The home buyer tax credit was extended and expanded, and mortgage interest rates have actually been trending even lower, but housing's recovery is still being hampered by new appraisal rules. At least that's what the builders and the mortgage bankers continue to say.
In the monthly sentiment survey from the National Association of Home Builders recently found, "fully one-third of respondents indicated that they have recently lost sales due to low appraisal values. This is up from a quarter of respondents who indicated as much in a survey taken in July."
The trouble is that appraisers are often using foreclosed or distressed properties as comps. The bigger problem, according to the mortgage bankers, is that the new Home Valuation Code of Conduct, instituted by Fannie Mae and Freddie Mac in conjunction with the New York State Attorney General, Andrew Cuomo, is putting inexperienced, poorly paid appraisers in the driver's seat on the road to housing recovery. The whole idea was to put a fire wall between lenders and appraisers.
There is currently a bill in the House of Representatives (H.R. 3044) sponsored by Rep. Travis Childers, D - MS, to institute a moratorium on the HVCC, but it's currently stalled. Members of the House Financial Services Committee did get it tacked on to the Consumer Financial Protection Act (H.R. 3126) which passed out of committee in late October.
The National Association of Mortgage Brokers, led by past president Mark Savitt, delivered 117,000 signed petitions from mortgage brokers all over the country to Attorney General Cuomo's Manhattan office. The petitions, which supposedly fill 50 boxes, seek the repeal of the HVCC.
"We're doing this to draw attention to the fact that the home valuation code of conduct is doing nothing to reduce or to prevent valuation fraud in fact it has increased valuation fraud by 46% since it went into effect," says Savitt. "It is harming consumers, harming the housing market, and harming the recovery of the economy as well."
Friday, December 4, 2009
Thursday, October 29, 2009
A Program that REALLY offers a NO COST Solution?
Remember the old adage "There is no such thing as a free lunch?" It turns out several programs can do this, including the Home Affordability Refinance Program, also called HARP, and FHA/VA Streamline. Here are some answers:
How can there be no closing costs?
The lender charges a slightly higher interest rate so it can absorb the upfront closing cost. The higher rate averages a half percentage point, depending on the loan amount. If you pay the closing costs instead, on average you have to stay in your home at least three to five years to come out ahead.
Will credit scores affect the interest rate?
FHA/VA Streamline programs do not have interest-rate adjustments (stepped increases) if your credit score is between 620 and 850. However, HARP loans do have interest-rate adjusters, which start at credit scores below 740. The lower your score the higher your rate. If your credit score is below 680, the adjusters might take the interest rate too high to justify refinancing with HARP.
How is the value of a home determined?
Typically with a computer-generated model, which uses recent sales data and tax estimates for quick valuation without a full appraisal. If not enough data is available for the quick valuation, a full appraisal would be needed. If the value comes in less than your first mortgage, HARP allows some flexibility as long as your mortgage does not exceed 125 percent of the current market value.
Do you have to pay private mortgage insurance again?
It depends. If your current loan does not have PMI, you won't be charged it on a HARP refinance, even if your new loan-to-value ratio is over 80 percent.
Can you drop a spouse from the new loan?
If you ended up with the house from a divorce or death, and you have made payments on your own for the last 12 months, you can still take advantage of refinancing -- and drop the spouse -- but you have to qualify on your own.
Are there any reasons not to refinance? Any risks?
The goal of HARP is to improve affordability and stability of your mortgage. There are no balloon payments or prepayment penalties to worry about. So if you can make your new mortgage payment, the only reason not to refinance is if the refinance doesn't reduce your payment.
If your goal is to pay it off quicker, you can do that in two ways. First, if you can afford your previous higher payment after the refinance, consider continuing to make it. By applying the extra amount to the principal balance, the loan will pay off sooner. You still will have a safety net of making only the regular payment, without the extra, if the need ever arises. Second, if you have been paying for seven years or more, consider a 15- or 20-year loan rather than one amortized over 30 years.
With either option, as long as you feel comfortable making the larger payment, refinancing could make sense.
How about a duplex or investment property?
Income properties have substantial interest-rate adjusters, so you need to take that into account.
Anything else you should know?
Documentation & income verification is needed. You must be current on existing mortgage payments. You cannot use this refinance to extract equity to pay off other debts. The HARP program will expire June 10, 2010. We hope you will be able to take maximum advantage of the savings before interest rates rise again.
How can there be no closing costs?
The lender charges a slightly higher interest rate so it can absorb the upfront closing cost. The higher rate averages a half percentage point, depending on the loan amount. If you pay the closing costs instead, on average you have to stay in your home at least three to five years to come out ahead.
Will credit scores affect the interest rate?
FHA/VA Streamline programs do not have interest-rate adjustments (stepped increases) if your credit score is between 620 and 850. However, HARP loans do have interest-rate adjusters, which start at credit scores below 740. The lower your score the higher your rate. If your credit score is below 680, the adjusters might take the interest rate too high to justify refinancing with HARP.
How is the value of a home determined?
Typically with a computer-generated model, which uses recent sales data and tax estimates for quick valuation without a full appraisal. If not enough data is available for the quick valuation, a full appraisal would be needed. If the value comes in less than your first mortgage, HARP allows some flexibility as long as your mortgage does not exceed 125 percent of the current market value.
Do you have to pay private mortgage insurance again?
It depends. If your current loan does not have PMI, you won't be charged it on a HARP refinance, even if your new loan-to-value ratio is over 80 percent.
Can you drop a spouse from the new loan?
If you ended up with the house from a divorce or death, and you have made payments on your own for the last 12 months, you can still take advantage of refinancing -- and drop the spouse -- but you have to qualify on your own.
Are there any reasons not to refinance? Any risks?
The goal of HARP is to improve affordability and stability of your mortgage. There are no balloon payments or prepayment penalties to worry about. So if you can make your new mortgage payment, the only reason not to refinance is if the refinance doesn't reduce your payment.
If your goal is to pay it off quicker, you can do that in two ways. First, if you can afford your previous higher payment after the refinance, consider continuing to make it. By applying the extra amount to the principal balance, the loan will pay off sooner. You still will have a safety net of making only the regular payment, without the extra, if the need ever arises. Second, if you have been paying for seven years or more, consider a 15- or 20-year loan rather than one amortized over 30 years.
With either option, as long as you feel comfortable making the larger payment, refinancing could make sense.
How about a duplex or investment property?
Income properties have substantial interest-rate adjusters, so you need to take that into account.
Anything else you should know?
Documentation & income verification is needed. You must be current on existing mortgage payments. You cannot use this refinance to extract equity to pay off other debts. The HARP program will expire June 10, 2010. We hope you will be able to take maximum advantage of the savings before interest rates rise again.
Wednesday, October 14, 2009
Mortgage Shopping? Look Locally
When it comes to getting the best possible interest rate for your home mortgage, apparently big is not better. So don't overlook the smaller banks.
Everyone knows that getting a lower interest rate on your mortgage can save you thousands of dollars over time, but what you may not know is that the best rates are not necessarily offered by the big volume players or the bank where you currently do your checking. Instead, they can often be found at smaller banks and credit unions.
"Neglecting to include smaller community banks and credit unions could prove to be a costly admission," says Greg McBride, senior financial analyst with Bankrate.com of the loan-hunting process.
"In this market, in particular with jumbo large or jumbo confirming loans, smaller community banks and credit unions are very competitive," says McBride.
Compared to large banks, which are more depended on the secondary market, small banks have more flexibility to offer lower rate loans because "they are not dependent on an investor in the second market to eventually buy it," he said.
Smaller banks also have an incentive to offer better rates.
According to Darren Beck, chief marketing officer at LendingTree, smaller banks often have a harder time attracting customers than large banks as they are not as convenient, with fewer branches and ATMs.
"The holy grail is that the consumer is looking for a mortgage but also has financial assets [that they can transfer] and may be a small business owner," he says. The proof is in the numbers based on a recent data from Bankrate.com.
Keep in mind, though, when you hear about low interest rates, it is essential to compare deals on an apples-to-apples basis, as the advertised interest rate is only one part of the puzzle. There are a number of fees included in mortgage loans that could have a significant impact on your total costs including closing costs, pay down points, document preparation fees, underwriting costs and more.
First Century Bank, N.A. is a local Georgia bank. Please contact us today @ 404-798-5109.
Everyone knows that getting a lower interest rate on your mortgage can save you thousands of dollars over time, but what you may not know is that the best rates are not necessarily offered by the big volume players or the bank where you currently do your checking. Instead, they can often be found at smaller banks and credit unions.
"Neglecting to include smaller community banks and credit unions could prove to be a costly admission," says Greg McBride, senior financial analyst with Bankrate.com of the loan-hunting process.
"In this market, in particular with jumbo large or jumbo confirming loans, smaller community banks and credit unions are very competitive," says McBride.
Compared to large banks, which are more depended on the secondary market, small banks have more flexibility to offer lower rate loans because "they are not dependent on an investor in the second market to eventually buy it," he said.
Smaller banks also have an incentive to offer better rates.
According to Darren Beck, chief marketing officer at LendingTree, smaller banks often have a harder time attracting customers than large banks as they are not as convenient, with fewer branches and ATMs.
"The holy grail is that the consumer is looking for a mortgage but also has financial assets [that they can transfer] and may be a small business owner," he says. The proof is in the numbers based on a recent data from Bankrate.com.
Keep in mind, though, when you hear about low interest rates, it is essential to compare deals on an apples-to-apples basis, as the advertised interest rate is only one part of the puzzle. There are a number of fees included in mortgage loans that could have a significant impact on your total costs including closing costs, pay down points, document preparation fees, underwriting costs and more.
First Century Bank, N.A. is a local Georgia bank. Please contact us today @ 404-798-5109.
Tuesday, October 6, 2009
An Odd Wrinkle In Mortgage Rates
Conventional wisdom suggests that the bigger the down payment you make on a mortgage, the better the mortgage rate you'll get. After all, a bigger down payment means more equity in the home upfront, which gives the bank more of a cushion between the value of their collateral and the amount of your loan. However, an interesting anomaly has made some interest rates higher for home buyers with larger down payments.
The reason is a function of Fannie Mae and Freddie Mac underwriting guidelines. The logic behind this particular aspect of the guidelines is fuzzy even by bureaucratic standards, but that's not the point. For now, this rule creates a scenario where you could pay a higher interest rate with a 20% down payment than with a 5% down payment.
The takeaway here is don't assume anything about mortgage rates. You not only have to compare different loan options but when doing so, you should be very specific about the mortgage terms you have in mind. You also may want to run a couple different scenarios by your lender - you might be surprised at which results in the best terms.
The reason is a function of Fannie Mae and Freddie Mac underwriting guidelines. The logic behind this particular aspect of the guidelines is fuzzy even by bureaucratic standards, but that's not the point. For now, this rule creates a scenario where you could pay a higher interest rate with a 20% down payment than with a 5% down payment.
The takeaway here is don't assume anything about mortgage rates. You not only have to compare different loan options but when doing so, you should be very specific about the mortgage terms you have in mind. You also may want to run a couple different scenarios by your lender - you might be surprised at which results in the best terms.
Wednesday, September 23, 2009
The Housing Recovery and Targeted Government Stimulus
For anyone who argues the relevance of government stimulus on housing recovery, I submit the following.
One third of all home buyers in the past several months have taken advantage of the $8000 home buyer tax credit.
In addition to the tax credit, the housing market has arguably been juiced by government induced low mortgage rates. By buying up Fannie Mae and Freddie Mac mortgage-backed securities, the government has pushed the 30-year fixed to near record lows, recently at 5.02 percent and now around 5.08 percent (national average). That has pushed the refinance share of activity to 61 percent of all mortgage application volume, according to today's Mortgage Bankers Association weekly mortgage survey.
So it begs the question, what happens when the gravy train runs out?
The tax credit is set to expire Nov. 30th and the government is only set to keep buying Fannie and Freddie securities through the end of this year. Some experts say with all the government stimulus and deficit spending interest rates are sure to eventually rise. Only time will tell. One thing is for sure; It's a buyers market and the government is playing Santa Claus. So if there is anything on your wish list this year it may be time to act.
For anyone who argues the relevance of government stimulus on housing recovery, I submit the following.
One third of all home buyers in the past several months have taken advantage of the $8000 home buyer tax credit.
In addition to the tax credit, the housing market has arguably been juiced by government induced low mortgage rates. By buying up Fannie Mae and Freddie Mac mortgage-backed securities, the government has pushed the 30-year fixed to near record lows, recently at 5.02 percent and now around 5.08 percent (national average). That has pushed the refinance share of activity to 61 percent of all mortgage application volume, according to today's Mortgage Bankers Association weekly mortgage survey.
So it begs the question, what happens when the gravy train runs out?
The tax credit is set to expire Nov. 30th and the government is only set to keep buying Fannie and Freddie securities through the end of this year. Some experts say with all the government stimulus and deficit spending interest rates are sure to eventually rise. Only time will tell. One thing is for sure; It's a buyers market and the government is playing Santa Claus. So if there is anything on your wish list this year it may be time to act.
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