USDA Rural Development Grant & Home Repair Loan

USDA Rural Development has two programs that many people are not aware of.  One is the USDA Grant for home repairs and the other is a USDA Home Repair loan at 1% interest.  I'll cover the basic qualifying factors in this blog.

First understand that all USDA loans are focused toward rural development so the property must be located in a rural eligible area.  This is mandatory and there is no way around it.

The Grant program is in the amount of $7500 Maximum.  The amount of the grant you will receive is equal to the cost of the repairs on your home.  You can't just apply for the loan and do what ever you want with the funds.  The funds and repairs are suppervised by USDA staff.

You must also be 62 years old or older to qualify for the grant.  Your income must be in the very low percentile.  Very low income is defined as 50% or less of the median income for that specific county.  This is hard over, no waviers.

Your budget and repayment ability are looked at along with your credit history.  If your budget clearly shows that you have very little income left after paying your bills and expenses you will probably meet that requirement.  Your credit does not have to be flawless but should not show blatant disreguard.

The USDA Home Repair loan is different in many areas.  This loan is usually refered to as a 504 repair loan.

There is no age requirement but to qualify your income must still be "Very Low".  Your repayment ability must be evident.  By that I mean that after paying your bills and living expenses you must have enough residual income to pay back the loan.

The loan as I mentioned is fixed at 1% interest with a maximum term of 20 years.  Your credit history must show that you do pay your debts.  Medical collections are sometimes overlooked if you do not have repayment ability.

Both the loan and the grant usually work well for people on fixed income.  These are great programs and help a lot of people.  To apply for one you must contact your closest USDA Rural Development office.

If you are interested in the USDA Guaranteed program you can research the qualifications at USDA Rural Development Mortgage Guidelines

USDA Direct Mortgage Guidelines

Many people are aware of USDA Rural Development's Guaranteed mortgage program that offers 100% financing.  The Guaranteed loan focus is on buyers in the median income level which is derived from the income in a particular country.

On the other hand not many people are aware of the USDA Direct Loan program which is also 100% financing.  The Direct mortgage program focuses on buyers with low to very low income.

Low income is defined as 50 to 80% of the median income for that county.  Very low income is 50% or less of the median income.  You can see that the direct program makes housing available to a group of people that don't have a chance of getting a mortgage in the traditional market.  Even people on a fixed income can qualify for this program.

This program also lowers the bar on credit worthiness.  Direct loans allow for alternative credit sources if the buyer does not have credit.  The underwriters are also tolerant to some collections if there is justification.  I should tell you though that they do not overlook collections for cell phone companies or cable companies and similar stuff so make sure these are paid off.

The homes that USDA will finance must be in an eligible rural area.  That usually means areas with less than 10,000 population.  You can check the eligibility of a property address from the following website: http://www.rurdev.usda.gov/

To find out if you qualify for the USDA Direct loan you should contact your closest USDA office and they will send you a pre-qualification application.  It is short and easy to fill out.  If for some reason you do not qualify they will counsel you so that you will qualify in the future.  You can locate your office from the website I just gave you.  It is a good deal.  Check it out!

You can find out more about the Guaranteed loan program from the following website:  Rural Development mortgage guidelines

If you have any questions about the loans just leave a comment and we will respond to your inquirey.
Good Luck.

FHA Mortgage Lenders

FHA Mortgage?  Be Careful About Your Lender.

Author: Connie Sanders

Jane is from California and had been approved for an FHA loan on a single family residence. Her lender had told her that she needed two months reserves in the bank before closing or the loan would not close. She was confused by this last minute requirement and came to me for clarification.

Well, I was confused too! FHA does not have a requirement for reserves (unlike conventional loans). The only reserve requirements with FHA are if a buyer is purchasing a 3-4 family unit. If purchasing a 3-4 unit, the reserves required are three months.

The answer here was a no-brain-er and is actually available on the HUD website. There is however, a really big issue here. Can you see it? Bear with me, here is another example.

Another couple was approved for an FHA loan in March of 08 and the company they were working with said the couple had to pay their 2007 taxes before the lender would close the loan. Hello, 2007 taxes aren't due until April 2008. These nice people asked if there was a law that required them to pay something that was not due. Well, NO! There is not even an underwriting guideline that calls for it.

What is going on here? Do you see the big issue yet?

I have a web site where I answer Mortgage questions from home buyers, sellers, real estate agents, loan officers, and yes, even underwriters. These underwriters and loan officers are from some well know companies. This isn't about my web site, ... I'm not even going to give you the URL. I only bring it up because that is why I see a big picture that others can not. I receive questions every day from all over our country,... and other countries in the middle east.

I have several major issues with this information so far but I'm only going to cover two.

First, Why don't Loan Officers and Underwriters know basic FHA underwriting guidelines? Simple, they have no experience or training on FHA! FHA loans are and always have been a terrific option for people that didn't quite fit into conventional guidelines. Best of all the interest rate is considerably lower compared to a sub-prime loan and as I write this today FHA rates are equal to par on a Fannie Mae. It doesn't get any better than that, right?

Well, FHA loans are fairly complicated to put together and they used to have stringent appraisal and inspection requirements. So, if a borrower didn't fit into Fannie or Freddie it was easier and quicker to slap them into a sub-prime instead of FHA. Sub-prime was a slam dunk, ... and so what if the rates were higher on a sub-prime, few consumers understood their options anyway. (That mentality is why I built my site in 2002.)

Another reason companies didn't do FHA loans was because they had to be HUD approved which meant they had to have a minimum net worth and pass a costly Audit every year. So again, why bother when sub-prime was so easy and available.

Now, of course the sub-prime days are almost a thing of the past or at least not as "sub" as they use to be. The savior? ... FHA Loans of course, except that very few, including underwriters have any experience with them or understand the differences between FHA and Fannie. Thus, in the two examples above, underwriters and LOs are just making stuff up or worse case, running scared because of all the flack in the industry right now.

In defense of the underwriter (as in example two) I will say that they have the authority to require what ever they deem necessary to improve a portfolio. Many of the questions I have received from underwriters seem to reveal that it is usually a case of inexperience and over caution.

The mortgage industry professionals are struggling to catch up/learn FHA guidelines. If you are a consumer you must be very careful to find someone that has been HUD approved for at least two years. And Do Check, seriously. Some companies are doing FHA loans and they are not HUD approved. They are under the dis-illusionment that HUD will allow a non-HUD approved broker, to broker, to another HUD approved broker! Sounds a little flaky, no?

How in the world did we ever get in this mess? We can throw most of the blame to the politicians and presidential candidates that are hyping it up for their own agenda. It is not as bad as they say but they are speaking so loudly that the rest of the world is now listening. Did you read what is going on in the UK's market today? Good grief.

I don't believe in bailing out our large lending companies and here is why. Back in this article I mentioned getting questions from India and other countries in the middle east. Now I ask myself, why would a mortgage underwriter in India, who I can hardly understand due to "no speaking good English", be calling me on the telephone at 3:00am about a loan in Texas??

Go Figure!

(Update: Jan. 2012)  This article applies today but now we all know what really happened and why.  It is still going on.  Worse, the Government is still doing Sub-prime, subsidised loans on the tax payer's dollar. (USDA Rural Developments 502 Direct home loans)  These loans are sooo sup-prime that up until a few months ago food stamps were actually used as repayment income in the DTI calculation.

I received a phone call from a gentleman last week that is opening up a mortgage company and is looking for staff to run it.  The company wants to originate and close loans, ... and package them to sell to investors in the middle east.  ????
------


Connie Sanders receives questions from consumers and mortgage professionals every day. Find out more about FHA Guidelines at: http://www.fha-mortgageunderwriters.com

Article Source: http://www.articlealley.com/article_522361_19.html

Occupation: Certified Mortgage Specialist

Connie Sanders is a strong advocate for educating the consumer about mortgage loans before they apply for a loan. Connie put together a mortgage information web site at: Mortgage Underwriters and can be contacted there with any questions you may have.

http://www.mortgageunderwriters.com/

H.R.3548 Home Buyer Tax Credit Extended and Revised

The First Time Home buyer Tax Credit was Extended by the President in Novemver of 2009.  This is not breaking news by any means.  However, there is a lot of confusion by consumers and lenders.  I guess the confusion is because H.R. 3548 was also revised or change to include current home owners.

I have the facts listed below along with points of confusion and creative thoughts you may want to avoid.

• The bill extends the present $8,000 tax credit (up to 10% of purchase price) for first-time home buyers through April 30, 2010.  A first time home buyer is one that has not owned a home in the last 3 years.
• The bill has been revised to allow Current homeowners a $6,500 tax credit (up to 10% of purchase price) through April 30, provided they have lived in the home they are selling, or have sold, as principal residence for five consecutive years in the past eight years.
• The April 30th deadline is very confusing for some. If the potential home buyers have a binding contract on or before April 30th, they will have until July 1st to close the transaction.
• Income limits for eligible home buyers are expanded to $125,000 for single buyers and $225,000 for couples.
• The purchase price of the home cannot exceed $800,000. To help guard against fraud, buyers are required to attach documentation of purchase to their tax return.
• Home types include: single family home, condos, town homes, mobile homes, house boats and co-ops.
• The tax credit is not a deduction. The refund is paid to you in excess of taxes owed.
• There is no repayment required as long as you live in your new home for a minimum of 3 years.
• The HUD-1 or settlement statement/statements must be submitted with your tax return. (form 5405)
• This is important, ... you must by 18 years or older and NOT be claimed as a dependent by another tax payer.
• Don't get bitten by this provision. Your purchase CANNOT BE from a fimily member such as parents, children, siblings, or spouse.

Sounds simple doesn't it?  Maybe not so much..  I caution you not to wait till the last minute.  Most lenders do take two to three months to close a loan right now.

Good Luck.

I don't have a clue

This is scary.  We have several sites on the net and we get a lot of questions from borrowers and from underwriters.  What is going on in the mortgage industry?

The underwriters tell me that they are over cautious because of the Feds.  That is the scary part.  I mean that it is over the top!  I'm not going to go there because I would never stop.  I'm sure you have followed it in the news.  If you haven't send me an email and I will send you some news links and Government mandates.

We get questions about appraisals and resale dates and credit and income.  These questions would blow you away because they are all with in the guidelines but their loans are being turned down.

Even FHA is setting a minimum credit score.  They did not have one in the past.  What is so out of line about this new requirement is that it is so brain dead or out of touch with the real world.

Their new guideline is that applicants with a credit score below 580and below will be required to have a 10% down payment.  What is so out of touch is that no lender will do an FHA loan if the score is lower than 620.  It's like DUH?

I am very concerned about what is happening and so are the lenders and underwriters.  I'll be getting some insider info in the future and will share it here.  By insider I don't mean government stuff.  I hear all that is behind closed doors anyway.

Future FHA Changes

There are so many changes going on in the mortgage industry that it is no wonder we all seem a little confused, including underwriters.

FHA just recently relaxed the limits on origination fees and waived the 90 day property flipping rule for a period of one year. You can view the new property flipping guidelines here. Updates

What concerns me the most are the changes David Stevens, FHA Commissioner, is thinking about for the future.

• Raising the minimum down payment,
• establishing a minimum credit score,
• increasing the cost of mortgage insurance, and
• decreasing the amount the seller can kick in.

Read this article put out by the Wall Street Journal.
FHA Future Changes

I have some very real concerns about these changes. The average American, even with a job and good credit, doesn't have that kind of money set aside for a down payment and closing costs.

That only leaves them with two options: a VA mortgage, or a USDA Rural Development mortgage.

A VA Loan has always been a great 100% LTV loan for our veterans. Even though it does not require a down payment, the other guidelines are pretty strict. I'm sure the foreclosure rate is very low. I hope they don't start changing this program because our veterans have earned this exception.

The USDA Rural Development loans are also 100% LTV. They have a Guarantee program that is similar to a VA "Guaranteed" loan and they have a Direct Mortgage program with payments that can be subsidized by the Government. Both of these great programs are available but the property must be located in a rural area. There is more information here: Rural Development Guidelines

So, soon the average American will only have two options, unless they are a Veteran, and those are: buy a home in a rural area, or Rent!

Construction Loans

We get questions about Construction Loans all the time. Unfortunately many of those questions are after they are in a bad situation.

This will be a short post but I want you to think about this information BEFORE you start. These are the major issues that you need to consider.

Construction loans are lender specific. Your best bet on this type of loan
is to work with a bank local to the property.

From our experience:

Most construction lenders will pay off the land loan at the initial closing.

Most lenders will not use equity in the land as down payment unless you have
owned or buying for at least one year.

Lenders do not like to make construction loans if you have already started
construction. This is totally real!

Good Luck

Authorized User Tradelines

We get questions all the time about how lenders view Authorized User Tradelines when they determine repayment ability or Debt to Income. I hope this helps.

DU (desktop underwriter) takes credit report tradelines designated as authorized user tradelines into consideration as part of the DU credit risk assessment. However the lender must review credit report tradelines in which the applicant has been designated as an authorized user in order to ensure the tradelines are an accurate reflection of the borrower's credit history.

If the lender believes the authorized user tradelines are not an accurate reflection of the borrower's credit history, the lender should evaluate the borrower's credit history without the benefit of these tradelines and use prudent underwriting judgment when making its final underwriting decision.

In order to assist the lender in its review of authorized user tradelines, DU issues a message providing the name of the creditor and account number for each authorized user tradeline identified.

When ensuring tradelines are an accurate reflection of the borrower's credit history, as a general guide, if the borrower has several authorized user accounts but only has a few accounts of his/her own, the lender should establish:

• the relationship of the borrower to the owner of the account,
• if the borrower uses the account, and
• if the borrower makes the payments on the account.

If the authorized user tradeline belongs to another borrower on the mortgage loan, no additional investigation is needed. On the other hand, if the borrower has several tradelines in good standing and only a minor number of authorized user accounts, the lender could make the determination that:

• the authorized user accounts had minimal, if any, impact on the borrower's overall credit profile; and
• the information reported on the credit report is an accurate reflection of the borrower's credit history.

The lender is not required to review an authorized user tradelines that belongs to the borrower's spouse when the spouse is not on the mortgage transaction.

FHA No Longer Limits Origination Fee

Good news for mortgage originators and lenders. FHA no longer limits the origination fee to 1%.

This is also good news for potential buyers looking for a FHA loan. Lenders and brokers are not non-profit organization. If they can't make at least a small profit on a mortgage they won't offer that option to borrowers. That is a no-brainer to anyone that understands the cost of origination and lending.

HUD's mortgagee letter 2009-53 covers the origination fee and the new Real Estate Settlement Procedures Act (RESPA).

The new RESPA requirements spell out how all the fees must me noted on the GFE and the settlement statement.

The new laws also require that a lender submit all GFE and Settlement statements in the case binder submitted for insurance endorsement.

FHA Expects all lenders and brokers will continue to charge reasonable fees. The new requirements will make these fees available for review.

I think this is a good thing for all legit lenders and brokers. It will remove all doubt or false accusations that have been the butt of political finger pointers. Most of which do not have a clue about the mortgage industry!

What is Going on with Short Sales?

I get questions from consumers every week about issues with short sales. I ran across the following blog post and was really set back by it. I had no idea!

I thought it was important enough to ask the owner of the blog for his permission to reprint it here. He gave it, so enjoy.


A Short Sale Story You Wont Believe!
Does our Government really want to clean up this mess?

This just in

Basically, IndyMac Bank (now OneWest Bank), is holding clients hostage, demanding a promissory notes, or they will proceed to foreclosure. For the life of me, I couldn't figure out why they were doing this. What advantage could there possibly be for them to proceed to foreclosure?

Yesterday, I figured it out. You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009. Guess who the investors are behind OneWest? George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire).

Now, listen to the deal they got from the FDIC..

Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts). They purchased all current HELOCS at 58% of Par Value!!!

Next, in order to "sweeten the pot", the FDIC stepped in and guaranteed the following: For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss. The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan. Let's use my clients situation as an example:

If the Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200. OneWest pays $334,600 for the loan. We have an all cash offer of $241,000, net to OneWest. So, let's do the math, shall we?

The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer. In this case, $485,200-$241,000, or $244,200. Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called "net loss". So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).

Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360. Remember, OneWest paid $334,600 for the loan. So, OneWest puts $101,760 in their pocket, thanks to the FDIC. Folks, that is over $100k of our hard-earned tax dollars!

So, you ask.Why does this program hurt short sales? Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure? And we wonder why nobody can get a Loan Modification? Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? And, to add injury to insult, they have held this loan for 6 months! Not a bad ROI, huh?

What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE! Imagine if they could make $100k, then get a deficiency judgement! Talk about making some big bucks!

Can you say "GREED"?

The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc.

This entire agreement between the FDIC and OneWest can be found on the FDIC website. It's all there, for the world to see! They have it all layed out. All of the formulas, worksheets, etc.

Now, it's up to us to bring it to the attention of our elected officials and the media. Enough is Enough!

Wait, it gets better.The FDIC just announced that it needs to start borrowing money from the U.S. Treasury in order to replenish it's deposit insurance fund (the same fund being used to pay all of these banks in the Loss Share Agreements). Go Figure! -

Reprinted story from Frank Bernardo-October 21, 2009
Joseph M. Moore
President
More2Lend Financial
Phone: 800-310-7577
Fax: 800-647-8777
E-Mail: fha@more2lend.com
Website: www.more2lend.com


To view the story on his blog follow this link: Short Sale Story

HR3548 Home Buyer Tax Credit

This is Great news for the housing market. HR3548, the extension of the first time home buyer's tax credit was passed in both the House and the Senate. The Senate passed it 98 to 0 and the House passed it 403 to 12.

The income limits are $125,000 for single applicants and $225,000 for joint applicants. The maximum purchase price is $800,000.

My advice to you is this. If you are contemplating about taking advantage of this tax credit, ... Don't sit on the fence. Do it Now, or at least start by the first of the year. There is a time limit.

You must have a contract by 4/30/10 and your loan must close by 7/1/10. This is not much time. It take two to three Months to close a loan in today's market.

There are only three options for a "no down payment" or 100% LTV loan: FHA, VA, and USDA Rural Development Guaranteed or Direct Mortgage. These organizations are overwhelmed by the shear number of applications because they are the only 100% loans on the market right now.

These organizations are way understaffed and there is no option to hire. This is the Government, and there is no budget to hire more people.

Buyers and Sellers should be aware of this and make sure their contract reflects two to three months to close the loan. This is not a joke.

So, take advantage of HR3548 but start now, don't wait.

Good Luck.

USDA Rural Development Guaranteed Program

The USDA Guaranteed loan program has clarified a guideline that has long been left to individual interpretation. RD Instruction 1980-D restricts applicants from owning more than one or ... multiple homes.

This guideline has been an issue for a long time. Most of the guidelines for this loan are the same as or derived from FHA Guidelines. So why has there always been a disconnect? As with any company, the regulations are thick and always changing, and employees are not trained. So, one office will allow ownership of another home and a different office will not.

RD AN No. 4454 has just addressed this. The Answer is:

Loan applicants are limited to retaining ownership in one dwelling other than the one associated with the loan request. To retain ownership of the dwelling and meet this eligibility requirement, the retained dwelling must be outside of the applicants local commuting area OR not be structurally sound, functionally adequate.

Manufactured homes that are not anchored on a permanent foundation are not considered structually sound and functionally adequate.

I hope this helps to clarify and or define the issue. You probably know more now than the underwriter. Refer them to the AN number above.

Good Luck.

First Time Home Buyer Tax Credit

This 2009 home buyer tax credit is really a great thing but there is a time limit so you should act on it as soon as possible. Many people don't understand the requirements so I have summarized them below. The first time homebuyer tax credit is $8,000 so you should sit up and pay attention.

Time Frame:
For your first-time home buyer purchase to qualify for the $8,000 Tax Credit you must purchase and close the loan on your new home between January 1st 2009 and December 1st 2009.

Home Owner Eligibility:
All United States Citizens may participate if they pay federal taxes, and are first time home buyers. A first time homebuyer is an individual that has not owned a home in three years.

Types of Homes:
The main factor is that your purchased home is your primary residence. It can be a condo or town house or single family, new or used.

If you sell your new home within three years you will have to repay the first time home buyer tax credit. That is the only repayment provision.

This tax credit is cash in hand. By that I mean that it is refundable so to speak. If you owe $2,000 in taxes you pay them nothing and you will receive $6,000 back from the government. Or, ... if the government owes you $2000 you will receive $10,000. (2,000 + 8,000)

There are income limits and the details can get a little confusing. To put it simply, if you are single, your adjusted income cannot exceed $75,000. $75,000 - 95,000 you can still get a partial credit.

If you are married, filing jointly the max adjusted income is $150,000. $150,000 - $170,000 you can get a partial credit.

As a first time home buyer you can take your tax credit on your 2008 0r 2009 tax filing.

It's all good so go out and buy that new home!

For Sale By Owner Program

An active for sale by owner program can really help you find good mortgage leads and it is a real value to the home seller. Actually, if you know your stuff it can really get the homeowner off to a great start and amplify his chances of selling his home by himself. You can't get more Win - Win than that.

Most programs consist of a fsbo manual with good information about advertising, appraisals, preparing the home, home warranty, and most importantly a guest register or sign in log. The manual will usually also contain a blank sales contract and real estate disclosures required for that state.

Your most important investment is the time you spend with the home seller going through the manual and teaching them about the contract and disclosures.

During that time you should also explain about the different loan types and the ramifications to the seller. You know, like VA paper work and inspections or tricky FHA appraisal stuff. There is also a good side to VA and FHA an that is that the seller can help the buyer get into the home with seller concessions, paying closing costs and in helping with the down payment.

You can teach them that is it better to pay closing costs and/or the down payment than to lower the selling price. This approach will cost them less and will actually find more qualified buyers. If you don't understand this concept and the numbers you need to view it at for sale by owner advantage.

It is very important to put these options in the advertising. It will help to bring out the serious qualified buyers. These are the buyers that will sign the guest register, ... and you will follow up on to pre-qualify for the home seller.

You know, I say this all the time and maybe you have heard it before but it is so absolutely true that I have to keep saying it. Fifty buyers may view this home, ... only one will buy it. The other 49 will still need financing. If you can't turn some of these potential home buyers into future clients, you are in the wrong line of work. I really mean this.

I put together a program for a company I used to work for. This program was enormously successful.

I have that manual in pdf format that you may download free. Take a look at it, give it some though, and think about how you would adjust it to fit your level of commitment.

The pdf format manual is free. If you like it and want the MS Word files so you can quickly modify it for your letter head or what ever, we do charge a small fee for those files. But hey, this pdf file will give you lots of ideas and you can develop your own program. FSBO Programs really work if you commit to working them.

Download the pdf for sale by owner manual and give it some thought.

I'll be happy to coach you on your program or answer any questions. Good Luck!

Converting Existing Homes To Rentals

All of the new mortgage programs and guidelines have got everyone feeling uneasy. Underwriters are leaning conservative and over document. Consumers are just baffled at some of the new documentation requirements. Here is a question I just received from a consumer that illustrates just that.

My question has to do with the Underwriter of a Home mortgage loan. This will be our second home. The mortgage is a couple of days from closing and the underwriter is now asking for a list of items before final approval. The items requested are not items at all, they're questions such as: Must provide an acceptable motivation letter stating why we would move from a higher price house to a lower price home? and must explain what we are going to do with the first home? (these questions really seem out of line to me for the simple fact that we were already pre-approved and frankly what bearing does it have on their decision). The last statement from this item list is the one that made me feel like i am being walked on and lead by the noise: Must be reasonable and the underwriter must be satisfied that the move makes sense for these borrowers. Can these people really play god like this? Any advice/input would be great.

I have a lot of empathy for these people and I'm sure if I were in their place I would feel that this information is none of the underwriters business too.

The guidelines have tightened up and underwriters are overwhelmed with all the new documentation requirements. These people are having to deal with the Mortgagee Letter that came out in September of 2008. It's kind of scary. You can read the letter at this link: http://va-guidelines.blogspot.com/2008/10/fha-debt-to-income-rental-income.html

see ya.

Financial Crisis - Mortgage Failure

We have been in the mortgage and financial industry for a long time. We are asked, everywhere we go, "What really caused this financial crisis?".

We stumbled across this video the other day and thought we should share it with you because it covers the cause very well. Our intent is not to offend, but to help you understand the "how we got here" question.

This video moves very fast but it covers the facts on how we got in this financial mess. You may not like what you will see here, ... but it is all true. You can google it.

So ... watch it twice. Send it to your friends.

There are so many lies out there how can anyone know what is real.

This is real.

Jerry and I are in the mortgage business and we have watched it unfold.






If for some reason this video does not play here, you can watch it at: http://www.youtube.com/watch?v=1RZVw3no2A4


Wishing you the best.

Connie

Non-Purchasing Spouse - FHA

The mortgage guidelines on a FHA loan regarding a non-purchasing spouse are ambiguous and difficult to understand. I get questions on this topic month after month.

There are many reasons why a spouse would/should be left off the mortgage application. One is bad credit. Another reason would be income. The primary borrower is determined by the largest income. If that person has poor credit the only way around it is to leave them off the application.

However, this could be a catch 22 if the other spouse does not have enough income to pay all the debt. Is the non-purchasing spouse's credit examined or used in the DTI calculation? The answer is no and yes.


Does the non-purchasing spouse go on the title? The answer is yes, no, maybe. Confusing??

The answers lie around the state the property is in and if it is a community property state. That helps a little but it is still confusing. Remember, confusing or not, right or wrong, you always follow what the underwriter or closing instructions determine.

You can take a look at the actual guideline wording at FHA Guidelines.

Hope for Homeowners - H4H - Good? - Bad? - Ugly!

Hope for homeowners! I can't believe they picked that title because it is so deceiving! In fact, I would say it is just the opposite.

The homeowner who goes for this is totally screwed because he gives up all future appreciation. (he may as well rent) I guess what he gets out of it is, ... is, ... well, I guess he doesn't have to move. I would like to say that there is no foreclosure on his credit report but my gut says that this product will show on his report and he will be dinged for it. (Any bets here?)

Let me clarify future appreciation. This program creates artificial equity for the new mortgage lender at the expense of the old mortgage lender which must take a 10% bigger loss and accept the new loan payoff as paid in full.

This new loan essentially "mortgages" the new/created 10% equity and any (?) future equity to the government and to any subordinate lien holder that agreed to release their lien. If he stays in the home for the rest of his life, or at least 7 yrs he will get the benefit of appreciation after that point. Most people move every 4 to 7 years. Do the math.

OK, but look at the math this way. If the homeowner had a 2nd mortgage for $30,000 and gave up their lien for a promise of future equity from the new loan, how long would it take for the home to appreciate $30,000?

Oh, and this lender really only gets a "portion of the equity". What does that mean?? I haven't found the fine details yet. Understandably hidden if they even exist at this stage!

So, ... the original lender takes the major hit here because he not only takes the loss from the equity in the declining market, he also takes an additional 10% loss because he has to give it to the new lender. Remember, the new loan is only 90% LTV. And, he is suppose to smile about this.

The home owner is screwed but doesn't have to move. The old lender gets the royal work over but maybe that is justice although I think the blame is placed in the wrong place here as this lender was only following government direction!

The BIG looser is the American people because all our brilliant elected officials have done is spread the loss into the future to cover their ass and given the government "owner rights" to our equity into the future. The government is now in our nickers!!!

WE LET THIS HAPPEN!! Wow, I am really up set about this stuff.

I have added to our site the underwriting guidelines to the Hope for homeowners program. Please go and review this information and then please comment here and change my mind about the smoke and mirrors the politician are using to destroy our Independence and freedom. Please, tell me that I am wrong.

We have also put up the guidelines for the FHA Secure program. I wasn't a big fan but when I compare it to the H4H it is a great program. Few will qualify for it but at least it doesn't sell our children down the road! Review it here: FHA Secure - Rescue Program

Please come back and comment.

Connie

Emergency Economic Stabilization Act of 2008 - HR 1424

I don't know how you feel about all this economic bail out stuff but it really gets me angry. I'm not going to share my opinion because it doesn't matter. However, I think everyone should read the bill and develop their own opinion based on facts, not media hype.

I did some research and have links below of the pdf files so you can read it for yourself, or download it and read it later. I would like to say that in my opinion all bills going up for vote should be available to the public BEFORE they vote. Unfortunately, that is not the case. Maybe we can change that.

IF you want to just download the files to read later you only have to right click with your mouse and select "save target as", then tell it where you want it saved on your computer. I usually just put the stuff on my desktop.

This link is to the pdf file on HR 3997, the Emergency Economic Stabilization Act of 2008 that was voted on in the house of representative on the 28th. This is the original version. HR 3997

This is HR 1424 which is the revised version of the bill (HR 3997) and was actually passed. HR 1424

This link is a one page summary of the Act. One Page Summary

This link is for the section by section summary. It is much better than the one page summary. section by section summary


This stuff is worth the read. Post your thoughts.

Economic crisis - we will survive

What actually created this economic crisis? I guess it depends on who you ask. I will say though that I'm really tired of all the spin everyone is putting on it.

The facts are in our history and you can trace it back or chart it if you would like. Does it matter which political party contributed to this disaster? I don't think it really matters as far as the past is concerned but you need to understand the party platforms so we get the right people in office to fix it.

Here is a short but very fast moving account of how we got here. It moves pretty fast, I actually had to watch it twice.

Before you watch it I want you to understand that I am not pushing politics here. It's a good video because of the facts. I am an independent and don't support either party but that is a different subject.



Incase the video has been taken down, you can watch it here on YouTube.

Or, you should be able to view it here on this blog.

My personal opinion is that we should not have a Bail Out. Let the pieces fall and it will clean out all the bad guys.

I think a lot of "how bad it will be" is hype too. Do I have any facts to base that on? Just my gut because they are not giving us any real information so we can make an intelligent decision. You know about the mushrooms, right?