The National Association of Homebuilders released a report saying it will be catastrophic however there isn’t really much to worry about for most American markets according to many economists and academics…

“As far as Fannie Mae and Freddie Mac are concerned, there is a tradeoff there between supporting the higher priced homes and weaning the housing finance system off of unusual limits it was put under during the crisis.” This is what Fed Chairman Ben Bernanke said to Congress this week. A study done by George Washington University suggested the same thing; the decrease in the maximum loan amount would raise the cost of borrowing for very few people (forcing them into JUMBO loans) and this world have no effect on most mortgage shoppers and a negligible effect on local housing markets.

FHA loans should see the same (lack of) change. According to the G.W. report “The FHA still could serve 95 percent of its historic targeted market even if the maximum FHA loan limit were reduced by nearly 50 percent” and “FHA’s expansion played a major role in keeping the housing market afloat during the economic collapse of 2008 and 2009. However, we now are left with large loan limits that were set when home prices at the top of the bubble. They don’t reflect current market conditions and are unlikely to assist the FHA in reaching its historical constituencies – first time, minority and low income homebuyers.”

“I understand the private sector is taking at least a significant number of the jumbo mortgage market but at a higher cost,” Bernanke also said.

Bernanke does admit that jumbo loans will come, “at a higher cost,” but we have to put in perspective what exactly that higher cost will be. Interest rates on mortgages today are already near historic lows at about 4.5% today and bond yields don’t look like they will be changing too much in the near future.

The bond market doesn’t seem to think the U.S. is really in danger of defaulting on its obligations, so rates should remain steady. If a jumbo rate is higher, even by a full percentage point, it’s still historically pretty low, and buyers looking at a higher-priced home likely expect to pay a higher interest rate already anyway. The jumbo market has always been like this, except before the temporarily loan amount increase the maximum loan amount was $417,000 (more than $200,000 less than the new lower amount will be) so in all reality no one, not even the homebuilders association, should complain.

-Greg

This is such a great program and, as opposed to many Down Payment Assistance programs from agencies like SHRA and CalHFA, this grant is not only for the first time homebuyer, people not buying their first home can qualify, and is actually a grant. Not a 2nd mortgage that needs to be paid back over time or when the house is sold. This is true FREE grant money.

Of course there are some rules and not every buyer or property will qualify. However the vast majority of you that want to buy a home in this market should fit in under the guidelines.

Some of the pertinent features of the loan are:

• The loan can be a 30 year fixed FHA or VA loan ONLY.
• The grant is 3% of the total loan amount and the proceeds can be used for down payment, closing costs, prepaid items (taxes, insurance), and even earnest money.
• The 3% grant is not a loan or second mortgage and does not need to be included in the loan calculations
• No monthly payment: Since it’s not a loan there is no monthly payments and the grant does not have to be paid back

As far as eligibility, here you go…

• Income limits (Sacramento, El Dorado, Placer counties $90,120)
• Buyer does not have to be a 1st time homebuyer
• Owner occupied primary residence in California
• Single Family Residences, FHA approved Condos, Planned Unit Developments (PUD’s) are OK

And here is what is NOT allowed:

• 2-4 Units
• Rental Homes
• Co-ops
• Investment Properties
• Recreational, vacation, or second homes
• Manufactured Housing

Underwriting

• Underwritten by our Innerwork Mortgage (FIMC) Underwriting Staff
• Run through FNMA Desktop Originator Automated Underwriting
• Minimum FICO score of 640
• Seller paid closing costs up to 6% to cover normal and customary fees is allowed

Please let me know if you have any questions about the Platinum Program. It’s not going to be the perfect fit for everyone, but will be for a lot of people and will not be around forever!

~Greg

A.) require a smaller down payment than even FHA (3% compared to 3.5%)

B.) require no appraisal, saving $400-$500 as compared to pretty much any other loan

C.) have no Mortgage Insurance premium added on to the payment, realizing a significant saving over other low-down options

To qualify for the credit the offer must be submitted by 4.11.10 and escrow has to close no later than 6.30.11.  to be eligible for the incentive. Also, while HomePath is available to investors (with at least a 10% down payment) ,the 3.5% closing credit is only available to people intending to live in the property as their primary residence.

“Terry Edwards, VP of Fannie Mae’s Credit Portfolio Management team said “attracting qualified buyers to the market and reducing the inventory of vacant homes remains essential to stabilizing neighborhoods and helping the market recover. Since interest rates remain low, the incentive will go a long way toward helping even more families buy a new home so this is a great time for Fannie Mae to offer some assistance.”

To find a list of HomePath eligible homes give me a call/e-mail or check it out yourself at http://Homepath.com. You can also ask your Realtor to do a search for HomePath homes for you (if you need a referral to a top-quality Realtor in your area let me know). I see a lot of these properties in the Sacramento and Roseville real estate markets. The lists are updated with new properties as they come to the market.

 Fannie’s Press Release

 ~Greg

This loan is originated, underwritten, and funded within Comstock Mortgage, with underwriting/docs/funding all in our Sacramento home office. There are no outside agencies providing overlays, restrictions, or time delays to the purchase process. It really is THAT simple… 

Of course there are some rules and not every buyer or property will qualify. Some of the pertinent features of the loan are:

** Loan
- FHA 30–year fixed rate loan only (no 203K)
- Interest rate is determined daily, currently 5.5%

** Grant
- 3% of total loan amount
- Proceeds can be used for:

• down payment
• closing costs
• prepaid items
• earnest money

- Not a 2^ndlien: Grant does not need to be calculated into the loan calculation in any way

- No monthly payment: Since it’s not a loan there is no monthly payments and the grant does not have to be paid back

 **Borrower Eligibility
- Income limits ( Sacramento, El Dorado, Placer counties $87,720.00)
- Buyer does not have to be a 1st time homebuyer

 **Properties Allowed

- Owner occupied primary residence in California
- Single Family Residences, FHA approved Condos, Planned Unit Developments (PUD’s)

**Properties Not Allowed
- 2-4 Units
- Rental Homes
- Co-ops
- Investment Properties
- Recreational, vacation, or second homes
- Manufactured Housing

 **Underwriting

- Underwritten by Comstock Mortgage Underwriting Staff
- Run through FNMA Desktop Originator Automated Underwriting
- Minimum FICO score of 640
- Seller paid closing costs up to 6% to cover normal and customary fees

 Please call me with any questions…

 -Greg

A HomePath home may offer the best financing possible today. The loan only requires a 3.0% down payment, instead of a 3.5% down payment as required by FHA. There is also no PMI or mortgage insurance required, a huge savings to the new homeowner. Better yet there is no appraisal so the buyer saves even more in closing costs and the escrow can close faster. Given this 3.5% closing cost assistance buyers can get their new home with only 3.0% down, no appraisal fee, and have the seller – Fannie Mae - pay 100% of the closing costs (if you’re paying more than 3.5% in closing costs it might be a good idea to call another lender)! Even if there was PMI required it would still be a great deal.

 To be eligible for this incentive:

• Initial offers must be accepted on or after September 23, 2010;
• Property sales must close on or before December 31, 2010, and close within 60 days of offer acceptance; &
• Buyers must be owner-occupants and confirm that the property will be used as their primary residence by completing a certification form (investors are excluded)

Fannie Mae says that this incentive reinforces their commitment to stabilizing communities and assisting buyers. For more information about the incentive read the press release, or give me call/e-mail…

~Greg

There are a number of other methods being used for this fraud but that is the most prominent. This is not only bad for the lenders – something the public is probably apathetic to – but to you and me every day. As it usually does, greed always has a victim, even if it’s not easily noticed. If you’ve been out there trying to get into your first home for months with no luck, only to see a home you made an offer on for sale again a month or two later, there’s a good chance you are victim to this fraud, albeit indirectly. I’m sure you can see the problem this can cause.

What can we do about this? The DRE asks that we (Realtors, mortgage professionals, and you) report possible fraud directly to them. Especially unlicensed induviduals perpetrating this fraud, something that is extreemely damaging to the consumer and the industry alike. Is it worth the time? I say yes. In a time that ethics is SOOOO imporant in real estate and lending we need to do all we can to stop fraud. It’s important to all of us, even if we don’t think about it every day.

~ Greg

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 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