Roseville Loan Expert

California Assembly Bill: SB 1275, which would have a negative impact on lender/servicers in California, and ultimately mortgage borrowers in the state, failed this morning on a reconsideration vote in the State Assembly.  The bill failed 29-36, and is not expected to be revived.  A number of  organizations, including the California Mortgage Broker’s Association, opposed the bill for the following reasons:

• Measure is unnecessarily complex and riddled with procedural traps
• Promotes strategic defaults negatively impacting communities
• Fails to require tender by borrowers as a symbol of good faith
• SB 1275 invites litigation through inclusion of TWO private rights of action
• Inappropriately meddles with pending litigation
• The measure may be preempted for federally chartered institutions creating an unlevel playing field exacerbated by the recent credit union only carve-out

 For full bill text, click here

To read more about the California Mortgage Brokers Association’s opposition, click here

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Just a quick look at last week’s mortgage bond market. Up and down (red is bad) in huge strokes all week long. I hope you see how important it is to work with a mortgage professional that not only has access to this data, but understands how to use it to your advantage. It could make a huge difference in how much interest you pay over the life of your loan!

Here’s to hoping this week starts off with a bang and we can keep these historically low rates for a little while longer (so far it’s already looking good)!

-Greg

There is more important news for first time homebuyers in California expecting to get the 2010 tax credit after buying their homes. In the link below the Franchise Tax Board spells out the updated process, how much is left, and what to do to ensure (or give yourself the best chance anyways) you get the credit…

http://www.ftb.ca.gov/individuals/new_home_credit.shtml

The site claims they will be updating the website daily until the deadline to request the credit; AUG 15th, 2010. If you haven’t filed your request yet, get on it!

I received a letter from the federal department of Housing and Urban Development (HUD) informing me that there are going to be sweeping changes to the FHA mortgage insurance program starting next month. This is something that has been talked about for some time but nothing had been finalized. The major change is in FHA’s Up Front and annual mortgage insurance premiums, the Up Front premium is being reduced my more than 50% (from 2.25% to 1%!) and the annual premium is being increased from 5.0% or 5.5% (depending on loan-to-value ratio) to .85% or .9%. But what is FHA mortgage insurance and what does this mean?

I was once told that FHA IS MORTGAGE INSURANCE. FHA is the government’s program that allows more Americans to own homes. They have both purchase and refinance programs designed to allow those with less of a down payment (equity for refiance customers) and/or lower credit scores than the conventional mortgage market will allow. To keep the program safe and tax payers off the hook for FHA losses, HUD employs a mortgage insurance premium to keep the program viable. EVERY FHA LOAN HAS MORTGAGE INSURANCE (MI). This MI premium keeps the program solvent, allowing for the program to continue and more people to become homeowners.

Recently, with the decline of conventional financial availability, FHA’s market-share has grown. So much so that they needed to make a change to keep the program running well. These changes will make a negligible difference to homeowners payments but will keep the program up and running for the long term. Up until these changes took place the UFMIP premium for an FHA loan was 2.25% of the loan amount. Although this amount is not required to be paid by the homeowner at closing it is financed into the loan, making the loan amount thousands of dollars higher than it otherwise would be and increasing the monthly payment accordingly. The annual MIP was .55% (or .50% with at least 5% down payment) but that is not being raised to .90% (or .85% with at least 5% down payment). This, of course, is going to increase monthly payments.

What does this mean? Well, not much in the beginning. Those obtaining FHA financing will have smaller loans, a good thing, but their monthly payment will be increasing but about the cost of a trip for two to the movies (without popcorn, candy, and drinks!). Not a bad price to pay to keep these programs viable and starting out with a smaller loan. But that still seems like a negative on the surface. Higher monthly payments, no matter how small the increase may be, is a negative.

However that is not looking at things in the long term. One thing to remember is, FHA’s mortgage insurance is only required to be in place for 5 years, or when the mortgage balance reaches 78% of the original purchase price, whichever comes last. Anyone that keeps their home long enough to realize the deletion of the annual MIP will see huge savings over today’s situation. To keep it simple, their monthly mortgage payment without the MIP will be less from day one because they are only financing the Up Front MIP of 1% of the loan amount, not a whopping 2.25% as they are today, so their loan amount is smaller. That principal and interest payment is the same for the life of the loan and when that MIP premium they are paying for the first 5 years falls off, their payment will be reduced drastically.

In the short term this change will not mean much to people; loan amounts will be a little smaller, the overall payment will be a tad higher, and this valuable program will stay in effect for more Americans to utilize to become homeowners or refinance to today’s incredibly low rates. Those that keep their homes/loans for 5, 10, 15, 20+ years will realize huge savings in the later years. Seems like a win-win to me.

Your Local Expert,
Greg Cowart

The mortgage industry can feel a little more patriotic this 4th of July holiday now that President Obama has signed two bills to re-start the flood insurance program and extend the closing deadline for homebuyers seeking a tax credit.

The National Flood Insurance Program has been shut down for the past month (as it had expired earlier in the year and congress had not managed to get an extension through yet), which has tied up mortgage closings in many flood-prone areas. The bill – H.R. 5569 - President Barrack Obama signed authorizes FEMA to approve new flood insurance policies through September 30. It also allows FEMA to approve flood insurance applications and renewals that have been pending since the June 1 shutdown.

The second bill – H.R. 5623 - extends the closing deadline for the homebuyer’s tax credit program by three months to September 30. Originally, homebuyers who signed a sales contract by April 30 had until June 30 to close and qualify for the tax credit. But a tax credit-driven jump in home sales caused closing delays. The National Association of Realtors warned that up to 180,000 buyers could miss the deadline and lose their tax credit — $8,500 for first time homebuyers and $6,500 for repeat buyers. Real Estate agents noted that changes in mortgage settlement rules and lapses in the flood insurance program and Rural Housing Service single-family loan program contributed to closing delays.

1. I applied for the 2009 New Home Credit, but didn’t get it since the money ran out. Can I apply now since there is more money available?

 No. The 2010 New Home / First-Time Buyer Credits are only available for purchases which close escrow on or after May 1, 2010 

2. I just closed escrow on a new home on April 26, 2010. Can I apply for the New Home Credit? 

No. The 2010 New Home / First-Time Buyer Credits are only available for purchases which close escrow on or after May 1, 2010. 

3. What is the difference between requesting a reservation and applying for a credit? 

Reservations can only be requested for the New Home Credit and are optional. Since the credits are allocated on a first-come, first-served basis, a reservation will hold the buyer’s place in line until two weeks after escrow closes, the due date of the application. Applications are used for both the New Home Credit and the First-Time Buyer Credit and are required for either credit. 

4. Why can’t I request a reservation for the First-Time Buyer Credit? 

The reservation process is intended to allow buyers, who are purchasing a new home that may not be completed until after the $100 million cap is reached, to still have an opportunity to apply for the credit. This prevents some new home buyers from being disqualified just because the home they are purchasing is in an earlier stage of construction. 

5. How do I reserve a New Home Credit? 

Buyers who will qualify for the New Home Credit and enter into an enforceable contract on or after May 1, 2010 to purchase a new home may apply for a reservation using FTB 3549-RR, Reservation Request for New Home Credit. Both the buyer and seller must certify on the form that they have entered into an enforceable contract. Specific pages of the purchase agreement must be faxed to FTB along with the reservation request so FTB can verify the information. FTB will send the buyer a letter stating whether the reservation request is approved, revised, or denied. 

6. Does FTB’s approval of my reservation request guarantee my credit? 

No. FTB 3549-A, Application for New Home / First-Time Buyer Credit must still be completed and faxed, along with the buyer’s final settlement statement, to FTB within 2 weeks after escrow closes. If FTB does not receive the completed application and the settlement statement within 2 weeks after the close of escrow, the reservation will be cancelled and you will not be eligible for the credit. 

7. Can I just send my application for the New Home Credit with my reservation request? 

No. Any application (FTB 3549-A) received before escrow closes will automatically be denied. Applications are only valid after the home is actually purchased. The date of purchase is the date escrow closes. 

8. I entered into a contract to purchase a new home before May 1, 2010 but the house will not be completed for several months. Can I request a reservation? 

No. Reservations for the New Home Credit can only be completed if the contract is entered into on or after May 1, 2010. However, if the contract is cancelled and a new contract is entered into on or after May 1, 2010, you may request a reservation. 

9. How long will it take FTB to respond to my application or reservation request? 

It will probably take FTB 3-6 months to respond to your application or reservation request. We must build a new computer system before we can begin verifying the applications and reservation requests. Please wait at least 4 months before contacting FTB regarding your application or reservation request. Because of this delay, it will be important to keep a copy of the fax confirmation. 

10. I requested a reservation, but I have not received a letter from FTB telling me whether my reservation request was approved. Now escrow is closing. What should I do? 

Do not wait for FTB’s response. Complete an application (FTB 3549-A), and make sure it is faxed to FTB within 2 weeks after escrow closes. If FTB does not receive your application on time, your credit will be denied. 

11. I requested a reservation, but now I will not be purchasing the home. How do I notify FTB? 

Write “Cancel” across the face of Side I and Side II of the original reservation request (FTB 3549-RR) that was faxed to FTB and fax it to FTB at the number shown on the bottom of the form. Use this method regardless of whether or not FTB has responded to your original reservation request. 

12. I’m a First-Time Buyer, purchasing an existing home that has been lived in before so I can’t request a reservation. However, I think the $100 million will run out before escrow closes. Can my escrow person send my application early? 

No. If FTB receives your application (FTB 3549-A) before escrow closes, your application will be denied. 

13. I am purchasing a duplex and intend to live in one of the units. Do duplexes qualify as a “single family residence?” 

The unit that you will live in qualifies as a “single family residence.” However, the credit amount is determined by the portion of the purchase price allocated to the unit that you will live in. Multiply the purchase price by the square footage of the unit you will live in divided by the total square footage of the duplex. Use the same method if you are buying some other multiplex. 

14. I currently own my home, but I am selling it and buying a new home that has never been lived in. Do I qualify for the New Home Credit? 

Yes. You do not have to be a first-time buyer to qualify for the New Home Credit. 

15. I just sold my home in another state. I am now moving to California and buying a home that has been previously occupied. Will I qualify as a First-Time Buyer since I have never owned a home in California? 

No. If you have owned a principal residence within the last 3 years, you do not qualify for the First-Time Buyer Credit, regardless of where the home was located. 

16. I am married, but I have been separated from my wife for several years. I have never owned a home, but my wife purchased a home last year that is now her principal residence. Since my wife will not be purchasing the home with me, can I apply for the First-Time Buyer Credit? 

No. If you are married on the date you purchase the home, you do not qualify for the First-Time Buyer Credit if either you or your spouse has owned a principal residence within the last 3 years. It does not matter that your spouse is not purchasing the home with you or that you are separated. 

17. I qualify as a First-Time Buyer and I am purchasing a home that has never been lived in. Why can’t I choose which credit I want instead of having to get the New Home Credit? 

When buyers qualify for both credits, the law states that the amount will be allocated from the New Home Credit. The money for the First-Time Buyer Credit is expected to run out much faster than the New Home Credit. 

18. I am a First-Time Buyer and I am purchasing a home that has been previously occupied. Do I need to have the seller provide his/her SSN and address? 

No. Seller information is no longer required for the First-Time Buyer Credit. The application (Form 3549-A) was revised May 26, 2010, eliminating the seller information requirement for the First-Time Buyer Credit. If you previously faxed an application to us with the seller information included, do not send a revised application. 

19. I faxed my application to FTB, but I forgot to include the HUD-1 statement. What should I do? 

Fax the HUD-1 statement along with a copy of your original application to the same fax number. Include a note explaining why you are sending the application a second time. 

20. I faxed my application to FTB, but I made a mistake on the application. What should I do? 

Fax the corrected application to the same fax number. Include a note explaining why you are sending the application a second time. Do not send the HUD-1 statement a second time. 

21. How is the two week period to file an application determined? 

Applications (FTB 3549-A) must be received by FTB within 2 weeks after escrow closes. Two weeks means 14 calendar days. A calendar day starts at 12:00 AM and ends at 11:59 PM. Saturdays, Sundays, and holidays are included. We count the day after escrow closes as the first full day. For example, if escrow closes June 1, 2010, the application must be received between June 1, 2010 and June 15, 2010. If the application is received before June 1, 2010, or after June 15, 2010, the application will be denied. 

Information obtained from the CA Franchise Tax Board; 

For more information: http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml

As I wrote back in March, “Walking away” from your mortgage? Maybe think twice, contrary to popular belief it’s already impossible to “walk away” from your home unscathed and there are plenty of reasons not to. However today government-sponsored mortgage giant Fannie Mae announced a new policy designed to encourage borrowers to work with their current lender and pursue alternatives to foreclosure, giving homeowners even more incentive not to “walk away” from their home and mortgage.

Under the new rule: “Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.” Fannie Mae backs the vast majority of non-government loans (FHA, VA, USDA, etc) so this might be a big factor to a lot of people. As of right now it is possible for buyers to get a new Fannie Mae loan in as little as 2-3 years after a foreclosure, this rule more than doubles that time IF the homeowner/buyer falls under the

“We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, executive vice president for Fannie Mae’s credit portfolio management. “Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.”

Due to the econpomy and current real estate climate they have not been going after those that choose to walk from their mortgage obligation over the Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.

Let me know if you have any questions..

-Greg

Today’s payroll flop — only 20,000 real jobs created in May — will take some time to settle all the way in. Immediately: 10-year T-notes are 3.22% (from 3.36% yesterday and 3.99% six weeks ago), and the best mortgages below 5.00%.

The payroll report has confirmation: new unemployment has held high for five months; May retail sales look soggy and auto sales flubbed in May.

In days ahead, the entire recovery camp from government to stock-pushers has more than explaining to do. It must change its mind.

All in one fur-ball: How can mortgage rates be so low, and home prices so low, home affordability the best ever measured, yet housing defies recovery? One unifying answer: credit. Not enough, and wildly too tight. The credit dearth is perfectly rational. At default rates like these, nobody knows what new loan is safe to make, and underwriting has been overtaken by hand-shaking, eye-glazed panic. The horrifying conundrum: new loans will inevitably produce new losses, yet without enough new loans, losses on existing ones will be greatly higher.

The good thing for us is hidden in the above. Rates are at all-time lows and home affordability has never been better, the perfect storm. And even though it may not seem like it, we’re lucky here in California. Throughout the rest of the country the loss of the $8,000 home buyer tax credit has taken it’s toll as purchase applications are down sharply from a month ago (even though prices are the same and rates are lower) but we have another $10,000 tax credit available to use here in California! The local Sacramento area market is actually looking up with an every so slight month-over-month and year-over-year price increases in housing. Uber-low rates, dropping unemployment rates, and value in home prices coupled with that free $10,000 tax credit available to many Californian homebuyers should help that continue until the economy and national housing starts to pick up as well.

The glass is half empty, but it’s actually more than half full. Somehow…

Fannie Mae HomePath Financing…. Have you heard of it? If not you’re in for a nice suprise. This is a little-known program recently rolled out by mortgage giant Fannie Mae that helps them get some of the foreclosed homes sold and buyers into those same homes with a fantastic mortgage for taking it off their hands.

 Ask you Realtor about it. Any time you see this logo on a listing or on the MLS it means the home is already approved for HomePath financing. OK OK, what is HomePath and why do I want it anyways? Well, Homepath is probably the best loan out there for buyers with low down payments. The minimum required down payment is actually lower than FHA (3% to FHA’s 3.5%) and there is no MI (Mortgage Insurance) or appraisal required. Not only that, they may give 3.5% back to the buyer for closing costs so it really is the lowest down payment option in the Sacramento area for the majority of future homeowners. Here are a few of the benefits of Fannie Mae Homepath…

* Ask your lender for cost details on loans without mortgage insurance

We have this incredible program in house here at Comstock Mortgage. Give me a call if you have any questions.

Sincerely,

Greg

Sacramento area home prices are getting up off the mat, increasing 12.4 percent from the bottom of the market reached in April of last year. The four-county region —said to be one of the hardest hit in the nation with overwhelming foreclosures and 35 percent-plus drops in home values — had a median-home price of $188,100 last month, compared to the so-called “trough” price of $167,340 a year ago.

A large percentage of the price increase last month came from Sacramento County alone, easily the most affected by the downturn, with numerous communities, such as Elk Grove and North Natomas, reporting 50 percent price drops in some neighborhoods during the worst of it. The Sacramento region had the smallest price increase from the “bottom” of the market in the state, with 40 percent-plus gains in San Francisco and Santa Clara County leading the way. But in our local four-county region Sacramento County was the only county in the region that enjoyed a price increase compared to a year ago. Mostly in the cities of Fair Oaks, Galt, North Highlands, Orangevale and Sacramento, which ofset price declines in Folsom and Citrus heights….