What’s with All the HUD Emails?

What’s With All the HUD Emails?

Karen Deis, Publisher, www.MortgageCurrentcy.com

I don’t know what’s happening at FHA lately, but they seem to be back-pedaling A LOT lately, and worse yet, modifying some of the mortgagee letters by sending an “email” instead of a “formal notice.”

Here are a couple of things HUD has updated that will affect your origination business right now.

First, FHA has delayed the $1,000 collection, disputed account, identity theft rule (ML 2012-3) from last month until July 1st (which means Case Numbers issued after that July 1st date—not the loan app date). Go through your files and search for the deals that you killed because of this rule—and get them closed. What we expect is a modified version of this rule down the road. So stay tuned.

Another email from HUD clarified that reducing the term of a mortgage on a streamline refi will also meet the net tangible benefit test. The big deal here is that previously it did not apply to streamlines, and now it does.

So, in yet another email, HUD gave step-by-step details on how to cancel case numbers on streamline refis and special instructions for streamlines that require an appraisal. HUD has updated the streamline refi worksheet that you should have started to use on April 6, and an updated FHA TOTAL Scorecard Guide came out on March 15.

Okay, enough about FHA and on to HARP 2.0. Fannie just updated their FAQ on March 15 and updated five of the questions. The biggie here is the addition of question 59, where Fannie says you can add a non-occupant borrower to the refi plus and DU refi plus loans. What are some of the reasons you would want to do this? One reason would be that on a manually underwritten loan, where the payment increases more than 20%, you might need additional income to qualify. Another reason would be to add a child, spouse, brother, or sister who has limited credit to help them establish a mortgage credit history.

The other questions that were updated are: Can you refi if the loan is in a trial modification period?

Does a DU refi plus loan for a property located in a condo project, have to have a condo project review?

How do you use DU to find the standardized address if DU gives you a property mismatch warning?

Which types of transactions are eligible for a DU Refi Plus field work waiver? By knowing which types of loans qualify for waivers—and there are five types—you will not only save your borrowers the appraisal fee, but you’ll be their mortgage hero.

In this issue, you’ll find the very first ever Mortgage Talking Points for consumers: What You Need to Know about HARP: Home Affordable Refinance Program. (By the way, there are a couple of training classes on the http://www.mortgagecurrentcy.com.) This article makes it easy for consumers to understand these different topics: • Determining if your home qualifies • What you will need to apply • What is the “unknown” • What are the benefits. So how can you use it? Facebook post, blog about it, an email and snail mail.

In this issue, you’ll find a couple more Mortgage Talking Points for your real estate agents. The first one is called Manufactured Housing: Quick FHA Financing Facts. There are certain areas of the country where you’ll find manufactured housing, and FHA will finance these types of homes if they meet the 11 conditions. Real estate agents need to know this if they are listing this type of home.

The second is called Mortgage Credit Certifications: A Blast from the Past. Freddie updated how they will use the tax credit to help borrowers qualify for a higher loan amount. So if you are in an area where it’s offered, it’s another way to get the word out on how it works.

And to wrap up what you need to know this month, Freddie has renamed chapter 26 from “Cash and Other Equity” to “Borrower Funds.” The big change here is that cash-out proceeds from a refi cannot be used as cash reserves on Freddie loans.

So, why read Mortgage Currentcy?

Because getting a loan approved these days IS rocket science.

Where Will Mortgage Rates Go in 2011?

Last week’s Treasury auctions’ effects heavily amplified; High volatility still common in fixed-income markets; Traders coming back this week; Strong beliefs that economic growth in 2011 will be significant; What about housing?

The final week of 2011 was quite the roller coaster for mortgage originators and home buyers waiting to lock in their mortgage rate. After a very weak 5-year Treasury note auction on Tuesday, mortgage pricing worsened by almost 1 point, roughly the equivalent of a 0.25% increase in interest rates. Then, on Wednesday, 7-year notes were on the block. Surprisingly, that auction saw the healthiest bidding in many auctions. Mortgage pricing reversed, more than offsetting Tuesday’s losses. Activity was minimal on Thursday, in spite of the best weekly unemployment claims report since 2008, while Friday, mortgage pricing improved on minimal activity, as traders closed out positions to close the year.

The key characteristic seen recently in fixed-income markets, such as those for Treasury debt and mortgage-backed securities is volatility. Movement in markets since the November 3rd announcement of “Quantitative Easing II” has been exaggerated, with daily pricing changes often more than twice the previously common change. That is to say, if mortgage originators had become accustomed to mortgage prices changing by 1/4 to 1/2 point on a busy day, since November 3rd, the new reality is that it isn’t uncommon for mortgage prices to change by 1/2 to 1 point. That type of change results in very rapid shifts in mortgage rates, and volatility like that makes home buyers nervous.

A significant factor that has contributed to this volatility is low trading volume. Traders are tending to purchase fewer Treasury secruities, which is contributing to the exaggerated swings we have seen in markets. This is not at all uncommon in the holiday season. From the Monday before Thanksgiving through New Year’s Day, many bond traders schedule time off from work, as do professionals in many other industries. The result of this is that the remaining traders are more likely to be swayed when markets make a sudden move in one direction or another. Short sellers, betting that mortgage prices will continue to worsen, also contributed to this effect.

On Wall Street, the consensus is that 2011 will be a strong year for the economy. Recent economic data (other than employment and housing data) has borne this out, with most of the regional Federal Reserve Bank business indexes showing positive signs for growth, inflation starting to pull away from zero, and retail sales figures suggesting the just-ended holiday season was the best in 4 or 5 years. The Federal Reserve, on the other hand, isn’t so sure, and is continuing its $600 billion asset-purchase program, intended to provide some stimulus to the economy, but, more importantly, to keep inflation positive.

A too-low inflation rate can lead to economic stagnation much like what Japan experienced in the latter part of the 20th century. The bigger concern is that the economy might actually slip into deflation, in which prices of goods and services decline over time. This causes consumers to defer purchases, expecting lower prices, which leads to lower economic growth and still-lower prices. It can be a very difficult economic cycle to break.

If recent data is correct (and we’ll have a very good idea on January 28th when the advance reading on 4th quarter GDP is released), we should expect mortgage rates to continue rising gradually, with the 30-year fixed rate mortgage staying between 5%-6% for most of 2011, barring other significant economic shifts. If, however, the Fed is correct, and economic growth has been overestimated, mortgage rates could correct significantly later this month, likely bringing the average 30-year fixed rate back below 4.5%. At present, according to Freddie Mac, the average 30-year fixed rate is 4.86% with an average of 0.8 points.

This week will provide a significant test for mortgage rates, as the most significant data of any month is published: employment market data. November was a conundrum, as only 39,000 jobs were added, in spite of continual declines in weekly unemployment claims. When we get a reading on December, it is hoped the picture becomes much clearer. Here’s what to expect later this week:


  • ISM Manufacturing index
  • Construction spending


  • Factory orders
  • Same-store sales
  • Fed minutes


  • ADP employment – private payrolls
  • ISM Non-manufacturing


  • Weekly unemployment claims
  • Monster employment index


  • Ben Bernanke speaks

All the key data points this week hit Americans in their pay checks. Are those checks growing? We’ll know by Friday. If they are, then predictions of a better-than-expected 2011 may come true.

But what about housing? Housing led the US economy into the Great Recession, as home prices tumbled when many owners were unable to make their payments, whether initially due to predatory lending, poor underwriting, or poor consumer choices, or later as the initial effects of the crisis sparked wave after wave of layoffs. Housing data has been dismal since the expiration of the home buyer tax credit last June. Because so many middle-class Americans held such a large proportion of their wealth in their homes, this has precipitated the largest broadening in the wealth gap in decades.

Consumer confidence will not rebound strongly until consumers are confident of when home prices will stop falling. At present, there are between 9-11 months of housing inventory on the market, and housing experts suggest there are many more months worth of inventory that have yet to be placed on the market. Will 2011 be the year that housing markets hit bottom? Check back here regularly to find out.

If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great week!

Related articles:

Last Week’s Report

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.

Fannie Cracks Down On Foreclosure Redemptions SEL 2010-07

In case you missed it, this was a big deal on TBWS Daily the other day.  Here is the skinny – I’ll start at the end – the foreclosure is not complete until the redemption is over.  In other words, the bank does not take possession or “own” the property until after the redemption period—because technically, if the “owner” can scrape together the money, they could still buy the home back from the bank.   

 Here’s how this generally works…First, Homeowner stops making payments

  • Bank sends “breech letter” – 60 days
  • Bank begins foreclosure process — Posts legal notices or begins Judicial process (depending on state laws) – 90 days
  • After appropriate time has passed or orders are issued, a Sheriff’s Sale occurs at the county courthouse
  • Bank typically does not get a high enough bid and buys the Sheriff’s Deed for the amount of the mortgage back to themselves – but if they did get a high enough bid, the buyer must pay cash — no mortgages at this point —  but someone must have tried or Fannie wouldn’t have said something, right?  The bank/buyer does not technically OWN the property – they own the rights to the property after the redemption is over
  • 6-18 months is a typical redemption period – the owner still owns property but for only under certain conditions (payoff and time limit).  The owner may also still occupy the property and do as they like with it
  • Only after expiration of the redemption period is the transfer of title in the property completed.  At this point, the Sheriff will remove the former owner and their belongings from the home.  The Bank now has the right to transfer the property to another individual
  • This redemption period can be accelerated in cases of abandonment by the owner – in most cases that reduces the waiting period to 30 days

 Fannie calls this a Title Defect for a reason – you would not get a title policy without exceptions, you do not fully OWN the property – yet.  You also do not have the right to sell or transfer the property since you do not own it.  If you did make the mistake of mortgaging a property without clear title and the seller did not have the full right to transfer, do not fret…Fannie says it will buy the mortgage after the expiration of the redemption period. 

Let your agents know.  www.MortgageCurrentcy.com has a Mortgage Talking Points for your agents.  Set up sales meeting and ask a foreclosure attorney & title rep to discuss your state’s rules!   Or use www.ConstantConnecting.com to email the talking points to your Realtors(r)