Fairfax-VA.  The ML 2010-24 is guidance for Combined Loan To Value (CLTV) refinance transactions – only. The new policy and guidelines are more restrictive than the old FHA policies guidelines.  In the past FHA policies did not have a restriction on minimum equity limits (LTV and CLTV in loan talk), but Wall Street and the big banks added their own restrictions that allowed an FHA loan to be underwater by only 25% of the appraised value.  Essentially in the past,  FHA didn’t care how far underwater a borrower was, the loan request was able to be approved if the loan circumstances met FHA guidelines. But the companies that funded FHA loans do care how much equity a homeowner has. In the end,  investors (Wall Street and the big banks) did and do care how far a homeowner is underwater so they set the max at 125% of the home’s value as the limit.  Just as in the past, he who has the gold sets the rules. Wall Street and the big banks have the money and clout, so they set the rules to try and limit their exposure to potentially bad loans which could result in large losses.

An explanation of three different FHA programs is below:

Homeowners are now restricted to a 97.75% LTV (2.25% remaining equity) on rate and term refinance, 85% LTV (15% remaining equity) on cash out refinance and 125% CLTV (underwater by 25%, so ZERO equity) for an FHA streamline refinance.  The refinance for borrowers in negative equity positions (underwater) is only available if the current servicer is willing to give up 10% of the current loan balance and that loan must not be a FHA insured plus many other restrictions.  The LTV limit is 97.75% and the CLTV limit is 115%, you should not get excited about this product since it will be more difficult than getting a short sale approved.  This is based on the ML2010-24: Combined Loan-to-Value Requirements for Refinance Transactions (8/6/10).

The Clock is Ticking!
Time is Running Out for Significant Savings!

Attention home buyers! Waiting to buy a home could cost you nearly $20,000 or more over a seven-year period if you time your purchase incorrectly. While the actual impact will vary depending on purchase price, the impact will certainly be significant because of stimulus programs scheduled to end in the coming months.

Economic turmoil and the real estate bubble have created significant opportunity for all those seeking to capitalize on the situation at hand. YOU Magazine will address the real estate purchase market and what people interested in both buying and selling a home need to know this month to take advantage of the current market conditions.

We also consulted with Michael J. Maher of “The Maher Team,” one of the busiest agents in the country who sold 216 homes in 2009. With a degree in mathematics, he knows his numbers and the impact on both buyers and sellers.

As little as a few years ago, it would have almost been incomprehensible to expect that actions from Washington would impact decisions involving the purchase and financing of real estate. Well, that was then and this is now and the decisions people make or don’t make stand to impact wallets across the country.

Before You Buy – Things to Consider
The pressure is on to buy in the first quarter of 2010, so what should buyers focus on before pulling the trigger? Maher recommends that buyers focus on three things that are either expensive to fix later or unable to change without buying another home. His three primary areas to focus on are what he calls the three Ls: “Location, Lot and Layout.”

When considering location, use technology like GoogleMaps™ before visiting a home to save both time and gas. Mapping allows you to view the property from different angles, see if the home is on a busy street, or if it offers the other requirements you need. For example, if you need a large yard where the kids or dogs can play, a tool like GoogleMaps™ will help you eliminate some homes immediately.

While it is relatively easy to get caught up in the aesthetics, don’t do it. Overlook items you can change later like paint, carpet and other cosmetic details. Narrow your focus down to two or three homes and “all things being equal, focus on location, lot and layout.”

Selling a Home?
If you are selling a home and want to make sure you can get it off the market for time crunched buyers, remember that today is what Maher calls a “price war beauty contest.” Sellers need to be focused on having their home priced competitively and making it most appealing upon inspection. Sellers also should consider paying for a home warranty to alleviate any concerns cash-strapped buyers may have about paying for repairs after closing.

More than anything else for both buyers and sellers this year, Maher suggests that people not let the money savings opportunities pass them by. “Anyone that qualifies is in a no-lose situation – they are buying at the bottom of the market, economically, historically, seasonally, market-wise and interest rate-wise. The perfect storm has arrived and the pearls and treasures have floated to the surface.”

Gifts from the Federal Reserve Are on the Clock

MBS Purchase Program
Mortgage rates have been artificially low the past fourteen months due to assistance from the Federal Reserve and their mortgage backed securities purchase program. Regardless of the expert, when asked what the impact has been to lowering rates, the range is from 0.50-1.00% or potentially more. The Federal Reserve reiterated in its January statement that they will be ending the program on March 31st.

While it is uncertain to what degree interest rates will immediately rise starting April 1st, the overwhelming trend will be higher. Many experts are predicting that rates will start to rise in advance of April 1st.

Tax Credit
Low mortgage rates are not the only stimulus program ending in less than three months. Credited for boosting a major share of home sales at entry level, first time home buyers have been taking advantage of a tax credit of up to $8,000 for over a year.

Repeat purchasers were also given incentive in November with the availability of up to $6,500 in post-closing cash. Tax credit qualifying buyers have until April 30th to get under contract and must close by June 30th. If home buyers miss either date, it will be a costly one.

HUD and the FHA Tighten Up
HUD announced in January that the upfront costs to obtain an FHA mortgage are going up for any applications received April 5th or later. The cost of the up-front mortgage insurance premium (MIP) will increase for all case numbers effective April 5th by 0.50%, from 1.75% to 2.25%.

What Waiting Will Cost You
The costs of missing out on the combined incentives add up quickly for those who fail to act by the deadlines. The first incentive scheduled to end will impact buyers on a monthly basis in the form of higher monthly payments. On a $200,000 mortgage, a 1.00% increase to interest rates could increase a monthly payment by $125 a month or $10,500 over a seven-year period. Obviously, the longer the loan remains in place, the greater the impact of the potential loss.

The second potential loss that will be incurred would be waiting to obtain a mortgage guaranteed by the FHA. In the same example of borrowing $200,000, the upfront cost would be an additional $1,000, or .50% of the amount borrowed. While this cost may be financed, the impact to a monthly payment would also be an increase of approximately $5 a month and have to be accounted for later upon the sale of the property.

Finally, the third potential cost in waiting will be the end of the tax credit for qualified buyers of a primary residence, up to $6,500 for repeat buyers and up to $8,000 for first time home buyers.

Add all this up and the cost of choosing to wait could run up to nearly $20,000 or more depending on the purchase price of a home and the type of mortgage applied for. So, even if someone believes that home prices may fall from where they are today, even with a modest decline in price, the cost of waiting could outstrip any benefit of finding a home for less.

Copied from my ‘You’ online magazine subscription

Vienna, Virginia: Fannie Mae has updated its automated underwriting software recently. The changes are major and could affect how many potential home seekers actually become homeowners. Having a loan underwritten by an actual person are almost non-existent these days. Both Fannie Mae and Freddie Mac feel they are better served using their proprietary software programs.  Desktop Underwriter^® (DU) Version 8.0 has changes to credit score requirements and mortgage insurance coverage will include:

Maximum Debt To Income Ratios (DTI). This is the ratio of how much of your monthly income is being consumed by your monthly debt.

• Maximum DTI lowered to 45%, with flexibilities offered up to 50% (as approved by the software)

Minimum credit score requirement for home buyers in Fairfax, Virginia and Alexandria, Virginia

• Minimum credit score increased from 580 to 620 (excludes Fannie Mae^® DU Refi Plus^TM
• The REfi Plus loan is for homeowners that loans are owned by Fannie Mae (this is different than who you make your payment too) Click below to find out more. Find out if Fannie Mae or Freddie Mac owns your mortgage

High Balance Mortgage Loans over $417,000 to $729,650

• 2009 Temporary high-cost area loan limits will be supported by the new software.
• Eligibility guidelines and Appraisal Field Review requirements have changed

Mortgage Insurance (MI) – Coverage Changes

• Reduced MI and lower cost MI options will be retired for loans underwritten using new software
• With this change, Fannie Mae has introduced a new minimum MI coverage option with associated Loan Level Pricing Adjustments (LLPA’s). These are add-ons Fannie Mae charges for different loan scenarios.

Mortgage Insurance (MI) - Changes to Financed Mortgage Insurance Requirements

• Desktop Underwriter (DU) will be updated to allow financed MI using either a single premium plan that is paid at one time upfront, or a split premium plan that has both an upfront and monthly component

2-Unit owner-occupied interest-only LTV/CLTV changes. Loan To Value and Combined Loan To Value – Essentially state how much equity is in the home. 80% LTV is the same as stating a home has 20% equity for real estate in Fairfax, Virginia and Alexandria, Virginia.  

• Maximum LTV/CLTV reduced from 80/80% to 75/75%

Expanded Approval (EA) are gone!! A paper borrowers are the only ones that will be able to get a loan in the future.

• EA II and III recommendations will no longer be offered by DU 8.0

Federal Housing Administration (FHA) has implemented significant changes for streamline refinances . These changes will affect all FHA streamline loans across the country and in the northern Virginia area, Vienna, Virginia, Alexandria, VA, Fairfax and the surrounding cities and county’s. These changes take place on all FHA case numbers ordered on Wednesday, November 18, 2009 or later.

The changes are:

1. New seasoning requirements (length of payment)
2. Payment history standards
3. A net tangible benefit test (The loan has to be good for the borrower, imagine that) 
4. Revised remaining equity (Combined Loan To Value requirements)
5. Elimination of the abbreviated loan application
6. Additional certifications and verifications

1. Changes about length of payment history or what we call loan seasoning:

Seasoning: At the time of loan application, the borrower must have made at least 6 payments on the FHA-insured mortgage being refinanced.

2. Payment History. At the time of loan application, the borrower must exhibit an acceptable payment history as described below.

Less than a 12 month payment history, the borrower must have made all mortgage payments within the month due. 

For borrowers that have a 12 month payment history or greater two points must be present: 
    Experienced no more than one 30 day late payment in the preceding 12 months
    Made all mortgage payments within the month due for the three months prior to the date of loan application.

3. Net Tangible Benefit: Basically, no more refinancing to just to refinance a client to generate fees. This is a good thing. It must be determined that there is a net tangible benefit (actual savings to the borrower) as a result of the Streamline Refinance transaction. Net tangible benefit is defined as follows:

Refinancing a fixed rate loan to a to fixed rate loan or ARM (adjustable rate mortgage loan) to ARM: A minimum 5% reduction in the total mortgage payment.

A fixed rate loan to an ARM loan: The new ARM rate must be at least 2% less than the current Fixed rate loan

ARM to Fixed: The new Fixed rate may not be more than 2% above the current ARM rate

Streamline refinancing to ARMs will be restricted on investment properties and second homes.

4: Have a second mortgage or Home Equity Line Of Credit?

All loan amounts can only addup to 25% more than the value of the property. 

5: Elimination of the abbreviated loan application. A complete loan appliction must be taken to include residence, income, and work history.

6. Certifications and Verifications: 

Must include a signed and dated cover letter certifying that the borrower is employed and has income at the time of loan application. This will be followed up with a phone call prior to closing to verify you are still employed.

Assets: If assets are needed to close, the funds must be verified and documented correctly

Congress passed a resolution yesterday to keep mortgage loan limits to the 2009 loan amounts. (This is good!) The current limit is $417,000 for most areas of the country. While if you live in a high cost area, like most of northern Virginia and the surrounding areas the limit is $729,650.

To check what the maximum is for your area click here: searchable form on HUD’s Web site by entering county name or county tax code.

Fannie Mae, Freddie Mac and HUD have released their new FHA and conforming loan limits for 2010.

The FHA and conforming loan limits for the Washington, D.C., Northern Virginia and Maryland, are as follows:

• One Family:  $729,750
• Two Family:  $934,200
• Three Family: $1,129,250
• Four Family: $1,403,400

The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee.”