(Originally written for 2010 taxes, but still applicable and helpful!)

4506-T Form Processing Needs To Be Particular

Requirements for 2011 IRS Transcripts

When filling out an application package, you’ll notice a form called the 4506-T.  This form enables a lender to obtain an electronic print-out of the Federal 1040 Tax Returns that have been filed with the IRS.  If the tax returns provided do not match the computer’s electronic print-out, line-by-line, than the loan may not fund.

Why Buyers should physically take their 2011 Returns to the Local IRS Office

E-filing could be an eight to 12 week wait, before a buyer’s loan may fund, causing Escrows not to close on time!

What If The Print Out Is NOT Available Yet?

Generally speaking, if the electronic print out was not available, than you couldn’t use that year’s income, from the 1040’s.  If 2009 was not a particularly good year, and you need 2011’s income to make certain that your qualifying ratios work, for the home of your dreams…than there’s a dilema.  Answer:

For loans underwritten before April 15, 2011, if the borrower has filed their 2010 tax returns, and the tax transcripts are not yet available, the tax transcript request will be returned from the IRS and reflect “No Record Found”, the following must be provided:

• 2011 Tax Transcript showing “No record or return filed”; and,
• Copy of the 2011 Tax Return, and,
• For Salaried Borrowers: a 2009 and 2010 tax transcript, current paystub and 2011 W-2;
• For Self Employed Borrowers: a 2009 and 2010 transcript, and 2011 1040’s stamped received by local IRS office along with 2009 and 2010 tax returns.

Don’t worry about the transcripts.  Access Real Estate Lending’s Processing Team takes care of ordering and processing the forms, using the 4506-T form, through an IRS portal.

Common Scenario question:

Self Employed borrower has filed their 2011 returns (no transcripts available yet) and they need the 2011 income to qualify for the loan. (Yes) We can drop 2009 income and use 20010 and 2011 provided the 2011 increase is “reasonable.” In order to do this, we must have copies of 2010 tax returns STAMPED received by the local IRS office. Unfortunately the copy of Electronic filing of 2010 returns is not acceptable, a copy, of the 2011 returns, must be a stamped copy, from IRS office.

We will provide further direction the closer we get to April 15, 2012. At that time we can give guidance when borrowers are filing extensions and what will be required. This policy is subject to change as we receive direction from our investors.

What to Subcribe To:

Get Our Twitter Updates
Get Our Blog Blast
Become A Fan On Facebook
Connect With Us On Linkedin

Interest Rates Continue to Climb

Why Are Rates Skyrocketing?

There are a couple of things occurring.  QEII is taking effect on the market, and deflating the value of the dollar, worldwide.  The U.S. is doing the exact same thing, it has ridiculed other countries of doing, in the past.  Quatitative Easing II is the government’s stimulus program to actually cause inflation (interest rates’ worst nemesis), in order to spur economic life, into an increasingly dead economy.

The second main issue is, again, Europe.  This time, it is Ireland.  Ireland’s financial banking system is at the brink of complete collapse.  Therefore, as we’ve seen in the past with other European Countries, the European Central Bank (ECU) and the International Monetary Fund (IMF), have stepped in and offered a deal to Ireland, that they may not be able to refuse.

Why would Ireland Refuse Help?

Pride!  Simply, put…Pride, Austerity, and higher taxes.  Ireland has the lowest tax rate of any European country.  And the concern is, that if they accept this assistance, they’ll have to raise taxes and perhaps cause the unrest that Greece had to endure, through their financial fiasco.  In economics, austerity is when a government reduces its spending and/or increases user fees to pay back creditors.  Austerity is usually required when a government’s fiscal deficit spending is felt to be unsustainable.

Safe-Haven Treasuries, Not As Safe

Investors Moving Money

During the uncertainty in Europe, investors tend to move their money into the safe-haven of U.S. Bonds, Treasuries, and Mortgage-Backed Securities.  However, with a plan on the table to revitalize Ireland’s financial stability, that safe haven is less attractive, and therefore, money pours out of these places, and into Stocks, Bonds, Gold, Oil, etc.  This causes rates to increase.

Hold Your Horses

Europe is still not out of trouble.  Greece, Portugal, Spain, and Italy, are all beginning to show signs, again, of financial trouble.  Their banking systems may need more bailout help, as they already have experienced.  If this rears its ugly head again, we could see these same investors shuffle money back into the safe-haven of U.S. Bonds and Mortgage-Backed Securities…causing rates to move downwardly again.

Watch Europe Carefully…Rates Could Benefit

Locking In

If you haven’t done so, already.  You’re not working with the right mortgage banker.  However, if you or your client, just had your application taken…I’d hold out and watch what happens with Greece, Portugal, Spain, and Italy.  We may have a small rebound, after suffering HUGE losses, this past two weeks.

Related Must Reads

Past European Troubles
Greece’s 1st Financial Rescue Program
Portugal’s Past Troubles

What to Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Become A Fan On Facebook
Connect With Us On Linkedin

Mortgage rates are hitting record lows and with the prospect of more government stimulus, the expectation is that rates will fall even further.  As of last week the national average for the 30 year fixed rate was 4.21%.  Mortgage applications for last week saw a surprising decline of 8.5% fir purchase applications.  No real explanation has been offered as to the cause of the slowdown however some people speculate that the barrage of news regarding the suspensions of foreclosures may have pushed buyers to the sidelines.  Additionally, some transactions that were started were also halted due to the foreclosure filing mess.  Refinance applications are going strong as they represent 83% of all mortgage applications for the past week.

Economic reports outside of housing continue to show no real direction for the economy.  The positive news reported this week was that inflation on the wholesale and retail levels are not a concern at all.  On the flip side however is that talk is starting to surface that the level of inflation is becoming almost to low which can be an indication that we may enter a deflationary economy.

On the surface some may say, “Hey if prices are going to drop, that is great news for me”.  However what happens in a deflationary economy is that if consumers recognize that prices are falling, then they will start to keep their money in their wallets and wait for lower prices.  If people start to hold off on purchases, then the whole recession cycle starts all over again.

Before anyone reading this begins to panic, it is important for you to know that last month retail sales came in higher than expected.  So at least for right now, consumers are spending money and that concerns about deflation, at least on the consumer level does not exist.

Employment still continues to be a drag on the economy.  First time jobless claims came in higher than expected and actually rose by 13,000 from the previous week.  This is the first increase in jobless claims in a month.  Continuing jobless claims continue to drop and some government officials are trying to leverage this news for political gain.  The truth of the matter is that the only reason why continuing jobless claims are declining is because more and more people are dropping off the unemployment rolls as their benefits run out and that no more extensions are available.

One of the ironic reports this week is Consumer Sentiment.  This report came in worse than expected and showed that people are becoming more concerned about the future of the economy.  The irony is in that Retail Sales continue to improve which is not what one would expect to occur if people are not optimistic.

What to Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Become A Fan On Facebook
Connect With Us On Linkedin

On or around October 21, 2010  Federal Housing Finance Agency (FHFA), Freddie Mac and Fannie Mae will will have created and executed new appraiser independence requirements to follow the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).  Until the change is released in the upcoming Selling Guide announcement, existing  provisions of the HVCC will still apply.

The Change

The revised requirements will continue to help us ensure that the highest standard of appraisal reliability and appraiser independence are retained. It will also maintain the spirit and intent of HVCC, and continue to provide important protections for mortgage investors, home buyers, and the housing market.

During this process, Freddie Mac has been recieving information and other valuable input from key industry participants.

For more information, visit the Home Valuation Code of Conduct Web pages on FreddieMac.com.

What To Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Connect With Us On Facebook

What Happened Yesterday?

Too Many Market Orders

Yesterday, the Stock Market had a wild ride.  They’re still determining the reason, however, many attribute it to Market Sell Orders.  Remember, computers are set to sell stocks, when a stock gets to a certain level.  Then, these computers are programmed to sell at the next market level, to “fill” their order requirement.  So, stocks got trapped in a technical nightmare, after losing so much value already, and basically, computers started “selling” at each market level…which kept getting lower…and lower.  The volatility was impressive, to say the least.  For example:   Accenture (NYSE: ACN) went from $40 down to 14 Cents!  If that wasn’t impressive enough, the stock ended the day at $41.09. So, you can imagine the roller-coaster ride that interest took, as well.

Fat Finger Thursday

Another analogy is that there was a Fat Finger involved in yesterday’s debacle.  Again, using computers, a trader could have accidentally touched one too many zero’s, when trying to sell a certain number of Stock, causing panic in the markets.  Regardless, it’s interesting stuff.

Unemployment Figures

Unemployment moved from 9.7%, in March, to 9.9%, in April.  However, the Labor Department reported that 290,000 new jobs were created.  The market expected 187,000 new jobs, so that’s a serious increase.  Coupled with the fact that revisions to February and March’s numbers increased jobs numbers by 121,000.

More Jobs, But Less Employment?

So, how do we move to a higher unemployment rate of 9.9%, yet add 290,000 jobs?  Well, when people are laid off, they probably prefer to collect their unemployment checks for a while.  If you don’t look for a job, for four weeks, than you’re removed from the Unemployment Figures, by the Labor Department.  It’s just the way things are…So, last month, 805,000 people started looking for jobs, again.  So how those numbers can twist and turn, like the roller coaster, above?

It's Safe To Float...

Locking Advice

I’m in favor of locking in, while the gettin’s good!  Germany has decided to help bail Greece out.  So, that could have a negative effect on the flight to quality, or safe-haven of Mortgage Backed Securities.

What To Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Connect With Us On Facebook

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

What To Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Connect With Us On Facebook

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!

Trouble In Greece Is Helping Our MBS

You Down With S.E.C?

What is going on with the Security Exchange Commission (SEC) and Goldman Sachs?  It’s unwinding into, an already, ugly mess.  The timing of the release of the lawsuit was already under suspicion, because generally an announcement like this would occur after trading hours.  This is to not effect the market , and have an obvious effect on Stocks.  Well, the SEC orchestrated a beautiful release party, so to speak.  You see, just as they were announcing the Goldman Sachs suit, they were also announcing their huge mistakes and sub-par handlings of the Bernie Madoff fiasco and the R. Allen Stanford Fraud Cases.  It looks like the SEC missed several red flags on Stanford, much as they did with Bernie Madoff.  According to the New York Times, the SEC found several securities violations over the years, “but each time the regulators ultimately let the company off with relatively small fines, records show.”  So, there is speculation that the announcement of the Goldman Lawsuit was timed perfectly enough to squelch any media coverage regarding mistakes that the SEC made on these two huge fraud cases.

Motivation From Financial Reform

And now, it’s being reported that the government has testimony that completely contradicts the findings, of the SEC, against Goldman Sachs.  This information is helping Goldman’s Stock, but there are many questions into what the true motivating factors are, behind the SEC’s actions, lately.  Could Financial Reform have anything to do with it?  We’ll have to wait and see.

Earnings Up, NO Down, No Up…

Corporate Earnings Reports were all over the board yesterday.  Starting with McDonald’s and Morgan Stanley beating expectations.  Unfortunately, Wells Fargo and Boeing’s revenue fell short of expectations.  The big news was reported after trading hours, when Apple reported significantly better than expected earnings.  This has shot their Stock to almost record high’s of about $260 per share.  Did you, also, hear about the next phase iPhone being left on a counter-top on a bar?  Well…you think that might not have been actually planned?  That could help their Stock, too, don’t you think?

Greece VII

Is this Greece VII, or VIII?  It looks like Greece and Portugal’s credit rating is falling and that their financial assistance packages may not have been enough to get them out of financial trouble.  This is helping funds to pour into the safe-haven of United States’ Treasuries.  If this continues into next week and the Treasury Auctions, it could be extremely beneficial for interest rates.

With Greece's Continued Problems...

Locking Advice

With no real economic information to report today, and the European troubles mentioned above, I’d continue to float.

9 Days Left To Get Into Contract For Tax Credit

What To Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Connect With Us On Facebook

Access Real Estate Lending...Opening Doors...

Are You or Your Borrower In Contract?

Remember, you just have until April 30, to be IN ESCROW, to qualify for the up to $8,000 Federal Tax Credit!

More Volatility Right Around The Corner

Greece VII

The European Union approved a thirty billion Euro ($40 Billion Dollar) bailout for financially stricken Greece, yesterday.  It’s the second such bailout in a couple of months.  Once Greece realized that the first bailout wasn’t going to be enough to really help them, they petitioned for a second bailout.  Where do I get in line for this type of assistance, huh?  Sign me up!

Corporate Earnings Week

The week starts off with Alcoa reporting lower than expected earnings.  This would generally hurt Stocks and boost Bonds, and did so, temporarily this morning.  However, expect extreme volatility since The Fed has exited the buying market.  First thing, this morning, we were up 31 Basis points, however, we just will have a lot of difficulty rising above numerous trend lines of resistance.  So, be prepared for a bumpy ride.

Businesses Pessimistic About Growth

The National Federation of Independent Businesses reported that businesses’ confidence level has dropped to an eight month low.  Seven of the reports ten components were in negative territory.  That’s not the best news for a struggling employment rate.

Numerous Lines Of Resistance Will Be Tough To Break Through

Locking Advice

Since this morning, we have lost 34 Basis Points.  Locking today, would probably, be prudent.

Related Must Reads

Greece’s Financial Woes
Greece’s First Bailout Plan: Trouble From The Beginning

What To Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Connect With Us On Facebook