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Monday Morning Mortgages>
Monday Morning Mortgages
July 27, 2009
Monday Morning Mortgages ~ Monday 7/27/2009
Monday Morning Mortgages is a brief week-opening report on mortgages in our area. This is a tool to assist my realty partners on loan trends, rates, program changes, and problem solutions.
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Mortgage Disclosure Improvement Act (MDIA)
In 2008 Congress passed the Housing and Economic Recovery Act of 2008. This law made several modifications to the way mortgage business is and will be transacted in the future. The Truth In Lending Act received extensive overhaul with the first part of that overhaul going in to effect on July 30, 2009.
The Mortgage Disclosure Improvement Act establishes new rules for the delivery of up-front disclosures, rules for collecting fees, reinforces the rules surrounding re-disclosures and imposes wait periods based on certain events.
The lender is required to mail out disclosures of fees to the borrower upon receipt of an application. The new law requires a wait period before any fees (except credit report fee which can be collected earlier in the process) to be collected from borrower until 3 DAYS AFTER THE BORROWER RECEIVES THE DISCLOSURES VIA THE MAIL. This means an appraisal cannot be ordered until after a waiting period. So once an application is taken, it will take a minimum of 7 days or more before an appraisal can be ordered and paid for by the buyer. (There is a possibility of shortening this period by having the borrower download disclosure docs from lender, signing them, and returning them immediately.) These wait days are all counted in business days, including Saturdays, excluding Sundays and federal public holidays.
In addition, if the fees change the APR more than .125% from initial disclosure prior to closing, the fees must be redisclosed and a 3 day waiting period goes into effect before buyer can sign closing docs.
How to deal with latest version of well-meaning, unwieldy legislation? My suggestion is to check the box on the CAR form for no loan contingency release required up until closing, since appraisals will take even longer. Check with your managing broker on this. Your most professional and diligent loan brokers will keep the process on track, but this law is yet another challenge in our work on the front lines of this wild housing industry.
Defaults Continue (by Rob Chrisman, RPM, 7/27/09)
There is news today that mortgage servicers are meeting in Washington DC to discuss how it is possible for them to carry out the directives on modifying mortgages that have been advanced by the Obama Administration. They’d better do something, as the delinquency numbers at Fannie and Freddie are frightening. According to a report from Barclay’s, two million loans are already delinquent, and 75,000 per month are falling behind. As it turns out, the agencies have the option of repurchasing the delinquent loans. This is highly doubtful, but nonetheless if they decide to do that, large blocks of mortgages will pre-pay, and any investor will see their mortgage holdings drop. Remember, investors pay a premium hoping to keep the mortgage on their books for some time. But with 5% of all Fannie loans, and 3.6% of Freddie loans, delinquent, it is a real problem. Per the study, defaults are concentrated in rates above 6%, originated in 2006 and 2007 in CA, FL, AZ, and NV, and have/had higher LTV with low FICO’s and higher loan balances. (Don’t look for any private programs for borrowers with a FICO of less than 620 and an LTV higher than 90% in the near future: their delinquency rate is 18%.)
Loan Closing Turn times for Escrow Timing
Conventional Mortgage 30 days
FHA 30 days
Today's Rates
WITH ONE LOAN POINT
Conforming (<= $417,000)
30 Year 5.25%
5/1 ARM 4.125%
5/1 ARM IO 4.5%
7/1 ARM IO 4.75%
Jumbo Agency ($417,001 - $662,500 in Sonoma County)
30 Year 5.375 %
FHA Conforming (<= $417,000)
5.5%
FHA Jumbo (to $520,950)
5. 625%
Super Jumbo (<= $3 million)
30 year fixed 7.125%
3/1 ARM 4.25%
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