Just So There’s No Misunderstanding–Mortgage Rules & FAQ’s

Title:  Just So There’s No Misunderstanding

By: Karen Deis, Publisher, MortgageCurrentcy.com

Before I get started with the updates for December, what I’ve noticed over the last few months is that Fannie, Freddie, FHA, VA and USDA have issued quite a few clarifications and updates in the form of FAQ’s and enhancements to cover the “grey areas,” so underwriters and LO’s have a clearer picture of exactly what a rule change means in plain language (just so there is no misunderstanding).

You’ll find three of them here this month from Fannie, including the new FAQ started on 11-19-12 where they answer DU 9.0 questions. Fannie has also created a comparison chart between DU 8.3 and DU 9.0 to illustrate the differences between the two.  You’ll find it in this issue.

If there is one article I would recommend that you read this month, it’s the one where Fannie makes some big underwriting clarifications in Announcement SEL 2012-13.

Here are some of the highlights, because these affect your files in process right now.

  • If you are refinancing a loan, the property taxes are 60 days past due and you are paying the back taxes by including them in the loan amount, it triggers a mandatory escrow account.
  • Fannie went on to talk about “their indication of borrowed funds.” The trigger here is that if there is a large deposit that exceeds 25% of total monthly qualifying income, additional backup documentation is needed.
  • Retirement funds used for cash reserves may be discounted by up to 40%, depending on the volatility of the type of retirement account.
  • Additionally Fannie indicated that you no longer have to get a letter or back-up documents that say the collection poses no threat to their first lien position.  This will make it easier on you and your borrowers.
  • You’ll find five more updates in this announcement, including the treatment of capital gains or losses – you no longer have to count them, even if they are reoccurring. And Fannie says you no longer have to count the Treatment of Capital losses as a liability (or income), even if the losses are reoccurring.

Let’s talk about the Consumer Finance Protection Bureau.  The latest warning is their findings when it comes to deceptive advertising practices.  They are relying on Reg Z advertising rules, which cover mortgage companies, and the Mortgage Acts & Practices rules, which apply not only to mortgage companies, but to real estate agents and builders as well.

My personal observation is that CFPB is asking their examiners to review ALL types of advertising and then to create a section in their examination manual for everyone to follow.  That’s why, for right now, they are sending out warning letters instead of fines.

MAP has been around since 2011, and you’ll find attached to this newsletter the article and Mortgage Talking Points™ article for your real estate agents and builders and what they need to do to follow the rules. In addition, you’ll find a REG Z video training course, with examples of mortgage ads that don’t meet federal rules.

Other updates this month

  • A joint venture between FHFA and CFPB to monitor the mortgage market
  • HARP program extension
  • Updates to the Fannie Appraisal messaging system
  • No increase in loan amounts for Fannie/Freddie
  • HUD and NMLS team up to collect data when you order a case number
  • VA updates to form 26-8937
  • FHA Extends Anti-Flipping Rules

In recapping this year, we wrote 114 updates – or about 10 per month.  In addition, we posted 136 most frequently asked questions that we hoped would help you get more of your loans approved.  Oh, and I also wanted to mention the “marketing component” of your subscription to MC – the automatic Tweets, Facebook posts, Mortgage Talking Points™ and charts and checklists.  www.MortgageCurrentcy.com

I hope that 2013 is your best year ever in the mortgage industry – and remember, getting a loan approved and closed these days… is rocket science.

What Do NMLS, FHA Condos, HARP & USDA have in common?

Title:  What do NMLS, FHA Condos, HARP and USDA have in common? 

By: Karen Deis, Publisher, MortgageCurrentcy.com

What do NMLS, FHA Condos, HARP and USDA have in common?

All of them have had rule changes within the last 30 days!

So, let’s start by talking about what’s supposed to happen when NMLS updates their website on October 22…

They are updating their “credit flags” and “credit scoring thresholds” within the reporting features.  So what does this mean to you? When it’s time to renew your license,  if you have at least one derogatory credit issue or change from the previous year, or you have a decrease in your credit score, your state’s licensing board will be notified and they will determine whether or not your license will be renewed.

They have also added some additional questions when you reapply. The most significant one is where they ask you if you have had any local, state or federal displinary actions taken against you.  If you answer yes, you must explain what it is – and again, the state will decided whether to renew your license.

One thing you can do right now is check your credit, and remember that NMLS uses Vantage scores, not Fico scores.  SO within this article, we’ve include a link where you can order your Vantage credit score.

Next, Fannie and Freddie have made it easier for consumers to qualify for HARP  Refi’s.  You’ll find two separate articles, but they are pretty much in sync with each other now—including the biggie that if the new monthly payment changes less than 20% over the old monthly payment, they are reducing the documentation for income and assets.

For example, if a borrower has at least 12 months’ PITI in cash reserves, there is no need to verify income.

They have also made it easier to remove a borrower. And if you are refi’ng a rental property, they have eliminated Form 1007.

Here’s what you need to know – the DU System has not yet been updated, and underwriters have been advised to disregard DU messages and use these new requirements.

So, it’s important that YOU know what the changes are, just in case the underwriter doesn’t know what has been updated or is asking for documents that may appear on the findings, but are not needed due to these changes.

Oh, and I just wanted to mention again that you’ll find a couple of mortgage talking points for consumers about this topic.

Let’s switch to FHA, where they have changed the Condo approval process, making it easier to get them approved.

The biggest changes are the homeowner’s association dues and investor ownership percentages.  Those have been real deal-killers in the past.

And if you’ve wondered what the old condo approval rules were—and how they have changed—we not only created a handy chart for you to refer to, but also provided a Mortgage Talking PointsTM for your real estate agents.

One last bit of news from USDA…last month, they made an announcement that they would be eliminating some cities and changing income limits on others.

How they make that determination is based upon census information, but they found there was a flaw in the data because the 2010 census no longer asked for income information, which was the method used by Rural Housing to determine eligibility.  They claim they will have it all worked out by the end of March, 2013.  Makes me wonder how they plan to do THAT!

One of the reasons I write about the rules and regulations and interpret them in plain language for you, is that I realize that getting a loan approved and closed these days, is rocket science!

(Read these articles for just $1. www.MortgageCurrentcy.com)

What you don’t know–can cost you a commission!

What You Don’t Know—Can Cost You a Commission!

By: Karen Deis, Publisher, MortgageCurrentcy.com

Before I get started on the mortgage rule and regulation updates from the last 30 days, I wanted to mention that there is a free article for you this month about the Consumer Finance Protection Bureau’s proposed no point, no fee rules, with an example of how it would work in real life!  http://www.mortgagecurrentcy.com/free-article-list.php

Okay, so a couple of FHA updates for you.

FHA has a little-known area in their appraisal section in regard to what they call unique properties.  HUD has given guidelines when it comes to log homes, extra small homes, lower than normal ceiling heights, and so on.

If a property has excess land, you’ll find guidelines on how to get an FHA loan.  Also covered are commercial use of property and homes that have been moved to a new foundation.  You’ll find a Mortgage Talking Points ™article to email and share with your real estate agents with all the details.

There is a new HUD Mortgagee letter regarding documentation required to verify social security income.  Basically, they are now in line with Fannie and Freddie that if the award letter has no expiration date, the lender is to consider that the income is likely to continue.  This is great news for everyone, and loan officers and Underwriters finally have something to cover their backsides with specific documentations.  Keep this 12-15 Mortgagee Letter handy until they get the Handbook updated.

Oh, one last thing – it really doesn’t need an article written about it, but is important nevertheless – FHA updated their Total Scorecard Users Guide.  It’s been updated on the website, including the video training class called FHA Total Score Card – 8 Deal Killers.  If you are a subscriber, it’s included.  If not, you can access it for $9. http://www.mortgagecurrentcy.com/video_training/course_list.php  

Now, on to a big announcement for some of you in high-cost areas.  VA has increased quite a few loan limits, so take advantage!  Comb those “VA jumbo” past contacts and see if there are any Veterans you can help out with purchases and refinances. The higher amounts are for purchase contracts and refis between August 6 and December 31, 2012. 

If there is one article that you need to read in this issue, it’s Fannie’s announcement 2012-07 with a ton of updates that will go into effect with the release of DU 9.0 on October 20, 2012.

The biggest change here:  FNMA is retiring the Comprehensive Risk Assessment Worksheet that it created years ago to assist lenders in assessing risk on a manually underwritten loan.  Now FNMA is moving many of these tips and risk awareness/parameters to their Eligibility Matrix, which include DTI and minimum credit score flexibility restrictions.

You’ll also want to read the latest HARP 2.0 FAQ’s that came out on August 16.  They did not highlight the changes in bold this time around, so we had to go back to the previous one to find out what was changed and what was added.  There were a total of 5 updates.

One of the questions has to do with subordinated financing, which will be updated when DU 9.0 is live on Oct 20th.  The other biggie has to do with reps and warranties – which is a huge gift Fannie is giving to lenders and underwriters.

And, if you are doing Rural Housing loans, we sent an email to subscribers a couple of weeks ago that the money for refi’s is all gone for the fiscal year ending October 1st.

And if you have a purchase transaction sitting there waiting for a loan commitment for USDA, it has to have a conditional commitment by Sept 30 or new annual and guarantee fees go into effect.  If the files aren’t committed by then, you must redisclose.

Call your local USDA office and find out their backlog. You may also want to warn your clients and real estate agents that there is a good possibility that they may have to pay a higher fee.

One last thing – we have posted the latest NMLS list of licensing and continuing ed requirements, by state.  Check out the document and see what’s required in your state.

Remember, “Getting a loan approved and closed IS rocket science.” You can read all the articles for just $1.  Click Here to Access. http://www.mortgagecurrentcy.com/subscription_options.php


Easy Way to Keep Track of Lender Overlays

Let’s say you do business with 5 or 6 lenders. You (or your compliance department) get email updates. Maybe you get them one at a time. Maybe you get 10 changes at one time. An easy way to keep track of all lenders, all at one time is by subscribing to www.LendingArt.com. It’s free and when you register, you can pick and choose which lenders you want updates from. It’s just that easy.

Rate Volatility, USDA Update and News About Credit Pulls!

Mortgage Rate Volatility

If you have been following mortgage rates lately you have seen them fall into the range of historic lows and then bounce back up as much as .25% to .375%. This volatility has been affecting rates for the past few weeks and I wanted to get some useful information to you to help explain these dramatic swings.

The underlying reality of mortgage rates right now is that they are lower than they should be. In a rational market, we would be seeing rates that would be about .5% higher than where they are right now. This would be based on a number of factors including the government’s pull back of support for mortgage backed securities and the markets moving toward a bias of seeking higher returns. When investors seek higher returns they move into the stock market. When they seek safety they move into bonds (mortgage backed securities are bonds that are often sought during these ‘flights to safety’). Up until a few weeks ago, there was a fairly dramatic move toward higher returns which meant people were buying fewer mortgage backed securities (MBS) which drove up mortgage rates.

Then came the collapse of the Greek government which sent shudders throughout the investment markets. Investors had another flight to safety and that flight drove mortgage rates down. That fear coupled with some disappointing job numbers has helped to keep mortgage rates depressed. There have been, however, some good economic reports smattered throughout the news over the past few weeks signaling a longer term return to economic normalcy. Once the short term anxiety relaxes we will likely see a rational focus on investing for higher returns which will lead to higher mortgage rates. The sad fact is that people are not acting rationally right now. There is a significant amount of fear and greed that is driving investment decisions and therefore mortgage rate volatility.

As you can see, there is no trend of lower rates that can be depended upon. As a matter of fact there is so much volatility in rates right now that an age-old adage should be applied to any rate assessment – rates will always rise more quickly than they fall. This creates risk for borrowers if they try to ‘time’ the market and miss.

If you are in the market to buy a home or are a Realtor working with buyers that are looking to buy a home (or if you know someone that is considering refinancing right now) they should assess what savings can be garnered by locking in a mortgage rate as soon as possible. I’ve heard many people saying that they have ‘heard’ that rates may go down further. I would not count on that. In actuality, rates would be lower than they are currently based on historic calculations of the price of mortgage backed securities and how they impact rates. Confused yet? You are not alone! The economic trends signal rates that should be higher. The flight to safety signals rates should be lower. There is no solid ground for anyone to make a short term prediction about the direction of rates. This tells me that the banks are looking at a ‘floor’ of sorts to keep rates from going so low that they will have trouble finding investors to hold 30 year securities with such low rates. In other words – rates are low. . . volatility is high. . .a borrower should determine their risk tolerance and decide if they would be more upset if they lost money when rates go up and they miss this short term opportunity. Make no mistake. Rates are going to go up and they are going to go up soon. We’ve seen it in the past few days and, if it weren’t for a bad jobs report on Friday we would likely be about .25% higher than we were on Thursday.

Sellers should be aware of the low rates and work their hardest to present their properties in the best light. They may be able to attract new buyers that may qualify for a higher price range due to the lower rates. A more expensive property may end up with a lower monthly payment than a buyer expected 2 or 3 weeks ago. There are also great opportunities to offer seller assist to help buy down an interest rate into unbelievably low territory right now. That buy down is likely much less expensive than lowering a sale price and the resulting payment savings could be similar or even more advantageous to a buyer than a price drop.  You need to work very closely with a mortgage professional to guide you through this process as it can be complicated to set up but can have great results if done correctly!

USDA Update
Congress recently passed an emergency appropriations budget through the end of June for new USDA funding. The expectation is that Congress will then vote on a longer term appropriation to keep the program afloat until the next fiscal year (beginning in October). The problem with this plan is that much of the emergency appropriation money has already been committed to loans that will likely close by the end of June (remember all of those first time buyers that rushed into the market and need to close by June 30?). Most of the lenders are NOT going to allow funding of USDA loans at this point. There is too much uncertainty about the amount of funds appropriated and a proposed increase in the Guarantee Fee for the investors to feel comfortable committing to these loans. It is likely that this will be sorted out by the end of June before Congress goes to recess but we’ll have to stay tuned. For now, it appears that the lenders and investors are taking the prudent approach and NOT allowing conditional commitments or funding for USDA loans. You may have heard announcements about USDA being available again – unfortunately, that is not the case right now. We’ll keep you posted as changes arise.

New Rule Requiring Another Credit Pull for Borrowers JUST BEFORE CLOSING!!!
A new rule was just passed by Fannie Mae that requires an additional credit pull just prior to closing. Until now, credit reports have been good for 90 days. Now there is a requirement for an updated credit pull just prior to closing to ensure there were no major credit changes (i.e. new credit that would impact a borrower’s debt to income ratio, new collection accounts, credit score changes). It is extremely important to include specific direction to your buyers about not applying for any new credit (department stores to save 10% all day, 6 month’s same as cash financing for appliances, etc) as these changes from their originally approved credit report will impact their ability to buy their home. You should also dialogue with a buyer’s agent putting in an offer on your listing to make sure they are aware of this recent change. If they are not familiar with this, you should direct them to your mortgage partner to get more education and to help them counsel their buyers about these risks. There is a significant loss of control for listing agents on this subject so you may want to determine some proactive ways to help minimize the potential for significant credit changes between offer acceptance and closing. Again, you want to align with a mortgage professional who can help you develop strategies for dealing with this issue to minimize the potential impact.

There is a lot going on in the mortgage market and it is more important than ever for buyers, sellers and Realtors to align with a seasoned mortgage professional who can help navigate these turbulent waters.