Mortgage and Real Estate Blog

NEWS FLASH: FHA changing MIP / PMI requirements effective July 14, 2008

This information is very important for writing FHA purchase agreements and when speaking to buyers. We suggest you print out and save the graphs below and pass this along to others.

FHA, as with many other lending options is switching to new RISK BASED PRICING. Risk-based premiums enable FHA to respond to changes in the market, like the recent implosion of subprime lending, by reaching out to higher-risk borrowers without having to raise premiums for all borrowers. Borrowers are better off, even with higher mortgage insurance premiums, because FHA insurance gives borrowers access to substantially lower interest rates than are charged for subprime loans, thereby lowering borrowers' overall borrowing costs.

Many of FHA's lower-income borrowers have FICO scores above 680 and would qualify for premium reductions relative to today's premium levels. In fact, as a result of the predominantly low- and moderate-income character of FHA borrowers, a larger number of low-income borrowers would benefit from premium reductions than would moderate-, middle-, and upper-income borrowers combined.  

The first number is the UP-FRONT MIP. The second number is the monthly PMI 

 Call Joe Metzler for all your MINNESOTA FHA deals at  (651) 552-3681

Need all the details?

For easy reading, start at page 26....     http://portal.hud.gov/pls/portal/docs/PAGE/FHA/IMAGE_LIBRARY/5171-N-02%20RBP%20FINNTC%20TO%20PUBLISH%20%205-13-08%20.PDF

Home owners are still optimistic about their home’s value, despite falling home prices all around them, according to a survey of homeowner confidence conducted by Harris Interactive for Zillow.com According to the survey, 72 percent of home owners believe their home's value has increased or stayed the same in the past year.

The reality is 75 percent of U.S. homes actually decreased in value from the same period a year ago, according to Zillow. In fact, in the first quarter home values dropped 7.7 percent year-over-year, which was the largest year-over-year decline in more than a decade, Zillow points out.

But home owners could be growing more realistic. Since the confidence survey was first conducted last December, home owners show signs they are moving closer to reality as 5 percent more respondents in the first quarter said they think their home value has decreased in the past year compared to those surveyed in the fourth quarter of 2007. Source: Zillow.com

What came first, falling home prices or a slumping market?

Chicken or the Egg?

While pundits galore will claim many different views, the answer is rather simple in economic terms.  After years and years of record home price increases, the market simply couldn't support the increases anymore. Buyers could no longer afford the prices. House prices started falling first simply because no one was willing to pay the price anymore.

Most loan programs like to see debt ratios no higher than around 40% of income. FHA for example is 43% on a manual underwrite. Again, simple economics apply here. If the average wage in Minnesota (where I am at) is $784 per week ($40,784 per year), assuming no other debt (not likely), 5% down, PMI, taxes and insurance, this person could buy around a $180,000 home. Start throwing in debt, car loans, credit cards, etc., and the maximum home price starts sinking as fast as a rock in water.

As home prices increased, buyers started switching to high risk, short-term loan products to make homes more affordable. As we can see by today's market, that was a short sighted plan that didn't work out well for many.

Therefore there really is only one way to get demand up and people to start buying again. Affordable prices. Simple supply and demand economics. Too much supply because of too little demand forces prices to drop. As unsold inventory clears, the result will be higher prices, but fewer sales.

The higher price but fewer sales, the normal supply and demand cycle was dramatically upset the past ten years as people threw caution to the wind and kept demand artificially high. Everyone wanted in and was willing to pay whatever price was asked. Everyone figured you could make a killing in the housing market. This was especially evident in the investment property market.

A killing has occurred. Just not the one most people expected.

So what do we do? Nothing. The market will correct itself as prices drop, rates stay attractive, and housing affordability returns.

(C) 2008 Joe Metzler - www.JoeMetzler.com

The real estate market today is one of the toughest in recent history. A large number of foreclosed homes on the market is marking it tough on the traditional home seller. While every market is different, most areas have seen about a 10% drop. The mortgage industry has tighten lending, with a virtual elimination of all non-traditional financing and zero down type options. Most programs today require 3% to 5% down and good credit.

Traditional sellers have the upper hand and an easier time in most cases in the "condition of the property" category versus a foreclosure, but it is still very tough when the banks are liquidating foreclosed properties, and the prices they are giving some of them away at.

So, what is a seller and buyer to do? How does a seller sell and a buyer buy in today's market?

First, understand that because of the large volume of foreclosed properties, it is a great time to be a buyer, whether you are a move-up buyer or a first-time buyer.

For sellers, now is not the time to try and sell your own property. You need the help of a FULL-TIME, experienced Realtor to help guide you through the process. Buyers need the same help to guide them through the maze of properties, both traditional and bank-owned. Having a good agent is extremely important. Take some time to interview your Realtor. How long have they been in business? How many sales have they completed? How many buyers have they helped? Can you get references? Don't just pick your agent from an open house, or use your sisters best friend who got her license last month.

For move-up buyers, you may have to give in to a lower than you like selling price, but you should reap a nice reward on any new home you buy. This is especially true if you are moving from the low $200k to the mid $300k range, as homes that were selling in the $400k range are now in the $350k. Therefore, even if you have to give up a little on your current sale price, you should more than make up for it on the buy side. Remember, a house priced right, and realistic, will sell even in today's market right away. Furthermore, with today's standard fixed rates hovering around 6%, you can still lock in historically great rates!

For first-time buyers, it is a great time to find aggressively priced homes, whether it is a bank-owned foreclosure, or a motivated traditional seller. Not all buyers are ready, or want to tackle "AS IS" foreclosures, so be sure to be honest with yourself about what you are doing to avoid a potential disaster down the road. Today's prices are again extremely affordable in the first-time buyer starter home category. Even though most zero down programs are no longer available, with proper negotiation, you can get the seller to pay most, if not all of your closing costs.  This means you can buy a $150k home for just $4500 out-of-pocket. With programs like FHA, the entire down payment can be a gift from family members, or community assistance programs. That is how it was always done prior to about 1999... and somehow people bought houses then, so don't sit back waiting. NOW is the time to buy!

Finally, one of the first things you should do is get pre-approved with a quality lender who will discuss with you your qualifying ability and program options in today's market. Someone who has the knowledge, expertise, and full range of programs (like FHA) to bring you to a successful no surprises closing. This is never the guy on the internet posting the lowest rate, or at the call center of the big bank. A word of caution. If you are shopping for a lender based on rate, be prepared to get screwed. Be sure to read these informative articles for more information: "Rate Shopping - How to do it right", and "Lender Shopping - How to do it right".

No matter what your real estate needs are, buying or selling, with the proper guidance of full-time professional Realtor and Loan Officer, you should be able to have your dreams come true.

(C) 2008 - Joe Metzler - http://www.joemetzler.com/

Modernizing the FHA: They aren't going the right way!  CONGRESS - Just leave it alone!  

Measures in the bill would overhaul the Federal Housing Administration's loan insurance program, which helps homebuyers with weak credit or little cash get an affordable mortgage.

The changes proposed in the bipartisan bill would raise the FHA loan limits from 95% of an area's median home price to 110%. But in high-cost areas, the FHA loan limit may not exceed $550,000.

Under the bipartisan economic stimulus package passed in February, the cap for FHA loans in high-cost areas was temporarily raised to $729,950.

 The Senate package also calls for FHA loan down payment requirements be raised to 3.5% from 3%.

For clarity, FHA currently has a minimum down payment of 2.25%. BUT, FHA requires the buyer put at least 3% of the purchase price into the transaction.  So if a buyer is paying all their own closing costs, their out-of-pocket is 2.25% plus their closing costs. If the seller or a grant program is paying their closing costs, the down payment is still only 2.25%, but they MUST put at least 3% into the deal.

Learn more at  http://money.cnn.com/2008/04/02/news/economy/housing_bipartisan_draft/index.htm?postversion=2008040311

NEW APPRAISAL GUIDELINES 

FACT SHEET

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FACT SHEET Listed below are key provisions of the March 3, 2008, agreement between Fannie Mae/Freddie Mac, the New York Attorney General’s office, and the Office of Federal Housing Enterprise Oversight (OFHEO). The Appraisal Institute requests feedback from members on the agreement and the new Code of Conduct to help identify problems and solutions to be advanced in our official comment letter. Please submit your comments no later than March 31 to appraisalcomments@appraisalinstitute.org. HOME VALUE PROTECTION PROGRAM AND COOPERATION AGREEMENT  Fannie Mae/Freddie Mac have agreed to adopt a Home Valuation Protection Code of Conduct (below) establishing requirements governing appraisal selection, solicitation, compensation, conflicts of interest, and corporate independence, among other things. Fannie Mae/Freddie Mac will adopt requirements contained in the Code and make appropriate changes to their Seller Guides. The effective date of the changes will be January 1, 2009. The parties to the agreement will establish the Independent Valuation Protection Institute (“the Institute”), an independent entity governed by a board of directors, to monitor and study this area. The board of directors of the Institute must be approved by both the Attorney General and OFHEO, and the Institute may be affiliated with an existing academic, professional association and/or industry organization. The Institute will establish a complaint hotline for consumers, and appraisers will be able to contact the Institute if they believe their independence has been threatened in any way. The Institute will mediate complaints or forward complaints to federal or state regulators or state and federal law enforcement agencies for possible investigation or prosecution. The Institute shall report publicly on the results of its activities to the Attorney General of New York and OFHEO on a bi-annual basis. The agreement requires Fannie Mae/Freddie Mac to provide an opportunity to comment on the new Code of Conduct, agree to review the comments in good faith, and consider any amendments to the Code to avoid any unforeseen consequences. Fannie Mae/Freddie Mac opened the comment period on March 14, and it is scheduled to run through the end of April. HOME VALUATION CODE OF CONDUCT No employee, director, officer, or agent of the lender, independent contractor, appraisal management company, or partner on behalf of the lender, shall influence or attempt to influence the development of an appraisal report. Withholding payment is considered improper influence of an appraiser.
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 Requesting a pre-determined value is considered improper influence of an appraiser. Providing to an appraiser a desired value for a subject property or a proposed or target amount to be loaned to the borrower is considered improper. The lender or any third-party specifically authorized by the lender shall be responsible for selecting, retaining, and providing for payment of all compensation to the appraiser. The lender will not accept any appraisal report completed by an appraiser selected, retained, or compensated in any manner by any other third party (including mortgage brokers and real estate agents). Loan production staff of the lender are forbidden from participating in appraisal selection, review and management functions. Lenders shall not utilize any appraisal report prepared by an appraiser employed by: o the lender, o an affiliate of the lender, o an entity that is owned by the lender, o an entity that owns the lender, o a real estate “settlement services” provider (as defined by RESPA), or o an entity that is owned, in whole or in part, by a “settlement services” provider. The lender shall provide the borrower with a copy of the appraisal report immediately upon completion and no less than three days prior to the closing of the loan. The lender will establish a telephone hotline and an e-mail address to receive any complaints from appraisers or other entities concerning the improper influence or attempted improper influence of appraisers. The lender shall quality-control test, by use of additional appraisals, the appraisals or valuations that are used by the lender, including the results of automated valuation models, broker’s price opinions or “desktop” evaluations. For More Information and To download full copies of the agreement and the accompanying Code of Conduct, visit www.appraisalinstitute.org/cuomofanniefreddie.

The Metzler Group at Great Rivers Mortgage bucks mortgage industry collapse by selling new Home Ownership Accelerator^® Loan. Introduced in the US in 2005, innovative all-in-one home loan combines personal checking with mortgage to help borrowers save thousands in interest payments.

Saint Paul, MN, April 1, 2008 - Fighting against the most challenging reversal in the mortgage market in decades, Great Rivers Mortgage has significantly expanded sales by focusing on the only growing loan product in America, the new Home Ownership Accelerator^® loan. Introduced just a few years ago in July 2005, the Accelerator loan has seen its popularity double in 2007 even as sales of traditional loan products have collapsed.

"We are very fortunate to have gotten certified to sell a loan program that actually is in tune with the new thinking in the marketplace," said Joe Metzler. "People can no longer count on appreciating home values to build equity, so they need a new solution.  The Accelerator provides it, building equity faster by accelerating the reduction of debt."  Metzler credits the Accelerator with bringing Great Rivers Mortgage through the current credit crunch "in much better shape than most mortgage brokers, many of whom have closed their doors."

The new loan is modeled on a popular Australian home loan program called the "all-in-one" loan that has a proven record of helping borrowers pay off their home loans years faster and save them thousands of dollars in interest payments.  This home financing tool works by combining a home loan and a full-service checking account. This innovation can produce large interest savings and loan payoffs in as little as half the time without changing the borrower's spending habits.  This product is timely because a large group of Americans, especially Baby Boomers, are realizing that they must stop extracting home equity and build it back up if they want to retire mortgage-free.

"The Home Ownership Accelerator is the first loan since the 15-year mortgage to help borrowers get done with their debt more quickly," said Joe Metzler. "For decades, the lending business has innovated new ways to make homes affordable to buy.  Now we finally offer more help to borrowers to better manage debt and get debt-free more quickly, if that is their financial goal," added Metzler, "or to manage their equity more effectively and efficiently if they are harvesting home equity for other financial projects."

Homeowners can access their funds to pay expenses just like they would with a checking account, using the unlimited checks, ATM/Visa point-of-sale card, and free online bill-pay that come with the account.  While the homeowner's funds are not being used, they keep the principal balance lower, thereby saving interest.  It essentially creates a higher effective return on those funds. A short film about how it works can be found on a special web site just for this new loan: (www.PayOffQuick.com)

"This is a huge win for homeowners," said Metzler. "Finally, here's an opportunity to shift the focus from simply minimizing payments to actually paying off efficiently, quickly, and with no change to lifestyle.  It's not magic.  It's simply takes the interest spread the banks had and gives it to the consumer." 

"This is the most revolutionary product to hit the U.S. mortgage industry in years," said (president of local mortgage broker association).  "The Home Ownership Accelerator offers consumers a unique opportunity to significantly reduce the amount of interest paid on their home loans without any change to their spending habits."

"It's not for everyone," said Doug Nesbit, National Sales & Marketing Director for CMG Mortgage, the developer of the Home Ownership Accelerator^® loan program.  "You need to have positive cash flow, very good credit, and be disciplined about your use of equity.  But for those people, the benefits can be amazing." 

The Home Ownership Accelerator is offered exclusively through mortgage brokers who have completed a mandatory certification course offered by CMG. The Home Ownership Accelerator^® is currently available in 40 states around the country.

Anyone who does NOT chose their mortgage company and broker carefully is doomed to struggle if they are advised to take out the wrong loan, and probably go-under when recession really hits! Allow Joe Metzler (http://www.joemetzler.com) to earn your trust and business.

Joseph Metzler
Metzler Mortgage Group at Great Rivers Mortgage
651-552-3681

joe@joemetzler.com
http://www.joemetzler.com/

Great Rivers Mortgage, is a partner with Mortgages Unlimited, a private, locally-owned company established in 1991, Mortgages Unlimited is one of the largest and fastest growing mortgage lenders in Minnesota. In fact, Mortgages Unlimited has closed well over $3 billion in residential mortgages!

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Subprime Defaults Exceed 25%

The default rate on securitized subprime loans hit 25.2% in December 2007, up 185 bp from that of the previous month, but defaults on alternative-A loans are also surging, according to a recent reports. 

Alt-A loans were loans where the customers primarily had acceptable credit, but needed "ALTernative" options to finance a home. No documentation of income type loans were extremely high on the list of alternative loan products, as were 80/20 100% combination loans. These borrowers are generally self-employed and highly leveraged.

Defaults on alt-A mortgages jumped to 8.26% in January 2008, up 106 basis points from the level in December and 250 bps from that of November. There are 2.8 million securitized alt-A loans totaling $839 billion, and nearly 20% of the loans are secured by second homes and investment properties.

The alt-A world is vulnerable in today's market with falling house prices and deteriorating labor market conditions. It is really a double-whammy for alt-A. The default rate includes loans 90 days or more past due, in foreclosure, and real estate owned.

Copyright 2008, Joe Metzler, http://www.joemetzler.com. All Rights Reserved.

FHA Market Share to Expand in 2008

In 2006, the FHA's market share was about 3% of total originations. Today, that number is closer to 10%, and climbing fast.

We are predicting robust growth in FHA originations this year.

• Since July, 2007 there has been unprecedented volatility in the secondary market for mortgage loans. The market for non-traditional loans has dried up, and investors are looking askance at anything outside of the conforming or government arena. The GSE's have taken steps to insulate against declining market values, and tighter underwriting guidelines will remain in place for some time to come. Combine these changes with a new set of industry regulations addressing home ownership and predatory lending, and you have a perfect scenario for the growth of FHA loan demand.
• Housing is the largest domestic policy issue on the horizon as we head into the elections for the U.S. Presidency this fall. The recently passed Stimulus Bill included a number of changes that will have a positive impact on FHA programs, including a new floor of $271,050 and maximum loan limits of up to $729,750. These limits are set to expire on December 31, 2008, giving lenders plenty of time to hop on the bandwagon

As a longstanding providers of FHA loans, we have the expertise and insight to customers buy or refinance their homes with stable FHA financing. FHA loans may account for more than 20% of loan originations by the fourth quarter of this year. Put our FHA expertise to work to for you by contacting us today. It's always FREE to apply.

Maximum loan amounts vary by State and County. Find out the loan limit is your area using our FREE Loan Limit Lookup Tool 

Copyright 2008, Joe Metzler, http://www.joemetzler.com/. All Rights Reserved.

NEWSFLASH: NEW LOAN LIMITS


Effective immediately: New FHA and Fannie / Freddie loan limits have been posted on HUD's website.

For conforming loans, it appears unchanged.

For FHA, it appears as if the Twin City (Saint Paul / Minneapolis) metro area is now:

• Single Family: $365,000
• Duplex: $467,250
• Tri-Plex: $564,800
• Four Unit: $701,900

Each county in each state is different. The lookup tool is at http://joemetzler.com/fhalookuptool.htm.  Select your state, county, then select FHA or Fannie/Freddie to get you information

Did you know?

• We are a HUD-approved lender (US Department of Housing and Urban Development).
• We Have been doing FHA loans over 10-years
• We are FHA Loan Experts

Copyright 2008, Joe Metzler, http://www.joemetzler.com/. All Rights Reserved.