Mortgage Talking Points

In five short (or long, depending on your perspective) weeks,  the Home Valuation Code of Conduct (HVCC), effective May 1, 2009 has brought a huge sector of the mortgage world to its knees, begging for mercy.   Just when the lending wheels of the economy’s engine were starting to turn again thanks to lower interest rates and first-time homebuyer tax incentives,  the sludge of HVCC are shutting them down.

These unregulated Appraisal Management Companies (AMCs) that are the vehicle through which many lenders have to now work to order an appraisal, are a joke, to put it mildly.  Appraisal orders aren’t acknowledged,  turn-around times are slow,  fees are higher,  local market expertise is gone so values are ridiculous,  and the folks paying the price are the consumer.  Our borrowers.  The ones the legislation was supposed to be protecting. 

In addition to the above problems, I’ve heard of a loan officer who ordered an FHA appraisal (required by their particular investor even though HVCC doesn’t cover government insured loans) only to wait three weeks and finally receive a conventional appraisal that was useless to her. 

The National Association of Mortgage Brokers issued a “Call to Action” today that I highly endorse.  Please take a moment to email hvcc@namb.org and tell them your horror stories. 

The 3-day Right of Rescission Notice is probably the most misunderstood of all the rules when it comes to refinance transactions. Your clients wonder why they have to pay 4 extra days of interest when their current mortgage is being paid off? Do Saturday’s count? (Yes, they do!)

Other situations that LO’s need to know:

• All fees must be refunded if the clients cancel – even if you have it in writing that it’s NOT refundable! This includes credit report and appraisal fees, even if paid directly to the appraiser.
• Refi’s where title is “other than” a “natural person” are exempt—however, if the loan is in “a trust”, the documents are signed “personally” so it DOES apply!
• If you have two or more people on the refi transaction, an one of them cancels, the refi is considered “cancelled”
• If the client sends the Right to Rescind in the mail and it’s post marked on the 3^rd day, the loan is considered CANCELLED—even if you receive it 30 days later!
• There are 5 circumstances where you DO NOT need a Right to Rescind
  • Construction Loans to buy or build a new home
  • Vacation or 2^nd home
  • Rental/Income Property
  • Land Refi
  • Commercial property Refi

Yes, construction loans are EXEMPT, yet many lenders and underwriters think the 3-day rule applies here as well.

NOTE: Sundays & 9 government holidays NEVER count when figuring disbursement days: New Years; Presidents day. Memorial day, Independence Day. Labor day, Columbus Day; Veterans Day, Thanksgiving and Christmas.

The “date counting” starts a midnight of the signing date…the loan closes at 2 pm, the time does not start ticking until midnight of that day which could turn into 4 or 5 days instead of 3.

Here’s the biggie: If for some reason the loan disburses WITHOUT all the signed waivers from all parties, the borrowers have 3 years to rescind—which means that they could essentially get the house free and clear. Right now, attorney’s are making a career out of checking to see if the R of R paperwork was properly filed!

p.s. There are a couple of other “rules” that are really obscure–but it’s better that your clients sign the waiver than risk the consequences!

FHA just released ML 2009-08 - Limits on Cash Out Refinances - going to 85% with case numbers after April 1, 2009. The news is that the 95%’s cash out refi’s are going away - for now!

Plus the 85% will be figured on the Combined LTV!

The big deal here is to order your case numbers before April 1 for anything in your pipeline!!!

If you have any clients “on the fence”, waiting for the rates to decrease, or have a subordinated financing that exceeds 85%, at least get the case number ordered BEFORE April 1 and they can make up their mind and lock later.

Cash-Out CLTV Clarifications

• New Subordinate Financing: New subordinate financing + new FHA first mortgage + any new junior liens cannot exceed 85% CLTV.
• Existing Subordinate Financing: May remain in place, subordinate to new FHA first mortgage, with no regard for CLTV.
• Modified Subordinate Financing: Newly modified existing subordinate financing that has to be re-executed at closing with new FHA loan is not considered a new subordinate lien. It is treated as existing subordinate financing.

Other Reminders

• Delinquent borrowers are not eligible
• Must have owned the property at least 12 months
• If owned less than 12 months, value based on the sale price or appraisal–the lower of the two
• Two appraisals required when loan amount exceeds $417,000 (before UFMIP) and is in declining area
• No co-signers or non-owner occupants can be added to meet credit underwriting guidelines

Check your pipeline! Check your pre-quals! You need to get in touch with them NOW since you only have 15 days left until April 1.

Mortgage Currentcy Staff
Mortgage Currentcy dot com

Currentcy Staff Writer

FHA Higher Limits Just Announced

• Loan limits have reverted back to the 2008 “higher” loan limits
• If the loan limit in your area was higher for 2009 (versus 2008) you can use the higher of the loan limits
• Higher loan limit amounts for 203(b) (1-4 family & Condos), 203(k) and 203(h) (disaster victims) are retroactive HOWEVER, it’s for loans “credit approved” (key word here) between January 1 and December 31, 2009
• HECM - Increased the loan amount from $417,000 to $625,500.  The effective date for this increase is February 24, 2009 and does NOT have an expiration date

There is a little-known provision in the American Recovery & Reinvestment Act of 2009 that authorizes a PARTIAL TAX CREDIT if a first-time home buyers income EXCEEDS the adjusted gross income (AGI) limit of $75,000 for a single person and $150,000 for a married couple. 

Two important things you need to know:

            1. “Income” is defined as the Adjusted Gross Income “line” on 1040, 1040A and 1040EZ. Yes, it actually says those words within the line item.

            2. The “Partial Tax Credit Income Cap” is $20,000 — and by the way, that’s the dollar basis for the formula we’re about to share with you. 

Example:            Married Couple’s AGI is $159,000

                             Subtract Maximum AGI $150,000 For Married Couple = $9,000

                             Divide $9,000 by $20,000 = .45

                             Subtract .45 from 1.00 = .55

                             Multiply .55 x $8000 (max credit) = $4,400

Yes, $4,400 is the tax credit this couple can get–even when their income exceed the so-called maximum income amount.  Even at $19,000 over the AGI, this couple could still get a $400 tax credit!  Use the exact formula for a single home buyer! 

Be sure to check with a tax advisor but as a first-time home buyer, this is awesome incentive to buy a home by December 1, 2009. Mortgage Currentcy Staff Writers

Okay rodeo fans. Anybody else besides me freaking out about the announcement made yesterday by Flagstar? If you are a correspondent lender like me and have been studying the HVCC to devise proper company compliance procedures for ordering your appraisals this will have you beating your head against the wall. Here’s what they are saying:

• Effective for loans purchased after 2/27/09
• All 2-4 unit properties (conventional and government) must have appraisals done by one of their approved Appraisal Management Companies (AMC’s).

ARE YOU KIDDING ME!!!

HVCC allows correspondent lenders to order their own appraisal (within guidelines).

HVCC states that government loans are exempt.

Is this the sign of what’s to come? The investors have decided to lump us all together, brokers and correspondent lenders, and disregard the HVCC guidelines and write their own rules?

Also the revised HVCC allows them to have ownership in the AMC’s they make us use. So they are not only going to disregard that, as a correspondent lender, I have a huge financial stake in every file, hence my motivation to avoid fraud AND they may make money on the side doing it. GIVE ME A BREAK!

Just a warning for all of you lenders out there scrambling to create procedures and organize personnel to be ready for the May 1 deadline:

IT MAY BE A WASTE OF OUR TIME!

We’ll keep you posted. Tracey Rumsey

Big news here is investment property guidelines.  Fannie gave us more flexibility in the number of units that can be owned by real estate investors, but also increased the reserve requirements for all investment properties.  (Fannie Mae Announcement 09-02 dated Feb 6, 2009)

Credit scores need to be 720 or higher, but investors can now buy 10 investement properties using Fannie Mae conventional financing–and best of all, the first 4 properties only require 15% down payment.  Getting Mortgage Insurance coverage might be another issue entirely!

Reserve requirements have changed for second homes and investment properties.  Second Homes required 2 months PITIA and rental property is 6 months PITIA for EACH property.

Loan Officers - Huge opportunity for your investor clients.  Remember, it is aimed at well-qualified investors.  Watch the reserve requirements, as DU will not catch that for you. 

Mortgage Talking Points flyer contains all the info.    Notify your real estate agents!  Search your database for the “ideal” client who may be interested in adding a few pieces of real estate to their investment portfolios instead of stocks and bonds.

If you are a loan processor, all I can say is document, document, document.  Make sure you can prove what taxes and insurance are for the other properties (check tax returns).  You will need that to verify your reserves are sufficient.  Get tax returns upfront and make sure you are getting your 4506 quickly when necessary. 

 Make sure your staff is familiar with how to execute the 4506 and get it back so your closings are not delayed.  In addition, this is a great opportunity to get out there and spread the word to investors. 

Dan Moralez

MortgageCurrentcy.com Staff Writer

FHA will permit loans originated under the 2008 loan limits to be refi-ed at mortgage amounts that exceed the current 2009 (and future) geographic loan limits. For streamlines with appraisals or full refinances, the mortgage amount may exceed the current geographic limit so long as:

Tracey Rumsey

• the new loan amount (without MIP) does not exceed the prior case loan amount and
• the new appraised value supports the loan amount and the LTV is not greater than 97.75%.

Great news! HUD has brought the 2008 high-limit orphan loans back into the fold! So important because these higher loan limit borrowers have so much to gain from lower interest rates right now. Not to mention the lenders who will originate their refinances.

Warning: Early payoff penalties could pound your profits!

• Most investors have an early payoff penalty that will be assessed to the loan seller if the loan is paid off within 90-120 days of purchase.
• Know your company’s policy regarding your commission and that early payoff penalty.