Tag Archives: mortgages

Real Estate

Banks Push Home Buyers to Put Down More Cash

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Many economists and housing analysts blame lax lending standards – including no-down payment, no-document loans – for contributing to the challenges in the current real estate cycle.  As a result, most lending institutions have increased minimum down payment requirements.  Now, a new proposal by the Obama administration calls for gradually raising down payments to a minimum of 10 percent on conventional loans – those that can be bought or guaranteed by Fannie Mae and Freddie Mac.

MAKING SENSE OF THE STORY

  • Banks have found that larger down payments discourage delinquencies by increasing the buyers’ exposure to loss and reducing the impact of declining prices.  According to a study by the Federal Reserve Bank of St. Louis, buyers who made smaller down payments were more likely to default during “unfavorable economic circumstances, such as a housing market slowdown or job loss.”
  • A recent analysis showed the median down payment in nine major U.S. cities rose to 22 percent last year on properties purchased with conventional mortgages.  That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.
  • Higher borrowing costs and larger down payments could cause housing prices to decline further, analysts say.  For now, borrowers who can’t afford such amounts are turning to alternative programs, such as loans for veterans or those backed by the Federal Housing Administration.  Some industry experts say this has created a nonconventional mortgage market for riskier borrowers and those who don’t qualify for conventional loans.

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For all your real estate needs Call
John J. O’Dell
Real Estate Broker
(530) 263-1091
Email jodell@nevadacounty.com

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Real Estate

Cal HFA Offers New 30 Year Mortage


The California Housing Finance Agency (CalHFA) announced this week the launch of a new fixed-rate, 30-year, FHA-insured mortgage program for low- and moderate-income home buyers.

MAKING SENSE OF THE STORY FOR CONSUMERS

  • CalHFA provides financing and programs for low- and moderate-income Californians.  The program announced this week enables qualified, first-time home buyers in California to receive a 30-year mortgage with a fixed interest of approximately 4 percent.
  • The CalHFA program includes upfront mortgage insurance, which is required for most FHA- insured home loans.  Borrowers are eligible to use the California Home buyer’s Down payment Assistance Program, which can provide up to 3 percent of the purchase price of the home for down payment or closing costs.
  • In addition to being a first-time home buyer – defined under federal law as not having owned and occupied a home for the past three years – borrowers also must meet income limits, which vary by county and family size.  Income limits can be found on the CalHFA Web site at http://www.calhfa.ca.gov/homeownership/limits/income/income-main.pdf.
  • Borrowers also must purchase homes within FHA’s loan limit and CalHFA’s sales price limits.  Mortgage loans are limited to $417,000 under FHA guidelines, while CalHFA’s sales price limits vary by county.
  • Additionally, borrowers must meet the minimum credit score requirements and maximum debt-to-income ratios and complete a HUD-approved home buyer education program.  More information about the CalHFA program can be found at CalHFA Home Page.

Read the full story.

Real Estate

New Federal Reserve Rules to Protect Consumers From Abusive Lending Practices

Getting a mortgage in the hay day of the housing bubble was sometimes a very costly adventure.  Some mortgage brokers would try to steer the borrower into  loans that gave the  broker the most points (a point is one percent of the loan) to them. In other words, they would pick a lender that gave them the most money for originating a loan with them. Some mortgage companies and banks would add un-necessary fees to increase their profit margin when originating a loan.

The Federal Reserve Board has  issued new rules to protect consumers from abusive mortgage lending practices.

The new regulations, which take effect April 1, 2011, will ban lenders from paying mortgage originators more for putting borrowers in more expensive loans. Consumer advocates have long decried the incentive, known as “yield spread premium,” saying it steers homebuyers into loans with higher interest rates.

Under the new rules, lenders will also have to disclose how borrowers’ payments could change over time, including the maximum amount that could be owed under an adjustable rate loan. Homebuyers will also have to be told about any balloon payments due at the end of the loan’s term.

The Federal Reserve has been tightening mortgage lending regulations in the wake of the housing bust. The Wall Street reform act recently passed by Congress includes similar provisions, but also addresses practices not covered by the board’s new regulations. The Fed plans to implement the act’s provisions in the future

By the way, the regulations are not in effect yet, so shop around when you are getting a mortgage. Ask how many points the lender is going to charge you and what other costs are they going to tack on to get your loan. Question each cost item that they are going to charge you to originate your loan. Compare closing costs among several companies to see which one is the cheapest and gives you the best interest rate. Compare what they told you verbally to what they put in writing.

Real Estate

Banks Paying For Their Bad Loans

Countrywide ad before they had to be taken over by Bank of America
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

Real Estate

New Rules for FHA Loans Makes It Harder to Get a Loan


Due to its wreaking financial problems, the Federal Housing Administration is tightening its lending requirements.

  • The FHA is federally mandated to maintain reserve funds at 2 percent or greater.  As of November, the agency reported that its fund had declined to .53 percent.  The funding is used to cover losses on mortgages insured by the FHA that go into default.
  • Loans insured by the FHA generally are less expensive to borrowers because of the lower down payment requirements.  However, these loans also have fees, such as up-front mortgage insurance.  To help the agency raise its cash reserves, the FHA is increasing the up-front mortgage insurance premium from its current 1.75 percent to 2.25 percent.  HUD released a Mortgagee Letter today making the premium increase effective in the spring.
  • The agency also is raising the minimum credit score requirements.  Currently, borrowers with FICO scores as low as 500 have been approved for FHA-insured loans.  Under the policy changes, new borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA’s 3.5 percent down payment program.  New borrowers with less than a 580 FICO score will be required to put down at least 10 percent.  FHA expects this to take effect in early summer once it passes the normal regulatory process.
  • The new policy also will reduce the amount of money sellers can provide to home buyers at closing to 3 percent, down from its current 6 percent, of the home’s price.  The change brings the agency in line with industry standards and removes the incentive to inflate appraisals.  The FHA expects this to take effect in early summer after it passes the normal regulatory process.

Source: CNN Money