Since the subprime home loan market crashed in 2006, lenders and banks have been tightening loan guidelines for refinance a purchase mortgages. 

• Credit scores need to be higher
• Income needs to be greater
• More equity is needed to refinance
• More money is required for down-payments

Government loan products like the FHA and VA loan have emerged as the most flexible mortgage for borrowers who are struggling to qualify for a refinance loan. The FHA and VA streamline refinance have helped a lot of American homeowners refinance in a pinch. The FHA streamline does not allow borrowers to finance closing costs in the loan, so borrowers typically have to come out of pocket for lending costs like appraisal, title and escrow.

According to research from Deutsche Bank, the number of consumers in the United States with credit scores below 600 has increased to 26 percent from only 15 percent prior to the start of the recession.  This increase in bad credit scores could be attributed to late mortgage payments, credit card debt settlement or a bankruptcy.  Examining credit data further reveals that 9 percent of all U.S. consumers have a credit score in the 600-649 range.  Today most conventional and jumbo mortgage loan products require credit scores of at least 680. 

Based on current loan guidelines and the credit score requirements for a home loan approval, any applicant with a score below 600 is almost certain to be turned down by a banking institution.  Borrowers in the 600-649 range are also considered “weak” candidates with a high turn down rate, especially if the credit score is below 620.

Based on the total number of Americans with a credit score of 649 or lower, up to 35 percent of all Americans are effectively locked out of the refinance or purchase mortgage market for the foreseeable future.  With foreclosures and default rates constantly increasing, it is conceivable that credit standards could be tightened even further by lending institutions.

Prohibit payments to the loan originator that are based on the loan’s interest rate or other terms. Compensation that is based on a fixed percentage of the loan amount is permitted. Prohibit a broker or loan officer from receiving payments directly from a consumer while also receiving compensation from the creditor or another person. Prohibit a broker or loan officer from “steering” a consumer to a mortgage lender offering less favorable terms in order to increase the broker’s or loan officer’s compensation. Provide a safe harbor to facilitate compliance with the anti-steering rule.

Among other provisions, Section 1403 of the Reform Act creates new TILA Section 129B(c). The Board intends to implement Section 129B(c) in a future rulemaking after notice and opportunity for further public comment. Here are a few discrepancies…

• The Reform Bill gets a bit more specific with the definition of “steering, but the final rules issued today already impose restrictions preventing the originator from steering borrower into loans that are not in their best interest.
• The final rule issued today does not include a provision in the Reform Bill (TILA Section 129B(c)(2)) that says the borrower may not make any upfront payment to the lender for points or fees on the loan other than certain bona fide third-party charges.  Make sure you read that closely, it says UPFRONT.  Some mortgage lenders charge an appraisal fee disguised an “application fee” and will not refund it if the borrower goes with another lender before the home inspection is completed. This regulation eliminates the borrower paying an “application fee” right after they are issued the GFE.
• It is unclear whether or not the Reform Bill’s revisions will affect a home equity credit line as well because they are not considered “Closed End Credit”.

The Lead Planet posted an interesting take on the YSP banning > Fed Bans Lenders from Paying YSP to Mortgage brokers

The Bankrate survey considered San Francisco and Los Angeles in California as they ranked fourth and fifth respectively in a national mortgage cost analysis.  While Mortgage News found that closing costs for San Diego home loans averaged $3,986.  While Orange County home loans reported closing costs of $4,459.

Bankrate.com reported that New York mortgage loans had the highest closing costs at $5,623 and Arkansas had the lowest, at $3,007.

The finance news company also said the financial reform law penalizes companies if they underestimate closing costs, so this year’s survey reporting a 36.6% increase could be a high estimate.   Bankrate also reported that fees charged directly by mortgage lenders increased 22.8%.  Fees charged by third parties such as title insurance companies and appraisers rose 47%.

Home mortgage rates on other types of mortgages were mixed.  15-year fixed mortgage rates were 3.86%, up from 3.85% the prior week. Rates for 5/1 adjustable-rate mortgages, or ARMs, set at a fixed rate for five years and adjustable each following year, were 3.27%, unchanged from the prior week.

Zillow’s rates are based on thousands of custom mortgage interest rates submitted daily to anonymous borrowers through the website. They are not marketing rates, or from a weekly survey.  Mortgage rates, which are linked to yields on Treasuries and yields on mortgage-backed securities, appear poised to move lower. Yields move inversely to price.  Treasuries rallied on Tuesday after the Federal Open Market Committee, the Federal Reserve’s policy-making arm, said it plans to reinvest principal payments from its mortgage holdings to buy long-dated U.S. debt.

The HUD Reform Act of 1989 established the Mortgage Review Board with the goal of to monitoring approved FHA lenders for violations of the agency’s program requirements.  The question is — Will the lenders survive for a year without the ability to originate FHA home mortgage loans?  Read the original mortgage news post online > FHA Mortgage Lenders Lose Certification.

www.youtube.com/watch?v=IeREpKxIYhY

In April, Treasury outlined their “Housing Finance Reform” objectives. The administration’s proposals will be designed to achieve four objectives.

1. Mortgage credit should be available and distributed on an efficient basis to a wide range of borrowers.
2. A well-functioning housing market should provide affordable housing options, both ownership and rental, for low and moderate-income households.
3. Consumers should have access to mortgage products that are easily understood.
4. The system should distribute the credit and interest rate risk in an efficient and transparent manner that minimizes risk to the broader economic system an does not generate excess volatility or instability

Demand for home loan financing has hovered near the 13-year low reached earlier this month, showing the lowest mortgage rates on record have yet to spur sales after the expiration of a government tax credit. It will take gains in employment and in consumer confidence to boost housing.   “The housing market is weak,” Paul Anastos, president of Mortgage Master Inc., a Walpole, Massachusetts-based mortgage lender, said in an interview before the report. “There’s good opportunity out there in the housing market, but because consumer confidence is fairly low, people aren’t really shopping. They’re worried about other things, like jobs.”

Survey respondents reported a drop in the average production volume to $157.8 million from $216.5 million in the previous quarter.  MBA reported that the home loan volume decline was the main driver behind the decline in profitability.   As home loan volume fell, operating expenses increased to $5,147 per home loan compared to $4,402 in the 4th quarter, an increase of 17%.  The “net cost to originate” rose to $2,945 per loan in the 1st quarter of 2010, from $2,345 per loan in the 4th quarter of 2009.  This figure includes all production operating expenses and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.

Despite this challenge as originations declined in the first quarter, the independents and bank subsidiaries still produced an average of thirty two basis points of production profit, primarily resulting from higher secondary marketing gains.”  MBA’s 1st Quarter 2010 Mortgage Bankers Production Survey covers 295 companies, 70 % of which are independent mortgage companies.

An index of home loan applications in the U.S. rose to the highest level in nine months last week as record-low borrowing costs boosted refinancing, the Mortgage Bankers Association said today. Originations probably will decline to $1.48 trillion this year from $2.1 trillion in 2009, according to a July 14 forecast by the group.

Popular loan programs like cash out second mortgage loans and interest only mortgages have almost completely disappeared.  Bad credit mortgage options are few and far between with FHA and VA home loans occasionally taking a risk on a borrower with a poor credit score.  Home equity loans were once offered at 125%, but now you can consider yourself truly blessed if you qualify for a 90% equity loan.  Even the FHA streamline refinance loan requires borrowers to pay for the closing costs “out of pocket.”  Most borrowers are using a FHA loan for cash out refinancing because they do not require a 700 credit score like most home equity lenders demand today.

Undoubtedly the pool of borrowers that qualify for mortgage refinancing or home buying has shrunk, but maybe there is a silver lining.  In the near future interest rates will likely rise.  If you are one of the chosen few who meet today’s home lending requirements you just might qualify for the mortgage loan of a lifetime.  If you do qualify – - – Seize the opportunity and lock into the lowest fixed rate ever!  Read the original Nationwide article > Mortgage Loan of a Lifetime