Jeff Rickard

     Just an FYI to Realtors out there.  Last week we were doing an owner occupied loan and the mortgage insurance company (other player now involved in underwriting) ran a check and found out that the borrower had another property that had mortgage insurance issued for owner occupancy.  They then would not issue new owner occupied mortgage insurance.  At that point the deal died.

     What was the explanation?  The borrower had been transferred to Tennessee and did buy an owner occupied home.  Before he got there the company decided for business reasons against the transfer and now the client was faced with buying his home in Denver as a rental property.  Are you kidding? 

It has come to our attention that some sellers who are in trouble on their mortgages and are in pre-foreclosure or foreclosure are being advised to set up a “Land Trust” to avoid having other creditors attach liens to the property.  After reviewing the documents with our attorneys, we have determined this will be unacceptable and will in fact trigger the FHA 90 day flipping rule among other things.

In the example provided, the seller transfers the title to the property from him/her personally to this Land Trust which may or may not be in the Seller’s name.  Many times, this is put not only into the seller’s name but into the name of another individual or entity as well which is what will trigger the FHA flipping rule.

Please make sure when you are reviewing the contracts or title work that there is no reference to a Land Trust being the seller of the property.  If you find an instance of this then the 90 day rule must be applied. 

Remember you can not use FHA financing to buy the house unless the seller has been in title for at least 90 days.  There is an exception to this on bank owned properties and some non profit organizations.

     I have just spent the last few weeks fielding several calls that have started out with the phrase “last year I qualified for $300,000″ or “last year a mortgage guy said I could get a loan for $300,000″.     Well let me tell you, last year was a long time ago. 

     There is no more stated income, there are a lot less “bad” loan officers, there are no more “B” paper lenders and the concept of just saying yes and we will see what sticks is finally over.  

     The key is that these people who I have been talking to who are saying they qualified for $300,000 (a payment of about $2100/month) only made $2500 a month gross.  They NEVER “really” qualified for $300,000 but they are in total shock when I tell them they can only qualify for about $140,000. 

     You may ask how can they be that *&%$#@, but the truth is, the mortgage industry and certain Realtors not only said it was possible but actually closed the clients friends and coworkers, who made exactly what they made, on the $300,000 house.

     So what do we do now?  Start over, get the correct answers and instead of being angry about how much you qualify for be thankful that you did not buy last year!

     This is a great time to be a first time home buyer.  Prices are right, FHA rates are low and down payment assistance from the Colorado Housing and Finance Authority (CHFA) is easier than ever to get.  That is why my business and the business at Universal Lending is BOOMING.  

     So what is the problem?  The mortgage industry.  All the fall out from the past that actually has brought FHA and CHFA back from the dead is now bringing other players into the mortgage decision process.  This time it is the companies that provide mortgage insurance, at one time a mortgage service that was taken for granted is now part of the decision process. 

     If you are doing a 100% conventional CHFA loan in a declining market (almost all of the front range), such as My Community or Home Possible you now need to supply the mortgage insurer the following: the loan application, credit report, income documentation, sales contract and appraisal for their review. 

     What does that mean?  Best case scenario -more time (4-5 days as of today).  Worst case scenario - they say no.

     It appears that we will be able to go to $362,790 on FHA loans without a price hit.  The FHA increased limit for most of the front range is now $406,250.  So, if you are over the $362,790 you will experience increased cost to get that loan.  That cost is still undetermined but best guess is that it will be between 2.5 - 4 points.  WOW! 

Rates are going through the roof and the old standards of forecasting rates are no longer accurate.  What is going on?  The following is an explanation that is given by FNMA to their vendors:

The Capital Markets Sales Desk has fielded a large number of calls from customers simply asking,  “What’s going on?  Why is the mortgage market trading lower every day?”  The following are reasons that could help explain why mortgages are struggling and why current market conditions are so volatile: Continue Reading »

     There are new loan limits for FHA as part of the economic stimulus package offered by Washington.  This is big news because FHA is a 3% down payment loan and at this point they are not really changing down payment requirements due to the declining market.   The limits in the front range will increase from $308,370 to $406,250.  The limits are different by cities and counties but the $406,250 represents most of the front range.  Boulder is at $460,00 and Eagle County is $729,750.

     There is a big “however” though, which is just because the government announced it does not mean the investors and mortgage companies are prepared to offer it.  We anticipate that we will have investor support by next week but we also anticipate (rumors from investors themselves) that there will be price hits for the increased loan amounts.  In other words it will not be regular FHA pricing it will be increased interest rates.  

     This is a question that I am asked constantly and with the changes in the mortgage industry “as much as you want” is no longer the answer.  There is a “Credit Crunch” and an “Affordability Crunch” going on today.  In the old days it was banking practice to say you could afford 2 - 3 times your annual income for a home.  In the last few years that “New Normal” was expanded to 5-6 times your annual income, and then we would let you artificially inflate your income.  No wonder we are in a foreclosure nightmare! Continue Reading »

We are all aware of the the changes and hysteria in the mortgage business lately.  There are over 200 mortgage companies / investors out of business in the last twelve months.  B paper is gone, no income is gone, stated income is for the most part gone, 100% financing is seriously hampered or gone in the conventional market, negative amortization is highly regulated or gone and low credit scores, if they can get a loan, will pay dearly for it. 

     The big question is will they stay gone?  In the past we have had many cycles of the market getting tough and the pendulum swinging in the opposite direction.  Then the market improves and the pendulum swings back.  Continue Reading »

     The 2007 tax change that allowed mortgage insurance to be tax deductible has been extended by the IRS for the next 3 years.  Yippee!