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

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New High LTV Refinance Announced, HARP extended

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…

– Greg

(916) 330-4652

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refinance to lower their payment, local housing markets, or local economies; but it is what it is… The change has been rescinded.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.

FHA’s Homeowner Armed With Knowledge blueprint

FHA UpdateLast week the Federal Housing Administration, an arm of HUD (the department of Housing and Urban Development) announced a new “Blueprint for Access” that, if implemented, should lower the cost of having an FHA loan as well as make getting an FHA loan a little easier for some home buyers.

The biggest thing here is the HAWK (Homeowners Armed With Knowledge) program which, in exchange for the home buyer sitting through a short homeowner education course, will cut the historically high FHA mortgage insurance premium factors.

FHA-questions-cost-MIGenerally speaking FHA loans are great. They tend to have lower rates than conventional loans and are easier to qualify for and get closed. The big issue with FHA is the mortgage insurance and how much it can increase a homeowner’s monthly payment.

However due to the housing “crisis” and recession tied to it HUD had to increase the FHA’s cost of borrowing to re-fund its MMI fund (Mutual Mortgage Insurance fund, which losses on FHA loans are paid to lenders from) that had taken a hit due to defaults and foreclosures in 2008-2012. HUD increased both the up-front fee collected on FHA loans (UFMIP) as well as the annual premium that is paid monthly by FHA borrowers as part of their monthly payment to all-time highs; making new FHA loans more expensive than at any time in their history, despite having lower rates than conventional loans.

The HAWK program will reduce the UFMIP by 50 basis points ($1,750 on a $350,000 FHA loan) as well as the annual MIP by 10 basis points ($30 a month on a $350,000 FHA loan).

For those willing to take additional homeowner courses after closing and make on-time payments for the first two years of the loan FHA will reduce the amount of the annual MIP by an additional 15 basis points (another $42 a month on that $350,000 loan, for a total of a $72 reduction in monthly payment).

Right off the top the HAWK program will save an average Roseville/Rocklin/Lincoln buyer between $1750-2,000 off their total loan amount and $70-100 a month off of their payments after two years compared to an FHA borrower that does not participate!

The detailed guidelines will be posted this summer and the program is slated to roll out in the fall. I’ll let everyone know once the program has been implemented and additional details once they are known…

http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2014/HUDNo_14-048

Sincerely,

Greg Cowart

(916) 412-3313 – info@rosevilleloanexpert.com

Credit Corner: New legislation to help consumers

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…

Sincerely,
Greg Cowart

(916) 412-3313
info@rosevilleloanexpert.com

Major changes make what was once impossible possible

Towards the end of 2013 Fannie Mae quietly released an update to their Desktop Underwriter (DU) underwriting system, the system used to underwrite the vast majority of Conventional mortgages nationwide.

Much of the update is inconsequential, it mostly had to do with updating the software to comply with the new QM (Qualified Mortgage) rules that went into effect on Jan 10th, as well as some minor changes to the way DU underwrote HARP refinances, but one big change may positively affect a lot of people. Definitely a lot of people I have talked to over the last couple years.

One of the good things about current conventional guidelines is they allow qualified borrowers to buy or refinance in as little as two years after a short sale so long as they have a 20% down payment or 20% equity in the case of a refinance.

Fannie Mae Roseville Short Sale

Many people suffered the effects of the Great Recession from 2008 – 2011, losing their primary residence or maybe a 2nd home or investment property, and today qualify under Fannie Mae’s guidelines for getting a new mortgage. The issue has been DU has not been able to differentiate between a short sale and a foreclosure when it reads credit reports and it made it so A LOT of people could still not qualify because of the issue with the software.

Yes, a glitch was making it so people could not buy a home or take advantage of recent low rates. 

Fannie Mae has been aware of this issue for a while but never did anything to fix it. Versions of DU were announced and announced and there was no update to fix this issue. Creative lenders (like me) created a workaround with our credit report providers to help DU read the data is was getting wrong accurately but Fannie Mae asked the credit report providers to stop doing this. At the end of the day well-qualified people could not get their loan even though they met all the guidelines.

That is until Fannie FINALLY did something about it with the release of Desktop Underwriter 9.1. Now the software is able to correctly read the credit report and determine if the loan was foreclosed on or was a short sale. Big difference.

If you or someone you know had issues qualifying to buy a home or refinance in the last couple of years with this glitch please give me a call (916.412.3313). It may (probably should) just work this time around! If you want to buy a home or refinance to a lower rate and payment and you had a short sale as recently as January 2012 you may already be able to qualify!