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Category Archive: ‘Mortgage News’

Best Mortgage?

best loan

Hat tip to both daytrip and just some guy for sending in this article from the

All with no down payment, no closing costs and no mortgage insurance. The Ongs’ real estate agent, Jill Medley, called it “the best loan in the history of real estate.”

The key feature of the so-called wealth-building home loan is a sharply reduced interest rate on a 15-year term. Instead of requiring a down payment, banks allow borrowers to use their money to pay interest upfront, often called “buying down” the rate.

For their $400,000 house, the Ongs used what would have been a 4% down payment — $16,000 — to instead buy down their rate to 0.5%. In little more than three years of monthly payments, the couple will have more than 20% equity in the home, assuming the property value stays the same.

That more than doubles the equity they would build with the same amount down on a 30-year Federal Housing Administration loan at the going rate of 3.25%.

The Ongs pay only about $150 more each month than they would have paid under the longer-term loan, which would include a hefty mortgage insurance payment.

These are NACA deals, which are capped at a $400,000 purchase price.  Down payments are required but they come from grants, which is how they get around having to pay the PMI.

Buyers also have to live where they can find a house for $400,000 or under, and select a house that nobody else wants – because if there are multiple offers, these 100% financed deals that rely on multiple grants for the down payment will be the last deal chosen by the listing agent.

Buying down the interest rate is a great idea for buyers who are confident they will be in the home for years.  But the benefits diminish quickly for those buying higher than $400,000.

Here is a comparison:

$800,000 purchase price

$160,000 down payment

$640,000 loan amount

15-year loan with 2.0% rate (buydown would probably cost $15,000?)

$4,118.46 per month for 180 months.

30-year loan at today’s 3.75% jumbo rate:

$2,963.94 per month for 360 months.

Paying the loan off in 15 years saves you around $300,000 in interest, which is good.  But if you can live with a monthly payment of $4,118 per month, have an extra $65,000 for additional down payment and opt for a 30-year loan, you can buy a house for $1,125,000 and have the same payment as the $800,000 house.

Unfortunately $800,000 doesn’t buy you much around here any more, and if buyers happen to wonder into a house listed for $1,125,000, they may decide to forget the imposed monthly discipline of a 15-year loan, and instead pay down the loan voluntarily as time goes on.

Posted by on Jan 4, 2015 in Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 3 comments

97% Down Payments

There’s been a lot of hullabaloo about the Fannie/Freddie decision to drop the minimum down payment from 5% to 3%.

But the 2% difference will have virtually nothing to do with the decision to default. If a homeowner is going to walk from a 3% down payment; they will walk from a 5% down payment too.

Shiller speaks in his usual ‘casual indifference’ here, but they didn’t cut his last point in the video – that historically the ‘slowing of appreciation has sometimes been the precursor to declines':

According to recent data from the National Association of Realtors, first-time homebuyers account for just 33 percent of all home purchases. That’s the lowest level in 27 years.

“Maybe there’s a cultural change. Our millennials spend more time on Facebook than standing over the backyard fence and talking to the neighbor,” Shiller said, attempting to explain the drop in new homebuyers.

  “Maybe neighborhoods are not as important. Or maybe there’s an urbanization trend going on.”

Posted by on Dec 15, 2014 in Down Payments, Mortgage News | 6 comments

Appraisal Issues


Hat tip to Susie for sending in this article on appraisals:

An excerpt:

This past July Janice Charlton of Thousand Oaks, Calif., says she was low-balled on a refinance appraisal with the value coming in at $745,000. “I was completely shocked. I follow the real estate market,” said Charlton.

She appealed the value through the lender with the AMC that hired the appraiser, to no avail. “It’s arbitrary. It’s a real conflict-of-interest,”  she added.

Charlton did not give up. She applied elsewhere. Less than a month later another appraiser through a different lender brought the value in at $860,000. Charlton’s perseverance paid off. She completed her refinance, saving $1,397 per month with her new, lower house payment.

Unfortunately for the loan rep, this borrower did the only thing she could to obtain her refinance – go to another bank.

Low appraisals are not as common on purchases because the appraiser is given the sales price and told to hit it.  But I never take it for granted – I meet every appraiser on time, and bring several comps to justify the price.  It’s a sales job – realtors who send one of their assistants or just tells the appraiser to use the lockbox are asking for trouble.  Get Good Help!

Posted by on Dec 7, 2014 in Mortgage News | 2 comments

More Free Cheese

max cheese

More foreclosure-avoidance incentives were announced this week:

An excerpt:

“While the housing sector has strengthened in recent years, there are still many homeowners struggling to make their mortgage payments,” said Secretary of the Treasury Jacob J. Lew. “The changes we are announcing today offer meaningful incentives for borrowers to stay current in their modifications, increase their opportunity to build equity in their homes, and provide vital safety nets for those facing greater financial strains.”

The Home Affordable Modification Program (HAMP), established in 2009, offers homeowners loan modifications with lower monthly payments achieved through lowered interest rates and modified loan terms.  Many homeowners with HAMP modifications have been eligible to earn up to $5,000 if they adhere to modification terms for five years.  The amount is applied to their outstanding principal balance.

Under the revisions an additional $5,000 will be available to homeowners after a sixth year of on-time payments and they will then have the opportunity to re-amortize the reduced mortgage balance, thus further lowering their monthly payment.   HUD/Treasury estimate some one million borrowers with HAMP modifications may be eligible for the new incentive.

HAMP Tier 2 was developed as an alternative for homeowners who can’t qualify or are unable to sustain a HAMP Tier 1 modifications.  It provides modifications with a low fixed rate for the life of the loan.  The revision announced this week will include reducing the interest rate for these modified loans by 50 basis points which will also make more borrowers eligible for the program.  It also extends the sixth year $5,000 pay-for-performance incentive to Tier Two borrowers.

Posted by on Dec 6, 2014 in Bailout, Loan Mods, Mortgage News | 8 comments

Underwriting Guidelines

Rob Dawg brought up how discriminatory the underwriting guideline is for those who use interest/dividend income to qualify – they have to prove that the income will extend three years into the future.  Yet those homebuyers on salary or hourly pay don’t have to make any such assertion, and they could get fired the next day after closing.

There are other underwriting guidelines that make you scratch your head too.  Here are some examples:

1. ‘Gift’ for down payment – The previous standard was that as long as your down payment was at least 20% of the purchase price, the entire amount could be a gift.  But now the Fannie/Freddie automated underwriting is allowing 10% down payments to be all-gift too.  Is that really ‘skin in the game’?  Sellers can still pay all buyer closing costs too.

2. Reserves – If you are buying a rental property, you have to use at least a 20% down payment (25% on 2-4 units), AND have at least six months’ worth of payments in the bank at closing – which includes your PITI payments on current residence and the new rental property.  It makes sense too – you could get hit with a quick vacancy, and the bank would want you to have ample reserves.

However, when buying a residence as an owner-occupier, the required reserves are much less.  The guideline states that the buyer should have two months’ worth of payments in the bank – which isn’t much – and a lender told me he has been closing FHA/VA loans recently with less than one payment’s worth of dough left in the bank!

3.  Appraisals - With the new rules that isolate appraisers from influencing agents, you’d think the inflated-appraisal problem would be solved.  But they still give appraisers the actual sales price and tell them to hit it, which takes out some of the objectivity.  Even so, today’s article (LINKhat tip T&W) included this quote, “If you thought what was happening before was an embarrassment, wait until the second time around”.

Think of these questionable guidelines when you hear how the ‘tight credit’ is mucking up the market!

Posted by on Dec 2, 2014 in Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 5 comments


From the

A new mortgage lender is loosening documentation requirements, allowing applicants to provide less paperwork on income and assets than is typical to get a home loan.

Social Finance, a peer-to-peer lender often referred to as SoFi, rolled out mortgage lending in five states—New Jersey, North Carolina, Pennsylvania, Texas and Washington—and the District of Columbia on Tuesday. The San Francisco-based lender began offering mortgages in California in August.

The firm has specialized in student loans since it launched in 2011. The move into mortgages comes as SoFi prepares to file to raise $200 million to $250 million in an initial public offering early next year, according to its chief executive Mike Cagney.

SoFi’s mortgages will be geared toward borrowers with high credit scores, though other criteria will be less onerous than what most other lenders require. The firm isn’t requiring tax returns to verify applicants’ income or proof of funds to verify the source of borrowers’ down payments—requirements that most lenders have had in place since the housing downturn. Instead, SoFi is accepting applicants’ most recent paystub or W2 as proof of income. It will also take all applicants at their word that their down-payment funds aren’t coming from a loan they have taken out elsewhere, says Mr. Cagney. Borrowers will have to make a minimum 10% down payment.

Read the full article here:

mortgage rates Oct 10 2014

Posted by on Oct 10, 2014 in Mortgage News, Mortgage Qualifying | 8 comments

Helicopter Ben’s Refi


For a guy who has thrown around trillions of dollars, Ben Bernanke was probably more surprised than anyone who has been turned down for a refinance in recent years – hat tip to Mark, Joe, and daytrip who sent this in:

Here’s a full explanation:

Business media are having a lot of fun today over a throw-away remark Ben Bernanke made yesterday.  In a question and answer session with Moody Analytics economist Mark Zandi, the former Federal Reserve chair said he was having a little personal trouble in the financial markets.  “I recently tried to refinance my mortgage,” he said, “and I was unsuccessful in doing so.”

According to multiple reports, when the audience laughed Bernanke insisted he was not making it up.

“Overregulation and the fear of buybacks makes it difficult to make a common sense loan, ” notes Geoff Allison, a Senior Loan Officer at Blue Skye Lending.

“While there may have been a rhetorical goal underlying the comment, it’s not hard to believe based on the current state of lending guidelines.  A recent change to what is essentially a commission-based job with no recent history of working on commission would prevent anyone from getting a conforming loan,” says Mortgage News Daily’s Matt Graham.  “Even though there are products that he could qualify for, they don’t carry the same low rates as the more stringent programs.”

Bernanke made the remark in an appearance before a conference hosted by the National Investment Center for Senior Housing and Care.  Zandi confirmed the remark to CNNMoney and said, “It highlights how tight credit is for residential mortgage loans.  This is the key constraint on the housing recovery.”

Lending standards were tightened by banks and regulators in response to the rapid deflation of the housing bubble and, according to Bloomberg, Bernanke said, “I think it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions.”  He acknowledged that the first-time homebuyer market is not where is should be as the economy in general strengthens.  “The housing area is one area where regulation has not yet got it right.”

This is old news for market participants.

Frank Hanna, an Originator at Gateway Funding sums it up “In order to truly help the housing market and ultimately the economy we  will need to see lending regulations strike a better balance between the current defensive underwriting posture and common sense.”

Bloomberg headlined its report, “You want proof that it’s tough to get a mortgage? While CNN went so far as to underwrite Bernanke’s loan.  They found that he bought his Washington, DC home in 2004, paying $839,000 and it is assessed today at $880,700 although Zillow puts its market value about $80,000 higher.  His $200K salary as Fed Chair is history but he commands as much as $250,000 per speech, consults at the Brookings Institution, and his last financial disclosure put his assets in the $1 million to $2 million range (putting him way down the list of wealthy Fed Board members.)

What we don’t know is whether Bernanke or Zandi made any real news yesterday.

Nick at the WSJ confirmed Ben’s approximate loan amount on twitter:


Posted by on Oct 3, 2014 in Mortgage News | 0 comments

Subprime Again?

HT to daytrip for sending this in:

An excerpt:

This lending freeze is not just preventing people like the Sleimans, who have struggled to document their income, from chasing their dreams. It’s bad for the overall economy too.

Laurie S. Goodman, an expert in housing finance at the Urban Institute, a think tank in Washington, D.C., recently calculated that lenders would have made an additional 1.2 million loans in 2012 had they merely loosened standards to the prevailing level in 2001, well before the industry completely lost its sense of caution.

As a result, fewer young people are now buying first homes, fewer older people are moving up and less money is changing hands. Instead of driving the economic recovery, the housing business is dragging behind. “An overly tight credit box means fewer individuals will become homeowners at exactly the point in the housing cycle when it is advantageous to do so,” Goodman and her co-authors wrote in their study, published in The Journal of Structured Finance. “Ultimately, it hinders the economy through fewer new-home sales and less spending on furnishings, landscaping, renovations and other consumer spending.”

“We’ve locked down mortgage lending to the point where it’s like we’re trying to avoid all defaults,” said William D. Dallas, the chairman of Skyline Home Loans, who has three decades of experience in the industry. “We’re back to using rules that were written for Ozzie and Harriet. And we’ve got to find a way to help normal people start buying homes again.”

Navy Fed is doing their part, and these aren’t VA loans.  Rate is around 5.50%:


Posted by on Sep 13, 2014 in Mortgage News | 6 comments

FHA Selling Loans in Default

From the – thanks daytrip:

An excerpt:

The protests over the FHA Distressed Asset Stabilization Program are the latest ripple in the wake of the foreclosure crisis, which has seen growing concern about the “Wall Street-ization” of the housing market.

A handful of large real estate trusts and investment firms have scooped up an estimated 200,000 bargain-rate houses in the last two years — in some cases elbowing first-time home buyers out of the way — and turned them into rental properties.

Some of these firms are now buying the loans, getting potential rental properties even before they are in foreclosure. Other buyers aim to profit by collecting mortgage payments or by selling the homes after they foreclose.

From the FHA’s perspective, the program is working, said Carol Galante, the agency’s commissioner.

“We really do consider the DASP to be quite successful in accomplishing what it set out to do,” she said. “That was to achieve significant cost savings for [the FHA] and at the same time offer borrowers a final opportunity to avoid foreclosure.”

Many of the loans that are being sold haven’t had payments on them in two or three years, Galante notes, and they’ve run out of options for being reworked by the FHA. But a new owner may be able to restructure them or reduce principle payments to help borrowers, she said.

Of the 38,000 loans that had been sold before July 2013, about half are still being worked out, according to data released last week by HUD. In about 5% of cases, borrowers are back on schedule making payments. Most of the rest ended either in a foreclosure or short sale or were flipped to another investor and are no longer being tracked.

The program has some successes, said Sarah Edelman, a policy analyst at the Center for American Progress.

About one-fifth of the loans are in “neighborhood stabilization” loan pools, which are geographically concentrated and carry higher workout requirements. Nearly 24% of them are being paid on time. And among the relatively small slice that were sold to nonprofit lenders that partner with community housing groups, the success rate tops 35%.

“This program shows a lot of potential,” Edelman said. “FHA really has an opportunity to build on its strengths.”

Posted by on Sep 10, 2014 in Mortgage News | 0 comments