Westchester County New York Real Estate Blog

FHA Rules on Mortgage Insurance to Change

Rules for obtaining FHA loans will be tightening.  Where there is no minimum credit score now a credit scor of 580 will be necessary to obtain FHA funding.  Sellers concessions will top out at 3% and to read the entire article from the NY Times, here.

"Borrowers who get an F.H.A.-insured loan will soon have to pay a higher initial insurance premium. The new premium will be 2.25 percent of the value of the loan, up from 1.75 percent.

Starting this summer, sellers will not be able to offer as much help to buyers to pay their closing costs. The maximum amount of assistance will drop to 3 percent of the value of the property, from the current 6 percent"

New Good Faith Estimate for 2010

        

 Real estate chit chat is centering on the new Good Faith Estimate  (GFE) which is mandatory with any new mortgage loan applications after January 1, 2009.  Since I am a real estate broker I am not an expert on the new GFE and I am learning about it.   From what I can see the form is an improvement over the previous version but buyer's should not be lulled into thinking they can rely on it 100%.  It is not perfect.  It applies to the loan and not to some of the other expenses you may incur at the closing table.  In the past the monthly payment of a buyer was the PITI which stood for "Principal, Interest, Taxes (property) and Insurance (homeowners).  Now the monthly expense does not include the property taxes.  Ask lot's of questions when you apply for your loan!

Here is a link to an excellent article on the new GFE, good place to start to learn about this.

2010 GOOD FAITH ESTIMATE OVERVIEW

The New Form

HUD's Settlement Cost Booklet

Some More Mortgage Regulations!

For anyone who doesn't quite understand some of the reasons for our housing/mortgage problems this article in the New York Times will give you a good overview.  There are new regulations becoming effective on October 1st that join numerous other new regulations that have been put in place over the last year.

During the home lending boom from 2003 to 2006, subprime lenders would often offer loans without requiring borrowers to prove that they could make the monthly payments. With stated-income loans — or as some called them, “liar loans” — borrowers could easily fabricate annual income figures and even buy a home without a down payment.

From the New York Times, here.

Difficulties with Jumbo Mortgages....

 

For borrowers with household incomes between $250,000 and $500,000, however, mortgages are not as easy to get, Mr. Adamo said. “These people are living in places where starter homes might be $1 million,” he said, “and it’s really affecting them.”

Fannie Mae and Freddie Mac will accept only loans below $729,500 in the highest-cost markets like New York City and northern New Jersey. For mortgages larger than that, mortgage brokers and bankers must find other investors who want to take the loans. (Mortgage brokers process the applications on a lender’s behalf, while mortgage bankers will finance the loan and sell it shortly thereafter.)

To read complete article from the New York Times, here.

What is Mortgage Insurance?

 

This type of insurance is usually only required if the downpayment is less than 20% of the sales price or appraised value (in other words, if the loan-to-value ratio (LTV) is 80% or more). Once the principal is reduced to 80% of value, the PMI is often no longer required. This can occur via the principal being paid down, via home value appreciation, or both. In the case of lender-paid MI, the term of the policy can vary based upon the type of coverage provide (either primary insurance, or some sort of pool insurance policy). Borrowers typically have no knowledge of any lender-paid MI, in fact most "No MI Required" loans actually have lender-paid MI, which is funded through a higher interest rate that the borrower pays.

Lenders Mortgage Insurance (LMI), also known as Private mortgage insurance (PMI) in the US, is insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan. It is insurance to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property.^[ Typical rates are $55/mo. per $100,000 financed, or as high as $1,500/yr. for a typical $200,000 loan^.

The annual cost of PMI varies and is expressed in terms of the total loan value in most cases, depending on the loan term, loan type, proportion of the total home value that is financed, the coverage amount, and the frequency of premium payments (monthly, annual, or single). The PMI may be payable up front, or it may be capitalized  onto the loan in the case of single premium product. Sometimes lenders will require that LMI be paid for a fixed period (for example, 2 or 3 years), even if the principal reaches 80% sooner than that. Legally, there is no obligation to allow the cancellation of MI until the loan has amortized to a 78% LTV ratio (based on the original purchase price). The cancellation request must come from the Servicer of the mortgage to the PMI company who issued the insurance. Often the Servicer will require a new appraisal to determine the LTV. The cost of mortgage insurance varies considerably based on several factors which include: loan amount, LTV, occupancy (primary, second home, investment property), documentation provided at loan origination, and most of all, credit score.

If a borrower has less than the 20% downpayment needed to avoid a mortgage insurance requirement, they might be able to make use of a second mortgage (sometimes referred to as a "piggy-back loan") to make up the difference.^[4] Two popular versions of this lending technique are the so-called 80/10/10 and 80/15/5 arrangements. Both involve obtaining a primary mortgage for 80% LTV. An 80/10/10 program uses a 10% LTV second mortgage with a 10% downpayment, and an 80/15/5 program uses a 15% LTV second mortgage with a 5% downpayment. Other combinations of second mortgage and downpayment amounts might also be available. One advantage of using these arrangements is that under United States tax law, mortgage interest payments may be deductible on the borrower's income taxes, whereas mortgage insurance premiums were not until 2007. In some situations, the all-in cost of borrowing may be cheaper using a piggy-back than by going with a single loan that includes borrower-paid or lender-paid MI.

LMI/PMI tax deduction

Mortgage insurance became tax-deductible in 2007 in the USA.^[5] For some homeowners, the new law made it cheaper to get mortgage insurance than to get a 'piggyback' loan. The MI tax deductibility provision passed in 2006 provides for an itemized deduction for the cost of private mortgage insurance for homeowners earning up to $109,000 annually.

The original law was extended in 2007 to provide for a three-year deduction, effective for mortgage contracts issued after December 31, 2006 and before January 1, 2010. It does not apply to mortgage insurance contracts that were in existence prior to passage of the legislation.

Disclaimer - this information was correct at the time it was written.  Please verify this information with an Attorney or Mortgage professional prior to making any decisions about private mortgage insurance.

All text is available under the terms of the GNU Free Documentation License. 

Should You Use A Mortgage Broker or Banker?

   

From the New York Times:

  They do not provide a personal shopping service and may compare only a handful of lenders on your behalf. If you want to be sure you’re getting the best rate and the lowest costs, the only way to come close to succeeding is to hunt extensively on your own."

Some of the best advice about what to do and how to do it is in this article from the New York Times yesterday, to read more, here.

 

 

 

 

 

Federal Crackdown on Mortgage Modification Scams

Be carefull out there.  A lot of fradulent mortgage modification companies have sprouted up.  A lot of them have misleading names and imply they are somehow associated with federal or state agencies.  They take your money and do nothing in exhange for it. BE CAREFUL BEFORE YOU PAY ANYONE TO HELP WITH A MORTGAGE MODIFICATION!

"The Federal Trade Commission today announced a crackdown on fraud and deception by mortgage modification and home foreclosure rescue companies. The FTC is seeking to halt the proliferation of these mortgage relief scams – which target distressed and vulnerable consumers who are delinquent or facing foreclosure – through increased law enforcement, consumer outreach, and close coordination with federal, state, and non-profit partners.

At a joint press conference today, Treasury Secretary Timothy Geithner, Attorney General Eric Holder, Department of Housing and Urban Development Secretary Shaun Donovan, and, on behalf of state enforcers, Illinois Attorney General Lisa Madigan, joined FTC Chairman Jon Leibowitz in warning consumers about these types of scams and in encouraging consumers to seek out free, HUD-approved housing counselors for help with their mortgages. The FTC and Attorney General Madigan also announced enforcement actions and initiatives.

http://www.ftc.gov/opa/2009/04/hud.shtm

Waiting for Housing Prices to Come Down - What About Mortgage Rates?

Or, to put it another way, is it better to jump into the market now before it hits bottom?

The answer depends on where you live. In some parts of the country where prices may fall much further, it could pay to hold off even if mortgage rates do continue to rise. But in places where houses no longer look so overvalued, like San Francisco, it may be tempting to start testing the waters.

If you are a prospective home buyer waiting for the bottom of the housing market, there is another fact you need to take into account: mortgage rates are rising. 

Mortgages are slightly higher, here.

 

Are You PreQualified or PreApproved?

Get pre-approved!

"Know the difference between "pre-qualified" and "pre-approved." Getting pre-qualified is a casual process where the lender tells you how much you should be able to borrow based on how much money you make, how much debt you have and how much you have to put down on a house. Pre-approval occurs only after you actually apply for the loan and the lender gives you in writing the amount you can borrow. A buyer who is pre-approved is more attractive to sellers and their agents than one who is only pre-qualified. Once you find a mortgage that is best for you, get pre-approved before you start making offers on a home."

From the American Bankers Association site.

A Bipartisan Solution to the Mortgage Crisis!

We are awaiting an announcement from Congress about a bipartisan solution to help the foreclosed homeowners in this country.  As I look at the picture of the Senators who are working on this and that they have now come together to put this package together I can only think that it is a good thing it is an election year and that everyone is stuggling to have their party win the election.  In the picture, they are smiling, and friendly, slapping each other on the back, yuk. (open link to article and take look).

"At a minimum, the bipartisan package was expected to include up to $200 million to expand counseling programs for homeowners at risk of foreclosure, $10 billion in tax-exempt bonds for local housing authorities to refinance subprime loans, $4 billion in grants for local governments to buy foreclosed properties and a $15,000 tax credit for purchasers of foreclosed homes or newly built homes that have been sitting vacant.

Roughly 4.2 million mortgages were either past due or in foreclosure at the end of last year, according to the Mortgage Bankers Association. An additional three million borrowers may default in the near future.

Both the Senate Banking Committee and the House Financial Services Committee have been working on bills that would allow the Federal Housing Administration to insure $300 billion to $400 billion in additional mortgages, with an upfront cost of $10 billion. The Bush administration has been developing a similar plan of its own that would expand an existing refinance program called F.H.A. Secure"

A Bipartisan Resolution, from the New York Times, here.  They are stating that the final resolution might be forthcoming by this afternoon so let's wiat and see what they come up with.  Molasses.

Pre-Approvals/Pre-Qualifications

If you have been looking for a home for a while or are a first time buyer you need to keep in touch with your bank/mortgage broker.  If you have been looking for a while and got a pre-approval months ago things have and are changing with the banks on a daily basis and you might want to check in and update your letter.  If you are a first time buyer and are checking calculators and rates on various sites on the internet you should know that those rates might not apply to you.  Also, in the past getting a pre-approval letter was easier.  Now it may require a bit more time and more information.  Don't get caught at the last minute and not be prepared if you find a house you want to buy.

30 Year FIxed Interest Rates 1971-present

Thanks to the PhoenixRealEstateGuy.com for the following chart that shows the trend for interest rates since 1971 for 30 fixed rates. 

When Should I Put my House on the Market?

                             Now, Now, Now!

I just received an email from Rachel Mancini at HSBC.  She tells me that a 30 year fixed rate loan can be obtained with 5.375% interest rates and -0- points.  HSBC has a Community Works program which is now at 5.125% also with -0- points. Some highlights of the Community Works program are:

Quick facts:

• Only a 3% downpayment is required.
• Only 1% or $500 (whichever is greater) must come from your own savings.
• You can obtain an unsecured loan from HSBC to be used toward downpayment.
• Certain income level restrictions apply depending upon property location.
• The program is only available in select states.

Certain conditions will apply and not everyone will qualify.  For further information please contact Rachel at 914-696-3366.

Sub-Prime and What is Happening In Westchester County

"Foreclosure actions in Westchester County reached 1,975 through November of 2007 up 38.8% year over year.  Banckruptcies are also up with 345 homeowners fiing Chapter 13 (they keep their home while reorganizing their fnances) which is an 81.6% increase year over year", to read more....

                                     Sub-Prime in Westchester County

Foreclosure Scams-101

On Freddie Mac's website there is some very informative information about avoiding mortgage fraud.  Roaming around You Tube yesterday I came across this video from Freddie Mac, which is short and to the point - Be Careful Who You Speak to!  For counseling information please visit the Homeownership Preservation Foundation or call 888-995-HOPE.