(LoanSafe.org) - New polices established by mortgage giants Fannie Mae and Freddie Mac are aimed to expedite the short sale process.

Short sales play a major role in the real estate market as borrowers have no other way out of their property but to sell for less than the amount owed on the mortgage. The National Association of Realtors recently reported that 9% of home sales in the first quarter of 2013 were short sales.

This process can be frustrating for the seller, the buyer, and even the agent or broker involved in the transaction. With short sales generally being slow, complex and making a whole lot of tension between parties, it takes a great amount of work to make things run smoothly. This is why people like Tim McCallum, director of short sales at Fannie Mae, are working to shorten and improve the short sale process.

“We now order a valuation as soon as an owner indicates they want a short sale, rather than waiting for an offer to be received,” McCallum said. “If there is no response to an offer from the loan servicer within 30 days, the case can be escalated. Our process is to counter every short sale offer.”

This allows for as much transparency as possible between the seller and the real estate agents.

Another challenge that many short sale agents see is coming up with an estimated value of the property to sell at. With the housing market still struggling in many areas, even the most beautiful properties have to be sold at under-appreciated values. Bob Martin, vice president of valuations at Fannie Mae stated, “To help estimate the values of distressed homes, the team uses appraisals, which are required for all short sales, as well as Broker Price Opinions, and data from other internal and external sources, including current listings, pending sales and sold properties.”

Short sale offers should be responded to by mortgage servicers within 30 – 60 days. Once the offer is received, Fannie Mae may make a counter offer or agree to the amount proposed.

Requirements for Short Sales Under Fannie Mae’s Program:

-  If a borrower is more than 90 days past due on payments and has a FICO below 620, no documents of proof of hardship are required for the streamlined process.

-  Borrowers who have a FICO score above 620 or are not yet 90 days behind on payments, will be required to provide an explanation of financial hardship. These financial hardships include job loss, reduction in income, divorce, death, disability, etc.

3. Current borrowers may still be eligible if they can show they are at risk of imminent default. Owner-occupants are subject to a $3,000 relocation incentive.

4. Payments to a junior lien holder must not exceed $6,000; if approved the borrower will be released from any liability for the second loan.

5. Sellers cannot attempt to obtain title to the home at a later time or stay there as a tenant.

6. The seller and buyer cannot receive funds or commissions from the sale, and no fees can be paid to a third party to negotiate a short sale with the servicer.

It is important to note that 37 states have passed AMC legislation, and the remaining states have until 2015 to put this into practice. AMC legislation regulates appraisal management companies. Clients and real estate agents technically can communicate with appraisers, but many lenders have their own rules.

The Consumer Financial Protection Bureau has yet to release any guidelines for AMCs.

Short sales are a part of our real estate market that helps out borrowers who are at risk of foreclosure or cannot sell their home due to a decline in value. It allows them to avoid foreclosure and save a portion of their credit. Short sales also ruin borrowers credit for a less amount of time. It is essential that both Fannie Mae and Freddie Mac make short sales an efficient process.

Article source: Google Short Sales RSS

The annualized rate of housing starts
in March was over one million units for the first time since 2008, driven solely
by a surge in multi-family building which more than offset a decline in
single-family construction.  Multi-family
housing starts are now back to the levels of the early 2000s, benefitting the report
says from a continuing decline in homeownership which fell again in the first
quarter to 65 percent, the lowest rate since 1995.

Existing home sales fell in
March, essentially wiping out the gains in the first two months of the
quarter.  Sales of new single-family
homes rose from February and, combined with January sales which were the
strongest since April 2010, the annualized first quarter new home sales were up
51 percent, the biggest gain since 2003. 

Using the one from the National
Association of Realtors as a model, Fannie Mae’s economists have constructed
their own affordability index built on mortgage rates, family income, and home
prices.  The higher the index, the more
affordable homes are.  Of the variables,
affordability is the most sensitive to changes in interest rates and the index
projects that housing affordability should trend down gradually from its peak
in 2012 but will remain above the level considered normal through 2017. 

The analysis suggests that
affordability will continue to support the housing recovery but it is no longer
a primary diver of home buying.  Lending
standards, regulations about securitization, and housing finance reform will be
future keys to a transition to normal in the housing market.

Supply side issues have
contributed to the third straight decline in builder confidence in April.  But builders are anticipating a better
environment going forward and the declining inventories of both new and
existing homes point to improving sales conditions. 

These
shrinking declining backlogs of homes for sale along with declining shares of
distressed sales and increasing use of foreclosure alternatives are helping to
boost home prices which are continuing to increase in CoreLogic indices including
and excluding distressed sales.  This
indicates that the housing recovery is broadening across both distressed and
non-distressed properties.  Fannie Mae
expects further price increases into the spring home buying season as
inventory, though improving, remain lean.

Shadow
inventories also seem to be diminishing as data from the Mortgage Bankers
Association (MBA) show that seriously delinquent (90+ days) mortgages or
mortgages in the process of foreclosure have declined from the record high of
9.7 percent in the fourth quarter of 2009 to 6.4 percent in Q1 2013.  Overall mortgage performance has improved
meaningfully; loans at least one payment past due or in foreclosure are now at
a four year low of 10.3 percent.

The Report says
that anecdotal evidence is pointing toward a growing sellers’ market with
multiple bids becoming more common. 
Fannie Mae’s April National Housing Survey shows the nation is
approaching a ‘sweet spot.”  The
share of Americans who view it as a good time to buy remains high (71 percent)
while those who think it a good time to sell has doubled over the past year to
30 percent.  Further supporting a
sellers’ market is a solidifying consumer view that prices have bottomed
out.  The majority now even expect prices
to rise.   

The
mortgage lending environment has also improved. 
Cash sales still account for one-third of existing home sales but
mortgage demand has gradually increased with the MBA’s weekly survey in early
May showing purchase mortgage applications at the highest level in three
years. 

The yield on 10-year Treasuries
trended down to 1.61 percent on May 2, the lowest level for this year.  Then the stronger than expected April jobs
report helped boost investor risk appetites sending the yield back up to 1.90
percent at the time the summary was written. 
Fannie Mae expects the yield to rise gradually to nearly 2 percent by
the end of 2013 and mortgages rates to average 3.7 percent in the fourth quarter
of the year, remaining a strong support for the housing and mortgage
market. 

Fannie Mae
is revising higher its projection for multifamily starts for this year and next
but essentially kept the forecasts for single family starts and home sales
unchanged.  Multi-family starts will
increase about 35 percent during the year – nearly as strong a gain as last
year – and single family starts will increase about 24 percent.  Total home sales should rise about 8 percent
from 2012 and single family mortgage originations will fall 14 percent to $1.66
trillion in 2013 as refinancing retreats faster than purchase originations
increase.  Refinancing will fall to about
a 63 percent share of applications (down from a current range of 72 percent)
and mortgage deleveraging will come to an end as total single-family mortgage
debt will rise slightly for the first time in six years. 

Article source: Mortgage News Daily

Mortgage Rates: Builder Confidence Improves As Low Interest Rates Remain Intact

By: Rosemary Rugnetta | May 15th, 2013

Builder confidence improved during May as low interest rates remain intact leading to an increase of consumer interest in new homes. The National Association of Home Builders/Wells Fargo builder confidence index rose to 44 for the first time in five months. The limited inventory of homes for sale, improving job market and affordable rates are attracting potential new home buyers which is a major benefit for builders. The outlook amongst builders for sales during the next six months increased to its highest level in more than six years.

The Mortgage Bankers Association’s Market Composite Index showed that applications for week ending May 10th fell by 7.3% on a seasonally adjusted basis. The Refinance Index dropped 8% and the seasonally adjusted Purchase Index decreased 4%. The refinance share of all mortgage application activity remained at 76%.

Current conforming 30 year fixed mortgage rates are as low as 3.250%, 15 year fixed mortgage interest rates are as low as 2.375% and 5/1 ARM loan rates are as low as 2.250%. Having good credit is necessary in order for borrowers to obtain low rates that are offered by lenders. Conventional mortgages require that borrowers submit documentation for employment, income and assets, all of which will be verified by the lender. For both home purchase loans and regular refinances, an appraisal for the interior and exterior of the home is necessary to determine loan to value ratios. Many homeowners may still be eligible for the HARP refinance program which does not require an appraisal or other detailed documentation. HARP loans, which are available until the end of 2015, do not have loan to value caps so that even extremely underwater borrowers can refinance to a better mortgage. Borrowers who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009 are eligible for HARP refinances. As low rates continue, any type of refinance can save a homeowner a substantial amount of money each month. For information about refinancing, home purchase loans or HARP, the online form is available for submission and will return a response almost instantly.

Today’s FHA 30 year fixed mortgage interest rates are as low as 3.000%, FHA 15 year fixed rates are as low as 3.000% and FHA 5/1 ARM loan rates are as low as 2.750%. FHA mortgages are available so that consumers in any income range can attain homeownership. There are several different types of mortgage products offered through FHA including 203K rehab loans, energy efficient loans, condo loans, manufactured housing loans, and several others. In addition, FHA offers fixed rate and adjustable rate mortgages. Borrowers do need to know that FHA closing costs (APR) are high because of the upfront mortgage insurance premium and other FHA fees, but these are often paid with allowable seller concessions up to 6%. FHA’s refinance program, the FHA streamline refinance, is popular because it does not require an appraisal or any other documentation as long as there is no cash taken out. However, the streamline does require that the borrower have a good history of on-time mortgage payments. Until the end of 2013, the FHA streamline is offering reduced upfront and annual mortgage insurance premiums for loans that were endorsed prior to June 1, 2009. This is being done to encourage homeowners to move to a better mortgage with a low rate that is available in today’s market. The online form is available for information about any type of FHA mortgage through FHA approved lenders. When submitting this form, a response will be returned almost immediately.

Current jumbo 30 year fixed interest rates are as low as 3.500%, jumbo 15 year fixed mortgage rates are as low as 2.750% and jumbo 5/1 ARM loan rates are as low as 2.375%. Jumbo loans are for a larger amount of financing and require that borrowers have excellent credit in order to receive low jumbo rates. These loans typically require full documentation and verification. Substantial assets are necessary in order to fund the larger down payment and additional months of reserves that are usually required. Since guidelines and rates can differ from lender to lender, borrowers should shop around for the deal that matches their expectations. For convenience, this can be done by submitting the online form which does not require the input of a social security number.

MBS prices (mortgage backed securities) are up +6/32 (FNMA 30 yr 3.0 at 102.22 ) which is lower than earlier prices. MBS prices affect mortgage rates which move in the opposite direction. Industrial Production for April fell 0.5% and was below expectations. The Empire State Index dropped to -1.4 and was also below consensus. PPI for April dropped 0.7% and shows that inflation remains at low levels. Core PPI rose 0.1%. In other business news, Europe is falling back into a recession.

FreeRateUpdate.com researches and reports advertised rates of active lenders within the FreeRateUpdate.com network.

Article source: Google Streamline Refinance RSS

Article source: Broker Universe REO

In a short sale, the bank approves the sale of the house to a new buyer at a mutually acceptable price. Any unpaid remaining loan balance not covered by the sale proceeds may then be either partially or fully forgiven. The bank is an active participant throughout the process, negotiating for a higher price and higher repayment of principal from the original borrower.

In a foreclosure, the bank is essentially left holding the bag. The owners walk away at some point or live in the property rent-free until they’re evicted. Frequently there is damage to the house left by the departing owners, sometimes extensive. There is little or no cooperation between them and the bank.

Both transactions are serious, negative credit events for the borrower. After all, the mortgage wasn’t fully repaid. But the financial losses generated by a foreclosure typically are more severe for the lender than by a short sale.

Not only are there extended periods of nonpayment by the borrower but there are also substantial property management expenses, renovation costs, local property taxes and insurance while the house is being readied for resale. In some parts of the country, the average time to complete a foreclosure has exceeded two years.

The nation’s major sources of mortgage financing — Fannie Mae, Freddie Mac and the Federal Housing Administration — all recognize the differences between short sales and foreclosures in their underwriting policies regarding new mortgages. Fannie Mae generally won’t approve a new mortgage application by borrowers with a foreclosure on their credit report for up to seven years, but will consider lending to people who were involved in short sales, and who otherwise qualify in terms of recent credit behavior and available down payment, in as little as two years.

But if short sales routinely show up in credit reports coded as foreclosures, borrowers who might be able to qualify for a new mortgage two or three years after a short sale find themselves shut out of the market. George Albright, who completed a short sale on his home in New Port Richey, Fla., in 2010, has been trying for months to get through the hoops for a Fannie Mae conventional mortgage.

According to his mortgage broker, Pam Marron, Albright has a solid 720 FICO credit score, 20% down payment cash and more than adequate monthly income and reserves for a new home. But he keeps getting rejected because his credit report indicates a foreclosure, not a short sale.

That’s not unusual, Marron said, since there is no specific code to identify short sales. In a highly automated and strict underwriting environment, lenders go by the codes, according to Marron, harming creditworthy applicants like Albright.

“I did my time,” Albright said. “I’m ready to move on,” but because of the inadequacy of current credit reporting practices “I’m still paying more for rent than I’d be paying on a new mortgage.”

After a Capitol Hill hearing May 7 on credit reporting issues, Sen. Bill Nelson (D-Fla.) sent requests to both the FTC and the CFPB to investigate what he called the “disturbing practice” of misidentifying short sales, and to “penalize responsible parties in the mortgage- and credit-reporting industries, if they don’t fix this coding problem within 90 days.”

Nelson said real estate industry data indicate that there have been 2.2 million short sales nationwide during the last several years. Consumers who opted for a short-sale route rather than a more costly foreclosure are now being blocked from “reentry into the housing market,” he said, thereby “stifling economic recovery for all homeowners.”

Officials of the main trade group for the credit reporting industry, the Consumer Data Industry Assn., were not available for comment on Nelson’s short-sales complaint to the federal agencies.

kenharney@earthlink.net.

Distributed by Washington Post Writers Group.

Article source: Google Short Sales RSS

The bill amends the Truth in Lending Act (TILA) with respect to disclosures
of points and fees for so called “high cost” mortgage loans and has the
following key points

• Excludes from the computation of such points and
  fees: (1) the amount of any loan level price adjustment payment set by Fannie
  Mae, Freddie Mac, FHA, or similar government entity, (2) any compensation paid
  by a mortgage originator to an employee or creditor; and (3) any escrow for
  future payment of insurance.
• Modifies the inclusion in the computation of all
  compensation paid to mortgage brokers and specifies instead all compensation
  paid directly by a consumer to a mortgage originator, including a mortgage
  originator that is also the creditor in a table-funded transaction.
• Modifies the criteria for exclusion from the
  computation certain reasonable charges elsewhere exempted from the computation even
  though a creditor receives compensation, but only in so far as the creditor or
  its affiliate retains the compensation as a result of their participation in an
  affiliated business arrangement. Requires the charge to be: (1) a bona fide
  third party charge not retained by the mortgage originator, creditor, or an
  affiliate; or (2) a fee or premium for title examination, title insurance, or
  similar purposes.
• Modifies the conditions under which federal
  departments and agencies may exempt refinancings under a streamlined
  refinancing from an income verification requirement that, at the time a
  refinancing is consummated, the consumer has a reasonable ability to repay the
  loan and all applicable taxes, insurance, and assessments. Repeals the
  exception for bona fide third party charges not retained by the mortgage
  originator, creditor, or an affiliate from the requirement that total points
  and fees not exceed 3% of the total new loan amount. (Thus subjects such
  charges to the same 3% ceiling.)

CRL says the new bill would weaken a key mortgage reform by allowing
loans with excessive fees to
improperly meet the Qualified
Mortgage
definition.   Its issue paper, written by Ken Edwards,
points to the proposed legislation’s exemption of fees like yield
spread
premiums
from the 3 percent
points and fees limit for loans meeting the definition
of a Qualified Mortgage.  

Yield
spread
premiums, which
are
payments made to mortgage brokers through increasing a loan’s
interest rate, are complicated transactions, Edwards says, and as a result,
borrowers often
do not understand if they are paying a
competitive price.   He
quoted a 2010 Federal Reserve report which said “Yield spread premiums are complex and may
be
counter-intuitive
even to well-informed consumers…
The Board’s consumer
testing indicated that
disclosures about
yield spread premiums are
ineffective. Consumers in these tests did not
understand
yield spread premiums…”

“These
new loopholes would lead to more
expensive loans
for borrowers. 
Creating a points and fees exception
for
yield spread
premiums
and other fees will result in more borrower confusion and more
expensive loans. This would create new incentives for
abusive lending,”
the CRL paper concludes.

HR 1077 was introduced by Huizenga in
March.  It has the support of the National
Association of Mortgage Brokers, the Mortgage Bankers Association and the National
Association of Federal Credit Unions.  Over
two dozen groups, largely consumer organizations, are on record as opposing the
legislation including The NAACP, National Peoples Action, National Fair Housing
Alliance, and the Consumer Federation of America.

Article source: Mortgage News Daily

The answer appears to be yes, and last week two federal agencies — the Federal Trade Commission and the Consumer Financial Protection Bureau — were asked to investigate why. The reality is this: The credit reporting system now in place does not have a separate code that distinguishes a short sale from a foreclosure. Yet there are crucial differences between the two:

• In a short sale, the bank approves the sale of the house to a new buyer at a mutually acceptable price. Any unpaid remaining loan balance not covered by the sale proceeds may then be either partially or fully forgiven. The bank is an active participant throughout the process, negotiating for a higher price and higher repayment of principal from the original borrower.

• In a foreclosure, the bank is essentially left holding the bag. The owners walk away at some point or live in the property rent-free until they’re evicted. Frequently there is damage to the house left by the departing owners, sometimes extensive. There is little or no cooperation between them and the bank.

Both transactions are serious, negative credit events for the borrower. After all, the mortgage wasn’t fully repaid. But the financial losses generated by a foreclosure typically are more severe for the lender than a short sale. Not only are there extended periods of nonpayment by the borrower but there are also substantial property management expenses, renovation costs, local property taxes and insurance while the house is being readied for resale. In some parts of the country, the average time to complete a foreclosure has exceeded two years.

The nation’s major sources of mortgage financing — Fannie Mae, Freddie Mac and the Federal Housing Administration — all recognize the differences between short sales and foreclosures in their underwriting policies regarding new mortgages. Fannie Mae generally won’t approve a new mortgage application by borrowers with a foreclosure on their credit report for up to seven years, but will consider lending to people who were involved in short sales — and who otherwise qualify in terms of recent credit behavior and available down payment — in as little as two years.

But if short sales routinely show up in credit reports coded as foreclosures, borrowers who might be capable to qualify for a new mortgage two or three years after a short sale find themselves shut out of the market. George Albright, who completed a short sale on his home in New Port Richey, Fla., in 2010, has been trying for months to get through the hoops for a Fannie Mae conventional mortgage. According to his mortgage broker, Pam Marron, Albright has a solid 720 FICO credit score, 20 percent down payment cash and more than adequate monthly income and reserves for a new home. But he keeps getting rejected because his credit report indicates a foreclosure, not a short sale.

That’s not unusual, said Marron, since there is no specific code to identify short sales. In a highly automated and strict underwriting environment, lenders go by the codes, according to Marron, harming creditworthy applicants like Albright.

“I did my time,” said Albright in an interview. “I’m ready to move on,” but because of the inadequacy of current credit reporting practices “I’m still paying more for rent than I’d be paying on a new mortgage.”

Following a Capitol Hill hearing May 7 on credit reporting issues, Sen. Bill Nelson, a Democrat from Fla., sent requests to both the FTC and the CFPB to investigate what he called the “disturbing practice” of misidentifying short sales, and to “penalize responsible parties in the mortgage- and credit-reporting industries, if they don’t fix this coding problem within 90 days.”

Nelson said real estate industry data indicate that there have been 2.2 million short sales nationwide during the past several years. Consumers who opted for a short-sale route rather than a more costly foreclosure are now being blocked from “re-entry into the housing market,” he said, thereby “stifling economic recovery for all homeowners.”

Officials of the main trade group for the credit reporting industry, the Consumer Data Industry Association, were not available for comment on Nelson’s short-sales complaint to the federal agencies.

• Write to Ken Harney at P.O. Box 15281, Chevy Chase, MD 20815 or via email at kenharney@earthlink.net.

© 2012, Washington Post Writers Group

Article source: Google Short Sales RSS

Article source: Broker Universe REO

Since the government Home Affordability Refinance Program was created in 2009, it has undergone a series of enhancements that allow more homeowners to take advantage of it, and there are hints of more to come.

To be eligible for HARP, the loan must be owned by Fannie Mae or Freddie Mac. Luckily, the overwhelming majority of loans in this country are.

Those who qualify for the program can receive significant benefits.

James Phelps, a Vancouver, Wash., homeowner, recently refinanced his Fannie Mae loan on the HARP 2.0 program and saved $484 per month, even though his loan was 141 percent of the current value.

Homeowners who have been declined once for a HARP loan should be encouraged to try again.

For those who have a loan backed by the U.S. Department of Housing and Urban Development, the government wants you to pay less interest every month, and doesn’t care how much your house is worth. Requirements are much easier than those of other loan programs because there is no income or asset documentation, no appraisal, and overall credit history is not taken into consideration, other than the fact that there can be no mortgage payments more than 30 days late in the past 12 months. FHA loans are assumable.

For anyone who has served in the U.S. military and is fortunate enough to have a VA loan, the government has an additional benefit in the form of the VA Interest Rate Reduction Refinance Loan (IRRRL). Like the FHA Streamline refinance program, the IRRRL typically does not require an appraisal.

Mitch Merwin, also of Vancouver, lowered the interest rate on his mortgage and converted his 30-year loan into a 15-year loan, saving about $130,000 over the life of his loan.

There is certainly a method to the government’s madness in creating the helpful conditions that allow homeowners to refinance their underwater mortgages.

Further, the monthly savings for homeowners as a result of refinancing often goes directly into stimulating the economy because they are able to make purchases they wouldn’t ordinarily be able to make.

You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mae by checking www.fanniemae.com/loanlookup or www.freddiemac.com/mymortgage.

Gabe Terreson, branch manager of Home Team Funding, is a 17-year industry veteran who conducts training for mortgage consumers and real estate brokers. He can be reached at 360-993-5800, via email at team@hometeamfunding.com or online at www.hometeamfunding.com.

Article source: Google Streamline Refinance RSS