Danny Salas

Archive for the 'Mortgage Industry Updates' Category

Chico Residential Property Statistics Aug-09 vs. Aug-10

Check out how Chico’s Housing Market during the past 12 months!

For Sale Properties by Month

 

Median For Sale vs. Median Sold

 

 

Supply and Demand by Month

 

Information Not Guaranteed

Information retrieved from Clarus MarketMetrics®

Freddie Mac’s Automated Engine Gets A Facelift

LP Changes

Loan Prospector has updated it’s automated underwriting engine to accept only ratios to 50.33% of a client’s income, when qualifying for a loan.  Previous to the current announcement, Freddie Mac would allow a 55% of a client’s income to pay monthly obligations.  The announcement, from Freddie Mac, is another example of the changes in the lending industry, and the more stringent guideline requirement that the industry in going through.

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Tighter Guideline Announcements From Fannie Mae

Harder To Qualify

Fannie Mae announced that it will tighten lending requirements for its interest-only loans (I.O.)and adjustable rate mortgages (ARM).  If a borrower wants an Interest Only mortgage through Fannie Mae, for example, he or she will have to make down payments of 30% of the sale price. For Adjustable Rate Mortgage’s, Fannie Mae will only buy those underwritten to ensure that borrowers could still afford payments even if their interest rates reset to the higher of either; 1) the loan’s initial interest rate plus two percentage points or, 2) the maximum the interest rate the loan can rise to, known in the industry as the cap rate.

Examples:

As an example, for a loan with a beginning rate of 5% and a cap rate of 9% borrowers would have to demonstrate they could still keep up payments even if the rate rose to 9%.   For an ARM with a fixed period (for example 5 years) any initial period with 5 years or less qualify at greater of note rate +2% or fully indexed rate, and I.O. loans will have a maximum LTV 70% and a minimum FICO of 720 with 24 months minimum reserves.

Bye-Bye Balloons

Loans With Balloon Payments

Balloon Loans, unless they receive special approval, are going away entirely with Fannie Mae. Fannie Mae is giving the industry some lead time:  All loans not meeting the new guidelines must be purchased as whole loans on or before August 31, 2010.

For More Info.

Fannie Mae’s News Release

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Processing the 4506-T: The NEW Delay In Lending

IRS Form 4506-T: More Potential Delays

What’s IRS Form 4506-T

Now that April 15th has come and gone, lenders are struggling with a new potential delay.  The 4506-T form.

The 4506-T allows the lender to verify, line by line, the actual filings of a client’s 1040 Federal Tax Returns.  If one line is off by $1.00, than your loan may not fund…period!  Lenders are processing these forms on each and every file…or they cannot sell the loan in the secondary market.

What’s The Problem?

Since you need two year’s tax returns on every file, many times clients need 2009 tax returns to qualify for their loan, because 2007’s income may have been too low, or maybe their business didn’t exist until 2008.  Particularly with self-employed borrowers, as lenders will use the “net” income to qualify a borrower for their loan.  When the 4506-T is processed, you must use the two years’ tax returns compared with two years’ line by line result, from the Internal Revenue Service.  However, can take up to ten (10) weeks for the process to transpire.  If you have a client that is unable to provide 2007 tax returns that support income for qualifying, and you have to wait for the 4506-T results, it can get frustrating.

So, What’s The Answer?

There are a couple of things you can do.  One is to take your returns down to your local IRS office and submit them, ask for a copy, ask them to stamp the returns, IRS Received, and provide that to your lender.  NOT ALL LENDERS will accept this, however, we know who does…of course!  The concern, here, however, is that if you have mailed your returns in, and you hand deliver them…you will be assessed a late fee, because the IRS won’t have record that they were actually mailed.  Frustrating!

Another Route

Have your borrower contact the IRS at 800-829-8374 and ask for the assignment of a tax advocate. You may need to assist them in the preparation of documentation, which should also include a Letter of explanation explaining that the borrower will suffer financial hardship, if the processing of the return and availability of the transcript is not expedited. I received a processed 4506-T, directly from the IRS, in two weeks by employing the same method.

If either of these two processes are not viable options…you may be stuck…waiting!