For the first time since 2009, Fannie Mae and Freddie Mac are raising risk fees charged to lenders on loans they buy for resale to investors. Fannie and Freddie also are adding risk fees to more loans offered to borrowers with exemplary credit. Although lenders could absorb the cost, most are expected to add the fees to loan costs.
MAKING SENSE OF THE STORY
To avoid a fee or to receive a discount, most borrowers will need FICO scores of 740 or better and down payments of at least 25 percent.
The fee increases likely will affect most loans with terms longer than 15 years that are sent to Freddie beginning March 1, and to Fannie beginning April 1.
The most notable aspect of the fee increase is that the fees are being added to more loans to borrowers with higher credit scores. With few exceptions, risk fees previously hadn’t applied to borrowers with FICO scores of 740 or higher.
Part of the financial reform bill signed into law by President Obama includes the creation of a Consumer Financial Protection Bureau, which will write new rules and monitor problems and abuses in areas such as residential real estate settlements, credit scores, “truth in lending,” and equal credit opportunity.
KEEP THIS IN MIND
• Before the Bureau can begin implementing new laws to assist consumers, the president must nominate a director for the Bureau and the Senate must confirm the nominee. While this may take time, mortgage industry leaders say some of the core changes promised by the legislation either already are in effect or should be soon.
• Treasury Secretary Timothy F. Geithner has until Sept. 19 to designate a transfer date when key legal and regulator authorities shift from agencies such as the Federal Trade Commission and the Dept. of Housing and Urban Development (HUD), to the new consumer bureau. Once that takes place, the Bureau will begin implementing the new laws.
• One of the earliest and most widely anticipated changes expected to take effect impact home appraisals. By law, the agency must create new interim rules on appraisal accuracy and independence to replace the Home Valuation Code of Conduct (HVCC) rules imposed by Fannie Mae and Freddie Mac in 2009. Many in the real estate industry, as well as home buyers and sellers, report HVCC standards led to low home valuations that, in some instances, derailed home sales transactions.
• A national hotline system also will be developed that will allow aggrieved mortgage borrowers and others to issue complaints and alert the Bureau to unfair and deceptive practices.
• Rules requiring mortgage loan officers to verify mortgage applicants possess the ability to repay the loans they’re seeking also is high on the list.
To read the full story, please click here: LA Times
Just as we are getting some signs of stabilization in the housing market, we are charting into unknown waters starting next week. The Federal Reserve will end its purchase of mortgage securities this week. This could mean that mortgage rates will rise and put a damper on home sales.
However, it’s expected that private investors will step in to buy mortgage securities. If they do, analysts expect they will rise less than a quarter of a percentage point in the next three months. That gain would increase a monthly payment on a $250,000 mortgage by $30.
In a statement released March 12, Freddie Mac predicted that mortgage rates would average 5.2 percent on a 30-year fixed loan after the Fed stops buying. Fannie Mae put the rate slightly higher at 5.13 percent.
We’ll have to see what happens in the next few weeks as we go through this transition of selling mortgage securities and how it will affect mortgage interest rates.
John J. O’Dell
Real Estate Broker
Looking for short sales and foreclosures?
Go to JohnOdellRealty.com
Call 530-263-1091
According to a news release, the government is giving homeowners another year to refinance their loans under a little-used program designed to help borrowers whose homes have plummeted in value. My experience with clients who have tried to refinance their homes have had a total horrible experience with their mortgage holders.
The Obama administration effort, known as Home Affordable Refinance Program, had been scheduled to end on June 10 but will now run out on June 30, 2011, the Federal Housing Finance Agency said Monday.
The program allows borrowers who owe up to 25 percent more than their homes are worth to refinance to lower interest rates.
It was originally projected to help 4 million to 5 million homeowners with loans owned or guaranteed by Fannie Mae and Freddie Mac. So far, it has helped around 220,000, according to the Treasury Department. Yes, and you can blame the banks 100 percent. They would rather foreclose then refinance.
Countrywide ad before they had to be taken over by Bank of America
Banks are reaping what they sowed. As you know, during the housing boom, all the banks wanted were more and more mortgage loans. They loosen the rules that so low that credit scores did not seem to matter, as long as you were breathing and had a pen to sign mortgage documents. So now they have to buy back their bad loans!
According to the Wall Street Journal:
“The accountants at Fannie Mae and Freddie Mac are auditing mortgage files to uncover loans with improper documentation about a borrower’s income, and then forcing banks and savings and loans to buy the loans back.
Freddie required lenders to buy back $2.7 billion of loans in the first nine months of 2009. Fannie Mae won’t disclose its figures, but the mortgage trade publication Inside Mortgage Finance said Fannie made $4.3 billion in loan-repurchase requests in the first nine months of 2009.”
Of course now, the banks are tightening up their underwriting for mortgage loans more carefully than they were just a year ago. This results in a further slowing down of the lending process. Which is good and bad of course. But I think in the long run it will be better for all of us. What do you think?
Written by John J. O’Dell
Real Estate Broker
With a background in Civil Engineering
and General Contracting
What the figures show for April of this year is that residential sales are about the same number as it was for April of last year.However, we’ve had a further decline in medium residential home prices of minus 23 percent. Here are the stats for sales in Nevada County.
There were 67 residential properties sold in April 2009 compared to 62 residential sales in April 2008.Total residential sales from January to the end of April 2009 were 191 sales compared to the same period last year of 203 sales.
The medium price for April 2009 was $299,000 compared to April 2008 of $387,500 a decline in market price of 23 percent.There were 1,165 residential properties listed for sale at the end of April, which based on the number of sales from January to April 2009 equals about 1.6 years supply of residential property for sale, assuming sales continue at the same rate.
There were 20 land sales from January to April in 2009 with a 45 month supply of land at the end of April. Last year there were 45 land sales with a 49 month supply of land.
I’ve noticed a pickup in pending sales, which I post on this website daily for those that are interested, and it seems that the pending sales are up. They have been hovering in the 200 pending sales starting within the last month. However, this is for all sales, not just residential sales.
Where are we with future sales? It’s anyone’s guess, Fannie Mae and Freddie Mac asked lenders to forestall any more foreclosures until March 6, 2009.What they are doing now that the agreement date has expired? Some circles say we are in for a tsunami of foreclosures. The following banks had agreed to the government’s request and their expiration dates of the agreement.
JP Morgan Chase – New Owner-Occupied residential loans that are owned and serviced by JPMorgan Chase. As with Fannie Mae, the moratorium of foreclosures end date, March 6th.
Citigroup – All Citi-owned first mortgage loans that are principal residence and on loans for which understandings with investors have been reached. Moratorium end date – March 12th.
Bank of America (also Countrywide now renamed Bank of America Home Loans) – Delay foreclosures sales on owner occupied properties whose mortgage loans are owned and serviced by B of A or Countrywide – Through March 6th.
Wells Fargo (also Wachovia) – For Loans it holds. The moratorium is expected to remain in place until the government’s foreclosure prevention plan is announced. The majority of Wells Fargo’s mortgage loans are serviced by it and owned by other investors.
Fannie Mae and Freddie Mac will once more begin buying “super-conforming” mortgage loans of up to $729,750, which will bring rates down for borrowers with good credit seeking loans previously classified as jumbo.
Currently, loans greater than the $417,000 conforming limit in “normal” housing markets — or the super-conforming limit of up to $625,500 in high-cost markets — are considered jumbo loans.
Jumbo loans carry higher rates than conforming loans because they aren’t eligible for purchase or guarantee by Fannie Mae and Freddie Mac. Rates on jumbo loans are running at least 1 percent to 1.5 percent higher than conforming loans of less than $417,000.
In between conforming and jumbo loans are so-called super-conforming loans that exceed the $417,000 conforming loan limit, but are still eligible for purchase or guarantee by Fannie and Freddie.
Super-conforming loans carry slightly higher interest rates than conforming loans — about 25 to 30 basis points — but are less costly than jumbo loans that Fannie and Freddie can’t buy or guarantee. A basis point is one hundredth of a percent.
On Jan. 1, the upper limit for super-conforming loans was rolled back from $729,750 to $625,500. But the economic stimulus bill signed into law Feb. 17 restored the higher limit for single-family homes in high-cost markets that was in place for much of 2008.
The following week, the Federal Housing Finance Agency published lookup tables for the new Fannie and Freddie limits in high-cost markets — 250 counties nationwide.
But Fannie Mae did not issue its eligibility requirements for the new limits until March 30. Freddie Mac published its guidelines on April 16. Both companies will begin buying super conforming loans of up to $729,750 from lenders on May 4.
Wells Fargo will begin making super-conforming loans of up to $729,750 in high-cost markets on Monday, and Bank of America will start in mid-May, the San Francisco Chronicle reported.
