlement Procedures Act (RESPA).  In addition to the updated literature, the agency has set up a RESPA “FAQ” section and other information on a dedicated RESPA page so that consumers, settlement service providers and lenders can gain a better understanding of the new rules.

Here is the location of the .pdf of the booklet that you can save or print out for your reference. http://portal.hud.gov/portal/page/portal/HUD/documents/Settlement Booklet December 15 REVISED.pdf

Mortgage lenders are now required to provide loan applicants with the following:

- Good Faith Estimate—provided at the time of application to borrowers to outline the home loan terms and Total settlement costs.

- HUD-1/HUD-1A Settlement Statements—to inform borrowers of final costs at settlement.

- Servicing Disclosure Statement—to inform the borrower whether another financial institution may be servicing their loan.

- Settlement Cost Booklet—provided within three days of application to inform the borrower of fees involved in home purchase settlement.

In a recent NAR survey of Realtors, the report indicated that 85% home buyers appeared to be disinterested in the higher-end real estate market because they can’t get jumbo mortgages or didn’t want to pay higher mortgage interest rates.  Although NAR’s re Regulators said the stress tests showed 10 of the nation’s 19 largest banks needed to raise $74.6 billion in capital between them. The banks regulators said must raise the largest sums — Bank of America ($33.9 billion), Wells Fargo ($13.7 billion) and GMAC ($11.5 billion) — are big players in mortgage lending.

In general, the need to raise capital can constrict new home mortgage lending, because new home loans create additional capital requirements. Regulators base mortgage lenders’ capital requirements, in part, on the dollar amount of mortgage loans outstanding, and projected losses on those home loans and other investments. The results of the stress tests shouldn’t have any impact on conforming mortgages, because lenders can sell the loans they originate to Fannie and Freddie, said Tom Kelly, a spokesman for Chase, the consumer and commercial lending business of JPMorgan Chase & Co. Kelly said conforming home loans have made up more than 90 % of Chase’s originations in recent months.   “In terms of whether to do more jumbos or not, it’s a decision about pricing, risk and whether holding jumbo mortgages on your balance sheet is the best use of your capital,” Kelly said. “The secondary market for jumbo mortgage loans has not returned at all, so each individual bank has to decide, one, do they have the capital, and two, do you want to use that capital?”

In a recent article, Aleshia Howe considers the impact of low interest rates and the lack of home financing in recent weeks.  Mortgage lenders and consumers alike have watched home mortgage rates tumble to near mid-4 % range before quickly rising above than 5%. As home mortgage rates continue to flirt with 30-year lows, local mortgage lenders say they’re seeing a noticeable spike in refinancing inquiries, but the historic low rates have done little to convince “looky-lue” homebuyers to re-enter the market.

Is now a good time for New Homebuyers to Jump in Because Home Mortgage Rates are low? 

The volatility in the market is expected to hang around. However, with mortgage rates approaching record lows, applications for the week ended Dec. 26, 2008, ran 155% ahead of the mortgage activity seen during the same week in 2007, according to the Mortgage Bankers Association’s weekly survey.    Many mortgage lenders say the rise in applications coincided with another drop in mortgage rates, as the federal government’s efforts to throw a lifeline to the residential mortgage market begin to manifest.  FHA home loan rates remain low and most of the new home loan applications reflect some type of FHA loan product.

According to the MBA’s survey, rates on thirty-year fixed-rate mortgage loans averaged 5.03% last week, down from 5.04 % the previous week.  Mortgage refinancing applications for refinancing made up 82.9% of all applications filed for the week ending Dec. 26, 2008, while the share of applications for adjustable rate mortgages, or ARMs, averaged 0.8%.  Not unlike the refinance boom that occurred during the last economic downturn in 2003, local lenders say their phones are continuously ringing and home refinancing is on most borrower’ minds. The difference between 2003 and now, however, rests in the guidelines.  “Mortgage rates have gone down; they’re not the lowest they’ve ever been, but they are definitely the lowest they’ve been in a while. Of course, these days are tougher than in the old days because of what’s gone on in the past year or so,” said Bob Neville, lender at Franklin Financial Mortgage in Southlake and board member with the Dallas-Fort Worth Association of Mortgage Brokers, or DFWMBA. “Things have tightened up considerably and it’s a whole new ball game, but people with good credit and a little equity are able to get some very nice rates.”

Scott Burdette, managing director of the Dallas-Fort Worth offices of IRR–Residential Valuation Consultants, said his firm also has seen a drastic uptick in refinancing applications for local properties.  “You’ve got willing people, but not all are capable because of new rules,” he said. “But there’s a definite spike and that means at least people are trying to be smart and make sure they’re in the best situation they can be in.”  Read the complete home financing article >

The U.S. Department of Housing and Urban Development released its first revision to the Real Estate Settlement Procedures Act in 30 years. The new form requires disclosure of yield spread premiums paid to mortgage brokers.  HUD claims the new loan disclosure revisions for a new standardized Good Faith Estimate that HUD estimates will save borrowers about $700.  “For the first time ever, HUD is requiring mortgage lenders and brokers to provide borrowers with an easy-to-read standard Good Faith Estimate that will clearly answer the key questions they have when applying for a mortgage loan,” HUD said.

The current financial crisis began with the collapse of Fannie Mae and Freddie Mac in July. The dominant institutions in the American mortgage market, and among the most powerful institutions politically, became wards of the government in a matter of weeks. What was their fatal flaw?

One popular explanation, often advanced by the GSEs themselves, is their “affordable-housing goals.” In 1992, as part of the Federal Housing Enterprises Financial Safety and Soundness Act, Congress required the GSEs to devote some of their home loan purchases to housing for families in the lower half of the income distribution, and also to families living in areas considered to be “underserved.” Housing for both homeowners and renters is included. Specific %age targets were set on a transition basis; the U.S. Department of Housing and Urban Development was required to revise the targets periodically, by regulation, which it has done 3 times (1996, 2001, and 2005).

The law requires HUD to set goals on the basis of the kinds of mortgage loans the GSEs actually buy — their market — and the importance of lower-income borrowers and underserved areas in that market. Research in the late 1990s showed that the GSEs were already buying the better-quality bad credit mortgages and also low-documentation loans (“Alt-A”), so the goals in 2001 and 2005 included these loans as part of their market.

The home financing goals will then be factored in as %ages of the mortgages the GSEs actually bought between 2001 and 2004, for example, out of every 100 loans they bought, 50 were supposed to be for homeowners and renters in the lower half of the income distribution. This may sound high, but in those years other mortgage lenders, making loans to similar types borrowers as the GSEs, made more than 57% of their loans to lower-income families. Effective in 2005, the goal was raised to 52%, with a further increase to 53% for 2006.

RESPA continues to promote affordable-housing goals, but is that realistic? They let the GSEs off the hook and shift the blame to the Bush administration, at the same time diverting attention from the refusal of congressional Democrats to allow stronger regulation of Fannie and Freddie after their accounting scandals surfaced in 2003. The goals are even blamed by some conservatives, who see them as credit allocation, and overlook the special privileges conferred on the GSEs by their federal charters which create something close to a federally sponsored duopoly in the mortgage financing market.

I heard an awful report about Citi Mortgage freezing home equity credit lines.  A mortgage lender recently reported that one of his clients heloc was frozen without notice.  Here are the facts according to mortgage banker Bryan Dornan, “The borrower was a 781, full doc borrower under 40% DTI and under 75% CLTV.  The borrower lives in San Diego county and reported that they had always made their mortgage payment on time and they have even made a principal paydown on the credit line that paid off over $100,000 of the outstanding balance.” 

One day they received a letter in the mail that CITI was freezing their credit line effective immdiately.  The borrower had the option to appeal the decision and when they followed that path, they had to pay for a new URAR appraisal from an appraiser that Citi Mortgage selected.  I don’t know about you, but when a 780 fico, full doc borrower under 75% CLTV gets their credit line frozen, I start to wonder…  Is this the state of mortgage brokering and lending in 2008?   With banks freezing 2nd mortgages on borrowers like this I start to believe that the mortgage crisis has just begun.  Please share your recent lending stories.