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Greg Cowart - Mortgage Broker or Lender at The Securus Group
Greg Cowart - Roseville Loan Guy

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Credit Bureaus fined for things they can’t stop doing

Last month two of the major American credit reporting agencies, Equifax and TransUnion, were heavily fined by the CFPB.

Equifax, TransUnion fined for selling consumers credit scores not used by most lenders

The fines came from consumer complaints about practices such as selling credit scores to people that lenders don’t use, as well as using deceptive practices to fool some consumers into signing up for costly monthly subscriptions via “free” credit report offers. They’ll be paying $5.5 million in fines as well as $17.6 million in restitution to the consumers that were harmed by their actions.

If you’ve known me for any time you know I am not a fan of the credit bureaus. They are not held accountable by anyone (until now anyways) and can, through negligence and apathy, ruin people’s lives. As much as one’s credit history and score can do that anyways.

As part of the settlement they agreed to admit no wrongdoing but are paying the fines and should not be continuing these practices.

Administration rolls back FHA MI change…

I may have jumped the gun on that last post. Yes the HUD Commissioned did announce that on January 27th FHA MIP rates were going to be reduced, but I had no idea that our new president’s first act (and I mean within minutes of being inaugurated) would be to roll back this change.

It’s not a good thing for people buying homes, people looking to refinance to lower their payment, local housing markets, or local economies; but it is what it is… The change has been rescinded.

As always I will let you know if there are any changes when they come.

– Greg

This is big, FHA LOWERS MI!!!

In an unexpected announcement HUD Secretary Julián Castro has announced that FHA’s Mutual Mortgage Insurance Fund (MMIF) has more than fully recovered from the trouble it was in due to the Great Recession of 07-2011. This is going to allow them to reduce FHA MI rates by a full .25% and the new rates go into effect on January 27th, 2017.

Anyone getting an FHA forward mortgage on or after January 27th will see their mortgage insurance premium reduced by .25 of what it would be today. This is effectively reducing FHA mortgage rates by .25%, as the net effect on the mortgage payment is effectively the same!

If anyone has been thinking about buying, or considering a refinance, there has not been a better
time to utilize FHA in the last decade. Since the loans are fully guaranteed (by the funds in the MMIF) FHA rates tend to have lower interest rates than Conventional loans do. When combined with what has been a .85% MI factor on most FHA loans (30 year fixed, LTV of 95% or above) for the last couple years (it was even higher before that) Conventional would beat FHA out in quite a few scenarios. That number of scenarios is now lower and FHA is going to be even more competitive.

This is a big thing for a lot of people. It’s going to reduce monthly payments for a lot of people that otherwise would not have been able to buy, which will help support the local housing market, and it will also help reduce people’s monthly mortgage payments if they refinance, which puts money back into their pockets (and ultimately back into the local economy).

FHA loan limits increase too!

FHA UpdateFresh on the heels of Fannie Mae and Freddie Mac increasing their loan limits, the FHA has followed suit.

FHA has become one of the go to loan products for first time home buyers, those with low down payments, and those with credit challenges. It is a great product for many people in that not only does it allow one to buy (or refinance) with they otherwise might not be able to, since every FHA loan is insured against default investors love them and the interest rate is generally lower than many other options!

The maximum loan limit on an FHA loan in Placer, Sacramento, Yolo, and El Dorado Counties is now $488,750. This matches the “high balance” loan limit for Conforming loans (those backed by Fannie Mae and Freddie Mac) in these counties announced last week.

Conforming loan limits increase in first time since 2006

Good news on the loan front! For the first time in a decade Conforming loan limits have increased, offering a little bit of relief and flexibility for borrowers that otherwise would be stuck exhausting more of their resources on a larger down payment, or forced into the Jumbo market.

The new Conforming loan limit for California: $424,100…. High Balance Limit in Placer, Sacramento, Yolo, and El Dorado Counties: $488,750 FHA-questions-cost-MI

Each is an increase that will make a difference in the required down payment for people who’s loan amount would have been capped at $417,000 or $474,950, increasing the standard limit by $7,100, and the high balance limit for the 4 counties in the Sacramento area by $13,800.

Some higher cost counties, such as in the Bay Area and Southern California, see the high balance limit increasing to $636,150 (from $625,500).

There is no information yet on if this will affect FHA loam limits in any way (historically FHA has adjusted their limits with Fannie and Freddie in most, but not all, counties)

Electronic Mortgages the wave of the future?

Today, in our industry, we already do pretty much everything electronically. Pretty much…

But there is a lot of paperwork that still has to be received from the borrower, not to mention signing what seems like hundreds of pages at closing. Due to recent statements by Fannie Mae and Freddie Mac, as well as some new “eNotary” features on the horizon, that could all be changing.

fannie-mae-freddie-mac-roseville-mortgageThe first and most important part of this is the suite of new tools GSE’s Fannie Mae and Freddie Mac are soon to be rolling out to lenders. These tools include things like automated appraisals on certain loans, automatic income verification for most W2 borrowers, and automated asset verification. When applicable these new tools will allow less documentation to have to be faxed/e-mailed to the lender, as well as less time to close, and savings to both the lender and the borrower (especially when the automated appraisal applies).

With these tools Fannie and Freddie are offering some relief from “reps and warrants”, which will create more certainty on the part of the lender and MBS (Mortgage Backed Securities) investors. This should reduce costs for lenders, reduce risk for MBS investors, and (theoretically anyways) should result in shorter loan processing times, lower cost mortgages, and possibly even lower interest rates than otherwise would be able to be offered if these reforms were not implemented.

The automated appraisal will not apply to everyone, nor will the automated income verification (it will not work for self-employed people, for example), but it should result in some documentation relief for most applying for a Conventional mortgage. FHA has no comment. 🙂

The “eNotary” thing is a little further out, beta programs are just beginning, but with the new rules the Fannie and Freddie tools they’re also going to be allowing a fully digital closings, where a notary creates an electronic signature and stamp and all the borrower has to do is click a screen, rather than sign over and over and over again.

Everything will be rolling out in the near future. Of course I will be keeping everyone updated as to the news. This is a VERY big deal when it comes to both the real estate and mortgage industry as it will undoubtedly result in faster loan closings on both purchase and refinance loans, and decreased costs to buyers/homeowners.

Potentially some good news for FHA, the housing market, and possibly even your wallet!

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.

Happy New Year!

And welcome 2015! It is going to be a great one!!!

structure_roseville_mortgage

USDA Update (important in Lincoln)

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?

CURRENT MAP

USDA Current Map

 

FUTURE MAP

USDA Future Ineligible

Delinquencies down to pre-crash levels for first time in 7 years.

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.
up-down-real-estate-roseville-rocklin
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!

Sincerely,
Greg Cowart

Senior Mortgage Consultant – 19 Years Experience
info@rosevilleloanexpert.com
(916) 412.3313