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Monday Morning Mortgages>
Monday Morning Mortgages
December 14, 2009
Fannie Mae 8.0 New Guidelines
So new loan guidelines are now in place for all Fannie Mae, Freddie Mac and FHA lending. The most notable of these changes to more conservative underwriting is the maximum 45% DTI. This means all of you realtors who have buyers shopping for homes using financing need to get your clients re-preapproved to note the lower approval amount.
• Total expense ratios now limited to 45% DTI, possibly up to 50% with compensating factors.
• Minimum credit score 620. So any buyer with a FICO score lower than that should be in credit counseling (I offer this service without fee), not home shopping.
• Foreclose history requirements: 5 years since completion date, and then only with 10% minimum downpayment and a minimum FICO of 680, no investment property or second homes, no cash out refinances. After 7 years, borrower’s can use standard guidelines.
• Deed-n-Lieu will require 4 years aging, and have some restrictions on lending until the deed-in-lieu ages 7 years.
• Chapter 13 bankruptcies will require 2 years from discharge date and Chapter 7 bankruptcies will require 4 years.
• Short sale needs 2 years from completion date to be eligible for a new mortgage.
What Makes the 30-year Fixed Mortgage Rate?
30-year mortgage rates are set by supply and demand through the bond markets. These rates vary multiple times a day (see www.sonomacounthomeloans.com for up to the minute rates) and are dependant on what investors (large investing funds in the financial markets) and loan servicers want to see flowing into their portfolios. The government does not set or change this rate directly. But the US Treasury’s buying of mortgage back securities has been helping keep rates down by increased bond demand. This massive buying will end in a few weeks. Expect rates to change drastically then.
January 1 Changes
Two big lending changes will be ushered in January 1st, along with the new year. The first is FHA’s requirement for HVCC procedures in ordering an appraisal. The second is the new Good Faith Estimate according to revised RESPA procedures. This GFE must be issued upon the identification of a property and sale price. It shows a total loan origination fee that includes points, underwriting, processing, and any other lending fees. Then it shows the rate with a rebate from lender to help pay the fees or not. This is a very different way of presenting estimated costs and the impact of rate on those costs.
It is important for realtors to understand that the retail lending banks (Citi, Chase, Wells) will give the same GFE as mortgage brokers initially, BUT when the time comes to lock the rate if rates improved the bank will keep the rebate difference without disclosure. Mortgage brokers will be giving any rebate as a result of rate improvement to borrower towards costs. The buyer will be better protected working with a mortgage broker who is forced to comply with full disclosure, as opposed to the banks that can still hide the end amount of rebate (YSP). If you have questions on this, call me.
Rates
Rob Chrisman says: What do we have to look forward to this week? It will be a busy pre-Christmas week for economic news. For one, the Fed meeting on Wednesday is expected to have no change for rates but, as usual, investors will be closely watching the language. The Producer Price Index (PPI) comes out tomorrow, as does Industrial Production and Capacity Utilization, and the Empire State Manufacturing Index. This is followed by the Consumer Price Index (CPI) and New Residential Construction on Wednesday. Housing Starts comes out Wednesday. Jobless Claims, Leading Economic Indicators, and the Philly Fed are on Thursday. This morning we find rates (10-yr at 3.54%) and mortgage prices about unchanged from Friday afternoon’s levels.
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