Here are some examples of some of the loans that I’ve been able to approve so far:

161% Loan-to-value refinance from interest-only payments to a fully amortizing loan. They will be lowering their payment by a bit under $100, but now $360/month will be going to their loan principal! –No appraisal required! Mortgage insurance is transferring to the new lender with no changes.

132% Loan-to-value home.  We had to do an appraisal on this one, but the borrower is saving hundreds per month, so that’s okay!

One of the big problems with the program the first time around was that nearly all lenders were limiting the loan-to-values to 105%. Also, the mortgage insurance was holding things up. I’m not saying that everyone is going to qualify for this time around, but it’s looking good so far!

We’ll see if this is a blip on the screen or if it is a full trend reversal and shows us where we’re headed in the coming months. My hope is that this is short lived. There is a lot of activity out there in the purchase market. I don’t want the wheels to fall off before we get some real momentum.

So, if you’re buying or refinancing into a new FHA loan and want to avoid the new MIP fees, you should get your application in quickly.

*Annual premium is paid monthly. To calculate, apply the rate to the loan amount and divide by 12.
*Up-Front premium can be financed

For a $200,000 loan, the savings are substantial. The up-front premium would be $200 instead of $2000 and the monthly payment would go down by as much as $100/month.

As soon as all of the details are released by FHA, I’ll update with another post. If you currently have a FHA mortgage, give me a call and I’ll help you determine if you qualify for a lower rate.

Now that you know a little about FHA, it’s not hard to imagine why they are somewhat struggling financially. Heavy losses in the housing market have taken a toll on the giant. The FHA Commissioner, Carol Galante, announced last Monday that the mortgage insurance structure would be changing. Here’s how:

There are two forms of insurance for FHA loans: up-front and annual insurance. Don’t be confused by the annual insurance. It is what you pay monthly in your mortgage bill. The up-front is either paid in cash at closing or financed into the loan.

For loans at 95.01%-96.5% loan-to-value (LTV) the current up-front rate is 1% and the annual rate is 1.15%. So, for a $200,000 loan, there is an additional $2000 financed (your loan balance would be $202,000) and you would pay $191.67 monthly. For loans that are started after April 1st, the up-front will be 1.75% (an increase of 0.75%) and the annual rate will be 1.25% (an increase of 0.1%). So, for the same $200,000 loan, you’re looking at an UFMIP of $3500 and a monthly payment of $208.33. This is an increase of $1500 in your loan principal and $16.66 monthly.

The FHA has not issued a mortgagee letter at this time to detail the changes explicitly, which is strange. Mortgagee letters are released anytime there are policy changes. As soon as it is released, I’ll update or validate the info here as necessary.

In the meantime, if you currently have a FHA backed loan and are thinking of a streamline refinance, now’s the time. Give me a call with your scenario and I can see if you qualify.

In order to pay for the extension, the FHFA (Federal Housing Finance Agency) told Fannie Mae and Freddie Mac to increase their guarantee fees by 0.10%. This raises some important questions:

What is a guarantee fee?
A guarantee fee is charged by Fannie and Freddie (or any other provider of mortgage-backed securities) to lenders for bundling, servicing, selling and reporting MBS to investors. It can also be charged to help hedge against losses in the portfolio.

What does it mean for me?
Well, an increase in the guarantee fee for a lender of 0.10% equates to an increase of 0.50% charged to borrowers on their loans. So, let’s say you want a 4.0% and there are no points being charged- now you have to pay half-a-point for the very same rate. Don’t think this is fair? Sorry, Fannie and Freddie securitize over three quarters of all mortgages in the US, so there’s no way around it.

When does it go into effect?
That’s a tough question. Even though the change in being enacted April 1^st (no April Fool’s joke here) loans that are funded at the end of February are subject to the new fees because the process of securitizing takes a while. So, any lock placed after January 23^rd is subject to the new fees. The exact date that all lenders are using for their implementation varies by a few days, but this is industry-wide. If you’re locked in now, you better close on time. If your lender has to extend your lock, you may be subject to the changes.

What about FHA and VA loans?
FHA and VA loans are not affected. The only loans that are affected are the conforming Fannie/Freddie agency loans.

Is there any good news in all of this?
You bet there is- rates have come down a bit. To tell you the truth, it’s been hard to see a change in the rates because the market has improved by about the same amount as the increase in fees. The difference is that the markets can change- the guarantee fee will not. I suggest taking advantage of the rates while they’re low!

Why do these programs fall short? Because the banks don’t have to participate. Yeah, that’s right- we handed them more than $700 BILLION dollars to make sure they made it through the financial crash and they decided to buy T Bills (government debt) rather than help out you and me. Thanks. I heard on KUOW (local NPR) station a few days ago that less than one million people have been able to modify their mortgage with the HAMP. Sad.

They teased us with changes to the program last November. You may have seen me say something about it back then. Well… that was underwhelming. All they are really doing is making Fannie and Freddie lower the fees for the program. Yes, that means slightly lower rates for HARP’ers, but get this- banks decided not to implement any of the new changes until March, when Fannie Mae and Freddie Mac make the fee changes.

It’s worth saying that I’m not a cynic. I really do think that the government will eventually do something that will actually help people. The frustration, however, comes from the fact that I and other mortgage originators are on the front lines. It’s not easy to talk to someone on the phone and have them start crying because they’re going to eventually lose their house because they are choosing between medical bills and a mortgage. Maybe all they need is a few hundred a month in savings to make it work- but with things the way they are now they’ll never know.

The most notable changes are the following:

• The limit of 125% loan-to-value has been removed
• The rates for new loan terms of 20 years and shorter should be a lot better
• The rates for new loans of greater than 20 years will have better rates (but not as good as 20 year rates)

The trouble that I see is that a) it’s still a voluntary program for the banks and MI companies and b) they still aren’t fixing the problem. Officially, yesterday was the first day that I could take applications for new-and-improved HARP refinances. Unfortunately, the pricing changes that are going to lower rates aren’t going into effect until JANUARY 3RD! Oh, and by the way- the changes to the maximum loan-to-value don’t go into effect until MARCH 2012! Oy vey.

Also, we’re just now getting “guidance” from the big banks about whether or not they’re going to participate in the program and how they’re going to augment the guidelines. We just got word from several of our banks stating that they are delaying implementation of all changes until March.

So, I know you’ve been hanging on, waiting for someone to come along and help, but the government and banks are saying to you, “Just wait a little longer.”

Don’t forget- if you receive VA disability you may be eligible to have your funding fee waived.

Call or email me if you’re a vet and I’ll help you get into a home ZERO DOWN!