The FHFA (Federal Housing Finance Authority, parent of Fannie Mae and Freddie Mac) recently announced a new streamlined refinance program for homeowners without a lot of equity, as well as an extension to the HARP program.
These are related announcements as HARP is the current solution offered to certain homeowners that would like to refinance but otherwise couldn’t due to a lack of 20% equity, and the new program will replace HARP after HARP’s newly extended end date of Sept 30th, 2017. I’ve talked about HARP plenty here over the years, so you probably already know all about it, what’s more important here is the post HARP world we’re about to be living in on October 1st…
The new program will be providing a sustainable refinance opportunity for borrowers without much equity that have demonstrated responsibility by remaining current on their mortgage payments. It makes sense for both American homeowners and the FHFA, as it will help people lower their mortgage payments which ultimately reduces the risk that they will be late or default on their mortgage.
To qualify for the new program homeowners must not have missed (been over 30 days late on) any mortgage payments in the previous 6 months, must not have missed more than one payment in the previous 12 months, must have a source of income, and the refinance must result in a benefit (such as a reduction in their mortgage payment). The new refinance does not require a minimum credit score, no maximum debt to income ratio, and an appraisal will often not be required.
When the final details have been announced you’ll find them here! Until next time…
Part of three big settlements the big three credit bureaus have made over credit reporting mistakes recently (the other two were with the AG of New York and the AG of Mississippi), Equifax, Experian, and TransUnion have settled a 31 state class action suit; paying a fine and, more importantly, ensuring future errors are limited…
“Big 3” Credit Bureaus Settle With 31 States Over Credit Reporting Mistakes
The big story here isn’t the fine, $5 million is a lot of money but nothing to these guys, but how credit reporting is going to be affected going forward. The original settlement is now two year’s old but today the changes are starting to take effect…
Not the least important is the fact that they will now have to hold newly reported medical collection data before putting it on a credit report. This is very important because, more often than not, these kind of collections show up on someone’s credit report before they even find out someone is trying to collect the debt. It gives time for them to handle things, or dispute the debt, before it can ever hit someone’s credit report.
Speaking of disputing debts, the other big part of the settlement is about how these agencies investigate disputes. Up until now the onus was definitely on the consumer (you and me), and even when we are right about something if the creditor responded to the dispute request saying the debt is valid the credit bureau would often side with the creditor and nothing would change about the way the debt was reported.
Going further, and I think this is big, collection agencies now have to include in their reporting who the original creditor was. This might not sound like a big thing but as someone that has literally ready many thousands (probably tens of thousands) of credit reports over the years, helping hundreds of people correct errors on them, I can’t begin to tell you how frustrating it ts to try and help someone fix a collection on a credit report where the collection agency isn’t even saying who the original creditor was!
It remains to be seen how these changes will be implemented, but it is nice to know someone is finally doing something about this. For decades now there was little to no oversight over these companies, companies who’s product might determine whether you get that job or apartment. Not to mention a mortgage!
If you have any questions or would like any help with your credit, or anything else for that matter, please don’t hesitate to reach out…
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.
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.
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).
Fresh 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.
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
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)
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.
The 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.
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.
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?