The Temporary Payroll Tax Cut Continuation Act of 2001 has all investors and lenders going into a pricing tailspin. The response by investors to absorb the initial increase in guarantee fee was uniformly quick, but the impact on pricing and rate sheets is quite diverse because each investor has its own pricing model and structure. This has become clearly evident in our routine comparative analysis of our rates sheets against a select group of lenders. We anticipate that this will continue over the next 30 days as the April 1, 2012 effective date draws near.

Our rate sheet will be no exception to this turbulent trend. We thus encourage all our loan originators to pick up the phone and call Secondary Marketing, if any rate sheet pricing appears to be out of whack, or when a concession may be needed to make deals work.

CAPITAL MARKETS

January 2012
Fannie Mae and Freddie Mac Pricing Changes due to Guarantee Fee Increase

As you probably have gathered from the notices you have recently received from other wholesale lenders, investors have immediately implemented the increase in the Fannie Mae and Freddie Mac guarantee fee. We apologize and wish we could have given you more notice. The following schedule illustrates the timing of guarantee fee increase on 45, 30 and 15 day locks.

45 days                                         1/11/2012
30 days                                         1/18/2012
15 days                                          1/23/2012

In addition, we need to temporarily adjust our lock extension and relock fees. Again, this is temporary until the new guarantee fee is completely absorbed. The following schedule illustrates the cost and timing of the our temporary relock and extension policies;

Prior to 2/10/12 0                                                 0
After 2/10/12 50 bps                                         50 bps

As you will see, our pricing, relock and extension fee changes are consistent and in line with what you will see from other lenders.

The following are some FAQ’s that might help explain this:

Why is this occurring?
As directed by the Federal Housing Finance Agency (FHFA), pursuant to the Temporary Payroll Tax Cut continuation Act of 2001, Fannie Mae and Freddie Mac are required to increase the guarantee fee charged for all mortgages delivered on or after April 1, 2012 by 10 basis points. In the next few months, FHFA will further analyze whether additional guarantee fee increases are appropriate to ensure the new requirements of the law are being met.

What is a guarantee fee?
It is a fee charged by mortgage-backed securities (MBS) providers such as Fannie Mae and Freddie Mac, to lenders for bundling, servicing, selling and reporting MBS to investors. The main component of the guarantee fee is charged to protect against credit-related losses in the mortgage portfolio. Think of it as insurance. Commonly known in the mortgage industry as “g-fee”, this is a deduction in relation to the interest rate.

How does a 10 basis points increase in guarantee fee impact my borrower?
A 10 bp increase in g-fee effectively raises the interest rate to the borrower by 12.5 basis points. A 12.5 bp increase in rate generally translates to a 50 bp increase in fee or a 50 bp reduction in rebate. Since all investors have already implemented this increase in their respective pricing structures, you will be seeing the effect of this increase in the rate sheets published by all lenders.

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Recently, the President signed into law a new bill H.R. 2112, called the Consolidated and Further  Continuing Appropriations Act of 2012. In response to this new legislation, HUD has issued Mortgagee Letter 2011-39 detailing the acceptance and timing of the return to higher FHA loan limits.

Visit HUD’s FHA Mortgage Limits webpage for a simple way to find out your loan limits

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Home Affordable Refinance Program (HARP)

Listen to Real Estate Today Radio with Daniel Salas on the new guideline changes for these loans and how it affects borrowers.

Local Market Segments with Daniel Salas. Sundays from 11am to 1pm.

Read the article: http://accessloans.net/2011/11/22/clearing-up-confusion-on-harp-loans/

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If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under the enhanced and expanded provisions of HARP. 

To see if your home loan is serviced by Fannie Mae, go to:  http://www.fanniemae.com/loanlookup/  

To see if your loan is currently serviced by Freddie Mac go to:  www.freddiemac.com/mymortgage

See the Federal Housing Finance Agency’s News Release on HARP changes go to:  http://accessloans.net/2011/10/24/harp-changes-to-reach-more-borrowers/

Clearing Up (or Causing More) Confusion on HARP Loans

The Federal Housing Finance Agency (FHFA) recently announced changes to the Home Affordable Refinance Program (HARP) to assist more home owners with the ability to refinance their homes, and save themselves from foreclosure.  While this announcement has grabbed the attention of the news media and the public, it needs to be understood that this is an update to HARP, not an introduction to HARP.  These loans have been in place for years; however, the guidelines have been updated to assist more borrowers with more opportunities than we have experienced in the past.  However, eligibility for these loan programs will not start until December 1, 2011, and it may take time for the GSE’s (Fannie Mae and Freddie Mac) to get contracts solidified with individual banks.  So patients, regarding true availability of these loan programs, must be expected. 

HARP, consists of Fannie Mae and Freddie Mac loans whereby borrowers may refinance their existing mortgage, lower the interest rate, and therefore payments, even if they were under water or had no equity in their homes.  Old guidelines enabled people to refinance up to 125% of their homes’ value, while new guidelines will not limit the loan to value…so, you, potentially, could refinance a $200,000 loan, even if your home is worth $100,000.

Also, with the old guidelines, you were limited to 105% of the value of your home, if you had a second mortgage, that was going to stay on the home, and the two loans combined could not exceed 125% of the value of the home.  This has changed as well. 

Fannie Mae participates in HARP via a loan called “RefiPlus.”   Freddie Mac participates in HARP via a loan called, “Open Access.”  Fore simplicity purposes, I will discuss Fannie Mae’s RefiPlus program, however, similar rules follow Freddie Mac’s Open Access’ eligibilities. 

One of the biggest changes is the cost of these loans.  Here’s what needs to be understood:  With risk, there’s cost.  For example, if someone is buying an investment home, that’s a riskier loan for the GSE’s to sell, so they are more expensive loans.  You can pay those fees up front, or you can increase the interest rate on that loan, absorbing all, or a portion, of the additional fees.  Same thing with these HARP loans!  If you have no equity, it’s riskier for the bank, and therefore, the GSE’s would charge more money, when you delivered the HARP loans to them…and therefore, the bank would pass those fees onto the consumer.  What the Enhanced HARP Guidelines have done, is lower those delivery fees, so that it can benefit more people by keeping those costs, and therefore interest rates, down. 

In the past you couldn’t be late on any mortgage payment, in the past twelve months to qualify.  Now, it’s going to just be the past six months.  If your payment is increasing by 20% (from an adjustable to a fixed rate mortgage) you must meet other guidelines in order to be eligible, but you still may be eligible.  If you have had a bankruptcy or foreclosure, you may not have to wait the traditional four to seven years, in order to be eligible.  If your loan amount is greater than 80% of the value of your home, the maximum amount of increased cost, or delivery fees, to the GSE’s will be .75% Points.  A fraction of what we’ve seen in the past.  These fee changes will not go into effect for loans delivered to the GSE’s until January 1, 2012. 

So, you’ll notice that the application dates, for eligibility are December 1, 2011; however, the delivery of these loans to the GSE’s are January 1, 2012.  These dates aren’t too far apart; however, you’ll notice that they are particular, regarding when you make take an application, qualify for the new program, qualify for the lower fees associated with the enhanced program, and delivery of that loan to the GSE’s.  All of these particulars must be hashed out behind the scenes, before eligibility for consumers may be taken advantage of.  Banks need to have their internal guidelines changed, to accommodate, and educate their underwriters, staff, etc., on qualifying and delivering these loans in an appropriate manner. 

So, the changes are coming, however, we must be patient.  This IS an opportunity that should increase more HARP volume, and save more Americans from foreclosure.

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  Need to finance home renovations?
Does a friend or family member have a fixer upper?

Own a new fixed up home in a maximum of 60 days, with this popular home remodel loan. Access is a trusted and experienced direct lender that has been able to get some of these loans through escrow in as little as 30 days.  We can get you preapproved over the phone before the offer is written. As all contracts are different, we will also set you up with the right agent.

Along with 203(k), Access is Experienced With:

HomePath ♦ HomePath Renovation ♦ Conventional ♦ FHA ♦ Reverse ♦ VA ♦ Spec: Residential Construction

For Real Estate Agents:

HUD 203(k) Seminar:   Learn how to correctly write HUD home contracts

When:  Monday, November 14th

Where:  Chico Association of Realtors
                   1160 East 1st Avenue, Chico, CA, 95926

Time:  9:00 A.M

Facebook Event

Presented by: Tammy Waller of Waller Real Estate & Access Real Estate Lending

Listen to this segment with Danny Salas on Real Estate Today Radio about the important changes that have occurred since the Mortgage Credit Crisis. Keep up with local market updates every Sunday from 11 Am to 1 PM on KPAY 1290 AM. 

Check out the related article on Appraisals, which was featured in the Chico Enterprise Record.

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After the Mortgage Credit Crisis (that’s it!  I’m referring to it as MCC from here on out!), everyone was blamed for the financial meltdown of Capitalism, worldwide.  Brokers, Bankers, Appraisers, Underwriters, and carnival ride operators (not sure about that one) were blamed for the fiasco. Government agencies were abolished, and new ones formed, like the Federal Housing Finance Agency (FHFA).  New laws were put in place, like Home Valuation Code of Conduct (HVCC) laws implemented into effect May 4, 2009.  Essentially, these entities were structured to manage lending practices to be certain that the world never experienced again, the gargantuan apocalypse and failure of the world capital markets.  So, for the most part, these changes have been favorable for the consumer.  No longer should you, legally, show up to escrow and have a surprise charge or interest rate on your closing statement.  No longer should the value of the home you’re purchasing be falsely represented to greedily, financially benefit a Realtor or Lender.  No longer should people purchase more than they can truly afford for a home.  Today, we’re going to discuss the appraisal changes that have already occurred, and what’s expected around the corner. 

As mentioned, on May 4, 2009, the Home Valuation Code of Conduct laws went into effect.  This change was implemented to prevent Loan Originators (Banks, Brokers, Credit Unions, etc.) from ordering appraisals from their “in-house” or commonly used appraisers.  In some markets, unscrupulous lenders were working with appraisers to increase the value of some homes, just to make a transaction work, as opposed to generating a true, appraised, “real,” value.  HVCC developed the formation of Appraisal Management Companies (AMC’s) requiring that lenders use these AMC’s to order their appraisals from a “panel” of appraiser “experts,” that the AMC had “hired.”  In essence, this removed the potential unrealistic valuations by putting a divider between the relationships.  Sounds like a good thing, right?  In some aspects, of course, it was a good thing.  The problem was that the AMC panels consisted of anyone that would do the job.  At first, we had appraisers from Texas, reviewing appraisals in Chico, and lowering values.  We had derelicts, that shouldn’t be operating carnival rides, appraising properties and adjusting values non-consistent with the experts that scrupulous lenders were used to dealing with in the past.  Estimates, into the trillions of dollars, were lost on real estate transactions that didn’t have careful, thought-provoking, legitimately adjusted calculations by professional, competent, knowledgeable appraisers. 

This nightmare wasn’t experienced on every deal, however, lenders learned quickly (the smart, educated ones, anyway) that  the “panel” of appraisers, on your AMC, was the key to successful real estate transactions, and smooth closings.  As you can imagine, it took time to understand the AMC’s procedures, and how to encourage an AMC to influence their learning curve, into an understanding of who the best appraisers were, in their particular areas, and to keep on their panel; building a good reputation for the AMC, and therefore, the lender.  This worked beautifully, for about a year and a half, until the introduction, this last month, September 1, 2011, of the Uniform Mortgage Data Program’s (UMDP) Uniform Appraisal Dataset (UAD).

UMDP will be used by Fannie Mae and Freddie Mac (The GSE’s), as a common way to deliver appraisals with uniform data requirements, like similar codes, to support improved quality and accuracy of data while preserving each GSE’s ability to determine what the data means to loan performance and loan quality, or how people pay the loans back.  It consists of the Uniform Loan Delivery Dataset (ULDD), the Uniform Collateral Data Portal (UCDP), and the Uniform Appraisal Dataset (UAD).  The ULDD and UCDP will be behind the scenes type changes, some already in effect, other changes to come.  But, the big change is (UAD). 

The UAD standardize certain data points to support consistent appraisal reporting.  Similar definitions, codes, common verbiage, etc. will be expected on appraisals so that the GSE’s have a uniform way of determining the quality of valuation, and influences on loan performance.  This information will be uploaded to a common portal, or website, monitored by a common entity. 

So, appraisers, via the AMC’s formed by HVCC, will upload their information and two pages of codes, to the UMDP’s UCDP, so the GSE’s can uniformly assess a client’s URAR and 1004(D), to approve a client’s 1003! 

This, actually, makes sense.  For those of you not understanding the industry jargon, URAR’s are Uniform Residential Appraisal Reports, and 1004(D)’s are appraisal certifications of completion from numbers that accompany appraisals.  A 1003 is the form number used for an application for a loan. 

Now, you must understand that in order to accommodate these new changes, the most significant impact on real estate transactions, will be expected turn times on appraisals.  Prior to September 1 and UAD, appraisal contracted turn-times, with our AMC, were five business days.  However, as appraisers learn the new codes, verbiage, and processes for uploading the information, we have experienced that 10 business days (or double the turn times) are more likely to be experienced.  At least until we all familiarize ourselves with all of the changes. 

Our turn times are still good…as we’re learning the new tricks, to circumvent delays…as we are smart!

Only available on properties acquired from Fannie Mae that require moderate renovation and designated by Fannie Mae on the www.homepath.com website as eligible for HomePath Renovation financing. Lender must document the file with appropriate pages printed from www.homepath.com

• Borrower must be an individual, US citizen, permanent resident alien or non-permanent resident alien.
• 1-4 unit owner-occupied principal residences only. Second homes, investment properties, manufactured homes, condos and co-ops are not eligible
• 1-unit owner-occupied 97% max loan to value 2-4 units 75% max loan to value
• The LTV is calculated from the LESSER of the purchase contract plus the total renovation costs (which includes renovation costs and required contingency) or the “as- completed” appraised value.
• Full “as-completed” appraisal required.
• The renovations must be completed within six (6) months after the closing date.
• Total Cost: The total renovation costs, including contingency, may not exceed the LESSER of 20% of the “as completed” appraised value or $30,000.00. No work can be started prior to closing. Rehab solely for foundation work is not permitted. Any foundation repairs may require a licensed foundation contractor.  Borrower may use more than one contractor; however, additional doc prep charges may apply. Each contractor must submit a Contractor Questionnaire, be accepted by the lender for the program and provide a W-9. Do-it-yourself projects are not eligible.
• Do-it-yourself Projects. “Do-it-yourself” borrower projects are not allowed.
• Renovation Escrow Account. Funds for renovation will be placed in an insured, interest-bearing account.
• Minimum Credit score required is a 660
• Max Debt to Income allowed is 45% (may allow up to 50% with strong compensating factors)
• Mortgage Insurance is not required; however loans with LTV’s over 80% are subject to applicable loan-level pricing adjustments.
• Loan Terms are 30 year fully amortized fixed rates ONLY (No balloons; ARMs; Interest-only)
• Escrow deposits for taxes and insurance will be established at closing. Borrower must provide paid-up first year’s homeowner insurance policy as a requirement of loan closing.
• Contractor: Contractors must be licensed and/or registered as required by individual
  State and/or local guidelines. All contractors must meet credit and reference guidelines as established from time to time by Construction Loan Committee and in accordance with FNMA HomeStyle guidelines. A Contractor Questionnaire must be filled out and signed by the business principal and include vendor and homeowner references related to the proposed project(s).
• Contractor Questionnaire: Contractor(s) must be designated for the construction project. The contractor(s) must complete a Contractor Questionnaire. Include a complete Questionnaire and send to the Construction Lending Department. Contractors must be registered or licensed in accordance with applicable state laws.
• Multiple contractors may be allowed on a case-by-case basis. All contractors must provide completed Contractor Questionnaire and W-9 tax information.
• Agreed Contract: Borrower must enter into a written contract with each contractor who will be performing some or all of the work. Each contract must include (1) the total amount to be paid to the contractor for the work, (2) a description and itemization of the work, (3) the timeframe needed to complete the work and (4) agreement by the contractor that the work will be completed within three (3) months of the closing of the loan
• Appraisal: Appraisal to be subject to completion of improvements. Appraiser must reference the existing condition of the property and specify the work to be done in detail. The appraiser must be provided contracts as described above indicating a description and itemization of the work.
• NO Cash-out: Borrower’s closing statement cannot show any cash to Borrower.
• Draws: Draws will be sent by Lender to Contractor. Draw requests must be signed by both Borrower and Contractor before submitting to Lender.
• Completion: All improvements must be completed in 3 months from closing. A 30 day extension fee of $750 will be charged to Borrower for non-completion. An additional $750 will be charged for each additional 30 days.

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