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Monday Morning Mortgages>
Monday Morning Mortgages
December 21, 2009
Fannie Mae 8.0 New Guidelines
After running preapprovals for my home-shopping clients with the new required underwriting system, most approvals were still good. The dreaded 45% DTI limit seems to be rather flexible in the new DO 8.0 system. When borrowers have high FICOs and some reserves, I’m seeing approvals up to 53%.
Mortgage Insurance to 95% LTV
With the stabilizing of the housing values, Genworth mortgage insurance provider is now insuring up to 95% LTV for high FICO owner occupied loans. This couples well with the Fannie Mae My Community Mortgage program which reduces monthly MI payments by half for those who qualify for the program. My Community Mortgage has an $80,200 income limit in Sonoma County.
So for your offers where you feel that an FHA 3.5% downpayment won’t work, using the 5% down may get your offer accepted. In comparing monthly payments for FHA (3.5% down) to My Community Mortgage (5% down), FHA comes up with lower monthly payments.
January 1 Changes - GFE
Beginning January 1, 2010, Good Faith Estimates will be very different. By new RESPA law changes, they must be issued within 3 days to a potential borrower upon identifying a property, sale price, loan amount, and borrower’s social security number. Instead of receiving a breakdown of all the various fees, the new GFE shows only one lump loan origination fee that includes processing, underwriting, any application fees, and broker’s compensation. This will be showing up on my GFEs at about $5,500. This amount cannot increase up until the closing of the transaction, based on the quote for that property, unless there are substantial “changed circumstances”. In addition, there are other grouped fees Then the borrower is given the choice of various interest scenarios, each associated with a “credit” (formerly the originator’s YSP) that would be applied to offset that lump sum origination cost.
For example, if the lump sum origination costs were $5,500, and the borrower chose a rate of 5% for an FHA loan, today the “credit” would be .875% of the loan amount. Assuming a $250k loan that would be $2,188 of credit the borrower would use to offset the origination fee, netting a fee of $1,638. But if they chose a rate of 4.75%, they would get no credit, but instead a charge of $625 for total origination fees of $6,125.
What I like about this is it puts the rate control directly in the hands of the borrower with the corresponding “credit” no longer at the broker’s discretion. Except in the case of retail bank lending where the bank does not need to disclose any change in amount of credit to borrower after initial disclosure.
The other fees like title/escrow, transaction fees, appraisal, credit, all have either tolerance limits of how much they can change by close of transaction or no tolerance once disclosed.
The purpose of this huge revision is to allow borrowers to shop around and have fees that do not change or change very little2 after being estimated.
January 1 Changes – Appraisals
After January 1st, all FHA appraisals will have to be HVCC compliant. So all loans up to $662,500 in Sonoma County will require independently ordered appraisals.
FHA Short Sales in Credit History
FHA will loan to a borrower with a recent short sale as long as the payments were may throughout the process with no defaulting payments showing up on the credit report. Fannie Mae requires a 3 year wait after a short sale.
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