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I would like to know what an asset manager does.  I mean, besides misinterpret purchase contracts and impose per diem fees to buyers when closing delays are caused by the seller.

I'm sure it's a stressful job, protecting the interests of those poor little banks.  I empathize, really I do.  But it's hard for me to comprehend how an asset manager, in good conscience, can make the decisions that they do.  Decisions that hurt a family trying to buy their home.

Maybe I should be specific.  In a purchase offer of $280,000, and FHA financing, seller concessions are asked for in the amount of $8000.00.  The bank accepts the offer and sends over their standard addendum which states $8000.00 is to be given for buyers closing costs. 

We move along towards closing, overcome a number of bumps and obstacles along the way, and finally get to the closing table. The lender asks for an addendum to the contract stating that the seller's concessions may be used for both recurring and non-recurring costs.  They say FHA considers "closing costs" to be non-recurring only so the addendum needs to specify recurring costs too.  They admit this is nowhere in print that they know of, but it was an issue in their FHA "test files," so they need the addendum.

Yes, I know, that sounded a bit weak, but with FHA cutting off lenders left and right for lack of compliance, I was not going to win that argument.

So the buyer's agent sends the addendum to the listing agent who sends it to the asset manager.  She doesn't sign it. She references a line of the bank addendum that says the seller will only pay those closing costs that local custom or practice allocate to the seller and any closing costs agreed to in section X.  Section X is where they agreed to the $8000.00. 

So what's the problem? (This statement must be read with a Brooklyn accent to fully appreciate the sarcasm)

As far as "local custom or practice," well, in Nevada, the local practice is to follow what the contract says.  Again, what's the problem? (Don't forget the accent)

So, in the end, the borrower lost out on about $2000.00 of sellers concessions because the asset manager would not sign the addendum, even though signing it would not have changed the bank's bottom line from the original agreed upon amount.

Lesson learned for me?  Tell all the agents I work with to make sure and specify in the original contract that seller concessions are to be used for recurring and non-recurring closing costs.  That way if the bank's counter offer or addendum doesn't stipulate otherwise, the original contract terms will be honored.

Well, at least honored by the lender.  I don't know if the asset manager would honor it or not.  They are going to try to squeeze any additional money they can out of the deal.  And I understand - it's their job.  It's how they manage assets.  But c'mon, doesn't fairness and common sense come into play here at all?

My second case in point.  A contract states a per diem fee of $50.00 a day for every day that a deal goes past the initial closing date - if the cause of the delay is not due to the seller.  We are moving along ok, time wise.  Then the appraisal comes back $15,000 below the purchase price.  It's an FHA loan.  The seller has to agree to reduce the purchase price for us to continue.  The addendum to reduce the price and a copy of the appraisal are sent to the asset manager.

We wait.  and wait.  and wait.  For a week and a half we wait for the seller's answer.  Finally, they agree to the lower price.  We go to closing.  The buyer's are hit with a per diem fee, including the week and a half we waited for the seller to make up their mind about the purchase price.  The buyer's agent sends an addendum requesting that the days it took the bank to approve the lower purchase price be removed from the total per diem calculation.  A reasonable request, right?  Nope.  Not according to the asset manager.  The buyer was still charged for the delay, even though doing so was a direct contradiction to the wording of the purchase contract.

Both buyers got their homes.  In the first case, the buyer's agent credited the difference and in the second case, I did.  And the banks squeezed a little more money out of the deals for themselves.  Guess those asset managers will be getting a bonus.

     In this ever changing mortgage market, even a buyer with perfect credit can have delays in their loan process.  With many sellers imposing fines for deals not closing on time, these delays can be costly to the borrower.  By following a few do's and don'ts, all the parties in a transaction can ensure a smoother and quicker closing.

BUYERS

1. DO get your documentation to your loan officer quickly.  That missing W2 or paystub means the loan can't go into underwriting.  If your contract has a stipulation for a full underwritten loan approval by a certain date, and it's not met, it could mean you lose the house.  There are several steps to the loan process, and if one is delayed, it delays all of the steps after it. 
2. DON'T change jobs in the middle of the loan process.  This may seem like a no-brainer but some buyers think that it's not a problem as long as they have another job lined up that can be verified.  The problem is that most lenders will not let the loan close without a paystub reflecting 30 days worth of pay at the new job.  Delays like this put the closing and earnest money at risk.
3. DO be honest with your loan officer.  If you've been late on your rent, for instance, or had a job gap, let your loan officer know so they can figure out the best way to overcome the issue.

REALTORS

1. DO specify in the purchase offer that seller concessions are to be used for both recurring and non-recurring closing costs, especially if it's an FHA loan.  FHA has defined "closing costs" as only non-recurring, so lenders are requiring an addendum stating that the seller concessions are to be used for both.  It prevents closing delays if this is specified in the initial offer.
2. DO make sure the contract given to the loan officer is legible, completely filled in, and signed by all parties.  By the time a contract is faxed to the listing agent, then back to the selling agent, then to title, it can be very hard to read.  Investors are asking lenders for legible, fully signed copies of the contract.
3. DON'T forget to let the loan officer know if there are any minor repairs that may need to be done to the property so that it meets lending guidelines.  It's not a good surprise for the loan officer to find out repairs are needed when the appraisal comes back.  Addressing the repairs up front avoids delays.  Also, if it's an FHA loan, make sure the utilities remain on in the property until the appraisal is done.  The appraiser has to certify that the property meets FHA guidelines and to do this the utilities have to be on.

LOAN ORIGINATOR (You didn't think I'd leave myself out, now did you?)

1. DO give an accurate estimate of closing costs to the buyer.  This isn't a mere "do" this is required by law.  Many title companies have their fees listed online, so it isn't difficult to quote a fairly accurate amount for escrow fees, lenders title insurance, courier, inspection, and endorsement fees.  Sometimes the fees are higher if the seller is a bank, so you may want to overestimate a little until an estimated hud is available.  Don't forget to include transfer tax and owner's title insurance.  Estimate for prorations and HOA transfer fees, and don't forget to include the realtor transaction, or doc fee, if there is one.  It's a good idea to provide the buyer with a worksheet which shows their total funds to close estimate, as well as the required Good Faith Estimate.
2. DO look over the documents the buyer provides to forsee any issues.  If you just pass them on to the loan processor, you may miss some important information.  Check for large deposits that show on the bank statments and ask for proof of what they are.  If the W2s provided don't match the employment information given, ask for more details.  Any issues that you can resolve up front will avoid delays later on in underwriting.
3. DON'T leave your borrower and selling agent in the dark.  Update them regularly on the progress of the loan.  If an issue comes up that could delay closing, such as an appraisal review, let the buyer and realtor know so there are no surprises.

     Getting a mortgage loan closed is a team effort now, more than ever before.  Whether you are a buyer, realtor, or loan officer, being aware of these do's and don'ts can avoid a doosie of a delay in your loan closing.

Fannie Mae just announced a 3.5% buyers incentive for buyers that close on a Fannie Mae owned home. The incentive is based on the final purchase price and can be used towards closing cost or the purchase of new Whirlpool appliances, or a combination of the two.

To be eligible for the incentive the following guidelines must be met:

1. Offers must be accepted on or after January 28, 2010
2. Property sales must close before May 1, 2010
3. Buyers must be owner-occupants, so Investors are excluded

Neither Homepath.com nor Efanniemae.com specifies whether Home Path financing must be used to qualify or if FHA financing can be used. It appears that either will qualify.

I was unable to find more specific information regarding the incentive, such as if it is in addition to negotiated seller concessions in the contract. Also, Fannie Mae current guidelines state that the maximum seller concessions allowed on a 97% or 95% purchase are 3%, so they must have a waiver for this incentive. I'll be doing more research next week to find the answers to these questions and will update this blog when I find it.

Lenders that offer Home Path financing have their own overlays to the Fannie Mae guidelines, so it would be wise to check with your particular lender to make sure that they will honor the incentive.

I thought I would share a little information on the Home Path program. It’s a great program for those buying Fannie Mae owned properties and is not restricted to first time homebuyers or owner occupants only. A few perks of the program are:

1. 3% down available with a 720 fico score for owner occupied purchases
2. 10% down for investors with a 680 fico
3. No mortgage insurance is required
4. No appraisal is required

A few downsides are:

1. Only 3% seller concessions allowed on owner-occupied purchases (with the exception of the new incentive)
2. Maximum debt to income ratio allowed is 45%
3. Higher rates than other programs
4. Less likely to approve borrowers with past collections, despite good fico scores
5. If you are purchasing a second home or investment property with Home Path financing, you must already own a primary residence

If you would like to see if you qualify for the Fannie Mae Home Path program, give me a call and I would be glad to pre-qualify you.

I’m going to rant a bit here. If you don’t like sarcasm or have an affinity for contradictory regulations, you might want to stop reading and head on over to a government website. I’m also going to give a disclosure for consumers who might have googled “respa” or “new GFE” and found themselves here to educate themselves on the new laws. If that’s you, you will want to read my blog just prior to this one, which I wrote especially to educate consumers about how the new RESPA changes will affect them.

This blog is for mortgage originators. Actually, it’s more for me, because I am thoroughly confused after reading HUDs “RESPA Rules FAQs.” This is a Q and A document of 52 pages meant to clear up any confusion about the new RESPA rules, the new Good Faith Estimate (GFE), and the new HUD 1.

Now, mind you, I didn’t put off reading this until now. It’s been published for a few weeks at least and I did read it at the end of the year. I was confused then too. I thought it was just me and if I talked to others in the industry, went to a few classes about it, and googled more info on it, that it would all be made clear to me.

I found out everyone else in the mortgage industry is just as confused as I am. I’m so glad I’m not alone. I would love to be able to enlighten my originator comrades and dazzle them with my keen grasp of the new RESPA rules and zoom up to the top of the google search engines because this blog was bookmarked and read by them all. Yeah. But I can’t. What I can do is entertain you with a few of the glaring inconsistencies and contradictions.

Lets start with the question of whether or not an originator can give a borrower a GFE if they don’t have all 6 of the pieces of information that constitute a loan application. That seems to be a popular question among broker forums. HUD clears that right up:

Q: When does a loan originator have to issue a GFE?

A: A loan originator must issue a GFE no later than 3 business days after the loan originator receives an application or information sufficient to complete an application. Application is defined as the submission of a borrower‘s financial information in anticipation of a credit decision relating to a federally related mortgage loan, which shall include the following: (1) borrower‘s name, (2) borrower‘s monthly income; (3) borrower‘s social security number to obtain a credit report; (4) property address; (5) estimate of value of the property; (6) loan amount and (7) any other information deemed necessary by the loan originator.

Q: May a loan originator issue a GFE if the loan originator has not received one of the six pieces of information included in the definition of an application ummmm, didn’t they just say 7 things? (borrower‘s name, borrower‘s monthly income, borrower‘s social security number, property address, estimate of the value of the property and mortgage loan amount sought)?

A: An application includes information the loan originator requires the borrower to submit in anticipation of a credit decision. If a loan originator issues a GFE, the loan originator is presumed to have received all six pieces of information.

Come again?? So, was that a yes or a no?? Can you repeat that?

Q: Are loan originators permitted to process a loan without all six pieces of information included in the definition of an application?

A: Yes. Loan originators may process a loan after they have issued a GFE and the borrower has received the GFE and has decided to proceed with the loan. It is presumed that, prior to issuing a GFE, a loan originator has received all six pieces of information.

Huh??

So we can provide a GFE without all 6 (or 7) pieces of information, but if we provide a GFE it’s assumed we’ve gotten all 6 (or 7) pieces of information? Did politicians write this?

It gets better. If you’re like me, you used to provide your borrowers that you’ve pre-qualified (and that’s a full pre-qualification, including seeing proof of income and assets)  with a good faith estimate so they can have an idea of how much they will need to come to close with - before they go out looking for a property. Most homebuyers like to know that.

Under the new RESPA rules, we cannot change the fees on the new GFE unless the circumstances prompting the change are officially deemed “changed circumstances” (unless the GFE expires). Surely a homebuyer who was in the process of looking for a property, and then found one, would be subject to “changed circumstances,” right? 

Q: Are the following sufficient to establish ?changed circumstances consistent with 24 CFR § 3500.7(f)?

ii) If a GFE is issued without a property address, the later identification of a property address.

A: If a loan originator issues a GFE without identifying a property address, the subsequent identification of the property address is not considered a changed circumstance.

But on the other hand....

v) The property address provided by the applicant, turns out to not be the correct, legal address.

A: This could constitute a changed circumstance.

Mmmmm, K. Let me get this straight. Client hasn’t found a house yet and we give them a GFE, we are locked into the fees stated until the GFE expires. But if client tells us address is “street” instead of “court”, then it’s ok to change it?

Clear as mud.

What I really love is how they have added “fortune teller” to our title. We have to forsee any errors or unexpected fees on the part of anyone in the transaction and estimate the GFE accordingly or we will pay for it. And if title doesn’t provide us with an estimated hud in time for us to give the borrower their GFE within the 3 days mandated by law, we will really be putting those fortune teller skills to use.

It’s going to be a challenging year for us all, and title companies, and Realtors, too. But if we made it this far and have dedication and integrity….and a sense of humor, we’ll get through it.

To read the “RESPA Rules FAQS” for yourself, go to:

http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs.pdf

If you are applying for a mortgage in the coming days,  your loan officer will be showing you the new good faith estimate form developed by HUD as part of their RESPA reform.  HUDs intentions were to make the consumer aware of all of the costs involved in getting their home loan, help them to be able to shop around for the fairest deal on a home loan, and avoid the consumer being overcharged.  These are noble intentions, but the resulting new good faith estimate is confusing and a little misleading.

For starters, you would expect a three page document that discloses all of the fees and costs of your loan to actually tell you how much money you need to come to the table with when it's time to close.  It doesn't.  You might also expect it to tell you what your monthly mortgage payment, including taxes and insurance is.  It doesn't.  You might expect that surely you would have to sign it to signify you accept it and understand it.  No, you don't.

What does it do?  It holds your mortgage loan originator, or loan officer, responsible for the exact and correct fees by all the parties involved in closing your loan.  If the title company says escrow fees and title insurance are a certain amount, and the actual fees are more than 10% over the estimate, your loan officer pays for the difference.  Period.  If title says, "oops, sorry bout that, we misquoted - my bad," doesn't matter.  You, the homebuyer, are not responsible to pay the higher incorrect charge.  Is this protecting the consumer against surprises at the closing table?  Absolutely.  Is it a tad unfair to the loan officer to be the scapegoat for everyone else's misquotes?  Absolutely.  But again, the powers that be are over compensating for past mistakes.

Honestly, this will weed out loan originators who are not in this business for the right reasons - if there are any like that left.  Those of us who have persevered thus far and are still doing loans are standing among rows and rows of fallen loan officers.  Those of us who take our business seriously and who are truly looking out for the best interests of our clients will embrace - well, maybe that's too strong a word - will adapt to this change.  And change is what our take home pay will be on the first few deals of the new year!   But then again, kidding aside, the loan officer is the one who provided the good faith estimate of all the costs to the best of their knowledge to the homebuyer, so maybe he is the one who should be held responsible for them.  Whether it's fair or not, it is what it is and we'll figure it out.  But I didn't write this blog for mortgage professionals, I wrote it to help consumers understand the changes.

So what else is different about the new good faith estimate?  You won't see the lender fees broken out on this version.  All of the lender, broker, processing,  and appraisal fees are lumped together on the first line.  The second box is an especially fun and confusing one - it will be a credit or a charge or it could be zero.  The third line is the difference between line 1 and 2 - or basically the actual net charge to the homebuyer for the lender, broker, and appraisal fees. 

So, what determines the amount that goes in box 2?  If your loan officer is receiving yield spread premium, that will reflect as a credit in box 2.  Yield spread premium is part of the loan officers compensation paid to them by the lender and it is added into box 1.  This compensation can affect the rate you are given on the loan and that's why box two is worded the way it is:  "You receive/pay a credit/charge for this interest rate of X."    If, for the rate you want, there is a cost, and no compensation or credit, then box 2 will show a charge and it's an extra amount you have to pay in addition to what's in box 1.  Whether box 2 is a credit or a charge, box 3 will reflect the net charge to you.

The yield spread premium  was disclosed on the old good faith estimate, but in a different way.  It didn't show as a credit to the homebuyer.  How it can be considered a credit when it is added into box 1, is a mystery to me, but a credit is what HUD is calling it.  If box 2 contains zero, then  your loan originator is not getting paid yield spread premium.  That doesn't necessarily mean they aren't getting compensation from the lender.  If they work for a bank or a lender that funds the loan then sells it right away to a bank, they don't have to show their compensation in box 1 then credit it back in box 2.   It's really just all a technicality in how brokers and bankers are paid.

The fact that affects all loan originators the same is that the number in box 1, for the most part, cannot change.  There are a few circumstances where it is allowed, but they must be very specific and be documented.

Boxes 3 through 7 on the new good faith are for third party and title fees.  If you choose a third party service that is recommended to you by the loan officer or other person in the transaction, the final fees for these services cannot be more than 10% higher than the estimates given in these boxes.  Box 8, property transfer tax, cannot be wrong by any amount, while boxes 9 through 11 - reserves, daily interest charges, and homeowners insurance, are not subject to any set limits.

One helpful revision to the good faith estimate is that the dates that the estimate is good through are very specific.  It can expire after 10 days and will need to be re-issued to you with any changes to the rate.  When your rate is locked, you will know exactly how long the rate lock is good for.

As always, knowledge is power.  If you plan on buying a home anywhere in the country, knowing your rights under the new RESPA revisions and understanding what those revisions mean to you will empower you to feel confident at the closing table.  For the HUD settlement charges booklet, and more helpful information for homebuyers, click the link below. 

If the new good faith estimate is confusing to you, don't be intimidated.  We are all learning it together.  Your mortgage professional can answer any questions you have.  If you haven't pre-qualified for your home loan yet, and you live in a state I am licensed in, I would be happy to help you. 

     Fannie Mae and Freddie Mac have finally expanded the guidelines of the Home Affordable program in an effort to help more homeowners. Under the current guidelines, you could not be more then 5% upside down in your property. For most homeowners, that was just not going to work.

     For the Fannie Mae program (Refi Plus), if you refinance with your current lender you can now go up to 125% of the value of your home. This just applies to your first, Fannie Mae owned mortgage. If you have a second mortgage, they will still allow the second to stay in place behind the new first up to any loan to value. That is, if the second mortgage holder will agree to do that. This is good news for many homeowners.

     Another piece of good news with the expanded guidelines is that starting September 19^th, you can use your favorite loan officer from a broker or bank to refinance your Fannie Mae loan and still go up to 125% of the value. This program is called the DU Refi Plus program. Making the higher loan to value available to all mortgage loan professionals will mean shorter processing times from application to closing and better service for the consumer. 

Unfortunately, if you have mortgage insurance on your current loan you will be limited in your choices for who can help you with your refinance. Talk to your mortgage professional and let them know who your current loan is with and that you have mortgage insurance and they will let you know if they can help you or if you have to call your current lender.

Here is the announcement in full from Fannie Mae: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0926.pdf

For any mortgage professionals reading this, this matrix is helpful in deciphering the differences between the DU Refi Plus and the Refi Plus: https://www.efanniemae.com/sf/mha/mharefi/pdf/refiplusmatrix.pdf

For those of us who live in Clark County, Nevada, 125% is not going to help us much. Most of us are upside down by quite a bit more than that. However, If you are a homeowner who put a fair amount of money down (20% or more) then maybe this program can help you. The other good thing about the Home Affordable program is that it can be used for an investment property or second home as well as a primary residence.

The Freddie Mac Home Affordable program has been expanded also. It too allows you to refinance up to 125% of the value of your home. The amount of closing costs allowed to be rolled into the loan were increased to $5000 or 4%, whichever is less. This means that you may not have to come out of pocket for closing costs.

As of October 1^st, the Freddie Mac program will allow you to go to your favorite loan officer to originate a Freddie mac Relief Refinance (their version of the Fannie Mae Refi Plus). This means more choices for the consumer. Like the Fannie Mae program, you will be limited if you have mortgage insurance on your current loan.

For more information about the Freddie Mac Relief Refinance program, go to: http://www.freddiemac.com/sell/factsheets/relief_refi_open_access.html

These expanded guidelines mean that potentially more homeowners can benefit from the Home Affordable program. If you would like to know if this program can help you, call your mortgage professional and ask. If you don’t have a mortgage person that you normally use, and I am licensed in your State, I would be glad to assist you. Please call or email me with any questions.

     If you've been waiting for the right time to buy a home, now might be it.  The Housing and Economic Recovery Act of 2008 has expanded the first time homebuyer tax credit for 2009.  The maximum credit is $8000.00 instead of $7500.00, it does not have to be paid back like the 2008 credit does, and you have until December 1, 2009 to get it.  There are a few facts about the credit that you should be aware of.

     The amount of the credit is 10% of the purchase price, up to a maximum of $8000.  So if you purchase a fixer upper for $50,000, your credit amount would be $5000.  If you buy a house for $150,000, even though 10% is $15,000, you are maxed at $8000.

     Only first time homebuyers can claim the tax credit.  A first time homebuyer is defined by IRS as "a taxpayer who has not owned another principal residence at any time during the three years prior to the date of purchase."  If you are married and your spouse owned a primary residence in the last 3 years, but you did not, you don't qualify.  If you are not married, but are buying a primary residence in 2009 with another person, and that person owned a primary residence in the last 3 years, you still qualify for the credit.  A little biased against married folks, but it is what it is. 

     If you owned a property, but it was an investment property or second home, and you purchase a primary residence in 2009, you do qualify.  Interestingly, if you owned a primary residence outside of the United States, you still qualify for the credit.  The home you are purchasing however, needs to be in the United States.  Non-resident aliens do not qualify for the credit. 

     Another interesting fact is if you bought a primary residence a few years ago, then moved out of it and made it a rental or second home, as long as it has not been your primary residence for 3 years or more, you qualify for the credit. 

     You need to be aware that you do not qualify for the credit if you buy a home from a close relative, such as a spouse, parent, grandparent, child, or grandchild.  Step-family doesn't count.   If the home does not remain your primary residence for 3 years after the date of purchase, you have to pay all of the tax credit back in the year that it stopped becoming your primary home.  Ouch!  Obviously then, you can't purchase the home, sell it the same year and claim the tax credit.  There are also income limits which will restrict how much of the tax credit you receive.

     The great thing about the credit is that it either directly reduces your tax bill, or increases your refund, dollar for dollar.  What this means is, if you owe $3000 on your taxes, and get the credit of $8000, then you will receive a refund of $5000.  If you are due a refund of $500 without the tax credit, with the tax credit your refund would be $8500.  That's a nice chunk of change to use for decorating your new home!  Even if your income is tax exempt, you still qualify to receive the credit.

     Now the big question you may be wondering is:  Can I use the funds at the closing table towards my down payment and closing costs?  The answer is yes, in some states.  Unfortunately, Nevada isn't one of them yet.  FHA allows for state agencies, like the Nevada Housing Division, or non-profits, to basically give you the credit up front to help with your down payment and closing costs.  Some states have already put programs in place to do this, but Nevada has not done this yet.  It appears from their website they are working on it, but they need to hurry because the purchase must close before December 1, 2009 to even qualify.  With short sales taking months to close, time is running out.

     If you live in a state that does have a program for you to use the money upfront, be aware that you still have to have your minimum required 3.5% down payment.  The credit can supplement your down payment, not replace.  It can also be used to cover closing costs. Check with your state housing agency for details.

     The IRS site has some helpful questions and answers and addresses specific scenarios, so be sure and check it out here:  http://www.irs.gov/newsroom/article/0,,id=206291,00.html

     If you have questions that aren't addressed at the IRS site, ask your tax preparer. 

     Remember that you need to allow at least 30 days for your purchase to close, more if it's a short sale.  If you want to take advantage of the tax credit, you should be actively looking for properties now and ready to make an offer on something very soon.  You must close on your purchase before December 1, 2009 to qualify.  Don't procrastinate and let $8000 slip away!  Call me and I can tell you how much you qualify to purchase.    

     I just realized that it's been quite a long time since my last blog.  It isn't for lack of mortgage related topics to write about, or because I don't care to express an opnion or educate folks about recent happenings in the mortgage industry.  Truth be told, I've been busy originating and processing loans, trying to help borrowers who are upside down in value or who have decided to jump in and purchase right now.  Not that anybody is sitting with bated breath, waiting for me to type up an opinion, but I thought I would mention it.

     Speaking of waiting with bated breath, the long awaited Home Affordable initiative is in full force.  Well, sort of.  It passed congress and now the lenders, whose cooperation is vitally needed for this initiative to help anyone, are scrambling to figure out how they will be implementing it.  There are two pieces to this initiative - one that affects refinancing, and one that affects loan modifications.  I'm going to focus on the refinancing piece.

     Before you get too excited, know this - if you are more then 5% upside down in your first mortgage, this initiative won't help you.  I have talked to many homeowners about doing a short refinance, and all of them are upside down by at least 35% here in Clark County, Nevada.  For those folks, if their lender will cooperate, a short refinance is a much better alternative.  Nonetheless, here are some details of the Home Affordable initiative.

YOU MUST CURRENTLY HAVE A FANNIE MAE OR FREDDIE MAC LOAN

There will be a website set up where borrowers and lenders can go, key in an address, and find out if the property has a Fannie Mae or Freddie Mac loan.

FANNIE MAE REFI PLUS OR DU REFI PLUS

If you currently have a Fannie Mae loan, and you call your loan servicer, or current lender, and they refinance you using this program, it's a Refi Plus loan.  If you go to your favorite loan officer or broker and ask them to do it, it's called a DU Refi Plus program.  They are basically the same thing, except the Refi Plus seems to have less income documentation requirements.

FREDDIE MAC

Freddie Mac is calling their program Freddie Mac Relief and is only offering it to servicers of Freddie Mac loans.  This means if you have a Freddie Mac loan, you can only get this program through your current lender.

OCCUPANCY TYPES

Both Fannie and Freddie are offering the program to owner occupied, second homes, and investment properties.  If your property is now an investment property or second home, the original loan had to be written that way to qualify. 

LOAN TO VALUE

The maximum loan to value is 105% for both Fannie and Freddie under this program.  If you have an existing second, it can subordinate to the new first and there is not a combined loan to value restriction. 

For example, let's say  you paid $200,000 for your home and you have a first loan for $160,000 and a second loan for $40,000.  Let's say your home is now worth $157,000.  you could do a new first loan for $164,850 (105% of $157,000), which would pay off your first, and pay for closing costs.  Then if your second lender agrees to subordinate, it would go behind your new first loan.  Your new combined loan to value would be 130%, but you would still qualify for the Home Affordable program since there is no combined loan to value (CLTV) limit.  This might be a good option if your first mortgage is at a higher rate then current rates, or if it is an adjustable rate mortgage.  One of the problems with this program is that the second mortgage holder would have to agree to it.  Historically, second lien holders are not very willing to subordinate to a new first mortgage.  It puts them at a higher risk then they already are.

You cannot pay off the current second mortgage with this program, or get a new second mortgage.  Your existing second would have to agree to go behind your new first mortgage.  This means you would still have your second mortgage payment and still be upside down in value.

QUALIFYING

There are no minimum fico score requirements for the Home Affordable program.  The standard Fannie Mae guidelines regarding bankruptcy and foreclosure still apply.  I haven't seen any details on whether mortgage lates would be acceptable, but the lenders will no doubt implement some guidelines on this.  You can refinance using this program after April 1, 2009.

MORTGAGE INSURANCE

If your original loan did not have mortgage insurance, then you will not be required to have it under the Home Affordable program.  If you did have mortgage insurance before, then you will need to have it again.  Therein lies another of the problems with this program - it depends upon the cooperation of the mortgage insurance companies, most of which don't insure properties in declining markets above 90%.  Las Vegas is definately a declining market.  So we shall see what happens.

     Lenders will be coming out with details and their own overlay of requirements within the next couple weeks.  I hope this initiative can help folks who need it.  My initial reaction though, is disappointment.  I had hoped it would encourage lenders to accept short payoffs and allow homeowners to refinance their mortgages down to the market value of their homes.  This would discourage people from walking away from their homes, and would lower people's mortgage payments so that they can afford to stay in their homes.  The cap of 105% LTV rules out 75% of the market in Las Vegas.

     I am an eternal optimist though, so if you think you may benefit from this program, or don't know if you do or not, call your lender, or your favorite loan officer, and ask.  You may be one of the few that it could help.  

FOR MORE DETAILS ABOUT THE HOME AFFORDABLE INITIATIVE

GO TO http://www.financialstability.gov/

One of the last ways for a homebuyer today to acquire a home with no money down may be a thing of the past very soon.  Down Payment assistance programs, once allowed by FHA, will be discontinued as of October 1, 2008.  Actually, most lenders stopped accepting loan submissions involving this program as of about the middle of September because the loans need time to close and then be insured by FHA and no lender wanted to be left holding the bag on an uninsurable loan.

The way Down Payment Assistance programs worked was this:  The seller agreed to donate 3% of the purchase price of the home to a non-profit group (such as Nehemiah, Genesis, etc...) plus a fee ranging from $300 - $500.  The non-profit group then "donated" the 3% to the buyer for their down payment.  Yes, we all knew the down payment was really provided by the seller for the buyer, but if the seller was willing to do it, and they buyer qualified for an FHA loan, then it was a great way to get buyers into homes. 

It has been especially useful recently, since virtually every other way for a borrower to get into a home with no money down has disappeared.  With the overabundance of homes on the market, and many of them bank-owned, even the banks were willing to donate the buyer's down payemnt to move the foreclosed homes off the market.  Personally, 80% of the purchases I have done in recent months involved down payment assistance from the seller.

Have the lending guidelines over the past few years been lax? Yes.  There were many mortgage loans that should not have been made--that's an extreme understatement.  Were FHA guidelines too lax?  In my opinion, no.  FHA loans have always been "make sense" loans.  If there are credit issues, explain and prove the reason for them.  If there was a hardship responsible for the credit issue, prove it.  If there were collections that should have been paid and weren't, pay them.  FHA loans were not subprime loans, they were common sense loans.

FHA borrowers are good borrowers who meet all the guidelines the government asks of them to insure their loans.  Is now really the time to restrict the pool of buyers even more by eliminating the last "no-down" program out there for non-veterans?

There is another bill, H.R. 6694, that if passed, will allow seller funded down payment assistance programs for certain borrowers.  Borrowers will have to have a minimum of a 620 fico score to qualify for down payment assistance and even at that, will have higher rates and higher mortgage insurance premiums.  Borrowers with 680 fico scores will qualify without higher rates.

H.R. 6694 seems to be the "happy medium" for banks and legislators today.  It will allow no money down programs for FHA borrowers, but put restrictions on it so that borrowers have some accountability for their actions.  Not a bad compromise in my opinion.

So how do you not feel like a loser if your home is foreclosed on?  I asked this question to my husband and he said, "You are not a loser if you bought a ticket on the Titanic, you just get to go swimming with a lot of other people."  That's why I love him.  He says stuff like that.

As it turns out, many of us who purchased homes with two or three year adjustable rates in 2005 or 2006, were buying a ticket on a sinking ship.  Unlike the titanic though, we all will survive this, and guess what, home appreciation will begin to go back up, it always does.

In the meantime, how do you deal with losing your home to foreclosure?  We put our hearts into our houses to make them homes and when our home is taken away from us, we feel a considerable emotional loss.  We're sad and we feel like we failed and we kick ourselves for buying at the wrong time, or not choosing the fixed rate, or not saving money to get us through tough times.  Stop, take a deep breath and put things in perspective.  Remember that in the end, we wouldn't call it home if our family weren't there with us.  If something happened to our spouse or one of our kids, it wouldn't matter where we were living or what we owned, because we would trade it all to have them back.  We wouldn't trade our family for our house though.

As devastating as a foreclosure is, you can recover from it, emotionally and financially.  Sure, you may have to rent for a while, but a rented house is still a home if your loved ones are there with you.  Save your money because mark my words, sooner or later a lender will come out with a loan program designed for people with a recent foreclosure on their credit.  They have to, because otherwise no one in the near future could qualify to buy a home again. It will require a down payment, and be a fixed rate, and we will have to prove we can afford it, because we're all a little wiser.

That's what bad experiences are supposed to do, make us wiser, and stronger and appreciative of the good things in our lives.

Now, is that the Carpathia I see in the distance, or is that another iceberg....

Did I mention it helps to have a sense of humor?