Mortgage and Real Estate Blog

The new "Mortgage Disclosure Improvement Act" (MDIA) starts next week (July 30 2009) and will likely seriously delay closings - especially over the next few months as unprepared lenders everywhere drop the ball until they all get comfortable and familiar with the new APR (Truth-in-Lending) disclosures. 

Learn what you need to know by watching this quick video at http://www.thinkbigworksmall.com/mypage/player/tbws/12733/1110605

The Federal Reserve Board changes to consumer protection regulations for APR disclosure, while mandated with good intention, will certainly cause delays right at the last moment as FINAL numbers used to prepare the ACTUAL APR are not always known until the last moment. The new rules have such a tight tolerance that lenders will almost ALWAYS have to be redisclosed, and DELAY THE CLOSING while everyone waits for the 3 day waiting period to pass.

The Federal Reserve Board approved final rules that revise the disclosure requirements for mortgage loans under Regulation Z (Truth in Lending) . Regulation Z is a consumer protection regulation that requires lender disclosure of the cost of financing a home, and has been revised to provide greater consumer protection.  The revisions are an amendment to the Truth in Lending Act (TILA) called the Mortgage Disclosure Improvement Act (MDIA) .   The MDIA covers primary residences and second home applications made on or after July 30, 2009, and requires that lenders provide disclosures earlier in the mortgage process.   The MDIA requires the following waiting periods:

• Lenders must give good faith estimates of mortgage loan costs ("early disclosures") within three business days after receiving an application for a mortgage loan (unchanged from current rules). The only fee that can be collected within this three day period is a nominal credit report fee.  
• Lenders must wait seven business days after they provide these early disclosures before closing the loan (usually not a problem, as it takes longer than that to get every done anyway).
• If there are any changes during processing to the terms or cost of the mortgage, lenders are required to give a new disclosure with a revised annual percentage rate (APR), and wait an additional three business days before closing the loan. A change that results in an increase to the APR of 0.125% requires re-disclosure. Closing can occur no sooner than three business days after re-disclosure. "Business days" include Monday - Saturday (excluding holidays).

The burden of proof is on the lender to deliver disclosures and most will not want to make exceptions in fear of closing a loan that is out of compliance.   Responsible lenders have already been doing this disclosure/re-disclosure all along. On most transactions, the actual increased time required to process loans due to MDIA may be three to seven days.  

Plan on additional delays in closing your next real estate transaction as lenders adhere to the new law. 

We are ready and fully prepared for the changes. Remember the lender choice reflects heavily on your future referrals. Once a deal is on the table, time becomes a critical factor.  Any delay or hiccup could mean that the deal doesn't get done.  There's nothing more frustrating than having a deal on the table that falls apart because it doesn't seem to be a priority to the lender who is too busy for your deal while he works on some refinances, or hasn't figured out the new laws.

That's why I make it a habit to make your problems, my problems; your obstacles become my obstacles.  And I work tirelessly to get your deals funded.  For properties in Minnesota or Wisconsin Only, 7 days a week, call (651) 552-3681, or E-mail me your questions.

- Joe Metzler, MMS

Great post - and one worth Re-Blogging. This is NOT written by me, but it sure could have been!

It is the dream of everyone to own their own home. Many potential home buyers have the income and credit to qualify for a mortgage. However, many lack the one essential ingredient to make homeownership a reality; the up-front money needed for down payment and closing costs. 

If you want to buy a home in area code 55106 (East Side of St Paul, Minnesota - Ramsey County), we have access to a special program that will GIVE YOU YOUR DOWN PAYMENT. This down payment and closing cost assistance program is a bona fide gift to homebuyers. There is no obligation to the homebuyer to ever pay it back as long as they live in the home 7-years.

PLUS, you still qualify for up to $8,000 in first-time homebuyer tax credits if they buy BEFORE 12/1/2009.

Call (651) 552-3681 right now to get started.

             

WHITE HOUSE WIDENING MORTGAGE REFINANCE RELIEF PROGRAM

The Obama administration has made changes recently to the current homeowner bailout program available to homeowners who are underwater on their home mortgage loans in an effort to stem the foreclosure problem.

The program is designed to allow homeowners to refinance to today's lower interest rates when under normal and traditional underwriting guidelines, they would not be able to do so.

The current program would allow strapped borrowers with mortgages up to 105% of their homes value as long as they were not behind on their mortgages. The changes just made allow borrowers to now have up to 125% loan-to-value and still be able to refiance.

BUT HOLD ON. While this sounds great on the surface, and while there has been a lot of consumer interest, the program has not come even close to expectations, helping significantly fewer people than Washington anticipated. It is because of these failures that they have expanded the loan-to-value limits.

This programs failures comes on the heals of two previously highly announced homeowner bailout programs called FHASecure and Hope For Homeowners, which both failed miserably in helping consumers.

Why do they fail? A huge issue on the current program has been that so many people owe more than 105% of the current value of their home. So this change should help qualify more people.

With this and the other programs, there is no lender mandate forcing lenders to participate. Many lenders understand giving people 100% (or higher) loans were part of the original problem, and simply refuse to offer the loans.

Underlying guidelines, shall we say "the small print" is also preventing many people from taking advantage of these programs.

In the end, while this announcement should help many more people, I also see this program being labeled a failure.

For more information on the "Making Homes Affordable Program", simply follow this link:

http://joemetzler.com/making_home_affordable_program.htm

Are you an investor looking to take advantage of today's housing market?

Real estate investing is not a major venture to undertake for the average person, but it can be dangerous without the proper tools, if its success you looking for.

The best of tools which would go along way in assuring your success in real estate investing, other than financial capital is information. The adage,' knowledge is power' holds a lot of truth when it comes to knowing when, what and how to invest in real estate. Having and using the right information will keep you even when the property markets are experiencing tough times. You can even beat the recession and achieve your wildest dreams.

With that said, in recent days, a new wrinkle has come into the market that is catching investors and the Realtors they rely on for information off guard (heck, even many loan officers). MANY INVESTORS BUY PROPERTY with CASH. Shortly thereafter, and usually after repairing the home, they look to get a standard loan to replace the money they spend on down payment and repair costs

75% LOAN-TO-VALUE on INVESTMENT PROPERTY is now pretty much the rule of the land when using standard Fannie Mae and Freddie Mac financing TO TAKE CASH OUT as lenders everywhere continue to tighten, rather that loosen underwriting guidlines.

Thats right, CASH OUT is 75% loan-to-value on investment property.

So, while investment properties can be a great deal, having the correct information in the pre-purchase stages is very important.

So what about purchasing an investment property? 20% down is still king when buying.

Dramatic drop in number of licensed mortgage lenders in Minnesota

In 2007, the State of Minnesota tightened requirements for mortgage lenders in an effort to weed out some of the smaller and more likely to be fly-by-night operations. One of the big requirements forced mortgage companies to maintain a large "net worth" requirement, or a large surety bond.

These efforts, along with the general state of the mortgage business has dramatically reduced the number of licensed lenders from over 4,100 in early 2007, to fewer than 1,100 in May 2009.

Hidden in those numbers is the fact that while the number of licenses are down, the number of individuals working in the industry is a bit harder to guage.

Many companies previously required their individual Loan Officers to carry their own license. New Minnesota rules only allow companies to be licensed, not individuals. Many of these people still work in the industy, but simply folded their individual license under the corporate umbrella, or closed their own small company to merge with larger ones.

In related news, the State Commerce Department recently cited 92 mortgage originators for a variety of infractions, but most were for failing to maintain the above noted net worth requirements. Of the 92 cited, just 7 of the companies or individuals kept their licenses.

FHA ANNOUNCES CONSUMERS CAN USE THE $8000 TAX CREDIT FOR DOWN PAYMENT

Consumers across the country are now being told they can take advantage of a Federal Housing Administration program to allow qualified home buyers to apply the $8,000 tax credit when purchasing a home.

FHA has said it will now permit its lenders to provide a short-term bridge loan that will let qualified home buyers use the tax credit to either make a larger down payment above the FHA required 3.5 percent, cover closing costs, or buy down their interest rate.

BUT WAIT: Don't get too excited, as nothing from Washington is this easy!

FIRST: if you read the actual Mortgagee letter from HUD, it says "AFTER you contribute your normal and required 3.50% down payment, you can use the $8,000 for a BIGGER down payment." WOW...  What a joke Washington! This will have little effect for most buyers.

SECOND: You CAN use the money for closing costs - but most people already just "roll it in", so this option is of little significant help

THIRD: We still need to see how the lenders and banks respond and roll this out to actual Main Street home buyers. We also have to see how the ‘bridge loan' companies respond to this and how they will implement this.

Who is going to lend this short-term money, where is it coming from, how much are they going to charge, how to do you get approved? These and more questions all need to get answered before anyone gets too excited about this news.

We also suspect that the $8000 "loan" minus any fees to get this early from the bridge company won't come cheap!

I think this is a good idea, but clearly Washington has misses the mark (AGAIN), and this deal stinks. We only need the recent examples of FHASecure and Hope For Homeowners to see that what sounds good in Washington doesn't usually play out so good for Main Street.

So while this is good news, it is NOT the homerun that some of us were hoping for - at least not yet.

We've been receiving calls all day about the "announced" ability to use the $8000 first-time homebuyer tax credit FOR DOWN PAYMENT. "

HOLD YOUR HORSES... it doesn't exist.... YET!
 
HUD Secretary Donovan appeared at a NAR function earlier today, and this is an exact excerpt of his remarks:
 
"We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a downpayment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to "monetize" the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly."
 
Okay - so what does that MEAN?  It means that they are about to "officially" put their stamp on approving the process (and authority) on who/where/why/when a first-time homebuyer can get a LOAN for the $8000 tax credit - to be used as part of the required down payment!
 
THIS IS HUGE! As soon as the "official" announcement is out, we will get it to you.

 The Death of Private Mortgage Insurance Companies

Ahhh the ever hated PMI on your home loan. The necessary evil. Is it going away?

Private Mortgage Insurance (PMI)? It is (was) an insurance policy required by mortgage lenders on conventional loans when the borrower had a loan-to-value (LTV) greater than 80%. PMI was established to help borrowers with little cash buy or refinance houses. I always called it the necessary evil. The rules were simple. If you didn't have 20% down, you didn't get a loan.

To get the loan, lenders required an extra bit of insurance to protect them, but YOU had to pay for it. The less down payment, the more expensive PMI is as your risk as a borrower went higher.

Then along came 2nd mortgages and home equity lines of credit. With these loans, home owners attempted to skirt PMI by dividing up their loan into two. The first mortgage at 80% loan-to-value or less, and therefore no PMI, plus a second mortgage to cover the difference.

Terms such as 80/10/10, 80/15/5 and 80/20 became common and PMI became an afterthought as people thought they had beaten the lenders. The reality was that for many people, the perceived savings were false, as the second mortgages came at a dramatically higher rate, or with higher risk. I can tell you many stories of people caught with their pants down as the "great rate" on the second mortgage climbed higher and higher. The payments ended up far surpassing the "savings" of avoiding PMI.

OTHER HIDDEN COSTS ABOUND: Most first lien lenders charged you a higher rate on your first mortgage because they knew what you were doing, and you really were not any less risky to them by having two loans. For example, if you had taken a loan WITH PMI, your rate may have been 6.00%, but by doing an 80/10, your first mortgage rate was 6.25%. Also, those second mortgages were never free in terms of closing costs. For many people, the extra closing cost of getting the second mortgage completely ate up all the benefits.

Of course each individual transaction is different, and while some truly gained benefit from two loans, few people ever did the real math to determined the true total cost of their loans over time. Plus, they almost never calculated in the fact that private mortgage insurance can be dropped once your loan-to-value reached 80%.

BEHIND THE MAGIC CURTAIN: Something few borrowers understand about the mortgage industry is who actually underwrites loans. For many companies, the underwriter is actually employed by the private mortgage insurance company, not the actual lender. In simplistic terms, this puts the PMI company on the additional hook for bad underwriting and adds another layer of protecting to the lender. Because of this, while the lenders typically follow Fannie Mae or Freddie Mac guidelines, the PMI company can add their own ADDITIONAL guidelines on top of Fannie and Freddie rules. These additional private mortgage insurance company add on rules have become a major lending industry issue recently, making getting a loan for many, much more difficult.

WHO CAN BLAME THEM?  PMI companies are losing $ Billions $ of dollars to lender claims, and 2nd mortgages and home equity lines are a thing of the past, thrusting PMI companies back into the "only game in town" position as lenders look to reduce their risk. I would anticipate within a short-time, that the private mortgage insurance (PMI) companies will not exist as we know them today, throwing further turmoil into the housing market

NO PMI? NOW WHAT? If the PMI companies die, will you be able to get a loan with less than 20% down or equity in the future? Sure, but I would assume that instead of PMI on your loan, you will probably have some sort of lender self-insured policies which will probably come in the form of dramatically higher rates.

We shall see...

What does this mean for homebuyers and homeowners wanting to get a loan with less than 20% equity in the property? MOVE NOW, and be sure working with a professional loan officer who can properly analyze your individual situation and explain current market conditions. This is almost never the guy quoting the lowest interest rate or the guy answering the phone on some big lender 800 phone number.

Call me with any questions you have concerning the current market, but only for properties located in Mnnesota or Wisconsin.

Making Home Affordable Program

The Obama Administration unveiled the final details of its "Making Home Affordable Program," which is designed to help up to 9 million American families refinance or modify their loans to a payment that is affordable now and into the future.

One of the initiatives in this program is aimed at helping responsible homeowners "refinance" their loans to take advantage of historically low interest rates. Here are some common Questions and Answers about the Refinancing Initiative in the program.

REFINANCING INITIATIVE

Who is eligible? You may be eligible if:

• You own and currently occupy a one- to four-unit home.
• Your mortgage is owned or controlled by Fannie Mae or Freddie Mac.
• You are current on your mortgage payments.
• The amount you owe on your first mortgage is about the same or slightly less than the current value of your house.
• And, you have a stable income sufficient to support the new mortgage payments.

How do I know if my loan is owned or controlled by Fannie Mae or Freddie Mac?

Simply call or email me. I'll help you determine if your mortgage is backed by Fannie Mae or Freddie Mac.

I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program?

Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less, you may qualify. The current value of your property will be determined after you apply to refinance.

If I am delinquent on my mortgage, do I still qualify for the Refinance Initiative?

No. But the good news is, you may qualify for the Modification Initiative. Contact me to discuss your situation and review your options.

I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for the Refinance Initiative.

Will refinancing lower my payments?

That depends. If your interest rate is much higher than the current market rate, you would likely see an immediate reduction in your payment amount.

However, if you are paying interest only on your mortgage, you may not see your payment go down. BUT... you will be able to avoid future mortgage payment increases and may save a great deal over the life of the loan.

What are the terms of the refinance and what will the interest rate be?

All loans refinanced under the plan will have a 30- or 15- year term with a fixed interest rate.

The interest rate will be based on market rates at the time of the refinance. Currently, interest rates are at historical lows, which makes this a good time to examine your refinancing options.

Will refinancing reduce the amount that I owe on my loan?

No. Refinancing will not reduce the principal amount you owe. However, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

Can I get cash out to pay other debts?

No. Only transaction costs, such as the cost of an appraisal or title report may be included in the refinanced amount.

How do I apply for the Refinance Initiative?

Call or email me today to discuss your specific situation and to examine your options. If this plan is right for you, we can begin working on your refinance immediately. PLEASE UNDERSTAND FULL DETAILS HAVE NOT YET BEEN RELEASED TO US, and while we will start taking applications, we will have to wait just a bit for full details and the program to be implemented internally.

As part of the discussion, we may need to look at the following information:

• Recent pay stubs to help determine your gross (before tax) household income.
• Your most recent income tax return.
• Information about any second mortgage on your house.
• Account balances and minimum monthly payments due on all of your credit cards.
• Account balances and monthly payments on all other debts, such as student loans and car loans.

As always, if you have any questions or would like to discuss how this may specifically impact you, I'd be happy to sit down with you. Just call or email me to set up an appointment.

If you are a homeowner who is current on your mortgage payments but unable to refinance to a lower interest rate because your home value has decreased, you may be able to refinance.

Do I qualify for a Making Home Affordable refinance? Answer these questions:

1. Is your home your primary residence?
2. Do you have a Fannie Mae or Freddie Mac loan? If you don't know contact:
   • Fannie Mae,
     • 1-800-7FANNIE (8am to 8pm EST).
     • www.fanniemae.com/homeaffordable
   • Freddie Mac 
     • 1-800-FREDDIE (8am to 8pm EST)
     • www.freddiemac.com/avoidforeclosure/
3. Are you current on your mortgage payments?
    
   • "Current" means that you haven't been more than 30-days late on your mortgage payment in the last 12 months.
4. Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?

IF YOU ANSWERED YES TO THESE FOUR QUESTIONS, YOU PROBABLY QUALIFY

Contact your local lender for more information

In MINNESOTA and WISCONSIN? You can Apply Online 24/7

FOR MORE INFORMATION, Visit www.FinancialStability.gov