On June 30th FNMA issued SEL 2010-09, “Selling Guide Updates and Additional Guidance on Appraisal-Related Policies”.

What a mouthful!

The updates are effective for all loans originated after September 1, 2010.

Here’s what FNMA had to say in this announcement:

In the past, Fannie Mae did not provide requirements concerning lenders making changes to the opinion of market value reflected in the appraisal report. During Fannie Mae’s post-purchase reviews, cases were identified where the lender had reduced the opinion of market value in the appraisal report based upon underwriter judgment, automated valuation models, or other methodology. Therefore, Fannie Mae has updated its appraisal policies to address the practice of lenders changing the appraiser’s opinion of market value and also to provide specific guidance when an appraisal is considered deficient.

So what updates did they make to their appraisal policies?

Well, we’ve got to go to FNMA’s Seller’s Guide for that answer, specifically page 571, which is titled,

“B4-1.4-21, Appraisal Report Review: Valuation Analysis and Final Reconciliation (06/30/2010)”.

Here FNMA finally gets to the issue:

The lender is responsible for ensuring that appraisal reports are complete and that any changes to the report are made by the appraiser who originally completed the report. If the lender has concerns with any aspect of the appraisal that result in questions about the reliability of the opinion of market value, the lender must attempt to resolve its concerns with the appraiser who originally prepared the report. If the lender is unable to resolve its concerns with the appraiser, the lender must obtain a replacement report prior to making a final underwriting decision on the loan. Any request for a change in the opinion of market value must be based on material and substantive issues and must not be made solely on the basis that the opinion of market value as indicated in the appraisal report does not support the proposed loan amount.

All right, so what in the world does that all mean?  (No wonder the government owns forests – they need the trees for all this paper!).

For one, it means a lender’s underwriter can’t just over-ride an appraisers value.

If the underwriter doesn’t like the value, they have to address the issue with the appraiser.  If the appraiser holds their ground, then the underwriter must order a new appraisal.

There’s a whole lot more blah, blah, blah in the announcement, but that’s the gist of it.

Thoughts

Is this really going to make that much of a difference?

I don’t think so.

We’ll just see more review appraisals ordered which borrowers will have to pay for and everyone will have to wait on the delays.

It is a step in a positive direction, so maybe that’s cause for a little confetti toss.

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

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You’ve applied for your mortgage to buy a home or to refinance, signed the application and turned in all the requested documentation.  Now, you wait and wait wondering what’s going on.

When will you be approved so you can schedule the movers?  Are you going to get approved & closed before that low interest rate goes away?  What did the home appraise for?

Tired of waiting, you call, get voicemail so you leave a message.  Then you’re back to waiting, waiting, waiting.

Real estate agents go through this same thing, waiting to hear from lenders about the status of the deal they put together.  Will it get approved and close so they can collect their commission check and pay their bills?

Over and over again , the number one complaint in the process of getting a mortgage is lack of communication.

Borrowers buying a home or refinancing AND real estate agents are always complaining that they have to contact the mortgage lender and then wait for a call back – if it ever comes.

As a professional, the one thing I stress to my Team is that one of the few things we really have control over is communication.  We can’t control appraised values, interest rate movements, requireed repairs or the numerous other issues that pop up during the loan approval process.  We can pick up the phone or send an email at any time to alleviate apprehension and frustration.

There are two ways to communicate - proactively and reactively.

I’d estimate that around 80% of communication in a real estate and/or mortgage transaction is reactionary.  Someone calls or sends an email (even text messages these days) and it’s responded to.

Not a very effective way to exceed expectations!

It’s so much better to proactively communicate.  It’s difficult to do though without a system and discipline.  Try to do it otherwise and you’ll soon end up in reaction mode again.

It’s funny that I’ve never been asked by a client how often our Team will communicate with them throughout the application process.  Everyone wants that low rate in the beginning, only worrying about being kept in the loop once they’re well into the approval process.

Even if you do ask about the level of communication to expect, how likely do you think it is that you’ll get an honest answer?  Ask about a communication plan and watch the curious looks you’ll get – it’ll be as if you’re speaking a foreign language.

That’s because most mortgage lenders don’t have a formal communication process!

If this is a concern to you, maybe we should talk.  We do have a formal system of communication.

It all starts with our Weekly Status Reports.   We email these out religiously every week.  We also send them out whenever we get a conditional or full approval.

What’s more, they’re designed to keep everyone involved in the transaction on the same page.  If there are real estate agents involved in a purchase, they get added to the email distribution list.  Get us the email address of the seller or title company and we’ll add them to the distribution list.

Now you may think we’re making all this up just to try to get your business.  I encourage you to look below at our Weekly Status Report Template that we use.

Then I challenge you to find a competitor that has something similar.

A recent Fair Isaac Company news release shows that U.S. credit scores have dropped since 2008 in synch with the economy.

High unemployment, a sinking economy and a Housing Crisis, take your pick as to why credit scores are dropping.

Consumers have defaulted on mortgages in record numbers and mortgage late payments carry a lot of weight on credit scores.  They’ve done the same on credit cards, although recent statistics indicate that problem is slowing.

So, is anyone really surprised by the Fair Isaac news release that credit scores are dropping?

The chart below is right from Fair Isaac:

Notice that the percentage of consumers in almost every FICO score range in the above chart has worsened since 2008.  Not by a lot, but they are worsening.

Keep in mind, that most mortgage lenders won’t accept middle FICO scores below 620.  So, the increase in FICO scores below 600 is not good news.

There are a two interesting trends on the chart:

- the percentage of FICO scores between 750-799 have actually increased in 2010 after dropping in 2009.  While this may seem like good news at first, that increase probably came from those dropping from the higher tier, which is a negative.

- the other interesting development is the percentage of FICO scores in the tier from 300-499.  It increased in 2009, but saw a pretty substantial decrease in 2010.  So, the number of people with the worst credit is dropping, which is good news.  You would think it actually be getting worse in our economic recession.  But look closer and you’ll see that the tier has always had the smallest percentage of consumers.  It actually takes a lot of negative reporting to get a FICO score under 500.  This is probably more a sign that the number of consumers now using cash instead of credit is increasing.  I’d also like to see Fair Isaac’s numbers/percentages on those that don’t have enough credit to generate a FICO score.  I’d bet they’re going up.

Again, keep in mind when looking at this chart that consumers are shifting from one tier to the next.  So, the 650-699 tier staying relatively stable, probably doesn’t mean much.  There are probably as many consumers dropping into it as there are dropping out of it.

The good news to take away from all this is best represented with the bar graph below:

If you add up the percentages you’ll find that in 2010, even after all the recent economic hardships, over 53% of American consumers have a FICO score above 700.

FICO Scores & Mortgage Rates

Fair Isaac didn’t cover this in their news release, but since this is a mortgage blog, we’ll cover it.

In 2008 FNMA/FHLMC started charging more to mortgage borrowers with FICO scores under 720.  They use what’s called, Loan Level Price Adjustments (or LLPA) to determine how much more to charge.

You can reference the previous link for all the detailed charges, but here’s the basic matrix:

*NOTE – the above price adjustments are in discount points, not interest rate points.

As you can see from the chart, if your middle FICO score is under 720 you’re going to pay more to get the going mortgage rate (unless you borrow less than 60% of a property’s value).

I’d like to see Fair Isaac break their tiers down to correspond with FNMA’s matrix above.  That would give us better data to see how the trend in FICO scores is affecting borrower costs.

What we can glean from their existing data is that in 2008 45.7% of consumers had a FICO score below 700.  In 2010 that number increased to 46.9%.

That means that an additional 1.2% of consumers paid either a higher interest rate or had higher closing costs in 2010 because of their FICO scores.

Do you think that’s going to get worse of better in 2011?

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

]]> http://www.thelendingedge.com/average-fico-scores-dropping-the-affect-on-mortgage-rates/feed/ 0 http://www.thelendingedge.com/mortgage_principal_reductions/ http://www.thelendingedge.com/mortgage_principal_reductions/#comments Sat, 14 Aug 2010 20:07:28 +0000 Drew Sygit http://www.thelendingedge.com/?p=635 HUD announced adjustments to its Making Home Affordable initiative to encourage more principal reductions on August 6th.  Soon after, rumors ran rampant on Wall Street and in the press that the Obama administration would be soon announcing that FNMA & FHLMC would be forgiving a portion of the principal owed on the trillions in mortgages they control. What’s going on?

Sometimes the best way to find out how a radical idea will be accepted, is to start your own rumor about it and see how everyone responds.

If someone in the Obama administration is playing this game, they got a lot of responses to digest.

Reuters, Barons & even Morgan Stanley weighed in on the rumor.  The rumor spread so fast the Treasury Department supposedly felt compelled to issue a statement of denial (not that I could find it).

With the economy still not recovering, Obama’s approval ratings in the trash and the Democrats expecting to get skewered in the coming elections – might they actually try it?

Who knows, but it would be extremely difficult to implement with any kind of fairness.

HUD’s FHA Short Refinance Announcement

What we can talk about is the latest attempt by HUD to get banks to use its principal reduction program.

HUD’s first two attempts to leverage the promise of FHA mortgages to get banks to grant principal reductions didn’t work, maybe the third time’s the charm?

Ah, to have the eternal optimism of our government officials.  They are so concerned about underwater homeowners that they keep searching for ways to get the banks to lower principal balances.  They keep trying & trying!

Oh wait, they’re just doing this to keep their jobs!

Even better, HUD couldn’t even come up with a new program this time around.  Instead they announced “adjustments” to their most recent failed program.

What’s it mean for homeowners?

Well if you’re upside down AND can convince your lender to forgive at least 10% of your loan balance, then you may qualify for this “FHA Short Refinance” option.

Has anyone at HUD taken the time to notice that banks can’t get up to speed on short sales or even foreclosures (shadow inventory)?

So, why does HUD think banks are going to embrace this program?
FHA Short Refinance Details

Even if you meet all the requirements below, I wouldn’t get your hopes up about getting your lender to approve you for this program.

This is pulled right from HUD:

Participation is voluntary and requires the consent of lien holders. In order for a loan to be eligible, the following conditions must be met:

1. The homeowner must be in a negative equity position;
2. The homeowner must be current on the existing mortgage to be refinanced;
3. The homeowner must occupy the subject property (1-4 units) as their primary residence;
4. The homeowner must qualify for the new loan under standard FHA underwriting requirements and possess a “FICO based” decision credit score greater than or equal to 500;
5. The existing loan to be refinanced must not be a FHA-insured loan;
6. The existing first lien holder must write off at least 10 percent of the unpaid principal balance;
7. The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent;
8. Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent;
9. For loans that receive a “refer” risk classification from TOTAL Mortgage Scorecard (TOTAL) and/or are manually underwritten, the homeowner’s total monthly mortgage payment, including the first and any subordinate mortgage(s), cannot be greater than 31 percent of gross monthly income and total debt, including all recurring debts, cannot be greater than 50 percent of gross monthly income;
10. FHA mortgagees are not permitted to use premium pricing to pay off existing debt obligations to qualify the borrower for the new loan;
11. FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance; and
12. The existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification as described below.

Anyone that’s attempted to get a loan modification already knows the difficulties in getting lenders to assist when you’re already behind on your mortgage.  Imagine the challenge of getting assistance when you’re current on your mortgage?
Summary

I can only think of three reasons HUD officials would even bother announcing this new option:

1. They’re trying to save their jobs by making it look like their doing something.
2. This is just the first piece of a bigger strategy.
3. They are truly incompetent

For more information on the HUD announcement:

FHA Short Refinance Announcement

HUD Mortgagee Letter 2010-23

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

HUD announced adjustments to its Making Home Affordable initiative to encourage more principal reductions on August 6th.  Soon after, rumors ran rampant on Wall Street and in the press that the Obama administration would be soon announcing that FNMA & FHLMC would be forgiving a portion of the principal owed on the trillions in mortgages they control. What’s going on?

Sometimes the best way to find out how a radical idea will be accepted, is to start your own rumor about it and see how everyone responds.

If someone in the Obama administration is playing this game, they got a lot of responses to digest.

Reuters, Barons & even Morgan Stanley weighed in on the rumor.  The rumor spread so fast the Treasury Department supposedly felt compelled to issue a statement of denial (not that I could find it).

With the economy still not recovering, Obama’s approval ratings in the trash and the Democrats expecting to get skewered in the coming elections – might they actually try it?

Who knows, but it would be extremely difficult to implement with any kind of fairness.

HUD’s FHA Short Refinance Announcement

What we can talk about is the latest attempt by HUD to get banks to use its principal reduction program.

HUD’s first two attempts to leverage the promise of FHA mortgages to get banks to grant principal reductions didn’t work, maybe the third time’s the charm?

Ah, to have the eternal optimism of our government officials.  They are so concerned about underwater homeowners that they keep searching for ways to get the banks to lower principal balances.  They keep trying & trying!

Oh wait, they’re just doing this to keep their jobs!

Even better, HUD couldn’t even come up with a new program this time around.  Instead they announced “adjustments” to their most recent failed program.

What’s it mean for homeowners?

Well if you’re upside down AND can convince your lender to forgive at least 10% of your loan balance, then you may qualify for this “FHA Short Refinance” option.

Has anyone at HUD taken the time to notice that banks can’t get up to speed on short sales or even foreclosures (shadow inventory)?

So, why does HUD think banks are going to embrace this program?
FHA Short Refinance Details

Even if you meet all the requirements below, I wouldn’t get your hopes up about getting your lender to approve you for this program.

This is pulled right from HUD:

Participation is voluntary and requires the consent of lien holders. In order for a loan to be eligible, the following conditions must be met:

1. The homeowner must be in a negative equity position;
2. The homeowner must be current on the existing mortgage to be refinanced;
3. The homeowner must occupy the subject property (1-4 units) as their primary residence;
4. The homeowner must qualify for the new loan under standard FHA underwriting requirements and possess a “FICO based” decision credit score greater than or equal to 500;
5. The existing loan to be refinanced must not be a FHA-insured loan;
6. The existing first lien holder must write off at least 10 percent of the unpaid principal balance;
7. The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent;
8. Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent;
9. For loans that receive a “refer” risk classification from TOTAL Mortgage Scorecard (TOTAL) and/or are manually underwritten, the homeowner’s total monthly mortgage payment, including the first and any subordinate mortgage(s), cannot be greater than 31 percent of gross monthly income and total debt, including all recurring debts, cannot be greater than 50 percent of gross monthly income;
10. FHA mortgagees are not permitted to use premium pricing to pay off existing debt obligations to qualify the borrower for the new loan;
11. FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance; and
12. The existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification as described below.

Anyone that’s attempted to get a loan modification already knows the difficulties in getting lenders to assist when you’re already behind on your mortgage.  Imagine the challenge of getting assistance when you’re current on your mortgage?
Summary

I can only think of three reasons HUD officials would even bother announcing this new option:

1. They’re trying to save their jobs by making it look like their doing something.
2. This is just the first piece of a bigger strategy.
3. They are truly incompetent

For more information on the HUD announcement:

FHA Short Refinance Announcement

HUD Mortgagee Letter 2010-23

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

With the world’s largest bond fund PIMCO stating there’s a 25% chance of deflation, the Federal Reserve announces new measures to spur the U.S. economy.

The Federal Reserve met yesterday and the markets held their collective breath to see what actions the Fed would take.

Citing continued concerns about the economy, the Fed left rates where they were as expected.

All the signs and statements point to the Fed being more & more concerned about deflation and the resulting contraction of the economy.  The Federal Reserve Press Release published after the meeting pointed out:

Bank lending has continued to contract.

and:

To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.¹ The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.

That last part is very good news for the housing industry.

The Fed reinvesting into more bonds means they’ll still be effectively subsidizing interest rates.

Don’t celebrate too soon though.  The Fed also remarked:

Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.

These factors are all working against many potential buyers taking the plunge into home ownership along with the contracted lending policies of the banking system.

Deflation will also work against the housing market.  You’ve probably already witnessed a deflationary mindset and didn’t recognize it.  Many potential home buyers have waited to buy a home believing that prices will continue to fall.  Think about a significant portion of consumers taking that attitude with cars, electronics, etc.  The whole economy goes into a tailspin that’s not easy to get out of.

When can we expect to see a sustained recovery in the housing market?

Look to the employment numbers.

I don’t mean the unemployment numbers!  Those are now skewed by the numbers of people that have given up on looking for a job.

When people start going back to work and getting raises, they’ll start buying houses.

In the mean time, those that can afford to buy will realize the best deals.

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

With the world’s largest bond fund PIMCO stating there’s a 25% chance of deflation, the Federal Reserve announces new measures to spur the U.S. economy.

The Federal Reserve met yesterday and the markets held their collective breath to see what actions the Fed would take.

Citing continued concerns about the economy, the Fed left rates where they were as expected.

All the signs and statements point to the Fed being more & more concerned about deflation and the resulting contraction of the economy.  The Federal Reserve Press Release published after the meeting pointed out:

Bank lending has continued to contract.

and:

To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.¹ The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.

That last part is very good news for the housing industry.

The Fed reinvesting into more bonds means they’ll still be effectively subsidizing interest rates.

Don’t celebrate too soon though.  The Fed also remarked:

Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.

These factors are all working against many potential buyers taking the plunge into home ownership along with the contracted lending policies of the banking system.

Deflation will also work against the housing market.  You’ve probably already witnessed a deflationary mindset and didn’t recognize it.  Many potential home buyers have waited to buy a home believing that prices will continue to fall.  Think about a significant portion of consumers taking that attitude with cars, electronics, etc.  The whole economy goes into a tailspin that’s not easy to get out of.

When can we expect to see a sustained recovery in the housing market?

Look to the employment numbers.

I don’t mean the unemployment numbers!  Those are now skewed by the numbers of people that have given up on looking for a job.

When people start going back to work and getting raises, they’ll start buying houses.

In the mean time, those that can afford to buy will realize the best deals.

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

Finally!  Statistics on how long it takes various mortgage servicers to approve and close short sales.

Everyone involved in the short sale process, sellers, buyers, agents, title companies, etc, want to know how long it takes to do a short sale.

Up to now, it was pretty hard to really answer someone when they asked, “how long does “lender” usualy take to approve a short sale?”

Now, thanks to a Deutsche Bank Short Sale Report, we all have something to reference to.

Here’s a breakdown by loan type:

Prime (FNMA/FHLMC):
1. GMAC – 6 months, 53% of distressed sales were Short Sales.
2. Citigroup’s servicing arm CitiMortgage – about 7.5 months, 56% of distressed sales were Short Sales.
3. Wells Fargo – roughly 8 months, only 34% of distressed sales were Short Sales.

(Countrywide – now owned by Bank of America (BOA) – had the slowest short sales, averaging more than 13 months, 59% of distressed sales were Short Sales.)

Subprime:
1. Wells Fargo – more than 15 months, 14% of distressed sales were Short Sales.
2. HomEq Servicing – 16 months, 22% of distressed sales were Short Sales.
3. Morgan Stanley’s servicing arm Saxon Mortgage Services – at a little more than 17 months, 18% of distressed sales were Short Sales.

(Equicredit and Ocwen both came in last with an average of more than 29 months on their short sales)

Option-ARM:
1. JPMorgan Chase’s EMC Mortgage – just over 8 months, 43% of distressed sales were Short Sales.
2. Aurora Loan Services – 10 months, 30% of distressed sales were Short Sales.
3. GMAC – just more than 10 months, 33% of distressed sales were Short Sales.

(Again, Countrywide/BOA brought up the rear with a short sale timeline at almost 14 months, 22% of distressed sales were Short Sales.)

Alt-A:
1. First Horizon – just over 9 months, 35% of distressed sales were Short Sales.
2. Both Wells Fargo and Aurora – roughly 11 months, Wells 17% & Aurora 16% of distressed sales were Short Sales.

(That wonderful company Countrywide/BOA again brought up the rear with a short sale timeline at almost 13 months, 24% of distressed sales were Short Sales.)

What Does the Data Mean?

Aren’t those great statistics?  Everyone now has all the answers.

Not so fast.

Why are mortgage servicers taking so long on short sales?

The short sale process is very similar to getting approved for a mortgage to buy a home.  Income, asset and applications must be turned in.  One of several methods to validate the property value must be done.  But, again, that’s all stuff that’s done in 30-45 days on a regular mortgage application.

The heads of these servicers are pretty mum on answering questions like this.

That’s usually a sign they don’t have good answers.

Bank of America, which owns Countrywide, was against short sales until just last spring.  Any surprise they rank near the bottom?

Ocwen has been slapped with several million dollar fines in the past for abusive practices in dealing with borrowers.  No surprise they’re at the bottom either with that track record.

Many hope that the federal government’s new HAFA program will spur more short sales.  If the results of HAMP are used to gauge the effectiveness of the government’s attempts to mitigate the housing crisis, don’t count on it.

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy 

Finally!  Statistics on how long it takes various mortgage servicers to approve and close short sales.

Everyone involved in the short sale process, sellers, buyers, agents, title companies, etc, want to know how long it takes to do a short sale.

Up to now, it was pretty hard to really answer someone when they asked, “how long does “lender” usualy take to approve a short sale?”

Now, thanks to a Deutsche Bank Short Sale Report, we all have something to reference to.

Here’s a breakdown by loan type:

Prime (FNMA/FHLMC):
1. GMAC – 6 months, 53% of distressed sales were Short Sales.
2. Citigroup’s servicing arm CitiMortgage – about 7.5 months, 56% of distressed sales were Short Sales.
3. Wells Fargo – roughly 8 months, only 34% of distressed sales were Short Sales.

(Countrywide – now owned by Bank of America (BOA) – had the slowest short sales, averaging more than 13 months, 59% of distressed sales were Short Sales.)

Subprime:
1. Wells Fargo – more than 15 months, 14% of distressed sales were Short Sales.
2. HomEq Servicing – 16 months, 22% of distressed sales were Short Sales.
3. Morgan Stanley’s servicing arm Saxon Mortgage Services – at a little more than 17 months, 18% of distressed sales were Short Sales.

(Equicredit and Ocwen both came in last with an average of more than 29 months on their short sales)

Option-ARM:
1. JPMorgan Chase’s EMC Mortgage – just over 8 months, 43% of distressed sales were Short Sales.
2. Aurora Loan Services – 10 months, 30% of distressed sales were Short Sales.
3. GMAC – just more than 10 months, 33% of distressed sales were Short Sales.

(Again, Countrywide/BOA brought up the rear with a short sale timeline at almost 14 months, 22% of distressed sales were Short Sales.)

Alt-A:
1. First Horizon – just over 9 months, 35% of distressed sales were Short Sales.
2. Both Wells Fargo and Aurora – roughly 11 months, Wells 17% & Aurora 16% of distressed sales were Short Sales.

(That wonderful company Countrywide/BOA again brought up the rear with a short sale timeline at almost 13 months, 24% of distressed sales were Short Sales.)

What Does the Data Mean?

Aren’t those great statistics?  Everyone now has all the answers.

Not so fast.

Why are mortgage servicers taking so long on short sales?

The short sale process is very similar to getting approved for a mortgage to buy a home.  Income, asset and applications must be turned in.  One of several methods to validate the property value must be done.  But, again, that’s all stuff that’s done in 30-45 days on a regular mortgage application.

The heads of these servicers are pretty mum on answering questions like this.

That’s usually a sign they don’t have good answers.

Bank of America, which owns Countrywide, was against short sales until just last spring.  Any surprise they rank near the bottom?

Ocwen has been slapped with several million dollar fines in the past for abusive practices in dealing with borrowers.  No surprise they’re at the bottom either with that track record.

Many hope that the federal government’s new HAFA program will spur more short sales.  If the results of HAMP are used to gauge the effectiveness of the government’s attempts to mitigate the housing crisis, don’t count on it.

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy 

September 7th, 2010 HUD is changing the MIP fees it charges borrowers for FHA mortgages.

The changes are expected o generate an additional $300 million per MONTH for HUD’s FHA insurance program.

That’s an extra $3.6 billion per year.

Here are the changes:

First, HUD is lowering the upfront MIP from its current 2.25% to 1.0%.  This is the amount that can be financed on top of the loan amount.

Simultaneously, HUD is raising the monthly MIP amount:

• For loans with less than 5% down – from 0.55% to 0.85%.
• For loans with more than 5% down – from 0.50% to 0.90%

Now technically these changes only affect loans of more than 15 years, but in reality most FHA mortgages are 30 year loans.

How Do These Changes Affect Borrowers?

Let’s compare some different purchase price amounts to see what HUD done to homebuyers:

Note: all the examples below assume a 4.5% mortgage rate on a 30 fixed loan with the minimum 3.5% down.

Notice that at every purchase price amount the monthly cost has gone up!

This means that for any given monthly payment a buyer will now qualify for less of a purchase price due to the higher corresponding payment.

Just be glad HUD didn’t implement a FICO credit score pricing matrix as they have discussed numerous times.  Just be forewarned – if FHA foreclosures don’t improve soon, that may still be implemented.

Are there any borrower benefits at all in this change?

There is if you can pay off your FHA loan quicker.  Notice in the above chart that the actual financed amount & payment are lower under the new program.  This is because of the lower upfront MIP amount.

For example, for a $75,000 purchase price the old plan had a principal & interest payment of $374.97 versus $370.38 under the new plan.  That’s a savings of $4.59/month.

The easiest way to pay off an FHA mortgage would be to refinance to a FNMA or FHLMC conforming mortgage.  But you’d need at least 10% equity to do so and FNMA/FHLMC have price adjustments for FICO credit scores, so you’d have to be careful and consult with a true expert mortgage professional about this.

More Information

If you’d like more information on this change you can click on the links below:

FHA letter from David H. Stevens

HUD Press Release

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

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Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
The most Certified Mortgage Expert in the Midwest

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P: 248-356-3739 • F: 866-215-3755 • dsygit@TheLendingEdge.com • www.TheLendingEdge.com