Special Edition: Fannie/Freddie Takeover
Over the weekend, the government announced that Fannie Mae and Freddie Mac were placed in conservatorship. This means that the two companies will temporarily be run by their regulator, the Federal Housing Finance Agency. The Fannie and Freddie Boards and Executive Officers were replaced, but employees were encouraged to stay. The stated objectives of this action were to stabilize the mortgage market, insure the availability of funding for new mortgage loans, and insure that new mortgages are affordable.
While a conservator will have control over Fannie Mae and Freddie Mac, product availability and day to day operations for the origination of mortgages are expected to continue uninterrupted and essentially unchanged. Fannie and Freddie are expected to increase the number of mortgages they own this year and next year, before reducing their portfolios beginning in 2010. Fannie and Freddie together own or guarantee roughly half of the $12 trillion in outstanding mortgage debt, and they are currently responsible for about 75% of all new mortgage originations, so the viability of the two companies is essential for an efficient mortgage market.
As a result of the takeover, the government now explicitly guarantees the obligations of Fannie and Freddie securities. This has removed uncertainty and increased the demand for mortgage securites. Both domestic and foreign investors had recently reduced their purchases of mortgage securities, and they are now expected to be comfortable stepping up their purchases again. Mortgage rates reacted favorably to the news on Monday.
Rates are great right nowJ Time to get buyers off the fence.
Tuesday, September 9, 2008
Thursday, August 14, 2008
Interpretation and Reality of the Housing and Recovery Act of 2008 - Arizona (Maricopa County)
Interpretation and Reality of the Housing and Economic Recovery Act of 2008 - Arizona (Maricopa County)
Recently the House and Senate passed broad-based housing legislation that was signed into law by President Bush last week. As expected, Fannie/Freddie/and HUD has not yet communicated a majority of the program requirements to the mortgage lenders and investors.
With that disclosure, here are several key changes and how it affects you:
1. Effective January 1, 2009, conforming and FHA loan limits are scheduled to increase. (Not for us) These changes replace the temporary changes imposed by the Economic Stimulus Act, and are to raise the limits permanently. At this time there is no relief for my business channels.
a. For FHA insured mtgs, the new limit will be 115% of the median home price in that area, up to $625,000. That provision will affect loan limits in high cost areas. In lower cost areas, the FHA limits are slated not to decrease.
b. For conforming, the limit will remain at least $417,000 for single family home. Starting next year, the new limit is either $417,000 or 115 percent of the areas median home price, whichever is higher – up to $625,000. After that, the limits can go up or down according to a price index. This could be an issue if not reversed.
2. Elimination of DPA (Down Payment Assistance Programs.) This one is clear as mud as to the mechanics, but the end result is they are being eliminated – and fast! When the law was signed, it stated a 10/1 program elimination, but provided no clarification of what this date actually was. The last round that the DPA was close to extinction, the “cutoff” date was the property contract date. This round, it is being interpreted that the 10/1/2008 date is a HUD delivery date for DPA funded files, and the investment community have already responded. Today alone, I have received notice from JP Morgan/Chase, Citi, Suntrust, and Franklin American that they will no longer accept new locks for DPA funded transactions. Countrywide indicated that their policy will be released verrrrry soon. These investors will honor all those in the pipe subject to extension and final delivery date limitations that will be covered under separate cover. First Horizon also announced today that Friday is the last day for their program. Given Chase is the major investor for many of the wholesale aggregators, expect most of the wholesale community to follow suit in the next few days. There is current legislation enacted to reinstate a “revised” version of the DPA programs with FICO and other restrictions, but it is a long ways away from being a reality. As of now, you have a very narrow window to secure a property and lock with the investor.
Until further notice, I can continue to accept locks on DPA files for investors that have not yet changed their guides. At this point, a max lock term of 20 days will be offered with no promise of the ability to extend. Extension expectations are weak .
Please understand that based on market conditions, this window may also be eliminated at any time in the near future. As stated above, Chase, Franklin American, and Suntrust are not available to lock future files.
3. $7,500 income tax credit. While this is being sold a credit, it is actually a 15 year no interest loan. The $7,500 is a direct credit in the year taken, but then repaid in equal installments through year 15 as an increase in taxes (not taxable income). This program is slated for homes purchased through July of 2009.
4. Property tax deductions for all homeowners. Under current law, you can deduct your property taxes from federal income tax if you itemize on schedule A. The law increases the standard deduction by $500 for single, and $1,000 for married. This will benefit the elderly and more affluent that may not have a mortgage on the property that forces/allows them to itemize.
5. Tax preference to encourage issuance of Municipal Bonds. We have had numerous discussions with the servicers, and issuers of the current bond programs that we offer. Their take is that while there appears to be some positive impact, it will be approximately 6 months before the tax code is actually written and the underwriters can attempt to float a new issue. There continues to be small offerings that are being released as the target funding requirements expire, but they evaporate in minuets. In addition, may of the program end dates for funding are not realistic.
In addition to the Housing and recovery act, Fannie and Freddie have also issued numerous changes that are being retracted as fast as they are issued.
1. It has been announced that they will be issuing an additional 25 bps adverse delivery fee. Several investors had factored that into their pricing, and have rescinded as of today. Your OB pricing engine will eliminate those who have not yet reversed.
2. In addition, there have been numerous new schedules of LLPA’s being issued by each investor. These have also been eliminated for the short term. It has been relayed to us that they are still coming soon, but the agencies are not trying to release the changes with the same release dates to prevent adverse selection. Lock em in if you can.
We will continue to forward new information as it is released, but as stated before, there are many unanswered questions. Please contact me with concerns/questions and market intelligence of others decisions.
Happy selling
aj
A.J.Johnson
Suburban Mortgage, Inc.
Sr. Loan Officer/Mortgage Planner
(602) 606-6702 Corporate Office direct
(623) 445-9769 Carefree Highway Office direct
(602) 206-2682 Cell
(602) 735-6702 efax
ajohnson@submort.com
www.mortgagesbyaj.com Pers. Mortgage website
www.submort.com/ajjohnson Corp Mortgage website
Lic # BK10123 , BKBR# 0114037
P Please consider the environment before printing this email.
Recently the House and Senate passed broad-based housing legislation that was signed into law by President Bush last week. As expected, Fannie/Freddie/and HUD has not yet communicated a majority of the program requirements to the mortgage lenders and investors.
With that disclosure, here are several key changes and how it affects you:
1. Effective January 1, 2009, conforming and FHA loan limits are scheduled to increase. (Not for us) These changes replace the temporary changes imposed by the Economic Stimulus Act, and are to raise the limits permanently. At this time there is no relief for my business channels.
a. For FHA insured mtgs, the new limit will be 115% of the median home price in that area, up to $625,000. That provision will affect loan limits in high cost areas. In lower cost areas, the FHA limits are slated not to decrease.
b. For conforming, the limit will remain at least $417,000 for single family home. Starting next year, the new limit is either $417,000 or 115 percent of the areas median home price, whichever is higher – up to $625,000. After that, the limits can go up or down according to a price index. This could be an issue if not reversed.
2. Elimination of DPA (Down Payment Assistance Programs.) This one is clear as mud as to the mechanics, but the end result is they are being eliminated – and fast! When the law was signed, it stated a 10/1 program elimination, but provided no clarification of what this date actually was. The last round that the DPA was close to extinction, the “cutoff” date was the property contract date. This round, it is being interpreted that the 10/1/2008 date is a HUD delivery date for DPA funded files, and the investment community have already responded. Today alone, I have received notice from JP Morgan/Chase, Citi, Suntrust, and Franklin American that they will no longer accept new locks for DPA funded transactions. Countrywide indicated that their policy will be released verrrrry soon. These investors will honor all those in the pipe subject to extension and final delivery date limitations that will be covered under separate cover. First Horizon also announced today that Friday is the last day for their program. Given Chase is the major investor for many of the wholesale aggregators, expect most of the wholesale community to follow suit in the next few days. There is current legislation enacted to reinstate a “revised” version of the DPA programs with FICO and other restrictions, but it is a long ways away from being a reality. As of now, you have a very narrow window to secure a property and lock with the investor.
Until further notice, I can continue to accept locks on DPA files for investors that have not yet changed their guides. At this point, a max lock term of 20 days will be offered with no promise of the ability to extend. Extension expectations are weak .
Please understand that based on market conditions, this window may also be eliminated at any time in the near future. As stated above, Chase, Franklin American, and Suntrust are not available to lock future files.
3. $7,500 income tax credit. While this is being sold a credit, it is actually a 15 year no interest loan. The $7,500 is a direct credit in the year taken, but then repaid in equal installments through year 15 as an increase in taxes (not taxable income). This program is slated for homes purchased through July of 2009.
4. Property tax deductions for all homeowners. Under current law, you can deduct your property taxes from federal income tax if you itemize on schedule A. The law increases the standard deduction by $500 for single, and $1,000 for married. This will benefit the elderly and more affluent that may not have a mortgage on the property that forces/allows them to itemize.
5. Tax preference to encourage issuance of Municipal Bonds. We have had numerous discussions with the servicers, and issuers of the current bond programs that we offer. Their take is that while there appears to be some positive impact, it will be approximately 6 months before the tax code is actually written and the underwriters can attempt to float a new issue. There continues to be small offerings that are being released as the target funding requirements expire, but they evaporate in minuets. In addition, may of the program end dates for funding are not realistic.
In addition to the Housing and recovery act, Fannie and Freddie have also issued numerous changes that are being retracted as fast as they are issued.
1. It has been announced that they will be issuing an additional 25 bps adverse delivery fee. Several investors had factored that into their pricing, and have rescinded as of today. Your OB pricing engine will eliminate those who have not yet reversed.
2. In addition, there have been numerous new schedules of LLPA’s being issued by each investor. These have also been eliminated for the short term. It has been relayed to us that they are still coming soon, but the agencies are not trying to release the changes with the same release dates to prevent adverse selection. Lock em in if you can.
We will continue to forward new information as it is released, but as stated before, there are many unanswered questions. Please contact me with concerns/questions and market intelligence of others decisions.
Happy selling
aj
A.J.Johnson
Suburban Mortgage, Inc.
Sr. Loan Officer/Mortgage Planner
(602) 606-6702 Corporate Office direct
(623) 445-9769 Carefree Highway Office direct
(602) 206-2682 Cell
(602) 735-6702 efax
ajohnson@submort.com
www.mortgagesbyaj.com Pers. Mortgage website
www.submort.com/ajjohnson Corp Mortgage website
Lic # BK10123 , BKBR# 0114037
P Please consider the environment before printing this email.
Saturday, July 26, 2008
Wednesday, July 16, 2008
Monday, July 14, 2008
How can I build and maitain an excellent credit history?
How can I build and maitain an excellent credit history?
Your proven ability to manage your money and meet your financial obligations is the basis of your credit score. The best way to build a solid credit score is to make a habit of always paying your bills on time in full each month. Your goal should be to build a long history of reliable bill paying behavior.Another way to build a good credit score is to have no more than 3 or 4 credit cards and to hold them for a long period of time. Keep balances low and use no more than 30 percent your available credit. This, of course, means resisting the temptation to accept pre-approved card offers in the mail or retail credit cards even though there may be a discount available for opening a new account. To maintain your good credit history, check your credit report every year. Look for errors and correct them as soon as possible. By law, you are entitled to one free credit report from each of the three reporting agencies once a year. The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies—Equifax, Experian, and TransUnion—to provide you with a free copy of your credit report, at your request, once every 12 months. For more information, go to the Federal Trade Commission’s Web site on credit.Free annual credit reports can be ordered from AnnualCreditReport.com.
Your proven ability to manage your money and meet your financial obligations is the basis of your credit score. The best way to build a solid credit score is to make a habit of always paying your bills on time in full each month. Your goal should be to build a long history of reliable bill paying behavior.Another way to build a good credit score is to have no more than 3 or 4 credit cards and to hold them for a long period of time. Keep balances low and use no more than 30 percent your available credit. This, of course, means resisting the temptation to accept pre-approved card offers in the mail or retail credit cards even though there may be a discount available for opening a new account. To maintain your good credit history, check your credit report every year. Look for errors and correct them as soon as possible. By law, you are entitled to one free credit report from each of the three reporting agencies once a year. The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies—Equifax, Experian, and TransUnion—to provide you with a free copy of your credit report, at your request, once every 12 months. For more information, go to the Federal Trade Commission’s Web site on credit.Free annual credit reports can be ordered from AnnualCreditReport.com.
Tuesday, July 8, 2008
Some myths and realities about Real Estate Appraisals
Myth: Assessed value should equate to market value.Reality: While most states support the concept that assessed value approximate estimated market value, this often is not the case. Examples include when interior remodeling has occurred and the assessor is unaware of the improvements, or when properties in the vicinity have not been reassessed for an extended period.
Myth: The appraised value of a property will vary, depending upon whether the appraisal is conducted for the buyer or the seller.Reality: The appraiser has no vested interest in the outcome of the appraisal and should render services with independence, objectivity and impartiality - no matter for whom the appraisal is conducted.
Myth: Market value should approximate replacement cost.Reality: Market value is based on what a willing buyer likely would pay a willing seller for a particular property, with neither being under pressure to buy or sell. Replacement cost is the dollar amount required to reconstruct a property in-kind.
Myth: Appraisers use a formula, such as a specific price per square foot, to figure out the value of a home.Reality: Appraisers make a detailed analysis of all factors pertaining to the value of a home including its location, condition, size, proximity to facilities and recent sale prices of comparable properties.
Myth: In a robust economy - when the sales prices of homes in a given area are reported to be rising by a particular percentage - the value of individual properties in the area can be expected to appreciate by that same percentage.Reality: Value appreciation of a specific property must be determined on an individualized basis, factoring in data on comparable properties and other relevant considerations. This is true in good times as well as bad.
Myth: You generally can tell what a property is worth simply by looking at the outside.Reality: Property value is determined by a number of factors, including location, condition, improvements, amenities, and market trends.
Myth: Because consumers pay for appraisals when applying for loans to purchase or refinance real estate, they own their appraisal.Reality: The appraisal is, in fact, legally owned by the lender - unless the lender "releases its interest" in the document. However, consumers must be given a copy of the appraisal report, upon written request, under the Equal Credit Opportunity Act.
Myth: Consumers need not be concerned with what is in the appraisal document so long as it satisfies the needs of their lending institution.Reality: Only if consumers read a copy of their appraisal can they double-check its accuracy and question the result. Also, it makes a valuable record for future reference, containing useful and often-revealing information - including the legal and physical description of the property, square footage measurements, list of comparable properties in the neighborhood, neighborhood description and a narrative of current real-estate activity and/or market trends in the vicinity.
Myth: Appraisers are hired only to estimate real estate property values in property sales involving mortgage-lending transactions.Reality: Depending upon their qualifications and designations, appraisers can and do provide a variety of services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.
Myth: An Appraisal is the same as a home inspection.Reality: An Appraisal does not serve the same purpose as an inspection. The Appraiser forms an opinion of value in the Appraisal process and resulting report. A home inspector determines the condition of the home and its major components and reports these findings.
Myth: The appraised value of a property will vary, depending upon whether the appraisal is conducted for the buyer or the seller.Reality: The appraiser has no vested interest in the outcome of the appraisal and should render services with independence, objectivity and impartiality - no matter for whom the appraisal is conducted.
Myth: Market value should approximate replacement cost.Reality: Market value is based on what a willing buyer likely would pay a willing seller for a particular property, with neither being under pressure to buy or sell. Replacement cost is the dollar amount required to reconstruct a property in-kind.
Myth: Appraisers use a formula, such as a specific price per square foot, to figure out the value of a home.Reality: Appraisers make a detailed analysis of all factors pertaining to the value of a home including its location, condition, size, proximity to facilities and recent sale prices of comparable properties.
Myth: In a robust economy - when the sales prices of homes in a given area are reported to be rising by a particular percentage - the value of individual properties in the area can be expected to appreciate by that same percentage.Reality: Value appreciation of a specific property must be determined on an individualized basis, factoring in data on comparable properties and other relevant considerations. This is true in good times as well as bad.
Myth: You generally can tell what a property is worth simply by looking at the outside.Reality: Property value is determined by a number of factors, including location, condition, improvements, amenities, and market trends.
Myth: Because consumers pay for appraisals when applying for loans to purchase or refinance real estate, they own their appraisal.Reality: The appraisal is, in fact, legally owned by the lender - unless the lender "releases its interest" in the document. However, consumers must be given a copy of the appraisal report, upon written request, under the Equal Credit Opportunity Act.
Myth: Consumers need not be concerned with what is in the appraisal document so long as it satisfies the needs of their lending institution.Reality: Only if consumers read a copy of their appraisal can they double-check its accuracy and question the result. Also, it makes a valuable record for future reference, containing useful and often-revealing information - including the legal and physical description of the property, square footage measurements, list of comparable properties in the neighborhood, neighborhood description and a narrative of current real-estate activity and/or market trends in the vicinity.
Myth: Appraisers are hired only to estimate real estate property values in property sales involving mortgage-lending transactions.Reality: Depending upon their qualifications and designations, appraisers can and do provide a variety of services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.
Myth: An Appraisal is the same as a home inspection.Reality: An Appraisal does not serve the same purpose as an inspection. The Appraiser forms an opinion of value in the Appraisal process and resulting report. A home inspector determines the condition of the home and its major components and reports these findings.
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