Tag Archives: borrowers

Money Monday: Shopping for Interest Rates

While interest rates have remained at low levels, many analysts are predicting that mortgage rates will be heading upward. With this in mind smart homeowners are rushing to lock in the low rates. The following tips will help interested homebuyers in shopping for the best rate.

mortgage rates and property taxes

How to shop: If you simply call up and ask a lender for interest rates the lender can tell you almost anything. One lender might offer a floating rate, while the next would offer you a forty day rate. Instead, before you call up you need to know two things: how many points you want to pay and how long you want to lock in the rate. You also want to call all the lenders on the same day. This way you will get a common basis of comparison for the different quotes.

Getting a reliable quote: Beware of lenders who promise unreasonable low rates. This does not mean that lenders are unreliable; however there is an incentive for the lender to fudge the quote in order to gain your business (the bait). Then when you go in to fill out the paper work the lender will change the rate on you (the switch).

How to Really Shop for a Lender: The best way is to get a referral, then shop other lenders. Do it properly, telling the lenders how much you are willing to pay in points and how long you want to lock in the rate. Make all your calls on the same day. Tell the lender you have filled out an application and that you will fax it in, so the rate has to be something he can deliver.

Money Monday: Who’s checking your credit?

You may be surprised….

According to the Consumer Federation of America’ research, it’s not just creditors who are looking at your credit scores.

You may not realize this, but creditors are only required to inform consumers that their scores are being checked when consumers have one of the three happen:

  1. They apply for a mortgage
  2. When they haven’t received the best loan terms
  3. When they are denied a loan

Who else may be looking at your credit? 

  • Electric utility companies
  • Cell phone companies
  • Landlords
  • Home insurers

Who is checking your credit score

This infographic is from the CALIFORNIA ASSOCIATION OF REALTORS at CAR.org.

New lending standards for homebuyers

loan modificationsIf you’re considering buying a home this year, but need a mortgage to do so like the majority of home buyers, then perhaps these new mortgage rules will help you pay back your loan.

As of January 10th, the Consumer Financial Protection Bureau has begun implementing new lending guidelines that, according to U-T San Diego’s article on the topic, “federal regulators say will protect against the risky lending practices that powered the housing bubble and caused a huge collapse in home prices that led to the Great Recession” Continue reading

San Diego foreclosures at 6-year low

San Diego County closed out 2012 with foreclosures at their lowest level in six years, says a report released Wednesday from local real estate information company DataQuick.

foreclosuresThe consistent drop in the number of people losing their homes to bank repossessions appears to be a product of an economy on the mend, increasing home values and government-led deals with major banks that promise borrowers alternatives to foreclosure, DataQuick officials said.

December foreclosures plummeted to 355, the lowest level since December 2006, when 288 were recorded. December’s total is nearly 18 percent lower than November’s and half of December 2011’s.

Default notices, the first official filing in the foreclosure process, totaled 878. That’s up 7.2 percent from November but down nearly 30 percent from the same month a year ago…

Read the rest of this article by U-T San Diego here: “San Diego foreclosures at 6-year low”.

FHA’s $16.3B deficit raises specter of taxpayer bailout

A fund used to support the Federal Housing Administration’s single-family mortgage and reverse mortgage insurance programs ended fiscal year 2012 with a $16.3 billion deficit, according to an annual report submitted to Congress.

The shortfall raises the specter that the agency will require a taxpayer bailout next year for the first time in its 78-year history.

In order to avoid a bailout, FHA will raise annual insurance premiums, sign off on more short sales, streamline sales of foreclosed properties, offer “deeper levels” of payment relief through its loss mitigation program, expand sales of delinquent loans, and, for new loans, reverse a policy instituted in 2011 that canceled required premium payments after loans reached 78 percent of their original value.

Next year, FHA plans to raise the annual insurance premium paid by borrowers on an FHA loan by 10 basis points, or 0.1 percent, which is expected to add $13 a month to the average borrower’s monthly payments.

The agency has also vowed to expand its sales of delinquent loans under its Distressed Asset Stabilization Program, committing to sell at least 10,000 such loans per quarter over the next year. Because such sales require investor purchasers to delay foreclosures for a minimum of six months, they represent an opportunity for borrowers to possibly avoid foreclosure while reducing FHA’s costs, according to the U.S. Department of Housing and Urban Development (HUD), of which FHA is a part.

The FHA has been hard-hit by defaults from housing bubble-era loans made from 2005 and 2008, with future losses estimated at $70 billion for loans made in 2007, 2008 and 2009 alone.

The agency has taken steps to strengthen its capital reserves in recent years, including raising mortgage insurance premiums three times in 2010 and again earlier this year. The agency has also tightened credit standards and prohibited seller funding of buyer down payments, a practice the agency now estimates will cost it more than $15 billion on loans issued before 2009.

“While the loans made during this administration remain the strongest in the agency’s history, we take the findings of the independent actuary very seriously,” said FHA Acting Commissioner Carol Galante in a statement.

“We will continue to take aggressive steps to protect FHA’s financial health while ensuring that FHA continues to perform its historic role of providing access to homeownership for underserved communities and supporting the housing market during tough economic times.”

In the report, the FHA said its capital reserve ratio, which measures reserves in excess of what’s needed to cover projected losses over the next 30 years, had dropped to -1.44 percent from an already slim 0.24 percent in 2011. Congress requires the agency to maintain a 2 percent ratio — a mandate the FHA now projects it will meet in 2017, up from 2014 in last year’s projections.

HUD said this year’s deficit “does not mean FHA has insufficient cash to pay insurance claims, a current operating deficit, or will need to immediately draw funds from the Treasury.” The deficit, calculated by an independent actuary, also does not take into account an estimated $11 billion in capital accumulation expected by the end of fiscal year 2013.

“Coupled with the $11 billion in additional capital from expected new insurance guarantee volumes in fiscal year 2013, we believe it is possible to return the (fund’s) capital ratio to a positive level within the year, and reduce the likelihood that FHA will need to call upon the Treasury for any special assistance this fiscal year,” wrote HUD Secretary Shaun Donovan in the report.

Whether FHA actually ends up needing a bailout will be determined not by this report, but by a valuation of the fund made for the president’s budget proposal for fiscal year 2014 to be released in February. A final decision on whether to draw funds for FHA from the U.S. Treasury will be made in September.

This year’s report projections are less sanguine than last year’s because of changes in its economic modeling, lower interest rates that have spurred refinancings and yielded lower premiums, and lower expectations for home prices, which turned around later than projected this year. Appreciation estimates do not include home price improvements since June.

The Center for American Progress (CAP), which describes itself as a nonpartisan research and educational institute, said the news was “almost inevitable” after the FHA stepped in after the housing bubble burst and private capital fled the housing market.

“By living up to its congressional mandate to provide support to the housing market in hard times, the Federal Housing Administration not only funded home loans for 7 million families, but prevented even more catastrophic home price declines,” said Julia Gordon, CAP’s director of housing finance and policy, in a statement. “Such declines could have cost 3 million additional jobs and sent our economy spiraling into a double-dip recession.”

Gordon noted that FHA still has more than $30 billion to settle claims, but federal budgeting rules require the agency to hold enough capital to cover all claims over the next 30 years.

Debra Still, chairman of the Mortgage Bankers Association, agreed that FHA plays a crucial role in today’s market, particularly since the agency is nearly the sole backer of credit for first-time buyers with less than 20 percent down payments.

“These buyers are a necessary support for the housing market. While there is near-unanimous agreement that FHA’s role in the single-family housing market today is too large, we must remember that the housing market would be far worse off, today and in the future, without FHA,” Still said in a statement.

She added that MBA stands ready to work with policymakers to protect the fund and enable FHA to continue to perform its mission in the single-family market. She cautioned, however, that “ensuring the right balance” in forthcoming regulations defining rules for a qualified mortgage (QM) and a qualified residential mortgage (QRM) were important for future credit availability.

QM would establish standards for borrowers’ “ability to pay” the mortgages they seek, while QRM would establish certain baseline standards for safe underwriting and require lenders to retain a 5 percent minimum ongoing stake in any loans they originate that don’t meet QRM requirements.

“For example, a final QM rule could drive an even higher share of the single-family market to FHA if it is not carefully crafted to protect consumers while ensuring the availability of credit from private sources,” Still said.

“More broadly, the best medicine for FHA is a steadily growing housing market with stable home price appreciation, a less likely outcome if the rules cause lenders to increase cost or tighten qualification requirements for borrowers.”

The regulations are under the aegis of the Consumer Financial Protection Bureau (CFPB), which postponed action on both rules in June after protests from Realtors, builders, banks, unions and consumer groups. Under Dodd-Frank, the CFPB is required to issue the qualified mortgage rule by Jan. 21, 2013.

The FHA has repeatedly said it will not require a taxpayer bailout. The National Association of Realtors has supported that stance, and urged Congress not to take steps that might discourage homebuyers, such as raising FHA minimum down payment requirements.

Earlier this year, the FHA got some breathing room after receiving a one-time payment of almost $1 billion from a $25 billion national mortgage settlement with the nation’s five biggest loan servicers.

The government has since sued one of the loan servicers, Wells Fargo, for “hundreds of millions of dollars” due to alleged “reckless origination and underwriting of its retail FHA loans over the course of more than four years, from May 2001 through October 2005.” The bank claims that the lawsuit violates the terms of the $25 billion settlement and has asked a federal judge to throw the case out.         

New short-sale program offers relief for underwater homeowners

One of the federal government’s most-important financial relief efforts for underwater homeowners started operating Nov. 1.

  •  Traditionally short sales, where the lender agrees to accept less than the full amount owed and the house is sold to a new purchaser at a discounted price, are associated with extended periods of delinquency by the original owner. The new Fannie-Freddie program breaks with tradition by allowing short sales for owners who are current on their payments but are encountering a hardship that could force them into default.
  • Eligible hardships under the new program run the gamut: Job loss or reduction in income; divorce or separation; death of a borrower or another wage earner who helps pay the mortgage; serious illness or disability; employment transfer of 50 miles or greater; natural or man-made disaster; a sudden increase in housing expenses beyond the borrower’s control; a business failure; and “other,” meaning a serious financial issue that isn’t one of the above.
  • Homeowners who participate in this new program should be aware that although officials at the Federal Housing Finance Agency – the agency that oversees the program – are working on possible solutions with the credit industry at the moment, it appears that borrowers who use the new program may be hit with significant penalties on their FICO credit scores – 150 points or more.
  • Other factors to consider are promissory notes and other “contributions.” In the majority of states where lenders can pursue deficiencies, Fannie and Freddie expect borrowers who have assets to either make upfront cash contributions covering some of the loan balance owed or sign a promissory note. This would be in exchange for an official waiver of the debt for credit reporting purposes, potentially producing a more favorable credit score for the sellers.
  • Finally, participants should be aware of second-lien hurdles. The program sets a $6,000 limit on what second lien holders – banks that have extended equity lines of credit or second mortgages on underwater properties – can collect out of the new short sales. Some banks, however, don’t consider this a sufficient amount and may threaten to thwart sales if they cannot somehow extract more.

Read the full story
http://www.latimes.com/business/realestate/la-fi-harney-20121111,0,6735335.story

Timing is key when locking home loan

lending ratesBorrowers shopping for a mortgage are obliged to select a lender before the price is “locked.” As a result, borrowers in shopping mode are vulnerable to lowballing — the practice of quoting a price below the market as a way of influencing the shopper’s selection.

Borrowers who have already selected a lender but have not yet been locked are vulnerable to an overcharge at lock, explained to them as being caused by “changes in the market price.” And borrowers who have been locked may overpay if the property appraisal comes in higher than the valuation used to price the loan, and the lender conveniently ignores it.
Continue reading

Why the big banks are doing more short sales

Why the big banks are doing more short sales

“San Diego County’s level of housing distress took a pivotal turn this year. Short sales, once rare deals in the real estate world, now make up a bigger share of the residential market compared to foreclosed homes that have been resold.

Short sales allow homeowners who can’t afford their mortgages to sell their homes for less than what they still owe, as long as the lender says OK. One in five homes resold in the county were short sales, based on August numbers from local real estate tracker DataQuick. Compare that to single-digit percentages seen while the housing bubble began to percolate in 2007.

Short SaleShort sales are expected to become even more common and easier to close as Freddie Mac, which owns or guarantees a sizable chunk of mortgages in California, will make it easier for borrowers to complete them starting next month. Borrowers will see that the process is considerably shorter and that it will leave less of a financial black mark on their credit histories.

Already boosting the number of short sales is a $25 billion mortgage deal between the nation’s biggest banks and 49 states that settled foreclosure abuse allegations and was signed earlier this year. The agreement essentially forces banks to do more short sales and provide relief to borrowers on expedited terms. Some banks are even offering cash as incentives to get more people to short sell.

“Banks are really motivated to do short sales,” said Matt Battiata, who owns Del Mar-based Battiata Real Estate. “…Banks have decided and learned over the last several years that short sales are a much better way to mitigate loss.”

The end result appears to be good for the housing market.

The increase in short sales means a more dynamic real estate market, fewer losses for banks and increased chances that short sellers could buy homes again after a shorter hiatus…”

Read the rest of this article by SignonSanDiego.com here: “Why the big banks are doing more short sales”.

Do you need help in selling your home as a short sale? Give me a call–I have experience in closing over 150 short sales in San Diego county.  – John A. Silva (619) 890-3648 | www.JohnASilva.com