I can’t think of a better way to celebrate Father’s Day than going to a car show with a few of your favorite Dads. Here are a few of my favorite photos from today’s visit to Burien’s Father’s Day Car Show, which included a chili cook-off. For more photos, click here.
Update 6/10/2009 11:20 am: Please read the comments 1-21 (especially Aubrey Cohen’s comments). Apparently according to a HUD representative, the tax credit can be used for down payment if it’s received through State Housing Finance Agencies. (I called the FHA help line twice this morning and both FHA representatives say this is not the case). The representative from HUD apologizes for the confusion and will make sure the Homeownership Centers understand… I apologize for the confusion too!
I feel like shouting “THE TAX CREDIT ADVANCE IS NOT DOWN PAYMENT ASSISTANCE!” up and down the streets of Seattle. Home buyers utilizing FHA loans still need to come up with a minimum of 3.5% for their downpayment (see the update above). Per HUD’s Mortgagee Letter 2009-15 dated May 29, 2009:
“The proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity tha tis reimbursed, directly or indirectly…may not be used to meet the 3.5% minimum down payment, but may be used as additional downpayment, buying down the interest rate, or other closing costs.”
Jane and John are buying a home using FHA for financing with a sales price of $300,000. FHA requires they invest a minimum of 3.5% of the sales price into the transaction. Jane and John need to have $10,500 of their own funds (which can be gifted or loaned from a family member) invested into this transaction. Assuming they qualify for the First Time Home Buyer Tax Credit and the IRS figures out how to resolve the issues of how to pay the FTHB Tax Credit Advances, they could use the $8000 towards closing costs, prepaids and any extra funds (after paying closing costs and prepaids AND after they invest $10,500) could go towards downpayment. (Unless…see the update above).
This is not a zero down program and this is not like the ol’ DPAs (Nehemiah, etc.). This is (if the details are ever worked out in time) an advance or loan against your tax credit.
Haaa… I feel a little better now. 🙂 One of the benefits of blogging… venting!
Fannie Mae issued Announcement 09-19 amending some very basic underwriting guidelines that will not only impact conventional financing; it will apply to FHA insured loans that are underwriting using Fannie Mae’s DU. You can read the entire announcement by clicking here.
Here are some of the changes:
Fannie Mae’s effective dates are to follow…if the loan is manually underwritten, this applies to applications dated on or after September 1, 2009. However, expect to see lenders and banks to adopt these guidelines early.
June 1, 2009 Update: I just got off the phone with someone in the licensing department at DFI. They hope to have more information available soon for mortgage originator licensing. Some details are still being worked out. From what I could gather from my conversation this morning, the main advantage for licensing now vs. later is that you will have more time to complete the clock hours, take the exams and to be able to spread out the costs for said classes and exams. I sincerely apologize for misinterpreting DFI’s site on the requirements for LO licensing…I wish I could line out my title of this post!
In April, SHB 1621was signed by Governor Gregoire requiring loan originators employed by correspondent lenders/consumer loan companies to obtain a Washington Loan Originator License by July 1, 2010. The State passed SB6471 last summer which had “unintended consequences” causing some loan originators who were regulated by the Mortgage Brokers Practices Act (and therefore licensed) to become defined under the Consumer Loan Act–allowing those LO’s to be “unlicensed”. With the passage of the SAFE Act, the State is stepping up to National laws which include CLA loan originators.
So my fellow mortgage professionals who are employed at correspondent lenders, here is an opportunity for you: if you submit your application to become licensed by July 30, 2009; you’ll reduce your education requirements by 12 hours and pass one less exam.
Here are the requirements to apply for a Washington Loan Originator Licenese from DFI.
All applicants (regardless of when you decide to sumbit your license) must complete Form MU4 via the Nationwide Mortgage Licensing System and Registry (NMLSR) and submit one fingerprint card, pay $155 licensing fee and…
LO Applications Submitted by July 30, 2009 (in addition the above):
Or you can wait until after July 30, 2009 to submit your LO Application and in addition to the above requirements:
Do you really like to procrastinate? Opt to delay this process until January 1, 2010 and you still get to pass both exams and complete the 2o hours of CE prior to submitting your license prior to the July 1, 2010 deadline. (DFI ask that you submit license no later than April 1, 2010 to allow processing time).
Deb Bortner of DFI will be speaking about the SAFE Act and Washington State Loan Originator Licensing at two upcoming events:
Both events include presentations on social media for mortgage professionals. I’ll be one of the speakers at Safeco Field along with David Gibbons from Zillow. 🙂 If you’re interested, you can get more info or register for either event with the Washington Association of Mortgage Professionals (membership to WAMP is not required).
As someone who’s gone through licensing, I can tell you it’s (an important) chore. Classes will fill up as the deadlines approach and I had the pleasure of being fingerprinted three times before I had a print that was acceptable. If you fail your exam three times (I wonder how often this happens); you’ll have to wait six months before you can try your luck at the exam again which means no loan originating for you until you have successfully passed your exams.
If you are originating mortgages in Washington State, I would not delay getting your Loan Originator License.
I’m closing my first conventional purchase that falls under the rules of HVCC (a majority of my transactions have been FHA) which became effective at the beginning of this month. Today I was asked by the Real Estate Agent, in disbelief:
“If I understand you correctly:
- We don’t know who the appraiser is
- We cannot contact the appraiser even if we knew. [Note: the real estate agent CAN contact the appraiser if they somehow know who it is…the loan production staff cannot].
- We have no idea when the appraisal will be done”
Yep. In a nutshell, people who are considered a part of “loan production” including mortgage originators and loan processors have no idea who the appraiser is until we receive it from said appraiser with conventional financing.
HVCC does not prohibit the real estate agent from communication with an appraiser. However, unless the appraiser contacts the agent to schedule an appointment there will be no way for a real estate agent to know who the appraiser is.
Note to Real Estate Agents: please keep this in mind when you are writing up offers with conventional financing. The mortgage originator has no contact with the appraiser and therefore, the Letter of Loan Commitment that is typically required within 20-30 days may still be subject to appraisal or the underwriter’s review of the appraisal. We can request the appraisals are provided to us by a certain date; but I cannot contact the appraiser to say “what’s the e.t.a. on the Jones appraisal; we really need it by Friday”.
Currently FHA is not following HVCC however, FHA has been adopting some of Fannie Mae’s other appraisal guidelines and addendums.
Are we having fun yet?
This morning I received an email from one of the major banks we work with recommending the use of a “FBI 
Occupancy Cert”. They are recommending the use of this form on any loans we sell to their bank, including owner occupied, investment or second homes. The form, which must be acknowledged by the borrower, states:
“Mortgage Fraud is investigated by the Federal Bureau of Investigation and is punishable by up to 30 years in federal prison or $1,000,000 fine, or both. It is illegal for a person to make any false statement regarding income, assets, debt, or matters of identification, or to willfully overvalue any land or property, in a loan and credit application for the purpose of influencing in any way the action of a financial institution.”
The borrower must then select the occupancy for the specific property that is being financed:
Directly above the signature line, the form states:
“I/we acknowledge it is illegal for a person(s) to make a false statement regarding occupancy of property being financed in a loan and credit application and that we are subject to prosecution under Section 1001, 1010 and 1014 under Title 18 of the United States Code”
This document seems to make it crystal clear what occupancy is and the potential risk of trying to finance an investment property as owner occupied or as a second home. Can something so direct make a difference and curb mortgage fraud?
The last few FHA High Balance (aka FHA Jumbo) purchases that I’ve closed, the buyers and agents thought a second appraisal was automatically required. FHA did adopt conforming appraisal guidelines for declining markets at the beginning of this month, but that does not guarantee a second appraisal.
What triggers a second appraisal for FHA?
Per Mortgagee Letter 2009-09, FHA defines a declining market as:
“…any neighborhood, market area or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended marketing times.”
Appraisers are having to determine overall trends for market areas including analyzing the current supply and demand, days on market, absorption rate and the prevalence seller concessions. For FHA and conventional loans, this is documented on Fannie Mae Form 1004MC which FHA adopted effective April 1, 2009.
Please note that conventional, FHA and VA appraisals require this new form. FHA does have additional requirements:
If a home buyer is using a FHA mortgage with a base loan amount over $417,000, they may want to consider saving up for that extra 1.51% down so that they are at a 94.99% loan to value and therefore (currently) avoid the potential second appraisal issue and make sure that the lender you’re working with does not have underwriting “overlays” that will impact you. FHA’s second mortgage requirements can be found on Mortgagee Letter 2009-09.
Regardless of what type of financing you’re doing, know that the underwriter is going over the appraisal with a fine tooth comb. It’s quite possible that if they don’t require a second appraisal, they may request additional information or comps from the appraiser which could take more time for your transaction to close. Since this post is based on FHA transactions–we won’t even venture into HVCC here…that’s a whole other can of worms.
A few weeks ago, a home buyer shared some pricing scenarios a fellow mortgage originator was offering to them.
Scenario 1 looks like the mortgage originator wants the borrower to believe they’re only making a half point in loan fees and the borrower is paying an additional 0.625% to buy down the rate further. How the borrower should look at this is that if they select Scenario 1, they are paying 1.125% to have 4.50% for a rate. (This was provided to me in mid-March and does not reflect current pricing).
On most current Good Faith Estimates have the following lines designated for “points”
In all my years (9 as of April Fools) of mortgage originating, I’ve never seen an estimate with 0.5% origination and 0.625% discount points. It just seems silly to me. This really illustrates why a consumer should just add up the points paid regardless of if they are entered as discount or origination–if you’ve paid either, you’re paying points. In fact, as I’m sure I’ve mentioned before (but it’s worth repeating) you should add up all closing costs disclosed in Section 800 of your Good Faith Estimate to see what you are paying for interest rate. Some lenders may have additional fees, such as processing, underwriting, funding…etc. Unfortunately, APR is not a fool proof way to compare interest rates.
While I’m dishing out advice, selecting a Mortgage Professional by interest rates–when we are currently receiving a new rate sheet ever 5 hours is crazy. Odds are, you’re not comparing apples to apples and rate quotes don’t mean anything unless you’re locking in at that moment.
In this current market, make sure:
I have been focused on what the big banks are doing to the mortgage broker industry because as someone who works for a correspondent lender, it’s closer to home. I am convinced that the big players are attempting to wipe out the mortgage broker industry while smearing it with mortgage meltdown blame so they can keep their hands clean. (If anyone can provide proof of a bank admitting they created mortgage programs and guidelines that were instrumental in creating our current climate, I’d appreciate it). I believe some major banks see this period in history as a grand opportunity to grab as much mortgage market-share by stepping on the little guy. And it appears they may be doing it to their own mortgage originators who are employed at home loan centers.
Over the weekend, The Seattle Times covered a local story about how a group of employees from JP Morgan Chase’s home loan center in Bellevue “made some mistakes” when they “jumped ship” for a mortgage company. What struck me, besides what it’s reported the employees did, was their reason for leaving:
“What prompted the mass migration. According to written statements from the lending officers, last fall it got increasingly difficult to complete the deals they lined up after Chase moved it’s loan processing from Bellevue to Tempe, Ariz. And in January they were told their work would be shifted into the bank’s branches….”
JP Morgan Chase has a much larger local presence with the acquisition of WaMU and their network of bank branches. Will Bank of America do the same with Countrywide’s home loan center loan originators? I’m assuming that loan originators located inside a bank branch are not compensated the same. Banks could employ people with less experience and originators who do not have their own client base…they’re counting on consumers to just walk on in and apply for a mortgage….just trust “the bank”.
I know that if I worked for a mortgage bank loan center, I’d bone up on my Teller skills.