Entries from March 2010 ↓
March 30th, 2010 — Mortgage Industry News
In less than a week, starting Monday, April 5, 2010 the Department of Housing and Urban Development (HUD) will increase fees for new FHA loans and reduce seller contributions. Getting an FHA loan just got more expensive a little harder.
In new policies set forth earlier this year, HUD announced plans to raise the upfront mortgage insurance premium (MIP) from 1.75% to 2.25% for everyone, this represents over a 28% increase in the insurance premium cost to the homeowner. Additionally, HUD will reduce seller contributions by 50% from 6% to 3%. Increase costs, reduce help, sounds like a great recipe to increase homeownership.
There are still a few days left to avoid being subject to higher loan costs, make sure to have the FHA Case Number assigned prior to Monday, April 5, 2010. That means you’ll want to take a full mortgage application before the weekend so your lender can register your loan in time for the deadline.
But don’t leave your application to the last minute.
Friday is Good Friday so most banks will be closed. Your true FHA deadline, therefore, is Thursday April 1. However, Southwest Funding will be open and underwriting files on Good Friday.
Also worth noting is that the FHA isn’t done with its changes.
In its policy statement, the group also announced its plans to petition Congress to raise monthly mortgage insurance premiums. The FHA’s formal request, in summary:
- Raise monthly insurance premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
- Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing
For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approve it, the FHA reserves the right to change its projections. Either way, it means higher costs for consumers.
The best plan, therefore, is to get your FHA mortgage into underwriting ahead of the switches because borrowing money is only becoming harder, and more costly.
March 29th, 2010 — Mortgage Industry News
Mortgage markets spiraled downward last week, raising rates to their highest levels in a month. Last Wednesday, March 24th, was the worst 1-day mortgage market performance in more than 6 months. Even Friday’s rally could barely offset the losses. Most of the movement was tied to geopolitical concerns and worries of a rapidly expanding federal debt load.
The best time to lock a conventional or FHA mortgage rate last week was Tuesday morning.
This week, markets should remain volatile. There’s a large set of economic data due for release, plus trading volume will thin as the week goes on because markets are closed Friday for Good Friday. Coincidentally, Friday is also the day that the March jobs report is released.
The non-farm payroll report is expected to show net job growth of 187,000 in March. This is a large number as compared to last month’s net loss of 36,000 jobs. However, analysts are already dismissing March’s numbers as skewed by both the bad storms of February, and the temporary hiring of Census workers.
In most months, major job growth would be bad for mortgage rates. This month, that won’t be the case. It will take a figure north of 200,000 to cause rates to rise and the higher the actual number, the more that rates will respond.
Also this week, on Wednesday, the Federal Reserve’s $1.25 trillion program to support mortgage markets comes to an end. Fed insiders estimate that the program dropped rates 1 percent since its inception in 2008. It’s reasonable that mortgage rates will rise after its end.
March 24th, 2010 — Real Estate Information
No surprise, Existing Home Sales were down in February, falling 30,000 units compared to the numbers in January. It’s the 4th straight month in which Existing Home Sales were lower, month-over-month.
An “existing” home is one that is previously owned and lived-in (i.e. not new construction).
Existing Home Sales peaked in November 2009, just as the First-Time Home Buyer Tax Credit was set to expire. Immediately thereafter, according to the National Association of Realtors®, monthly sales plunged 17 percent in December, then another 7 percent in January.
Comparatively, February’s dip is a modest 0.6 percent and is more in line with the pre-tax-credit Existing Home Sales trend. The real estate market is rediscovering its normal.
But “normal” may not last for long.
When the federal home buyer’s tax program was extended last year, the new rules stated that home buyers must be under contract for their new, respective homes on, or before, April 30, 2010 in order to claim up to $8,000 in federal money. That deadline is approaching and many markets are experiencing a surge in buyer traffic as April 30 nears.
The Existing Home Sales data doesn’t reflect this new demand, nor the number of new contracts written. It only accounts for home closings and, in February, closings were down.
For today’s buyers, the market looks favorable. The federal tax credit is in place, mortgage rates stubbornly stick near all-time lows, and home prices are staying in check.
Existing Home Sales should gain through March and April, pressuring home prices higher. And, by the time the press reports the gains, the best deals in the city may already be gone. Consider acting sooner rather than later.
March 22nd, 2010 — Mortgage Industry News
Mortgage rates have remained fairly level for a very long time, contrary to the predictions of most experts. Last week, mortgage markets closed unchanged. Monday through Wednesday we saw rates improve only for a sell-off on Thursday and Friday to undo the gains.
The sell-off from last Thursday andFriday may signal that markets are preparing for change.
One key event from last week was the Federal Open Market Committee’s scheduled Tuesday meeting. Upon adjournment, the Fed voted 9-1 to hold the Fed Funds rate in its current target range near 0.000% and reiterated its plan to keep rates low for “an extended period of time”.
The Fed specifically mentioned that its $1.25 trillion mortgage buyback program will end, as planned, March 31, 2010. This could force rates higher over the next two weeks because, according to the Fed, the existence of a buyback program forced rates lower by 1 percentage point in 2009. When the program ends, it’s expected that markets will give back some of that 1 percent, leading to higher mortgage rates.
This week, in addition to the buyback program’s looming end-date, there’s several other potential influences on mortgage rates:
- The Existing Home Sales data for February is released Tuesday, along with the Home Price Index
- The New Home Sales data for February is released Wednesday
- Consumer Confidence data hits Friday
Strength in any — or all three — of these reports should put pressure on mortgage rates to rise.
But there’s one wildcard this week and that’s the aforementioned Kansas Fed President Hoenig’s scheduled speech Wednesday morning. Typically, Fed members stay on message when making public appearances, but Hoenig is expected to talk about why rates should be higher, and what the Fed needs to do to prepare the economy for late-2010 and beyond.
His words could lead Wall Street to rethink its position on the mortgage bond market and that could cause rates to spike Wednesday afternoon.
Mortgage rates remain volatile and are still relatively low. If you’re unsure of whether now is a good time to lock in, consider that there’s a lot more room for rates to rise than to fall right now. Especially with momentum shifting for the worse.
March 18th, 2010 — Real Estate Information
Single-family housing starts remained steady last month, dropping just 3,000 units from the month prior, or 0.2%. For the 8th straight month now, new single family residence construction has been holding flat. Is this a good sign of better times to come?
According to the Commerce Department’s report released March 16, 2010, February marked the 8th straight month in which Housing Starts straddled the half-million marker, dating back to June 2009.
This is a different slant on the Housing Starts story as told by the media.
Most media outlets are reporting that Housing Starts fell 5.9 percent in February. Technically, this is true. Housing Starts did fall 5.9 percent last month. However, the Housing Starts data is comprised of three parts:
- Single-Family Housing Starts
- 2-4 Unit Housing Starts
- “Apartment Building” Housing Starts (i.e. 5 or more units)
The press tends to lump all 3 together but that’s not relevant for everyday homeowners and buyers.
2-4 unit homes, and apartments and condos are a different housing class as compared to single-family homes and are notoriously volatile, too. Single-family starts are more steady and better reflect the country’s housing stock.
Single-family housing starts are up 32 percent over the last 12 months.
Meanwhile, the pace of new buyers has not kept up with the pace of new housing stock. Therefore, because home prices are based on supply-and-demand, the price for a newly-built home was down, on average, in January.
With the federal home buyer tax credit expiring soon, home buyers will likely create new demand for homes. And with Housing Starts holding steady near 500,000, that should push prices higher through the spring months.
March 15th, 2010 — Southwest Funding News
Ask anyone in the mortgage business today how he or she is feeling about their mortgage career choices, and you may get a somewhat defeated response. But you won’t get that response from retail mortgage branch company Southwest Funding owner, Don Yount. Yount and his team at Southwest Fundings corporate headquarters in Dallas, Texas are enjoying their own boom – which is unusual when so many in the mortgage business are going bust.
Government regulations and sweeping changes in policy have literally turned the mortgage business upside-down. Southwest Funding actually sees this as a good thing.
Why?
“Most of the unscrupulous mortgage brokers and loan officers have left the mortgage business since new regulations have begun,” says Yount. “The rogue behavior of people in any business or industry has to be stopped, or the whole industry’s reputation will suffer. Some bad apples have hurt the industry, but I believe our consistent efforts at being ethical and staying within our compliance guidelines, plus the close-knit support of our branches, is contributing to our success. We get personally involved.”
The numbers at Southwest Funding speak for themselves. Since its beginning in 1993, Southwest Funding has grown from a single retail location to over 100 brick and mortar locations in multiple states. The company posted a 26% increase in loan production last year over 2008, despite a troubled economy.
When many mortgage companies have been shutting their doors over the last few years and leaving their brokers in the cold, Southwest Funding offers “a great place to land” by giving originators the option to both bank and broker their loans. This system of choice and flexibility is not new to Southwest, and they are now seeing some companies attempting to copy the Southwest style – but not exactly. The experience Southwest Funding offers is unmatched in the industry and has never been duplicated.
“Some of these net branch type companies have no idea what’s involved in making this type of business model run smoothly,” says Yount. “I hear complaints from those who join us that their former employer wasn’t even telling them all of the fees the corporate office charges until their first loan goes through. We would never do that. It’s sad in a way, what they are doing – but on the other hand it also means the same great originator and their team will probably end up calling Southwest Funding.”
March 15th, 2010 — Mortgage Industry News
For the first time this month, FHA and conventional mortgage rates rose last week. There was little economic news to cause direction either way.
Mortgage rates are far better than most experts have predicted right now. Weaker-than-expected economic data is one reason why. Lack of economic data may be another.
This week, however, economic data returns.
- Monday : Industrial Production and Home Builder Index
- Tuesday : Housing Starts and Building Permits
- Wednesday: Consumer Confidence
- Thursday : Producer Price Index and Initial Jobless Claims
- Friday : Consumer Price Index and Continuing Jobless Claims
And, as if all that weren’t enough to alert you, the Federal Open Market Committee meets for a scheduled, 1-day event Tuesday.
The Federal Reserve is expected to vote to hold the Fed Funds Rate in its current target range near 0.000%, but that doesn’t mean mortgage rates won’t change. Markets are responsive to the FOMC’s post-meeting press release and any clear talk of economic strengthening should drive rates higher.
Wall Street is on the fence waiting for the economic data which will give it plenty to look at.
If you’re floating a mortgage rate, or waiting to lock, be prepared for wild swings in mortgage rates — especially leading up to Tuesday afternoon’s FOMC adjournment. The Fed adjourns at 2:15 PM.
March 12th, 2010 — Mortgage Marketing and Training
What do you do when your borrower owes more than their house is worth? Can you refinance them?
Originally known as Making Home Affordable, the Home Affordable Refinance Program (HARP) is designed to help homeowners refinance their mortgage who may owe more on their mortgage than the home is worth.
Good news for you and your borrowers, the Federal Housing Finance Agency has extended the government’s Home Affordable Refinance Program by 12 months. HARP’s new end date is June 30, 2011.
There are 4 basic HARP criteria every borrower must meet:
- The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
- Your home must be a 1- to 4-unit property
- You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
- Your first mortgage balance must be 125% or less of your home’s market value
To check for the first requirement, both Fannie Mae and Freddie Mac have a website to verify if your borrower has a qualifiying mortgage. Fannie’s website is http://www.fanniemae.com/loanlookup; Freddie’s is http://freddiemac.com/mymortgage. If you don’t locate the loan on either website, your borrowers mortgage is backed by a third-party and is not HARP-eligible.
For borrowers that meet HARP’s criteria, there are some underwriting details which you should know.
If the original mortgage did not require mortgage insurance, the HARP mortgage will not require it, either – regardless of the new loan-to-value.
Additionally, all HARP refinances require income verification. It doesn’t matter if the original mortgage was a stated income or a no income verification loan. Your borrower should expect to produce 1040s and W-2s for their HARP refinance and asset statements, too.
Finally, second (and third) mortgages may not be “rolled in” to a new first mortgage loan balance. Suboridinate lien holders must agree to remain in a junior lien position, regardless of combined loan-to-value.
Southwest Funding offers training and support on HARP to all of its retail mortgage branch offices, as well as many other unique mortgage products. In addition, the company is able to both bank and broker these loans. If you would like more information on HARP or what Southwest Funding can do to help your business, contact us today.
March 9th, 2010 — Real Estate Information
In November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of “move-up” buyers — homeowners that have owned and lived in their home for 5 of the last 8 years.
The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.
To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.
In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:
- You can’t purchase the home from a parent, spouse, or child
- You can’t purchase the home from an entity in which the seller is a majority owner
- You can’t acquire the home by gift or inheritance
- Each buyer in the purchase must meet eligibility requirements
There’s other criteria, too.
For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.
You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional’s opinion is always wise.
And lastly, don’t forget that government’s tax credit program is a true tax credit. It’s not a tax deduction. This means that a tax filer whose “normal” tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.
If you’re currently in the House Hunt, mark your calendar for April 30, 2010. It’s 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase. You may find sellers more willing to negotiate today than several weeks from now.
Get started on opening your Southwest Funding retail mortgage branch today, your mortgage net branch alternative.
March 8th, 2010 — Mortgage Industry News
For those of us in the mortgage origination business in Texas, recent news from the Texas Department of Savings and Mortgage Lending (TDSML) might be a little worrisome.
The SAFE Act requires all residential mortgage loan originators (RMLOs) to submit a filing through the NMLS that will authorize NMLS to obtain a credit report on that individual. As part of this process, state mortgage regulators must determine the individual has demonstrated financial responsibility. The following items will trigger a TDSML review:
Bankruptcies filed within the last TEN YEARS;
Current outstanding judgments (except judgments solely as a result of medical expenses);
Current outstanding tax liens or other government liens;
History of and current collection accounts;
Foreclosures within the past three years;
Three or more accounts more than 90 days past due;
Multiple Social Security Numbers attached to the individual’s name;
Consumer provided comments;
No credit history for the individual;
Credit items the individual is appealing, if noted in the report; and
Outstanding child support.
TDSML will not rely on credit scores when determining an individual’s fitness for a license but may look at systemic, long-term financial irresponsibility as a reason to further investigate the information received before a final licensing decision is made. No single item listed above will serve as grounds for ineligibility, but several will cause further investigation and each decision will be made on a case by case basis.
The NMLS registry will be required for ANYONE originating in the country. For many people in mortgage industry who have seen their incomes drop nearly 70%, those first few items might very well be a sad reality. We want to encourage everyone we are in contact with to carefully review your credit history, and be prepared for a review if you fall into any of the items on the above list.
Southwest Funding works closesly with the TDSML including the Commissioner, Director of Licensing, and General Counsel. We know what it takes to get registered with the NMLS. Contact us today and see how Southwest Funding can help.
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