Today President Obama announced a plan for some pretty major changes at FHA that will make mortgages more affordable and accessible to creditworthy families. The most important of which, in my opinion, is the reduction of the annual FHA Mortgage Insurance Premium (MIP) by 0.5%.
As many of you know the FHA MIP has been the highest it has ever been for about the last year and a half. On a 30 year fixed FHA mortgage with a 3.5% down payment the MIP was 1.35%. Drastically affecting affordability on FHA loans as this MIP factor increased payments for new FHA borrowers significantly, making the MIP portion of the payment as much as 25% of the mortgage payment itself.
This was due in part because the FHA Insurance fund, the fund that since its inception in 1934 pays out claims to investors when FHA borrowers default, was below capital reserve levels required by congress due to losses sustained on FHA mortgages originated from 2005-2009 (contrary to what many politicians and media outlets reported, the fund was NOT in the negative and never required a bail out, but the fund has less than the preferred capital reserve percentage).
Also in part due to the fact that many in congress wanted to steer the market away from government loan programs and back to conventional loans (that, for better or worse, are still backed by the US government, go figure). The idea being that with FHA being more and more expensive, it would be less and less attractive.
As a result the FHA Mutual Mortgage Insurance fund is in better shape and conventional financing is a larger part of the market than it has been since the mid 2000’s.
But it isn’t as sweet as it sounds. The MMI fund would have repaired itself without huge increases in the MIP homeowners pay every month as the loans giving the fund issues were all from a 4 year period of 2005-2009, immediately preceding the recession and housing meltdown (interestingly enough though FHA loans still outperformed all other loan types during that period and defaults were relatively low in comparison to conventional/Jumbo), and they are mostly off the books via foreclosure or short sale already. The most recent 4 years of FHA originations are the highest quality loans the agency has ever seen (this is the same for conventional and Jumbo) as well. And both the economy and housing market have been damaged in multiple ways, seeing those that do get an FHA loan have less money in their pocket every month due to the historically high MIP, and also keeping many people from not being to be able to buy at all.
After Obama’s statement today helps fix the damage being done to FHA borrowers the new annual MIP on a 30 Year Fixed with 3.5% down will soon be 0.85%, down from 1.35%. On a $350,000 home in Roseville, after factoring in the $12,250 down payment and 1.75% UFMIP, an FHA borrower under the new MIP schedule will save $1,689 a year, or $140.75 a month!
Even though 0.85% is still well above historic norms for FHA’s annual Mortgage Insurance Premium industry estimates show that this will help 800,000 homeowners refinance to a significantly lower mortgage payment, especially seeing that rates right now at near historic lows, and help as many as 250,000 people become homeowners, while continuing to help build reserves in the MMI fund to protect against unforeseen future losses.
As mentioned right off the bat, this is A PLAN. Congress still has to approve the change and predictions are 50/50 as to if they will, with many analysts projecting enough resistance from a number of Republicans that want to see the government having no role in housing what-so-ever, and others in congress that want to wait until 2016 so the MMI fund can acquire reserves more quickly, to derail the plan.
Seeing how well FHA loans originated since 2009 are performing, the increase in health in the MMI reserve fund, the fact that 0.85% is still well above what FHA used to collect, and that FHA MIP premiums are paid for life instead of being able to be removed after 5 years, I can’t see any non-ideological argument against this plan. I supposed we’ll see how this plays out relatively soon.
And welcome 2015! It is going to be a great one!!!
We’ve been waiting and waiting, for years now, for the USDA to change the maps of eligible areas for their popular 100% financing loan program.
Since the 2010 census data became available we’ve known it would be inevitable that the maps will change (and they have given us what the future map will look like, see below) removing Lincoln from the eligible area, but the date for this to happen continually comes and goes with no change.
The use of the future property eligibility maps has again been delayed until Congress passes the 2015 budget, so if your area is eligible on the current maps, it will remain eligible, but don’t ask for how long as no one knows that answer. While you may see December 11th floating around as a date, that is just the date that congress must pass a new budget, vote for another Continuing resolution, or shut down the government.
Bottom line is there is still time to get into contract on a home in a currently eligible area that will no longer be eligible once the new maps take hold (such as Lincoln), but if you are thinking about it there isn’t much more time to make the move. Or is there? Anyone want to bet the move the deadline again?
A common theme on this blog over the years, “shadow inventory” and the future of distressed sales (foreclosures and short sales), is coming up one more time. While conventional wisdom for years has been every bit of good news on the housing front has been a bunch of hype I have been sharing statistics with you that spells out what has actually been happening.
In reality the future foreclosure rate is determined by one thing, one thing most media source and people never mention, people missing their first mortgage payment today. It is as simple s that. If you read this website you know that I share these statistics every few months or so and the number of people missing their mortgage payments has been going down, down, down; and with it the number of foreclosures 6-12 months later.
The nationwide delinquency rate is lower than any time since Q1 2008, the time we began to see cracks in the market but well before the crash happened. This means the foreclosure rate over the next couple years will be lower and lower too. To boot the actual foreclosure start rate is lower than at any time since Q2 2006!
“Shadow inventory,” homes that banks are holding onto or short sales/foreclosures that just haven’t happened yet, the media (and some gloomy Gus’) favorite boogie man is non-existent. The banks have already unloaded their inventory for the most part and home prices have rebounded so much only a small fraction of people still owe more than their home is worth.
I’m sure if you have been in the market to buy or sell a home lately you see that short sales and foreclosures are a very small part of what is out there, when just two years ago they made up the bulk of the market in the greater Sacramento area; including Roseville and Rocklin.
This is all good news!
Senior Mortgage Consultant – 19 Years Experience
As many of you know (and some of you don’t) I felt I had found a career-long home at Innerwork Mortgage a few years ago. When Innerwork was bought out in late 2012 by another company we merged and, of course, we all thought that was going to be for the best but things didn’t work out as planned.
I’m ELATED to announce that I’ve made a move to what I expect to be my home for the next 20 years! At a familiar address, back at the old Innerwork digs, with some of the same players, but with a new banking partner (Roseville-based American Pacific Mortgage).
We’re building a new branch that will be everything the old branch was and SO MUCH MORE! I’m ready to serve the Roseville/Rocklin area like never before and we have some special surprises in store for our real estate partners as well.
Below is a question I received on my website, as well as the answer. For the most part most lenders do a pretty good job of this but sometimes they don’t and you have the power to question them if they think they are collecting too much from you…
* * * * * * * * * * * * * * * * * * * * * * *
A $100. increase on my 30 year fixed mortgage!!
My loan was originally being serviced by Bank of America when we bought this property 5 1/2 years ago. We have never missed a payment or been late. Last January our loan was sold to Penny Mac for servicing, I have had nothing but problems with this company! The online payment center still won’t let me go all way through to pay, the automated phone payment frequently disconnects me, and usually after six tries when I do get an operator they have a $15.00 fee for helping me, Ugh!! Now my question: Can this company charge me an extra $100. a month because of their annual Account Analyst that has predicted that because of the rising costs of servicing my PITI 30 yr. fixed HUD loan my escrow acct. will be short by $1,300.00? If they can do that, it means that my terms HAVE changed and it is no longer a 30 yr. fixed loan! It’s not my fault that Southern California has an unstable economy, why should I have to pay for that! I tried to go back to B of A and they just sent me an automated form letter. Do I have any legal recource at all?? Please help, the payments are scheduled to start next month. L. B.
* * * * * * * * * * * * * * * * * * * * * * *
Everything goes back to the original terms of your mortgage. Something you signed at closing (there are different variations of what this document is called) dictates what a lender/servicer can and cannot do when it comes to adjusting your impound account.
Generally speaking they do have the ability to adjust what is needed on the impound portion of your payment on an FHA loan and this does not change the terms of your loan so long as only the impounds are affected. You are however able to challenge this. HUD (the Department of Housing & Urban Development) created rules to make sure lenders are not collecting too much.
The money in your escrow account is YOUR MONEY and is always your money until it is paid out. But the onus is on you to ensure you are not paying too much. As I am not an attorney I can only say so much, but I can share with you a link to HUD’s guidelines in the subject…
Basically lenders/servicers are only allowed to keep up to a maximum of 1/6 of the total cost of taxes and impounds as a “cushion” over and above the amount they collect so they have enough to make the next payment for your taxes or insurance. The issue here is what figure they are basing that calculation on.
From your question it sounds like you believe that is an arbitrary number, or a number based on an estimate of future expenses that may or may not be accurate. If that is actually the case I would think you have a valid complaint.
Your next step would be to make a “qualified written request” to the lender about the amount they are collecting (send it separate from your payment). They then have 20 days to respond and 60 days to resolve the complaint, including providing documentation that shows their calculations and where it is coming from. If they don’t solve it to your satisfaction you can then file a complaint with HUD.
One thing to remember is, if they are right about needing the extra $1,300, homeowners insurance and taxes are YOUR responsibility even if there are impounds on your loan. If they are short $1,300 for taxes next year it is highly likely that you will have to come up with the money all at once to make sure your taxes are paid on time and with no penalty. Some lender/servicers will pay the extra amount on your behalf but they will bill you for the difference and may increase your impounds by double the amount you were short when that was due (say $200 a month instead of $100) to A.) pay them back, and B.) to make sure there is enough so the next payment can be made when that comes around. Hope that helps.
P.S. If values have gone up quite a bit where you live it might make sense to look at a Conventional loan via a refinance. As opposed to an FHA loan you may not have to have impounds on a Conventional loan. You may be able to lower your payment and have the ability to pay your taxes and insurance on your own and not have to worry about the impounds. Something to think about. I get calls every day for people wanting to get out of their FHA loan and into a Conventional.
Earlier this week PG&E began work on a long-awaited modernization project on four miles of natural gas transmission lines and over 100 yards of distribution lines in the city of Roseville. Completion of all parts of the project is expected to take up to six months.
“These pipe replacement projects will allow PG&E to meet the increasing demand for natural gas to support additional growth in the area and improve the safety and integrity of the natural gas system,” said Erik Kurtz, gas distribution superintendent for PG&E’s Sierra Division. “During these projects, we will work to minimize impacts to customers as best we can, and we very much appreciate the support and patience of area residents and businesses.”
The Northern and Central California energy giant will be contacting residents and business owners in the affected areas to provide information and answer questions. Per regular safety guidelines they will vent natural gas from the pipelines they’ll be working on while they work, but the PG&E is encouraging anyone who has concerns about natural gas odors in the area to call them at (800) 743-5000.
While not law just yet, the Stop Errors in Credit Use and Reporting (SECURE) Act of 2014 will be a huge help to many consumers. We have had conversations about how the archaic credit laws are in the country, both on this website and with some of you in person, and I don’t see it ever being perfect, but this is a good start.
Reading the text of the bill some of it sounds redundant with current protections (that have not quite worked as planned) but this should help in clarifying those protections and make sure both creditors and the credit reporting bureaus are transparent and put more effort into follow the rules, as well as adding some guidelines such as requiring the credit bureaus to provide a free credit score along with the already available free annual credit report
Political realities of today being the political realities of today this may not ever pass (seeing as its authors and sponsors are all from one party) but I can’t see any reason for this to be political at all. My assumption is we see one of the few bills that passes with bipartisan support.
We can only hope, it will be good for ALL of us. At any given time there are an estimated 10 million American adults with major errors on their credit report! It could be you… I’ve been in that group at one time. While I am well versed in credit monitoring and repair due to my profession and was able to quickly fix the issue, most of those 10 million people aren’t.
Read more about the Stop Errors in Credit Use and Reporting Act of 2014 at my preferred credit repair provider’s blog here: BLUE WATER CREDIT BLOG.
Till next time please give me a call if there is anything I can help you with…
It was just pointed out to me by a local Realtor (thank you for all the great info you provide on a regular basis, Jen) that Placer County has updated their tax bill website…
Placer County Tax Bill Search
For any of your property tax bill needs in Roseville, Rocklin, or anywhere in Placer County here is your starting point. Of course you can always call me or your favorite real estate professional and have us do the research for you.
This has been a popular subject on this site, I’ve often discussed it in a way that flies in the face of what the conventional media has been pushing for the last few years; the rate of mortgage delinquencies nationwide has decreased to its lowest level in the last six years (since “pre-crash”).
In the 4th quarter of 2013 the percentage of homeowners at least 60 days late on their mortgages had dropped to under 4.0%. Marking two straight years of quarterly improvements and the first time this metric has been sub-4% since 2008.
The level is still too high, with most economists preferring it be under 2% in a normal market, but improvement is improvement. And steady improvement is even better!
But real estate is always local, right? Indeed, for the most part that is true, and in California our rate is 3.06% for Q4 2013! Beating the national average by quite a bit and putting us nearly in the normal range and at one of the lowest mortgage delinquency rates of any of the 50 states. The rate in the Roseville/Rocklin/Lincoln area is even lower, well within the historically normal range.
Looking forward? As we’ve discussed many times here, less delinquent accounts = less foreclosures in the future. This is why I was telling everyone that was so scared of the media’s boogeyman of the last half decade, “shadow inventory,” that they have nothing to worry about. It didn’t exist and, while the foreclosure problem looked as scary as could be in 2010-2012, the fact late payments were on the decline told us that distressed sales in the future were also going to decline.
Couple that with the FACT that mortgages of the last 5 years have been of MUCH higher credit quality (no more people that couldn’t buy homes could anymore, and are therefore less likely to default), we see an ever-improving real estate market that should stand on its own after years of being propped up by Washington.
Put this one in the win column!
SOURCE: TransUnion Data
Senior Mortgage Consultant – 18 Year’s Experience