Relaxed Mortgage Regs Could Free Up Credit

Banking regulators voted Tuesday to relax mortgage rules meant to prevent risky lending practices like those that helped spur the economic crisis while also expanding access to credit for homebuyers.

The Federal Deposit Insurance Corp. (FDIC) became the first of a half-dozen agencies to approve a final qualified residential mortgage (QRM) rule required by the 2010 Wall Street reform law.

The long-awaited regulations generally require lenders to keep at least 5 percent of the risk associated with loans on their books, thereby keeping their “skin in the game” in the event of default.

“The finalization of the rule should go a long way toward providing clarity to the markets and facilitating access to credit on sustainable terms,” FDIC Chairman Martin Gruenberg said.

The Federal Reserve and other regulators are expected to wrap up their work Wednesday on the rule, which stands as a victory for industry groups that balked at more stringent requirements floated in the wake of the economic crisis.

The final regulation, for instance, does not include steep down payment standards that were a part the initial draft and would have required borrowers to put up as much as 20 percent of the price of their home to qualify.

That provision, along with restrictive debt-to-income ratio and credit history requirements, sparked a torrent of comments from industry groups.

Ultimately, the final rule was drafted to hew closely to the related Consumer Financial Protection Bureau’s (CFPB) qualified mortgage (QM) regulations enacted in January to ensure borrowers have the ability repay their home loans.

Business groups heralded the regulations as providing a uniform set of standards that would help reduce regulatory burden by lowering compliance costs and, consequently, the cost of credit to consumers.

read more —> http://thehill.com/regulation/221383-relaxed-mortgage-regs-could-free-up-credit-for-homebuyers

How To Get a Mortgage Right Now, Even With Bad Credit

HUD, FHA programs abound for those hit by the recession

In his interview with HousingWire, Mel Watt, the director of Federal Housing Finance Agency urges the opening of the mortgage credit box to less-than-optimal borrowers.

“We are getting lenders to reduce some of the credit overlays,” he said in the exclusive interview.

Furthermore, FICO scores will ignore debts that have been paid off or settled, and a lesser weight will be assigned to medical bill collections, which account for about half of all unpaid collections on consumers’ credit reports.

Nonetheless, the average FICOs have been going down steadily since 2006 and it’s not hard to see why, what with the housing crisis, the financial meltdown and the general recession and record unemployment and underemployment.

So what can those with a FICO that is under 620 do to get a mortgage?

1. Prepare to pay more

People with poor credit can still get a mortgage, but they will pay far more than even those with credit scores on the margin.

Guidelines from the U.S. Department of Housing and Urban Development and the GSEs, Fannie Mae and Freddie Mac, advise waiting at least two years after a short sale, so long as credit after the short sale is good.

Sellers should be advised to do their homework on the mortgage brokers they are working with – shady and dodgy operators are like bottom feeders, looking to prey on those who are more desperate and who aren’t financially savvy, which is how they see people with poor credit.

2. Refinance ASAP

A bad credit mortgage may seem like the borrower is signing away their life on a bad deal, but so long as the borrower maintains their credit after the mortgage is signed, they can be eligible to refinance for a much better deal within two years, and their credit will have improved.

In short, a bad credit mortgage is a short-term solution that gets them in a home. It’s important to bear in mind that bad credit needn’t follow the borrower longer than necessary.

3. Ask about options

The 30-year mortgage is a popular choice, but maybe not the right one if the borrower’s credit is weak. Adjustable rate mortgages are also a possibility, depending on the circumstance, during which time the borrower can work on repairing and maintaining their credit while paying at a lower interest rate than are offered on fixed-rate mortgages.

Many people who had their credit torn up in the recession were not the typical bill skippers. They were hard-working, responsible people whose world was upended through layoffs, downsizing, the loss of contract work, and a dozen other legitimate reasons.

4. Get a co-signer

Many have some other assets, or have family members who are responsible. These people may be willing to co-sign. Federal Housing Administration rules allow for a co-signer on loans.

Above all, check with HUD, FHA, the FHFA, Fannie Mae and Freddie Mac for information on pathways to homeownership for those who have damaged credit.

It is possible to get a mortgage with bad credit today. Possible, but still challenging. 

 

courtesy of:  http://www.housingwire.com/

Mortgage Lenders Begin Easing Rules for Home Buyers

As a sign of mortgage lenders’ rising confidence in the housing market, restrictive lending standards are beginning to ease, and the credit freeze is starting to thaw. Lenders have started to accept lower credit scores and to reduce down-payment requirements.

Making sense of the story

• Lenders recognize that refinancing old mortgages will no longer be a huge profit center for banks, so competing for borrowers will be needed for business and future profits. As a result, lenders will have to open up to borrowers who may not have perfect credit or large down payments.

• For example, the lender TD Bank began accepting down payments as low as 3 percent through an initiative called “Right Step” for first-time buyers. A year ago, the program required at least a 5 percent down payment.

• Mortgage originations are expected to reach $1.1 trillion this year, which is down from $1.8 trillion last year and $2 trillion in 2012 due to less refinancing.

• While private lenders have shied away from low-down-payment mortgages in the past few years, in the past year, more than one in six loans made outside of the FHA included down payments of less than 10 percent.

• Credit scores for borrowers seeking conventional mortgages also are easing, as scores on purchase mortgages stood at 755 in March, down from 761 a year earlier.

• Smaller lenders are trying to appeal to first-time buyers while many larger lenders are gradually reducing down payments for jumbo loans in order to attract wealthy customers.

courtesy of:  http://online.wsj.com/

Fannie Mae and Freddie Mac Serious Delinquencies Continue to Drop

Washington, DC – Fannie Mae and Freddie Mac have completed more than 3.1 million foreclosure prevention actions since the start of conservatorship in 2008. These actions have helped more than 2.5 million borrowers stay in their homes, including nearly 1.6 million who received permanent loan modifications. During 2013, Fannie Mae and Freddie Mac completed nearly 448,000 foreclosure prevention actions, 99,700 of these in the fourth quarter. The majority of these allowed troubled borrowers to save their homes. The results are detailed in the Federal Housing Finance Agency’s fourth quarter 2013 Foreclosure Prevention Report, also known as the Federal Property Manager’s Report.

The quarterly report has information on delinquencies in each state and an updated, interactive Borrower Assistance Map for Fannie Mae and Freddie Mac mortgages, with information on delinquencies, foreclosure prevention activities and Real Estate Owned (REO) properties.

Also noted in the report:

• Serious delinquencies dropped 7 percent during the quarter t0 the lowest level since the first quarter of 2009, and the seriously delinquent rate fell to 2.4 percent.

• Nearly half of all permanent loan modifications in the fourth quarter helped to reduce homeowners’ monthly payments by over 30 percent.

• Approximately 31 percent of borrowers who received permanent loan modifications in the fourth quarter had portions of their mortgage balance forborne.

• There were more than 20,000 short sales and deeds-in-lieu completed in the fourth quarter, bringing the total to nearly 552,000 since the start of conservatorship.

• Completed third-party sales and foreclosure sales continued a downward trend with a 15 percent reduction in the fourth quarter and foreclosure starts were down 3 percent.

courtesy of:  http://www.fhfa.gov/webfiles/26165/4Q2013ForeclosurePreventionrelease040214.pdf

 

Mortgage Rates Creeping DOWNWARD Toward 4%!

Maybe the days of rock-bottom mortgage interest rates aren’t numbered, after all. Once again, rates are creeping down towards 4%.

Rates dropped 0.09 percentage point this week to 4.23% for a 30-year, fixed -rate home loan, according to the latest weekly report from Freddie Mac.

Mortgage rates started the year at 4.53%, and have sunk each week in 2014, falling a total of 0.3 percentage point.

Borrowers with a 4.23% mortgage would pay $982 a month on a $200,000 balance, compared with $1,017 on a 4.53% loan.  (read more –>)

courtesy of:  http://money.cnn.com/

Derogatory Credit Waiting Periods

CONVENTIONAL LOANS 

Bankruptcy Chapter 7:

2 years from Bankruptcy Discharge date with extenuating circumstances. Borrower must have a re-established credit history. See acceptable reasons for extenuating circumstances and clarification of re-established credit history at bottom.

4 years from Bankruptcy Discharge date. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

Bankruptcy Chapter 13:

1 year from Bankruptcy date with extenuating circumstances. Borrower must have a re-established credit history. Lender must include Bankruptcy payback payments into Debt Ratios and the borrower must obtain court approval prior to entering into a purchase contract. See acceptable reasons for extenuating circumstances and clarification of re-established credit history at bottom.

Foreclosure:

3 years from Foreclosure date in which title was transferred back to the Lien Holder with extenuating circumstances. Borrower must have a re-established credit history. See acceptable reasons for extenuating circumstances and clarification of re-established credit history at bottom.

7 years from Foreclosure date in which title was transferred back to the Lien Holder. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

Short Sale:

2 years from Short Sale date in which title was transferred to the new Lien Holder, with extenuating circumstances and a minimum down payment of 10%. Borrower must have a re-established credit history. See acceptable reasons for extenuating circumstances and clarification of re-established credit history at bottom.

2 years from Short Sale date in which title was transferred to the new Lien Holder, with a minimum down payment of 20%. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

4 years from Short Sale date in which title was transferred to the new Lien Holder, with a minimum down payment of 10%. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

7 years from Short Sale date in which title was transferred to the new Lien Holder, with a down payment less than 10%. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

FHA LOANS 

Bankruptcy Chapter 7:

2 years from Bankruptcy Discharge date. Borrower must have a re-established credit history with extenuating circumstances. See acceptable reasons for extenuating circumstances and clarification of re-established credit history at bottom.

3 years from Bankruptcy Discharge date if borrower included property into the Bankruptcy. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

Bankruptcy Chapter 13

1 year from Bankruptcy date if borrower has a re-established credit history and extenuating circumstances. Lender must include Bankruptcy payback payments into Debt Ratios and the borrower must obtain court approval prior to entering into a purchase contract. See acceptable reasons for extenuating circumstances and clarification of re-established credit history at bottom.

Foreclosure:

2 years from Foreclosure date in which title was transferred back to the Lien Holder with extenuating circumstances. Borrower must have a re-established credit history. See acceptable reasons for extenuating circumstances and clarification of re-established credit history at bottom.

3 years from Foreclosure date in which title was transferred back to the Lien Holder. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

Short Sale:

1 day from Short Sale date in which title was transferred to the new Lien Holder. Borrower cannot be more than 30 days late on previous mortgage/s or other credit obligations and can prove the Short Sale was necessary for financial purposes only such as employment relocation.

3 years from Short Sale date in which title was transferred to the new Lien Holder. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

VA LOANS

Bankruptcy Chapter 7:

2 years from Bankruptcy Discharge date. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

Bankruptcy Chapter 13:

1 year from Bankruptcy date if borrower has a re-established credit history and extenuating circumstances. Lender must include Bankruptcy payback payments into Debt Ratios and the borrower must obtain court approval prior to entering into a purchase contract. See acceptable reasons for extenuating circumstances and clarification of re-established credit history at bottom.

Foreclosure:

2 years from Foreclosure date in which title was transferred back to the Lien Holder. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

Short Sale:

2 years from Short Sale date in which title was transferred to the new Lien Holder. Borrower must have a re-established credit history. See clarification of re-established credit history at bottom.

CLARIFICATIONS:

1. All loans must receive AUS Approve/Eligible in order to obtain Lender Financing.
2. Extenuating Circumstances are events that are beyond a borrower’s control. Such events that cause an immediate decrease in income, and or an abrupt increase in a borrower’s financial responsibility, such as death of the primary wage earner or serious medical illness.
3. Re-established credit is when a borrower has no late payments or negative items reflecting on their credit report for a consecutive 12 month period or longer after an event such as a Bankruptcy, Foreclosure or Short Sale. Borrower must prove they are credit worthy through acts or credit responsibility. A 12 month rental history is also required with no late payments.

courtesy of:  http://brianberes.myallwestern.com/

New CFPB Qualified Mortgage Rules Do Leave Options for “Non”qualified Borrowers

Nick Wormald, a 29-year-old plumber with good credit, said he was shut out of the housing rebound until he asked the government for help.

Wormald, who bought a three-bedroom home in Haverhill, Massachusetts, for $215,000 in December, was required to provide a down payment of only 3 percent. That’s far below the standard 20 percent down, which he couldn’t afford. And he was spared the burden of buying mortgage insurance. The plumber got the fixed-rate deal through MassHousing, his state’s housing-finance agency, or HFA.

“It’s good that I didn’t have to exhaust all my funds,” said Wormald, who had to spend about 40 percent of his retirement savings for the down payment. “My family helped me out with bed sheets and things for the house. They’re great people but nobody has got $10,000 kicking around to give.”

Every state has one of these little-known agencies, which legislatures set up in the 1960s and 1970s to promote affordable housing. [California]  Now, as regulators tighten mortgage rules and big banks resist lending to riskier middle-income Americans, HFAs across the U.S. are rapidly expanding to restore the fading dream of homeownership. The state agencies got a boost from the Consumer Financial Protection Bureau, which exempted them from stricter mortgage regulations that it rolled out this month.

Some groups like MassHousing buy mortgages from lenders and send them to government-sponsored Fannie Mae to package into securities that the HFAs then sell to investors. The Boston-based group more than doubled its mortgage volume to an all-time high of $1.25 billion in the year ending in June, fueled by the introduction of mortgages that require no insurance.

Record Lending

HFAs in states including California, Idaho, Illinois, Minnesota, New Jersey, Texas and Virginia also are expanding. The Illinois Housing Development Authority funded more than 3,000 mortgages in 2013, a record, up 60 percent from the prior year. In California, loans with down payment assistance increased 29 percent to a record 6,311 in fiscal 2013 from a year earlier.

“We believe that housing-finance agencies will be able to play a bigger role in whatever the restructured mortgage market looks like in the future,” MassHousing Executive Director Tom Gleason said. “HFAs have already demonstrated that they’re ready to step up to the plate to absorb the risk associated with low down payment borrowers.”

The growth in lending may also help bolster the housing recovery, which hasn’t included many first-time buyers like Wormald. The homeownership rate for U.S. families earning less than the median income — about $51,000 — was 48.5 percent in the third quarter. That compares with 53 percent during the peak of the housing boom in 2006, according to Census Bureau.   (Read more —>) 

courtesy of:  http://www.bloomberg.com/news/

CFPB – New Qualified Mortgage Rule Now in Effect

Last week, the Consumer Financial Protection Bureau’s (CFPB) new qualified mortgage (also known as the ability-to-repay) rule went into effect.

The new rule is about helping borrowers understand the true costs of the mortgage they apply for. On the flip side, it is designed to keep lenders from lending money to borrowers who can’t afford to make those payments over time.

If it works out the way the CFPB has planned, the number of foreclosures should drop in the coming years, and, hopefully, some of the conditions that helped create one of the biggest real estate bubbles in U.S. history will be eliminated.

To be considered a qualified mortgage, a lender may not charge excessive upfront points and fees (capped at 3 percent of the loan), and the loan cannot be longer than 30 years in length (say goodbye to 40-year mortgages.)

Also, interest-only loans (also known as zero-down payment loans) and negative amortization loans (where the monthly payment doesn’t cover the true cost of the interest, so the total amount of the debt grows each month) will not be considered qualified mortgages.

No-doc loans, also known as stated-income loans because the loan officer would just write down how much the applicant said he or she earned and not verify that information, have been eliminated. Starting this week, if you apply for a mortgage, you have to be able to prove that you can afford to repay it in full.

In addition, the loans must fall into one of three categories:

• The monthly loan payment plus the borrower’s other debt payments cannot exceed 43 percent of the borrower’s gross monthly income;
• the loan must qualify to be purchased or guaranteed by a government-sponsored enterprise (such as Fannie Mae or Freddie Mac) or to be insured or guaranteed by a federal housing agency;
• otherwise, the loan must be made by a smaller lender that keeps the loan in its portfolio and does not resell it.

As the CFPB Web site puts it: “The ability-to-repay rule is intended to prevent consumers from getting trapped in mortgages that they cannot afford, and to prevent lenders from making loans that consumers do not have the ability to repay. It’s that simple.”

So, of course, the nonprofit real estate and mortgage trade associations, which represent the housing industry’s interests in Washington, are up in arms. They claim that self-employed individuals, small business owners and many others will have a harder time qualifying for loans. They also say that loans will cost more.

Perhaps. But while lenders may offer other sorts of nonqualified mortgages (provided they verify that the borrower can repay that loan), if a loan doesn’t fall into the qualified mortgage category, it will not receive the same sort of legal protections.

And after the billions spent to pay off the housing crisis, lenders may be inclined to primarily offer qualified mortgages.

courtesy of:  http://www.washingtonpost.com/

Jan 1, 2014 Borrowers’ Anti-Deficiency Protections Expand

Effective January 1, 2014, California’s anti-deficiency laws that generally prohibit a foreclosing lender from obtaining a deficiency against a borrower have been expanded to also prohibit the lender from claiming that a deficiency is owed or collecting on a deficiency. Existing law already generally prohibits a short sale lender from claiming a deficiency is owed or from collecting a deficiency.

Currently, certain lenders and debt collectors contact borrowers after foreclosure in an attempt to collect on deficiencies claimed to be due and owing. The new law, Senate Bill 426, will generally prohibit a lender from claiming that a deficiency is owed, such as on a credit report, or from collecting a deficiency. The new law applies to loans foreclosed upon by a trustee’s sale, as well as loans secured by purchase-money, owner-occupied, one-to-four residential unit properties (including refinances with no cash out). A lender, however, can pursue a deficiency against a guarantor or other surety (such as a mortgage insurer), or pursue other security for a cross-collateralized loan.

In a related case, a California appellate court recently decided that a lender is prohibited from pursuing a deficiency against a borrower after a short sale of a purchase money loan (Coker v. JP Morgan Chase Bank (2013 WL 3816978) filed July 23, 2013). The Coker case involved a borrower who successfully negotiated a short sale, but agreed to remain responsible for the deficiency on a purchase money loan. After close of escrow, the lender demanded that the borrower repay over $116,000. The court, however, ruled that the anti-deficiency protection for purchase money loans under section 580b of the California Code of Civil Procedure applied not just to foreclosures, but to short sales as well. The court also decided that the waiver of a borrower’s anti-deficiency protection under section 580b was void as against public policy.

The Coker case may help borrowers with short sales that closed escrow before California’s short sale anti-deficiency laws under section 580e came into effect in 2011 for one-to-four residential units (first trust deeds only starting January 1 and all deeds of trusts starting July 15). This court decision is especially significant for short sale borrowers given that another court recently decided that the statutory anti-deficiency protections under section 580e do not apply retroactively to a short sale that occurred before the statute was enacted (Bank of America, N.A. v. Roberts (2013 WL 3754831) filed July 17, 2013).

courtesy of:  CA Association of Realtors