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| Mortgage Musings... |
| In the year 2009 |
| What will 2009 bring? On January 1st, loan amounts for FNMA/FHLMC will go to $625,500, down from $729,750, VA goes to 100% to $625,500 and hopefully the year brings more Veterans home. FHA will go to $625,500 for high cost areas with standard pricing and guidelines, but will require a 3.5% cash investment, up from 3% currently. Nehemiah and Ameridream have joined with the National Association of Builders to champion the resurrection of seller funded dpas next year-we’ll see. The jumbo conforming product and jumbo FHA, pricing and guidelines will all sunset on December 31st. Expect the max LTV on conventional to be 90% in California, due to mortgage insurance restrictions. There will be more foreclosures, but there will also be many more modifications. The foreclosure malaise will move deeper into the middle class with the resets of the 5/1s and pay options products pushing defaults further into more affluent areas. Yes, the tide is still going out and not everyone is wearing a swimsuit (to quote Warren Buffet). But the timing for this next waive will come after and during more bank failures. We have already seen the FDIC mandate modifications on many of the Indymac mortgages. I think we will see much more of this in 2009. Alas, not all will be good candidates for modifications and many more will simply not try to negotiate one, but rather walk away. So, we will have more REO properties coming up next year, but I predict they will be larger homes. Financing maxed out at $625,500 means that many properties over this amount will have a lot of downward pressure on their values. And, the only high LTV game in town that does not require a veteran or has income limits will be the FHA loan. Focus now on your HUD approval unless you are exiting the business. Let us help you with sponsorship. Inquire with us about our on-site training and on–site weekly LO support. The FHA loan has a challenging, but not insurmountable learning curve. Helping originators with this process is our specialty. Position yourself as the government loan expert with your realtors now. Historically, when government loans are viable in your marketplace, and trust me they are now viable, the government loan experts get the realtor business. It is that simple. We have some very specific ideas to help you with this. Inquire with me today! Planning on marketing the Hope for Homeownership (HFH) FHA refinance program coming this October? You may want to redirect your energy toward the inevitable purchase business that is heading our way. Remember, this refi product has a 3.0 upfront MIP and a 1.5 annual MIP on top of GNMA II pricing and a 50% equity share with Uncle Sam. Plus, many lenders will steer clear of this product. The perception is that this product will attract the sub-prime borrower in trouble and then with limited opportunity for that same borrower to build equity and thus have a stake in the property, this product will be very risky.……Terri |
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Date: September 3, 2008
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| Boy, MI Confused... |
| And the Future of the MI Biz |
| What’s confusing? As we are down to essentially three programs, Conforming, FHA and VA, you would think finding a product would be easy. But not only do you have to sift through agency, HUD and VA guidelines, you have to know investor overlays AND MI restrictions. As for the MI restrictions, attached this morning is a comparison put out by GE that tracks all the main player’s guidelines. Pay close attention to page 3, which addresses declining markets. You probably want to also check the MI company’s website as well. Tracking MI restrictions and guides has become so crucial here in California that some program search services, like SearchMyLoan.com are now offering MI restriction filters at the request of their users. And the Future of the MI Biz: The MI companies reported huge losses for second quarter and are under pressure to build capital. Triad reported a loss of $198 million and has stopped issuing. PMI Group lost $246 million. AIG’s subsidiary United Guaranty reported operating losses of $440 million. MGIC posted a loss of $98 million and GE reported $59 million. And some would say we are only half way through this malaise from peak to trough. The 2004 & 2005 5/1 IOs piggybacked with HELOCs have yet to reset. The MI companies were issuing pool insurance on these seconds. Consider too the billions in pay option products that were funded in California up until 2007. MIT, WAMU, Paul Fi, Countrywide, ABConduit and Indymac were funding at full throttle right up to the end. Many of these loans were 90% “one-loans” also insured. Most concerning there was the popular combo of pay option products piggybacked with a HELOC. Unfortunately, as these loans reset, we will probably see more foreclosures reaching deeper into the middle class and further into more affluent areas. As the other shoe drops over the next 12-24 months, it is not hard to imagine the possibility that MI companies may not want to insure in California, or parts of California at all until things really stabilize. Look at all the extra restrictions the MI companies put on Florida. You should know too, that the MI companies are working hard to mitigate their own losses by rescinding on policies whenever possible, citing fraud, etc. As this trend continues the GSEs may start to give less weight to private mortgage insurance in general. The ramifications of this are unclear but we can surmise it could mean more program restrictions. The other thing we may see over the next year or two is the emergence of all new MI players. Two reasons: existing companies may find it difficult to write new business because their current book of business is depleting their capital base and more importantly those that could provide funding to the MI companies may find it more compelling to fund new insurers that don’t have legacy portfolios to contend with. Of course, this is just an opinion, but watching this unfold it seems to me that having HUD approval is your best defense and probably the best indicator of which mortgage brokers will survive the next few challenging years. If conventional gets capped at 80% (and the GSE’s don’t consider 80% to be a conservative exposure in this market), the FHA loan will be the only high LTV game in town. Terri |
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Date: August 18, 2008
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| Neighborhood Watch |
| Not just a sign posted on Suburban Streets |
| As we trudge along the path toward increasingly more government lending over the next 5 to 10 years (my personal estimation, we’ll see 70% by next Summer), we try to learn a little more each day. And if you have been reading my emails, you are learning a little more each day. Today’s tidbit: HUD is tracking all DE Direct Lenders, like Franklin American Mortgage AND all Loan Correspondents or mini-eagles, as to the performance and quality of our loans. Neighborhood Watch is more than a sign posted at the end of some residential streets, it is a database that maintains delinquency data on all FHA loans funded. All originators of FHA loans are publicly branded with a Compare Ratio that FHA, investors and direct lenders look at to get a sense of the quality of your originations. The Compare Ratio basically represents how the delinquencies on your originations compare to the delinquencies on all FHA originations in the same area and time frame. So, if your percentage is less than 100%, you are below the average and if you are over 100% you are above it. If your compare ratio is over 200%, that is considered a red flag and you could see some action taken by FHA and certainly by your lenders or investors. Go ahead and look yourself up. If you recently got your HUD approval, there may not be enough data to generate a compare ratio, but rest assured, there will be. Why do you care? As I said, lenders and investors are looking at this. Also, there are lenders that advertise “credit scores below 580 and all manual underwriting”. Be advised that the performance of those loans will reflect in your own compare ratio. HUD’s definition of Compare Ratio: The percentage of originations which are currently in default or were claim terminated divided by the percent of originations which are currently in default or were claim terminated for the selected geographic area. Compare ratio is the value that reveals the largest discrepancies between the subject's default and claim percentage and the default and claim percentage to which it is being compared. You can always count on HUD to clarify things… Access Neighborhood Watch at https://entp.hud.gov/sfnw/public/ and go to Early Warnings, then to Single Lender or All Lenders depending on what data you want. You will want to select Brokers/Sponsors then the Geographic area you want to run and the timeframe you want. To look at wholesale lenders performance, select Direct Endorsement Lenders then sort by Sponsored Compare Ratio. Of course, I am available to answer your questions in this regard. Are you placing an FHA/VA or Conventional loan today? Who loves you baby? Terri |
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Date: August 12, 2008
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| I'm back from Intensive 3 Day HUD Training |
| and Housing Bill Update |
| I am back from an intensive 3 day training put on by HUD in Sacramento. The presenters were all high level staff of our Santa Ana HOC center. Spending three days with them really humanized HUD for us and the depth of information was very lluminating. I learned I need to bring all of our underwriters flowers this morning! The HUD training road show heads to Portland, Oregon next. Join HUD Housing’s Email List at HUD.gov, so you will know when they return to California. Then sign up fast. They sell out seats within hours of the email announcements. NEWSFLASH: We will be underwriting VA loans in our California Operations office starting this Monday, July 28th! Great news, as the VA loan limit is going to $625,000 and our veterans will be returning soon. Let’s put them in homes! (100% financing with no monthly MI) WHAT'S GOING ON WITH THE HOUSING BILL? As I am sure you heard, the House passed the bill on Wednesday and the White House now says they won’t veto. Best guess on timing is Senate will pass it on Saturday and a signing ceremony at the White House could occur early next week. MAIN ITEMS: •3.5% minimum cash investment for FHA loans (gifts allowed from family members, unions, state and local bond programs,etc). •Seller-funded DPA to end, credit approval required by 9/30/08 •12 month moratorium on FHA risk-based premiums effective 10/1 •Streamlined approval process for FHA condos •No change to FHA approval requirements (no surety bond in lieu of audited financials) •Nationwide licensing system for loan originators •FHA floor at $271,050; ceiling for FHA/Fannie/Freddie at $625,000 •VA should have equivalent guaranty to raise limit to $625,000 |
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Date: July 25, 2008
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| New FHA Risk Based Premiums start Monday! |
| Triggered by Case #s ordered starting July 14th |
| If you haven't already done so, I recommend you pull a copy of HUD's Mortgagee Letter 2008-16 and familiarize yourself with the new premiums. Higher scored borrowers will actually pay less (1.25 vs. 1.5) for upfront MI premiums. But in many cases, for lower scored borrowers this means a higher upfront MI premium and possible higher annual premiums as well. You can still order your case numbers before this Monday to lock in a lower premium! Now, as I have mentioned previously, the Housing Bill, if enacted soon, could force a moratorium on the new premiums, so one strategy you might consider, if you didn't request your case number before Monday, and your client faces a higher premium, is to wait as long as possible to order your case number. The Housing Bill, which passed the Senate today and is gaining momentum, in light of FNMA & FHLMC news this week, could go through within the next couple of weeks. If your client is getting a lower upfront premium, tyou would conversely wait until Monday to order your case number and order it sooner than later! Terri |
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Date: July 11, 2008
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