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+

Underwriting Update for Financing of Investment Property with Fannie Mae

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Last Friday, when Fannie adjusted the allowance for the amount of financed properties owned from 4 to 10, other underwriting requirements on investment and second home borrowers were updated as well.  (Freddie Mac still has the 4 financed property limit).

Reserve requirements vary depending on the number of financed properties owned (including primary residence):

1-4 financed properties 0wned:

  • 2 months of reserves on the subject property if it’s a second home.
  • 6 months reserves on subj. property if it’s an investment property plus 2 months reserves on each other second home or investment property.

5-10 financed properties owned:

  • 2 months of reserves on the subject property if it’s a second home.
  • 6 months of reserves on the subject property if it’s an investment property plus 6 months reserves on each other financed second home or investment property.

Note:  Freddie Mac’s guidelines are *currently* 6 months PITI.

Other underwriting changes for investment properties include:

  • 70% LTV for purchase of 1-unit and 70% for 2-4 units.
  • 720 minimum low-mid credit score. 
  • No history bankruptcy or foreclosure in the past 7 years.
  • Rental income must be documented with two years tax returns.
  • Borrowers required to sign form 4506 (which you can expect on ALL loans these days–including owner occupied).

Don’t forget that there is a significant price hit of 0.75% to fee from Fannie and Freddie with investment properties on top of the credit score/loan to value adds (LLPA).    Seller contribution is limited to 2% of the sales price with investment property.

Fannie Mae Increases the Allowance for Financed Properties Owned

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It is really challenging to keep up with our constant changing guidelines.   Just this morning I was commenting over at the Seattle PI Real Estate Blog about the conventional guidelines permitting only four financed properties at a time for a borrower (more than four financed properties–no conventional mortgage for you!).    Moments ago, I received this updating Fannie’s guidelines (Announcement 09-02):

Multiple Mortgages to the Same Borrower
To support prudent lending for housing investment, Fannie Mae is changing our current limit of four financed properties per borrower. We will allow five to ten financed properties per borrower, with certain eligibility and underwriting requirements, including a 720 minimum credit score and 70-75% maximum LTV/CLTV/HCLTV (depending on the transaction and property type). The requirements apply to any loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower’s other mortgages.

Just a reminder that any mortgage guidelines that you find on the internet may no longer apply!

I better hop on over to the PI and correct my comment from this morning.  🙂

Kids and Foreclosure

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This morning I received an email of a poem that my niece wrote for a school assignment she read to her classmates.  

Just Maybe

I came home from school to a notice on the door. 

It’s not the first time, it’s been happening more and more.

This time it’s our water, last month the gas

Who knows what it’ll be next time, the money just doesn’t last.

This month we’ll make the car payment, we’ll hold off on cable for now.

Next month, we’ll work on credit cards, it’s hard, we’ll have to figure out how.

Maybe that will be enough to save the house.  Just maybe.

Don’t cry, honey, and don’t answer the phone.

Maybe I can get a second job, or maybe a family loan.

I can sell my pet hamster, one less mouth to feed.

I will baby-sit, mow lawns, go without, whatever you need.

Don’t worry, she says, tears on her face,

You shouldn’t have to struggle to save this place.

Maybe that will be enough to save the house.  Just maybe.

I came home from school to moving trucks outside.

My belongings in boxes, my tears I try to hide.

We tried in vain, and tried so hard

New house, new school, new friendships to start.

I’m nervous and scared, but cover it with a smile

I’ll be back on my feet, but it may take awhile.

Just wasn’t enough to save the house.  Just wasn’t.

by Shayann ~ 16 years old

Her words touch me…yes, she’s my sweetie-pie and I’m so sorry that her family lost their home last year.   I wonder how many other classmates of Shayann and kids like her are feeling the pain of foreclosure.    

And the Fed…

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With the Fed’s key rates all ready at a rock bottom 0-0.25%, no one anticipates rates to be lowered.  Any reaction will be from the release of their announcement which is anytime. 

Dan Green, one of my favorite mortgage bloggers, is documenting the impact of today’s Fed announcement to mortgage rates via Twitter.   Check it out.

I’ll update this post in a few moments with my two cents following the FOMC announcement.

Update 11:20 am.  

The Fed leaves the Funds Rate unchanged stating that “the economy has weakened furthe”r since their last meeting in  December.   They also reaffirmed their committment to continue buying mortgage backed securities:

“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. The focus of the Committee’s policy is to support the functioning of financial markets and stimulate the economy through open market operations and other measures that are likely to keep the size of the Federal Reserve’s balance sheet at a high level. The Federal Reserve continues to purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand the quantity of such purchases and the duration of the purchase program as conditions warrant.”

Click here for today’s FOMC Statement and be sure to follow Dan Green’s reporting on the reaction of mortgage backed securities.

Chase pulls out of Wholesale Lending with Mortgage Brokers

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I just received this memo from Chase:

“Home lending remains an integral part of our firm’s overall financial strategy, and as such, we have a responsibility to our customers, shareholders and employees. Over the last two years, we have diligently reviewed and adjusted our home lending strategy and practices to address the unprecedented challenges of today’s market. Today, we are announcing a strategic shift that we believe will serve our business and our customers well for the long term.

Moving forward, we have decided to focus on loan originations through the Chase bank branches, our Consumer Direct business, and retail-originated loans acquired from Correspondent lenders. Our new strategic direction is supported through the recent merger with Washington Mutual, which increased our bank branch inventory nationwide and enables us to serve nearly 70 percent of the American population.

As a result of our strategic decision, we will no longer accept any new locks and registrations from or purchase any loans originated by brokers effective Friday, January 16, 2009. As a result of these decisions, we are closing our Wholesale business….”

As of this moment, Chase will continue their correspondent relationships (our company is correspondent with Chase) but mortgage brokers just received another punch to the gut.   You can also see how little notice loan originators receive in this type of climate.  

The question is, how many other banks will follow Chase’s shift away from mortgage broker relationships. 

Mother Nature Happens…

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…and she doesn’t ask us if it’s convenient or if we’re in the middle of a mortgage transaction, for a natural disaster to strike, such as the current flooding in Western Washington.  When significant natural events occur, it may impact your mortgage transaction.   

Most commonly, the lender will require the appraiser to do a re-inspection (442) of the property for any transactions that are not funded prior to the event.  Even if your home uphill a mile from a flooded river, if you’re in a region (such as a zip code) that’s flooded, where an earthquake, wild fire or other has happened, be prepared for your transaction to be delayed.   The appraiser is typically required to verify:

  • The property is free from damage.
  • The disaster had no impact on the value or marketability of the property. 
  • Include an updated photo of the home.

If the appraiser determines that the property has suffered from the disaster, repairs will be required with a follow up inspection (442) from the appraiser.   All re-inspections from the appraisal are submitted to the underwriter for (hopefully) approval.  It is possible that the underwriter may add additional conditions after the review.   I have found 442’s to cost around $150 (per inspection). 

If the appraisal has not yet been completed during a transaction, the appraiser will most likely need to address the disaster and whether or not it has impacted the value of the home. 

It’s up to the lender (and can vary from lender to lender) on whether or not they will call for reinspections when a natural disaster happens.

It's Official: New Conventional Guidelines for Ordering Appraisals

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Fannie and Freddie have finally announced (I’m sure to no one’s surprise) the acceptance of OFHEO’s Home Valuation Code of Conduct which bans communication between a loan originator/mortgage broker and the appraiser for conventional 1-4 single-unit family homes.   Appraisals must be ordered through a third party clearing-house of sorts.   I picture this being similar to ordering a VA appraisal, which is not a pleasant process.  

Here’s an example from the Home Valuation Code of Conduct of what will no longer be allowed:

  • requesting that an appraiser provide an estimated…valuation in an appraisal report prior to the completion of the appraisal report or requesting that an appraiser provide estimated values any any time….
  • providing to an appraiser an…estimated…value for a subject property or a proposed or target amount to be loaned to the borrower, except for a copy of purchase and sale agreement.
  • ordering…a second appraisal…in connection with a mortgage financing transaction unless there is reasonable basis to believe the initial appraisal was flawed….

Lack of competition is generally bad for the consumer.  And I see this slowing the process down and possible increasing costs…where is the incentive to be effecient or competitive?  Who will pay the third party clearing house?

This is technincally effective on May 1, 2009; however, lenders are all ready implementing the new code.   This is still very new and we’ll have to see in the weeks ahead how this all works out.

Tips from King County for the winter weather

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We were contacted from local county officials requesting us to post information to help our readers regarding the potential winter weather:

Are you prepared?  Steps to stay safe in this weekend’s storm

With high winds forecast for this weekend and possible power outages, it’s time to take steps to stay save and avoid carbon monoxide poisoning.

How to avoid carbon monoxide poisoning

Carbon monoxide can kill you or cause serious injury.  Carbon monoxide gas comes from burning fuels such as gasoline, propane, oil, kerosene, natural gas, coal or wood.  Here are some steps to prevent carbon monoxide poisoning.

  • Never use a gas or charcoal grill, hibachi, or portable propane heater to cook indoors or heat your home.
  • During a power outage or at any other time, do not operate fuel-powered machinery such as a generator indoors, including in the garage.
  • Avoid combustion “space heaters” unless there is an exhaust vent.

Carbon monoxide poisoning can strike suddenly and without warning.  In some cases, physical symptoms of carbon monoxide poisoning may include splitting headache, nausea and vomiting, and lethargy and fatigue.  If you believe you could be experiencing carbon monoxide poisoning, get fresh air immediately.  Call for medical help from a neighbors home.  The fire department will tell you when it’s safe to reenter the home.

For a full list of carbon monoxide prevention tips and other safety and disaster information in English and other languages, visit www.kingcounty.gov/health/disaster

Other important safety tips

  • Make sure you are wearing enough warm clothing before going outdoors.  Wind speed can create dangerously cold conditions even when the temperature is not that low.
  • If you think power will be out for several days, check with your city for location of warming shelters.
  • Watch for signs of frostbite and hypothermia-slurred speech, confusion, uncontrollable shivering, stumbling, drowsiness and body temperature of 95 degrees Fahrenheit or less.  Get medical help immediately if you think someone has frostbite or hypothermia.
  • Check on elderly friends, family, and neighbors to make sure they are safe.
  • If power goes out where you live, keep food safe by keeping the doors closed on your refrigerators and freezers as much as possible.  A full freezer can stay at freezing temperatures about two days” a half-full freezer about 1 day.  Potentially hazardous foods, like meet and fish, should be discarded if thawed and warmer than 41 degrees.

Update: News Release from the City of Seattle

Snow in Seattle

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Yesterday many schools were closed with anticipation of snow…in Seattle, it missed us.  This morning, we made up for it!  There’s no doubt this is a “snow day”-much to the excitment of my teen.   I took this photo about an hour ago while I was taking my old Pug for his morning walk in Alki – West Seattle.  This snow, by the way, is perfect for building a snowman–nice and crunchy. 

I can’t help but wonder if our weather will impact year end closings with more snow in the forecast.  Hopefully everyone plans accordingly–especially with Christmas and New Year holidays coming up.

And on a business note, rates for 30 year fixed are currently 4.75% for 740+ credit (apr 4.875) based on $400,000 loan amount with a $500,000 sales price.  Priced with 1 point and 45 day lock.  Rates are higher than what I quoted yesterday morning by about 1 point in fee!  I’ll be posting updated mortgage rates here tomorrow morning!

Stay warm!

FOMC Cuts Discount Rate by 0.75%

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From the FOMC press release:

“The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent….

As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.  The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.

…In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 1/2 percent.”

Mortgage rates should continue to improve with the purchase of MBS.   This is why you need to do as Kenneth Harney recommends in this Sunday’s paper:

“Ask your broker or loan officer whether you can lock in today’s rate but still have the ability to move down should cheaper money become available to you.

Not all lenders can accommodate such requests. Some brokers offer 60-day locks with that option; others may charge you”.