Author Archives: Rhonda Porter

About Rhonda Porter

Rhonda Porter is an NMLS Licensed Mortgage Originator MLO121324 for homes located in Washington state. Her blog, The Mortgage Porter, is nationally recognized for sharing relevant information to consumers about mortgages. She has been originating mortgages since 2000 at Mortgage Master Service Corporation #40445 Consumer NMLS Website: http://www.nmlsconsumeraccess.org/TuringTestPage.aspx?ReturnUrl=/EntityDetails.aspx/COMPANY/40445 NMLS ID 40445. Equal Housing Opportunity. You can follow Rhonda on @mortgageporter, Facebook and/or Google+

FOMC leaves rates unchanged

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There’s really nowhere to go but up with the target Fed Funds rate.   From the Press release:

“To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion.”

As of the time of writing this post, I have yet to see lenders issue new rate sheets for the better in spite of significant improvements with mortgage backed securities.    We should be seeing improved rates soon. 

If you are in the market for a mortgage, whether you are buying a home or refinancing, be sure to provide your Mortgage Professional with all the required documentation needed.   We are all ready in the midst of a “refi boom” and this will compound the delays.   

Real Estate Agents: I highly recommend that you make sure the mortgage companies you have transactions with prioritize purchases over refinance business. 

Homeowners who are considering refinancing:  watch out for mortgage originators who are promising quick closings.  Every aspect of the refinance transaction will become clogged.

Everyone needs to be patient.

Nice Caller Wants to Modify My Mortgage

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I just received a very official sounding recorded message informing me that President Obama has a new program to help save my home–it’s NOT a refinance.  If my rate is over 7% or if I’m falling behind on my mortgage, I can be helped.  If I press 1, I’ll be connected immediately to a Restructure Specialist.  I’m feeling feisty…so I press 1.  

Immediately a polite gentleman boldly answered my questions.

Are you or do you represent my mortgage company?

No.  We’re a loan modification company.

If I understand Obama’s plan correctly, shouldn’t I call who I make my mortgage payments to for a modification?

Well you can, but the clients help receive better results.

Great!  Do you do this service for free?

No.  We don’t. 

Why would I pay you for this when I can call my mortgage servicer and do this for free?

Because you charge for our expertise.

How much does your expertise cost?

We have two convenient mortgage plans.  You can either pay $1899 or three installments at $699 each.

How did you get my phone number?  I’m on the do-not-call list. 

Our marketing department is calling everyone across the country with mortgages.

I couldn’t take it anymore.   I let him know that I was a Mortgage Originator who is versed on The Affordable Home programs and that I don’t condone this type of soliciting.    He told me he’s a mortgage originator too and then slammed the phone down in my ear.

There must be significant money in this industry to allow these companies to employ these solicitors.  I hope our State is agressive in regulating the loan mod industry to protect home owners from predatory actions.  

The recorded message on this phone call sounded so legitimate, I believe that people who are in desperate need of help would think it was coming from the Government.   If I didn’t have my background, and would not have known what to ask the gentleman on the phone, I’m sure he wouldn’t do anything to change that image.

The Making Home Affordable Program

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The Treasury has revealed their plans as promised which address helping responsible home owners with higher loan-to-values refinance and home owners who are facing financial distress (and may not qualify for a refinance) modify their existing loan.

It appears that the High Balance Conforming Loan Limits will apply to “high cost areas” such as Seattle and Bellevue.   This morning, I’m seeing that banks and lenders are now implementing the new higher loan balance of $567,500 (vs $506,000) which was announced two weeks ago (I’ve received one notice this morning stating this will take place effective March 6, 2009).  Update 4/23/2009:  It looks like banks/wholesale lenders may not adopt the revised 2009 High Balance limits until closer to May 1, 2009 when Fannie will officially begin to purchase these loans.  The few banks who did step up to the revised limit early on, either never did or quickly retracted back to the $506,000 loan amount.

From FHFA Director James B. Lockhart:

Fannie Mae and Freddie Mac will also undertake Home Affordable Refinance, a program that is designed to reduce mortgage rates for 4 to 5 million people whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. The refinance option will allow borrowers that currently owe between 80 and 105 percent of the value of their home to refinance their mortgages.

With the refinance program, it appears to be along the lines of a streamline refi where an appraisal may not be required.  This is not uncommon for “well qualified” borrowers to have an appraisal “waived”.  They have disappeared in recent times…it looks like the waiver is back.    The Home Affordable Refinance program ends on June 2010.

I’m especially pleased with the Home Affordable Modification program which I’m hoping will put an end to unsavory loan mods that were predatory.   This program is geared towards home owners who are at “imminent risk of default” and are in “financial hardship”.   It only applies towards owner occupied residences and this is a “full doc” process where the home owner will have to provide two most recent paystubs, most recent tax returns and sign a 4506T.   Second liens holders will receive compensation when they extinguish their lien rights (mortgage).

Loans to be modified must have been originated on or before January 1, 2009 and this program will run until December 31, 2012.

What now?

Home owners in financial distress should contact their mortgage servicer (where the mortgage payment is sent to) right away.

Home owners looking to refinance should gather their income documents and contact their preferred mortgage originator…and please be patient.   Refinances are taking longer to process and close.  Every aspect of the real estate industry has reduced staff.   Hopefully these programs will recreate a some jobs in the real estate lending industry.

Treasury has doubled it’s buying of Preferred Stock in Fannie and Freddie to $200 billion each in an attempt to keep mortgage rates low.   What needs to happen is to have some of the price hits (LLPA) removed or modified so that these efforts will work “in concert”.

Twas the Night Before March 4: Mortgage Eve

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Twas the night before

more information to follow

about the new refinances and cram downs

…almost too much  to swallow. 

Okay…I’ll stop with the rhyme simply because I can’t keep it going!   There are a lot of Mortgage Professionals and Homeowners waiting to hear if they will be helped tomorrow. 

According to the White House Blog, responsible upside down home owners with good credit may qualify to refinance with a loan to value up to 105% with a conventional 30 or 15 year amortized mortgage.  (I’m guessing most would and should opt for a 30 year amortized mortgage)…tomorrow:

  • When can I apply?

Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009. 

I’ve heard nothing as of yet…    I have a lot of questions that I hope will be answered soon.

This from Kenneth Harney’s article on Sunday:

In a letter to private mortgage insurers Feb. 20, Fannie and Freddie’s top regulator confirmed that there would be no requirement for refinancers to buy new mortgage insurance, despite exceeding the 80 percent LTV threshold.

James B. Lockhart III, director of the Federal Housing Finance Agency, described the new refinancing opportunity as “akin to a loan modification” that creates “an avenue for the borrower to reap the benefit of lower mortgage rates in the market.” Lockhart spelled out several key restrictions on those refinancings:

• No “cash outs” will be permitted. This means the new loan balance can only total the previous balance, plus settlement costs, insurance, property taxes and association fees.

• Loans that already had mortgage insurance will likely continue to have coverage under the existing amounts and terms, thereby limiting Fannie and Freddie’s exposure to loss. But loans where borrowers originally made down payments of 20 percent or higher will not require new insurance for the refi, despite current LTVs over the 80 percent limit.

• The cutoff date for the entire program is June 10, 2010.

The “no cash out” factor is concerning.  Refinances where a second mortgage and/or HELOC is included (being paid off) that was not obtained when the home was purchased, is classified as “cash out”.  Even if the second mortgage was refinanced as a rate-term (only to reduce or fix the rate–the home owner never saw a dime of equity from their home in the form of cash).    It appears as those home owners with second mortgages will only be able to subordinate the second mortgage…and good luck with that!  

Banks have yet to adapt the higher conforming loan limitseven though it’s been announced by HUD and FHFA…I’m hoping we’ll see this tomorrow as well “in concert” with the unveiling of Obama’s mortgage plan.

Obama’s plan promises lower mortgage rates…butthese rates are fighting Fannie Mae and Freddie Mac’s LLPAs (huge price hits, such as the 0.75% hit to fee with condos over 75% loan to value).   Why not just get rid of some of these adds that are making rates unactracting…or atleast consolidate some of the brackets.  Is there really a difference between a home owner with a 739 and 740 middle credit score?

We’ll know tomorrow if there is a Mortgage Santa Claus and if he left any goodies under the tree.

Refinancing with a Second Mortgage? Patience, my Friend, patience.

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I really try to lean towards writing about purchases here at Rain City Guide…don’t know why that is…it just is.  But the fact is, there are a lot of refinances going on right now and many may have second mortgages that are not going to be paid off as part of the refinance.    A recent comment on my post about unhonored rate locks prompted this post…it’s probably not his mortgage professionals fault his refi is taking this long…it’s his second lien holder.

helocIf a second mortgage is not paid off, the new first mortgage will require it to be subordinated.  This means that a subordination agreement must be recorded to make it public record that the second mortgage (often times a HELOC) is in second lien position and not first lien–this all boils down to who gets what rights in the event of a foreclosure.

Just because a lender request a second mortgage/HELOC lien lender to subordinate, doesn’t mean they have too…they get to mull it over and they can refuse to subordinate…which means that with the refinance, if the first mortgage (the proposed refinance) or the home owner cannot pay off the existing second mortgage, it’s probably a dead deal.

Some home owners want to keep their second mortgage or HELOC (home equity line of credit) because:

  • they can’t get a new one based on today’s guidelines and lack of availability.
  • they have a great rate that can’t be replaced.
  • their refinance will be classified as a cash out refinance if the second mortgage/HELOC was not obtained when they purchased their home.  (It doesn’t matter if the home owner refianced the orignal purchase money second mortgage and NEVER took cash out of the home–it’s treated as “cash out” with a whole new set of rules and pricing).
  • including the second mortgage pushes the home owner over certain loan limts (conforming, FHA, etc.).

Most second lien holders will not consider subordinating until the have a copy of the appraisal for the refinance and full underwriting approval from the first mortgage….then you wait for them to process it.   Some banks are taking more than a month AFTER receiving the appraisal and loan approval before they will CONSIDER IF they will subordinate…and there’s no guarantee they’ll do so.    I’ve seen some banks charge $250.00 to process a subordination REQUEST (no guarantee).    A borrower may be out the appraisal cost and the subordination fee with no refinance worse case scenario.

Have an honest conversation with your mortgage professional and ask questions…

  • Should or can you pay off the second mortgage with your refinance?
  • How long should the subordination take?  (some banks or credit unions take longer than others)
  • What happens if you lock and the subordination takes longer than expected?

If you’re a home owner with a second mortgage/HELOC that you want to subordinate, be prepared for a much longer closing which means, if you’re locking at application, a slightly higher rate or more in points–the longer the lock period, the more expensive it is.   Or you can risk floating your rate.  The choice is yours and there is no guarantee that the second mortgage/HELOC lien holder will subordinate…any risk (borrower or lack of equity remaining in the home) may cause the bank to give the subordination a thumbs down.  It’s nothing new.

Unhonored Rate Locks

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Did you know that a locked rate is a commitment for a loan to be delivered to a lender?   Mortgage companies and loan originators are often judged by how many loans they deliver or what their lock fall-out ratio is.   A normal expection used to be around 70-75% of locked loans to be delivered–now I’m hearing reports of 30-40% of locked loans actually being delivered to the lender.  

This is dangerous for mortgage brokers and correspondent lenders.  Why?  Wholesale lenders are cutting back and “cherry picking” which companies they’ll work with.   A significant factor is lock-fall out.  If odds are, a locked  loan is not going to be delivered, why should they work with that mortgage company?    

Sometimes the wholesale lender may be ordering the mortgage company to be “cut off” of future business and sometimes it may be the wholesale lender having their Account Executives that they need to reduce their client base to a certain amount of accounts (as a way to reduce the commission they’re paying the AE’s). 

There can be many reasons for a locked loan not to be delivered, such as:

  • the loan could not be approved because of the property (appraisal issues) or the borrower.
  • private mortgage insurance issues.
  • the borrower decides not to proceed with the transaction.

Here’s how one wholesale lender rates fallout:

  • 0-24.99% = Full approval.
  • 25-34.99% = Monitor
  • 35-49.99% = Watch
  • 50-74.99% = Probation
  • 75% or more = Inactivated.   Good by wholesale relationship with that lender.

Wholesale lenders don’t care if it’s due to the borrower not proceeding with the refi or if it was their underwriting that “killed the deal”…it often counts towards that dreaded lock fallout ratio.

A disturbing trend I heard from a local title insurance company is “double applications”.  Where a borrower is proceeding with a refinance transaction with two different lenders.   If both loan originators have the loan locked, someone is going to lose!   Not to mention, the expense to the title and escrow companies who are working on a transaction a consumer is not going to honor.   The only way this is caught, is if the title or escrow company happen to be the same one that the two loan originators the consumer is using.   Regardless of if both loans are locked or not, it’s unscrupulous behavior.    

Borrowers–please do not have two loan applications going on at the same time with two different loan originators.   When you do decide to lock in a rate with a mortgage professional, understand it IS a commitment.

2009 Loan Limits Confirmed by OFHEO

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It’s official!  OFHEO has announced the return of the 2008 limits:

Loan limits for mortgages originated in 2009 are set under the provisions of the American Recovery and Reinvestment Act of 2009.  Under that legislation, loan limits for 2009-originated loans are set at the higher of the 2008 limits and those that were originally announced for 2009 under the terms of the Housing and Economic Recovery Act of 2008. 

I’m anticipating that lenders will immediately endorse these limits.  Here are the revised 2009 loan limits:

King, Snohomish and Pierce Counties

  • $567,500 – One Unit
  • $726,500 – Two Unit
  • $878,150 – Three Unit
  • $1,091,350 – Four Unit

Other counties, including Kitsap, Jefferson, San Juan, Clark and Skamania counties are also at higher limits than other Washington State counties which are not part of the “high cost areas”.   For all Fannie and Freddie loan limits, click here.

Still unknown is how this will be priced.   FHA should be following with their revised loan limits as well. 

Update 2/25/2009: FHA loan limits for Washington Counties thru 2009 are here.

Notes from WAMP’s Meeting on Home Valuation Code of Conduct

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This morning I attended  Washington Association of Mortgage Professionals (WAMB) meeting in Bellevue to learn more about the Home Valuation Code of Conduct (HVCC) which will dramatically impact conventional appraisals.   It was a somber room of fellow mortgage brokers and correspondent lenders along with the panel of various representatives from the industry.  

In a nutshell, mortgage originators (if paid commission) will no longer have contact with appraisers for conventional mortgages.  Appraisals will be ordered via an appraisal management company–oddly similar to what Washington Mutual used before New York  Attorney General Cuomo investigated.   Although this is effective for loans delivered to Fannie/Freddie on May 1, 2009 or later, lenders will adopt the Code well in advance in order to be able to deliver compliant loans.

Lisa Goldsmith from Amtrust Bank discussed how they’re going to comply with HVCC beginning around April.  Amtrust will treat mortgage brokers and correspondent lenders the same.  

  • When the loan is registered with Amtrust, they will provide an AVM (an unreliable estimation of value IMO).  This is the only chance the mortgage originator has to decide whether or not they should proceed with the appraisal order.
  • The order is placed with an Appraisal Management Company (AMC).
  • A copy of the appraisal is sent to both the borrower and the mortgage originator.

The mortgage broker will have no idea who the appraiser is until the appraisal is delivered.  Correspondent lenders may be able to order appraisals as long as they meet the HVCC (and I’m sure they’re a huge risk of buy-backs if correspondents opt for this route).   In fact, mortgage originators (if paid commission) may not communicate with the appraiser.  

A big issue is portability of the appraisal.   If for some reason, a broker starts with a lender, like Amtrust, and then decides during the process they want to switch to another lender, Amtrust holds the appraisal.  The consumer has all ready shelled out $400-$500 to one lender.  It will be up to Amtrust to release the appraisal (if this is even acceptable) or another appraisal may need to be issued if the loan is switched.  The power is not with the consumer and it’s not with the mortgage broker.

Quality is a huge concern as well.  One mortgage originator stated that he currently has an issue with an appraisal that was provided via an AMC for a waterfront single family residence.  What he received was an appraisal with 6 comparable properties–4 of them were condos!    Second appraisals can be requested when it’s a question of quality–they cannot be done for “value shopping”.

It gets better…Fannie Mae amended guidelines earlier this year allowing appraisal management companies to be owned by lenders!   

“The lender’s ownership of or affiliation with an appraisal management company is no longer restricted.  However, any appraisal management company that provides the lender with an appraisal must adopt written policies and procedures implementing the revised Code.”

From Appraisal Press:

“In it’s current form, the HVCC discriminates against appraisers by (a) effectively requiring lenders to engage appraisers through appraisal management companies, which retain 40-50% of the fees paid by lenders, reduce competition as a result of industry consolidation, and deteriorate appraisal quality by forcing veteran appraisers from the workforce, and (b) creating an artificial preference for automated valuation models, which will result in fewer appraisals, reduced market transparency and the danger of increased in-house lender abuses.  The HVCC will deprive consumers of their right to obtain independent, quality appraisals.

So let me get this straight… banks and lenders can own or have ownership interest in appraisal management companies.  The AMCs (possibly owned by banks/lenders) can select which appraisers make their list AND they will reduce the appraisers incomes in an all ready challenging market.   Who regulates the AMCs?  

NAMB’s fighting HVCC and I don’t always support all of NAMBs views…I have to agree with them here.   Once again, instead of dealing with the offenders, industries are in the process of being punished wiped out.

2008 Loan Limits to Return Soon

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Part of the The American Recovery and Reinvestment Act of 2009 includes bringing back the higher 2008 loan limits to certain areas.   Locally this means we may see high balance loan limits increase from $506,000 for single family dwellings in King, Snohomish and Pierce counties back to $567,500.   Fannie Mae, Freddie Mac and FHA will move forward and lenders will immediately follow.

Stay tuned.

PMI Mortgage Insurance Company drop kicks Mortgage Brokers

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Today I had several Mortgage Professionals contact me regarding PMI Private Mortgage Insurance Company cutting off mortgage brokers via email and comments here.    I thought it must be a rumor…but it’s not, effective February 20, 2009 PMI Mortgage Insurance Company will no longer underwrite or insure loans for mortgage brokers.   However if you’re a lender, PMI is ‘Right alongside you…we’re in it for the long run”.  

From an email I received today from a Loan Originator:

It’s believed that PMI is the first of the nation’s seven MI firms to totally exclude loan brokers from their coverage menus. In recent months other MIs – including Genworth and MGIC – have tightened guidelines on broker-sourced loans, particularly condominiums and high LTV notes. A PMI spokesman confirmed the new policy change to National Mortgage News adding that, “This does not apply to correspondents.