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FHA Secure may Help People With Subprime Minnesota Mortgage Loans

July 14, 2008 at 4:41 pm · Filed under mortgage, subprime mortgage ·Tagged , , , ,

FHA Secure will hopefully help at least some Minnesota home owners who have risky subprime mortgages find some relief.  This program which will be available to some people who have a Minnesota mortgage loan, is designed to get people who got stuck into subprime ARMs, Adjustable Rate Mortgage, get into a 30 year fixed rate at a much lower interest rate and payment.  Not everybody will qualify and I have included some of the guidelines for qualifying here, taken from the governments HUD web site.

FHA Secure is a refinancing option that gives homeowners with non-FHA adjustable rate mortgages (ARMs), current or delinquent and regardless of reset status, the ability to refinance into a FHA-insured mortgage. With FHASecure, the lender will not automatically disqualify you because you are delinquent on your loan, and the lender may offer you a second mortgage to make up the difference between the value of your property and what you owe.

So long as you are current on your mortgage and have sufficient income to make the mortgage payment, you are eligible for an FHASecure refinance. If you are delinquent, the default must have been due to the payment shock of an interest rate reset or, in the case of an Option ARM, the “recasting” of the mortgage to fully amortizing.

FHA further modified the FHASecure Program with Mortgagee Letter 08-13 and is expanding FHASecure as follows:

1. To include borrowers delinquent on their non-FHA ARMs due to a rate reset or the occurrence of an extenuating circumstance but experienced no more than two 30-day or one 60-day late payment in the 12 months prior to the rate reset or extenuating circumstance that caused the delinquency; or

2. To include borrowers delinquent on their non-FHA ARMs due to a rate reset or the occurrence of an extenuating circumstance but experienced no more than one 90-day late payment or no more than three 30-day late payments prior to the rate reset or extenuating circumstance that caused the delinquency provided the loan-to-value on the FHA insured first mortgages does not exceed 90 percent.

3. Borrowers delinquent on their interest-only and/or payment option ARMs are not eligible for this expansion: borrowers with these types of mortgages must demonstrate that a rate reset caused the delinquency and that they were making the monthly mortgage payments within the month due during the 6 months prior to the rate reset.

4. For borrowers refinancing delinquent non-FHA ARMs the Up-front mortgage insurance premium (UFMIP) is set at 2.25 percent of the base loan amount (loan amount excluding UFMIP) regardless of the loan-to-value (LTV) ratio. For LTV ratios greater than 95 percent (excluding UFMIP) the Annual premium (collected monthly) is set at .55 percent.

This mortgagee letter replaces the specific guidance regarding FHASecure issued in Mortgagee Letter 2007-11 and is effective for case numbers assigned on or after July 14, 2008. FHA is implementing the policies in this letter simultaneously with the implementation of risk-based pricing through notice in the Federal Register May 13, 2008. Mortgagees are reminded that the eligibility criteria for delinquent borrowers and new subordinate financing under the FHASecure initiative are temporary and require that the loan application be signed no later than December 31, 2008. Mortgagees are also reminded that FHA has not changed its underwriting guidelines, but rather its eligibility criteria. Existing policies are still applicable, such as those involving bankruptcy. This mortgagee letter also clarifies guidance issued in Mortgagee Letter 2005-43 regarding cash-out refinance transactions.

To learn more about the FHASecure program go to the following HUD website: www.fha.gov. Minnesota Homeowners can contact Metropolitan Financial Mortgage Company to see if they qualify for the FHA Secure program by calling 612-869-9966 and asking for Dave Olson.

Click on these links for information on Minnesota FHA loans for Minnesota first time home buyers.

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When should I refinance my Minnesota mortgage?

May 29, 2008 at 4:20 am · Filed under Mortgage refinance, mortgage ·Tagged , , , , , , ,

If you weren’t able to refinance your Minnesota mortgage in the past few years, fear not as mortgage interest rates are still historically low and this may be a great time to refinance into a low 30 year fixed rate.

There are a number of Minnesota home owners who should be considering refinancing their mortgages at this time and this could be you if you fall into on of the following three catagories;

  1. If you have an interest only or a negative amortization mortgage (option arm).
  2. If your credit score has gone up significantly since you got your last loan, and
  3. if you had an ARM that reset at 7% or above in the past year, or you have an ARM that will be resetting in the by the end of the year.

While Minnesota mortgage rates have gone up in the past few days, they will probably come down a bit in the next few days and settle in between 5.875 and 6.25%, which for most Minnesota home owners is still a great deal.

If you have any questions about your current minnesota mortgage and whether or not you should consider a refinance, feel free to call me, Ken Horst,  at 612-251-8237.

If you looking for Minnesota homes for sale and would like to see over 24,000 homes for sale and local MLS listings in the Minneapolis metro area, visit www.mlsmaps.com

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Minnesota mortgage rates for week ending April 18th

April 18, 2008 at 11:29 pm · Filed under mortgage ·Tagged , , , , ,

Minnesota mortgage rates rose this week ending at 6.125% on Friday after having started the week at 5.75%. (rates for a 30 year fixed rate mortgage) You may also have noticed that the stock market rallied this week as well.  In general, when the stock market goes up, 30 year fixed mortgage rates also seem to go up.  This is a casual observation, not a rule, but after watching rates on a daily basis for the past 6 years, this relationship seems to hold up.

Minnesota first time home buyers can still get 100% financing with a combination of an FHA loan and a gift from a Down Payment Assistance organization.

For instant access to mls listings in Minnesota, visit www.mlsmaps.com

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Trigger Leads & Mortgage Pirates

April 3, 2007 at 3:26 am · Filed under good faith estimate, loan process, mortgage, mortgage pirates, trigger leads

Recently I had a client I was working with who called me about 3 days into the loan process and asked me if my lender had called her. I said I doubt it, the loan hadn’t even been approved yet and in 6 years, I have never had nor heard of a lender calling a borrower in the middle of the process. (if at all) She said that she had received a call from someone saying her loan documents were ready and she could schedule a time to come in and sign them. She also told me that in the 3 days since I had pulled her credit as part of the loan application process, she had received no less than 10 phone calls from mortgage companies claiming they knew she was looking for a mortgage and they would be able to offer her a better deal.

What’s happening is the result of a “mortgage trigger lead”. It works like this, a mortgage company can ask to buy any persons name and personal info the minute that persons credit is pulled by another mortgage company. Imaging that! How better to qualify a person as a mortgage lead than to know that they have just had their credit pulled by your competition. The only problem is that the technique that is commonly used to lure someone away from there mortgage person is to promise them a better deal. Most of these promises are made to the borrower before the new mortgage person has done any qualifying and generally don’t pan out. Bottom line is that if you are working with a reputable local mortgage professional that you may have even been referred to, you are probably getting a good deal on your loan. The best defense against these mortgage pirates is to ask them to send you a Good Faith Estimate and a letter guarantying the interest rate and closing costs won’t change at the closing. Odds of any of these “phone room wonder boys” complying with that request are slim to none and you can get them off your phone and finish your dinner.

This whole thing really makes me mad but it should make you even more mad. In this age of privacy how is it that the credit bureaus can sell my name, credit score, loan amount, total consumer debt and other factors to any mortgage company with a ton of money.(one such marketing company charges $25,000/month for access to these leads) How is it that this information that we all thought was private is readily available to anyone to purchase? What is worse is the quality and caliber of the people who are calling us armed with this personal and private info. Using tactics like telling you your loan docs are ready, or they can beat any deal you have seen, before they have even qualified you, these mostly young kids, most of whom have never owned a home or much else for that matter, are desperately trying to close your loan as fast as they can before you figure out what is really going on. Generally these sweat shops or mortgage phone rooms are simply dialing for dollars hoping to stumble onto the one or two borrowers referred to in the famous quote, “there’s a sucker born every minute”.

Sadly much of the sub prime mortgage industry is based on that phrase but the fact remains that the credit bureaus are making it even easier to exploit that point by giving unscrupulous characters enough private information about us to make it seem as if they are the company we are working with. Fortunately for mortgage professionals who get most of their business from repeat clients and referrals, this ploy rarely results in the loss of a client, but it does non-the-less bring even more confusion to an already complex process.

I’m lucky, as far as I know, I haven’t lost a client yet to one of these mortgage pirates but what concerns me is the increasing speed at which the calls start and the increasing number of calls. I almost feel bad for the sucker mortgage companies who are buying these leads. If they knew how many other mortgage pirates were also sold the same lead, they may be inclined to build a business around delivering on their promise and fostering long term relationships. Imagine that!

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Mortgage Times are a changing!

March 21, 2007 at 11:38 pm · Filed under 100% finaincing, credit score, mortgage, subprime lenders

Oh the difference a few months can make. I am currently sitting with 3 loans on my desk that only 3 months ago would have been closed and funded in two weeks or less. Today I’m not sure if I will be able to find any lender who will take them. Here is a couple examples of what I’m talking about;

One borrower has a 615 middle credit score, which is not very good but could be worse. They have a good job and make decent money and they have never been late on their mortgage which they have had for about 17 months. They called me to see about refinancing to 100% and taking some cash out to make some improvements on the home. In the old days (3 months ago) anyone with a credit score of 580 a good job and income could get 100% financing, with cash out, in a heart beat. Today after exhausting 11 lender resources, I finally had to call the client and tell them that the best I could do was going to be 95% and the interest rate was going to be almost insulting. Fortunately this client is not desperate for cash and can afford to wait a month or two until their credit score goes up to 620 points, they new floor for 100% financing.

Another borrower I have been struggling with has a 649 credit score but is self employed and has had 1 mortgage late in the past 12 months. We are able to use bank statements as proof of income so this loan is treated as “full doc” which means it gets the same consideration as someone who has a full time w-2 job. In the old days most of the 75 lenders I have access to would have taken this loan without hesitation, but in this new world, this loan has been accepted but then “kicked to the curb” twice. The borrower is a little frustrated and I can’t blame them. Trouble for mortgage officers in today’s market is that compared with this borrowers last experience, I look like I’m incompetent. What looked like an easy loan 60 days ago has turned into another mortgage nightmare for both the client and me. Originally the client wanted a 100% refinance with cash out, we are down to our last lender who will even consider it at 95% which leaves the borrower far less cash then they really want. We will get the loan done but it has not been a pleasant experience for any one involved.

This interim period that we are in now, between when things were easy for everyone and the new way where the few sub prime lenders that are left are seriously tightening their belts, is awkward to say the least. Those of us in the mortgage business have to learn to look at each loan application with more discretion as we navigate the new and ever changing guidelines that will seriously change the home finance landscape over the next few months.

Hopefully everyone can hang on for the ride.

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Subprime Lenders are Dropping Like Flies

March 14, 2007 at 5:05 pm · Filed under New Century, mortgage, subprime mortgage

In case you haven’t been watching the markets last week and yesterday, major sub-prime lenders are suffering and dying at an alarming rate of speed. D1, a subsidiary of HSBC reported writing off $10.6 billion in bad sub-prime loans in 2006. New Century, which is one of the top 5 sub-prime lenders in the country is rumored to be closing today, and Fremont Investment, another big sub-prime lender announced it was closing it’s door yesterday. In addition, there have been many smaller sub-prime lenders that served the market with useful niche products who have also already gone out of business in the past few weeks. What does it all mean?
Well, all the federal and state government efforts to “fix” the mortgage industry may be a big waste of time as the industry is in the process of self correcting through market forces, imagine that. It is starting to look like the big problems that our wise government was blaming on unscrupulous mortgage loan officers was as much or more of an issue with overzealous lenders who were desperate to keep showing higher revenues and profits, and had to turn to more and more risky products to do that because all the “A” borrowers had already been taken care of when mortgage interest rates dropped over the past few years.
Secondly, if you think the foreclosure rate is high now, fasten your seat belts! One of my best sub-prime lenders and also one of the top 5 lenders in the country told me yesterday that it is going to be almost impossible to find 100% financing for the sub-prime borrowers. What this means is that as all the sub-prime 2 year ARMs come due and threaten to adjust UP roughly 2% points, seriously crushing the cash-flow of these home owners, they will have nowhere to go. Over the past 5 years these people were able to do a cash-out refinance to lower or at least keep their interest rate and payment the same while they tried to get their spending behavior under control and improve their credit scores so they could come back to the market and finally qualify for the coveted “A” paper 30 year fixed mortgage. With lenders closing out the 100% and 80/20 loans, and with home prices being flat or declining in most markets, all these sub-pime home owners will have no where to go but get second jobs or walk away, as in many cases they owe more than their home is worth.
When the dust settles, there will be far fewer sub-prime lenders with far fewer programs that will be much less risky for the investors and those who qualify to purchase a home in this “NEW MARKET” will actually be able to make their monthly payments in a timely manner. Go figure!
Does anyone want to go tell the people in government before they spend millions of dollars fixing a problem that will be mostly self corrected by the end of March?

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