Effective today, Assurity Financial Services officially offers the new FHA Secure Mortgage product to borrowers who qualify.  The FHA Secure product allows homeowners to refinance various types of Adjustable Rate Mortgages that have recently reset.  Some of the eligibility highlights include:

1. The mortgage being refinanced must be a non-FHA ARM that has reset.
2. The borrower’s payment history on the non-FHA ARM must show that prior to the reset, the borrower was current in making monthly mortgage payments.
3. Under certain conditions, if there is sufficient equity in the home, FHA will insure mortgages that include missed mortgage payments.  FHA will permit first liens, purchase money seconds, closing costs, pre-paids, discount points, prepayment penalties and late charges.  The amount of the FHA Secure Mortgage may not exceed either the geographical maximum mortgage limits or the standard maximum LTV ratios set by FHA.
4. Lender must document that the reset of the non-FHA ARM monthly payments caused the borrower’s inability to make the monthly payments and that the borrower has sufficient income and resources to make the monthly payments under the new FHA insured refinance.
5. FHA encourages the use of Total Mortgage Scorecard to obtain risk classification.  If TOTAL renders an “accept/approve”, the underwriter will not need to perform review of the borrower’s credit history and capacity to repay.  In the more likely event that the risk class is a “refer”, the underwriter must determine borrower has the capacity to pay, and ratios should remain 31/43.  Compensating factors are to be provided to underwriter when ratios are exceeded.
6. The FHA Secure initiative is for refinancing borrowers that were harmed by non-FHA ARMs that have recently reset.  It is not to be used to solicit homeowners to cease making timely mortgage payments.   FHA reserves the right to reject applications where it appears that a loan officer or other mortgage employee suggested that the homeowners could stop making their payments; refinance into an FHA insured mortgage and keep the amount of payments not made on time.

Assurity Financial Services also notes that this program is temporary and requires applications be signed no later than December 31, 2008.

But why is HUD trying to shut these programs down when their name just sounds so good…”down payment assistance”? 

You first have to understand how the DPAs work with FHA financing. 

With FHA, the buyer is required to have 3% into the deal.  When the borrower lacks 3% to put into the deal the obvious answer in the FHA world is to utilize a DPA program.
The DPA would provide the buyer their 3% investment in the form of a gift, from a non-for profit organization.  In return the seller would pay the DPA program the 3% plus a fee. 

So what would the seller do? 

They would either, A) raise the price of the home to cover the DPA costs or B) not lower the price as much as they would have, to cover the DPA.

So in essence, the buyer was obtaining 100%, which is not something FHA wants — or will want (I’ll be discussing possible changes to FHA in a future blog).

In the past, when prices of homes were appreciating rapidly, this would not normally be a problem.  In many cases, by the time the deal actually closed, the 3% had been earned (and then some) and the buyer would have equity built in already.  However, now the market has turned and home prices are now stagnant to declining in most markets across the country. 

In today’s market, if a buyer uses a DPA to get into a home, by the time the home closes now, it may be worth less than what it was when they purchased the home.  If the buyer were to be forced to sell the home, they would not be able to sell it for what they paid for it.  In those cases the buyer/borrower is more likely to just walk away from the home.

This issue with DPAs is not a new one.  It has always been a hot button issue with HUD.  But when the market was good, it was easier to overlook.  Now is the appropriate time to examine what can be done.

With the market changing and FHA financing coming back onto borrowers and lenders radar, changes to the DPAs had to come.  What the ultimate outcome will be is yet to be seen, but it does not look good for Ameridream and Nehemiah.  You may still be able to take advantage of these programs for the next few months, but maybe not much longer.  The elimination of the DPAs is sad, as the program has helped hundreds of thousands of people get into their homes. 

It is also another reason that FHA must change to be more accommodating to those with lesser means.  FHA must modernize, to be able to continue to provide homeowners and lenders the types of financing that is attractive to both.  Look for more information about “FHA Modernization” soon to come.

–Tammy

Are you intrigued by what you hear but afraid that it sounds just too good to be true.?

You’re not alone, more and more people are asking me about reverse mortgages and getting the right reverse mortgage set up can give a much needed lifeline to seniors that are struggling to make ends meet every month. 

How does it work? 

A reverse mortgage is a loan that eliminates your monthly mortgage payment and uses the equity built up in it to give the homeowner a monthly income, a line of credit, or cash at closing to pay off bills, or any combination of the above. 

Here are some basic features of a reverse mortgage (courtesy of reversemortgage.org)

1. You must be at least 62 years old and own a home. (Note: There are some conventional reverse mortgages that have differing age requirements.)
2. You ALWAYS retain title (ownership) to the home. The lender never, at any point, owns the home, even after you (or last surviving spouse) permanently vacate the property.
3. You must still pay property taxes and insurance, and keep the home well maintained. If you are unable to pay your property taxes and insurance, then a special set-aside from your reverse mortgage can be created.
4. Repayment of the loan occurs when you (or last surviving spouse) permanently vacate the home. You or your heirs (estate) then must facilitate the pay back of the loan using either private funds or selling the home. After the loan is repaid, all leftover proceeds from the sale of the home go to you or the estate.
5. The amount of funds you are eligible to receive depends on your age (or age of the youngest borrower in the case of couples), the value of the home, the interest rate and the upfront costs. With the HECM product, the county lending limit is a factor. With all products, the older you are, the more proceeds you are eligible to receive.
6. Loan fees can be financed, or paid out of the available loan proceeds. This means you incur very little out-of-pocket expense to get a reverse mortgage. In most cases, you only have to pay for the appraisal, which costs roughly $350 depending on your market.
7. The loan balance (amount owed) grows each time you access funds from your line of credit or receive a monthly payment. In addition, the lender is charging you interest on the outstanding loan balance as well as a monthly servicing fee.
   Repayment of the loan is not required until you (or the last surviving spouse) permanently leave the home as a primary residence. For the HECM program, you can live up to 12 consecutive months outside the home, but this may vary for other products.
8. All reverse mortgages have a “non-recourse” feature, which means that the total amount owed can never exceed the appraised value of the home. If the amount owed exceeds the home’s appraised value, then the lender or the federal government (in the case of the HECM product) will absorb that loss.

This year, the industry is on pace to help even more seniors live a more comfortable lifestyle.  According to the NCOA (www.ncoa.org) there are more people taking out a reverse mortgage than ever before.

The Reverse Mortgage Forecast

* Source: HUD Data as provided by MBA of America

According to the U.S. Census, the population of seniors age 65 years and above is projected to increase 147 percent between 2000 and 2050. Currently seniors own over $2 trillion in home equity (NRMLA) and less than 1 percent has been tapped by the reverse mortgage program.

If you are interested in learning more about whether or not a reverse mortgage is a good option for you, call me today.

Many of you are familiar with the old adage…no matter what else…make sure you make the mortgage payment!  This is good advice.  A home is where we come for shelter.  It is where we rest our head at night.  It also is the largest financial investment most of us will make in our lives.  Losing it because we cannot make the payments is a difficult thing to do. 

Many individuals that have an ARM reset, may continue to have adequate mortgage payment history, but are behind on their car loan and credit cards.  This situation may not be the perfect fit for the FHASecure loan.  But it may be a good candidate for what is called a 203(b) refinance. 

FHA can help in so many different ways.

The great thing about FHA is that it is “common sense” type lending.  

What does that mean? 

Here is one example — once I worked with an employee for the post office.  They delivered mail for the community and had been in an accident while on the job.  The accident landed my borrower in the hospital and unable to work for a few of months.  Their temporary job loss caused my borrower to fall behind on just about everything he had.  His credit score was horrible and for him to do a conventional mortgage, with private mortgage insurance, while not impossible, was definitely more difficult.  He had always made his payments on time before the accident and was now back at his job full time.  He was able to provide me medical bills, workman’s comp, etc, etc ,etc to prove what his situation was.  This loan made sense and was a perfect FHA type loan. 

FHA is not worried about what your credit score is.  The mortgage insurance on an FHA is not sensitive to your credit score either.  That cannot be said for traditional conventional financing.  And if your loan “makes good sense”, it is a loan that can be done through FHA.

Is there an FHA loan that makes sense for your situation?  Invest the time to find out.

It doesn’t mean that you are a bad borrower. 

It doesn’t mean that you need to wait to see what options are available to you. 

It means that you need to get educated about what your options are n-o-w.

First, check your loan paperwork.  Does the ARM have a pre-payment penalty?  Most do.  A pre-payment penalty can limit your options, but it doesn’t mean that nothing can be done.  If it does have a pre-payment penalty…when does it expire?  Most expire at the end of the 2 year period.  But I have seen a couple of 2/28 ARM loans that had a pre-payment penalty that did not expire until a full year after the first rate adjustment.

If your loan has already reset, the rate and payment has probably gone up significantly.  Many thoughts may go through your mind.  How am I going to afford this?  Will I have to sell my home?  Will the bank foreclose on my home if I can’t pay this?

Whatever you do.  Don’t panic. 

Don’t fall into a scammer hands with “home equity protection” type schemes.  Talk to your current lender.  Find out what options are available to you through them first.  If they aren’t interested in your business, go elsewhere.

If you have always made your mortgage payments on time before the rate reset and now find yourself behind on the mortgage payments, there is help.  The FHASecure loan was created to help those who were put into ARM loans that have reset and caused a financial crisis.  With the FHASecure product, it does not matter how far behind you are on your current mortgage payment.  If you never had trouble making your mortgage payments prior to the rate resetting.  The FHASecure loan can help.

The FHASecure loan can even help when your current balance exceeds your homes current value.  If your current lender is willing to accept less than the full balance to pay off your mortgage, which many times they will, the FHASecure loan can put you into an affordable fixed rate mortgage. 

Many people have asked me, “Why would the bank accept less than what I owe on my home?”  The answer is, the foreclosure process is expensive and time consuming.  In most cases, lenders would rather take a small loss on the mortgage balance rather than having the legal expenses incurred to foreclose on a home, put the home on the market (which includes paying real estate agent commissions), and selling the home for even less than it’s true market value.

Make sure you are talking to someone who knows what they are talking about if you currently have a 2/28 loan — there is a window of time that is closing rapidly where you can improve your situation.

Your ARM is Resetting!

The dreaded day has come.  The day that you go out to your mailbox and find a letter from your current mortgage company.  You open the mail and find out that your adjustable rate mortgage is going to reset within a short period of time and your new payment will be… $WHAT?!!!

A number of things have lead up to this day.  You might not have known you had an adjustable rate mortgage if your lender wasn’t honest with you.  You may have forgotten that this was the loan that you had taken out to begin with.  You may have not understood what an ARM was or what exactly it meant.  You may have known that this day was coming and had hoped for the best.

And now you’re looking at what your payment is going to be and you find yourself thinking, “How am I going to afford that?” 

Many homeowners have lived through more than one interest rate reset.  Many of those same homeowners have now found themselves deliquent on their home loan and possibly facing foreclosure.  But what are you going to do?

1) Can you afford the payment for now and refinance into a more affordable loan?
2) Do you need to look at selling your home?
3) Do you need to contact your lender and see what you can work out?

If these options haven’t or just won’t work and you find yourself falling further behind on your mortgage payment – The FHASecure loan may be for you. 

And if you haven’t yet gotten a reset notice in the mail, you may know that your rate is going to reset in the next year.  Start looking at refinancing your mortgage now.  Don’t wait!  Many markets are declining in value.  Your home may be worth more today than when your rate actually resets next year. 

Rates are historically still great. 

Let me know if I can help.

All too often when reading a news article about subprime lending, the author defines “subprime” as loans given to those with less than perfect credit.  While this may be true in some cases, it by no means covers everyone that is in a subprime loan – such as the popular 2/28 ARM. 

There are many reasons why someone with good credit may be put into a subprime loan, some of them include:

1) The borrower chose the product.  Many of the 2/28 offered attractive terms and good rates.  The teaser rate could help get a borrower qualified for a higher loan amount.  Combine a good starter rate with an interest only period or option payment loan and it could mean some real savings over the first two years of your loan.  But now that rates are resetting, interest only and option payment periods are expiring, many are finding payments on their loan higher than what they can now pay.

2) Self-employed borrowers were commonly placed in subprime loans.  Documenting income for a self-employed person can be difficult and time consuming.  Depending on how much income is actually shown on the tax return, it could limit loan amounts or turn an approved loan into a denied one.  The solution?  No income verification loans and stated income loans. 

3) Inexperienced or lazy loan originators.  There were plenty of originators that never had done mortgages before the housing boom.  They may not have grasped all the conforming loan guidelines. Subprime loans had few rules or qualifications.  The ease of approval and quick processing times made the subprime loan a go to product.

4) Greedy loan originators.  Many of the subprime products paid the loan originator very well for each loan.  Not only did they pay well, they were easy to do and quickly completed.  That left more time to do more loans and make more money.

Many of the borrowers put into subprime loans had no reason to be in the loan they were placed — and now many of those same homeowners are finding it hard to make their mortgage payments. 

These people are losing their good credit that they had worked so hard to establish and face losing the home that put them into this position. 

This is only one of the reasons why The Bush Administration and the Federal Housing Administration (FHA) created the FHASecure product; to help struggling homeowners.  If you have had a rate reset and have fallen behind on your mortgage payment because of it, make sure you check to see if the FHASecure program can help you.

The woman calling had received a notice of sheriff’s sale because she had not been able to make her mortgage payments.  She had an adjustable rate mortgage that had adjusted for the second time in less than a year, pushing her payments up over $500 per month. 

She wanted to know if I could help. 

I gathered the appropriate information, faxed her what I needed her to sign and asked that she fax everything, including the request for sheriff’s sale that she had received, back to me right away.

When I looked over the court order for the sheriff sale, I noticed that the sale was scheduled to take place October 31st.  I had less than 3 days to save her home, and I just received her application.

I asked if she had spoken to her current mortgage company.  She confessed to me that she had refused to answer any of their calls, ignored all the mailed notices, and I was the first person she had spoken to about her situation.

Unfortunately, this is not the first time I have dealt with something like this.  In fact, mortgage servicers show that nearly 50% of all mortgages that are foreclosed on, they never are able to make contact with the borrower. 

If you are behind on your mortgage payment, no matter if it is 15 days, 30 days, 60 days or more…you need to speak with your lender. 

I understand that it can feel embarrassing to have to admit you are unable to make your mortgage payment.  But, believe it or not, mortgage companies don’t want your home back.  The costs involved to foreclose on a home are high and they are rarely able to sell the home for more than 70 cents on the dollar once placed on the market.

The earlier you work with your mortgage lender, the more options they may have to work with you.  If you don’t want to work with your lender.  Start looking at your options available to you elsewhere. 

The FHA Secure loan was designed for people who had good mortgage payment history until an interest rate reset on their mortgage.  You can behind on your mortgage, no matter how behind, and still be able to qualify for this type of loan.  The FHA Secure loan, may be able to help you even if you owe more than what your home is currently worth.

If you are behind and facing foreclosure due to  an adjustable rate mortgage rate reset don’t avoid your mortgage company, open a dialogue with them.  Then contact me to see if we can do something together to get you into an affordable fixed rate mortgage.

The Bush Administration today announced a new initiative called “Hope Now” that brings together mortgage lenders, service companies, counseling agencies, investors and large trade organizations.

Starting in November, the program will launch a direct mail campaign and develop a best practice methodology for counseling groups across the nation to ensure speedy loan modifications wherever possible.

According to Treasury Secretary Henry Paulson, 11 of the largest mortgage service companies (representing 60% of all mortgages in the country) have already agreed to join the new coalition. 

“These leaders recognize that by working together, coordinating and scaling up their activities, they will be able to work toward the goal to help more homeowners.”

The HOPE NOW website is up and the initiave is coming on the heels of the FHASecure initiave announced by the Bush Administration in August. 

From our friends at Agora Financial — the most-up-to-date-information on how many Adjustable Rate Mortgages are resetting in the upcoming months.