Archive for Mortgage Guidelines
Government Releases Additional HARP Guidance For Underwater Homeowners
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Tuesday, Fannie Mae and Freddie Mac unveiled lender instructions for the government’s revamped HARP program, kick-starting a potential refinance frenzy across Wisconsin and nationwide.
HARP stands for Home Affordable Refinance Program. The updated program is meant to give “underwater homeowners” an opportunity to refinance at today’s low mortgage rates.
In the two-plus years since its launch, HARP’s first iteration helped fewer than 900,000 homeowners. HARP II, by contrast, is expected to reach millions.
Lenders begin taking HARP II loan applications December 1, 2011.
To apply for HARP, applicants must first meet 4 basic criteria :
- The existing mortgage must be guaranteed by Fannie Mae or by Freddie Mac
- The existing mortgage must have been securitized by Fannie Mae or Freddie Mac prior to June 1, 2009
- The mortgage payment history must be perfect going back 6 months
- The mortgage payment history may not include more than one 30-day late payment going back 12 months
If the above criteria are met, HARP applicants will like what they see.
For HARP applicants, loan-level pricing adjustments are waived in full for loans with terms of 20 years or fewer; and maxed at 0.75 for loans with terms in excess of 20 years.
This will result in dramatically lower mortgages rates for HARP applicants — especially those with credit scores below 740. Some applicants will find HARP mortgage rates lower than for a “traditional” conventional mortgage.
In addition, HARP applicants are exempted from the standard waiting period following a bankruptcy or foreclosure, which is 4 years and 7 years, respectively.
These two items are inclusionary and should help HARP reach a broader U.S. audience.
HARP contains exclusionary policies, too.
- The “unlimited LTV” feature only applies to fixed rate loans or 30 years or fewer. ARMs are capped at 105% loan-to-value.
- Applicants must be “requalified” if the proposed mortgage payment exceeds the current payment by 20%.
- Applicants must benefit from either a lower payment, or a “more stable” product to qualify
And, of course, HARP can only be used once.
Fannie Mae and Freddie Mac will adopt slight variations of the same HARP guidelines so make sure to check with your loan officer for the complete list of HARP eligibility requirements.
Banks Resume Tightening Mortgage Guidelines
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As part of its quarterly survey to member banks nationwide, the Federal Reserve asked senior loan officers whether last quarter’s “prime” residential mortgage guidelines have tightened, loosened, or remained as-is.
A “prime” borrower is defined as one with a well-documented, high-performance credit history; with low debt-to-income ratios; and who chooses to finance a home via a traditional fixed-rate or adjustable-rate mortgage product.
After a 2-year easing cycle, the nation’s biggest bank banks report that they’ve reversed course, and are raising the bar on mortgage approvals.
For the period July-September 2010, 88% of responding loan officers admitted to tightening their prime guidelines, or leaving them “basically unchanged”.
If you’ve applied for a home loan of late, you’ve experienced this first-hand.
High delinquency rates and defaults since 2007 have caused the banks to rethink what they will lend, and to whom. As a result, today’s mortgage lenders scrutinize assets, incomes, and credit scores to make sure that nothing “slips by”.
For today’s home buyers and would-be refinancers, the mortgage approval process can be challenging as compared to how it looked just 18 months ago.
- Minimum credit scores requirements are higher today
- Downpayment/equity requirements are larger today
- Debt-to-Income ratio requirements are more strict today
In other words, although mortgage rates are the lowest that they’ve been in history, fewer applicants can qualify. And, with more the housing market still in recovery, it’s likely that guidelines will tighten again in 2012.
Therefore, if you’re among the many people in Lake Geneva real estate wondering if it’s the right time to buy a home or refinance, consider that, although mortgage rates may fall, approval standards may not.
The best rate in the world won’t matter if you’re not eligible to lock it.
Guidelines For Mortgages Start To Loosen At The Country’s Biggest Banks
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Another quarter, another sign that mortgage lending may be easing nationwide.
The Federal Reserve’s quarterly survey of senior loan officers revealed that an overwhelmingly majority of U.S. banks have stopped tightening mortgage requirements for “prime borrowers.”
A prime borrower is one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.
Of the 53 responding “big banks,” 49 reported that mortgage guidelines were “basically unchanged” last quarter. Of the remaining four banks, two said mortgage guidelines had “eased somewhat,” and the remaining banks said guidelines “tightened somewhat.”
It’s the second straight quarter in which fewer than 5 percent of banks tightened guidelines, and the first quarter in nearly 5 years in which the number of banks that loosened guidelines equaled the number of banks tightening them.
The easing in mortgage lending is a positive development for the housing market; and for buyers of Lake Geneva real estate and nationwide. Looser lending standards means that more buyers will be approved for home loans, and that should spur home sales forward across the region.
However, don’t confuse “looser standards” with “irresponsible standards.” It’s much more difficult to get financing today as compared to 2006. Delinquencies and defaults have altered how a bank reviews a loan application.
Today, underwriters are more conservative with respect to household income, total assets and overall credit scores. Even as compared to just 6 months ago:
- Minimum credit score requirements are higher
- Downpayment/equity requirements are larger
- Maximum allowable debt-to-income ratios are lower
If you can get approved, though, your reward is that mortgage rates are especially low. Since early-April, both conforming and FHA mortgage rates have been on a downward trajectory, and pricing is near a 6-month low.
Home affordability is at an all-time high, too.
Looser guidelines and lower rates should help fuel home demand through the summer months. If you’re in the market to buy, your timing appears to be excellent.
Lake Geneva Mortgage Guidelines Start To Loosen At The Country’s Biggest Banks
Posted by: | CommentsAnother quarter, another sign that Lake Geneva mortgage lending may be easing nationwide.
The Federal Reserve’s quarterly survey of senior loan officers revealed that an overwhelming majority of U.S. banks have stopped tightening mortgage requirements for “prime borrowers”.
A prime borrower is one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.
Of the 53 responding “big banks”, 49 reported that mortgage guidelines were “basically unchanged” last quarter. Of the remaining four banks, two said mortgage guidelines had “eased somewhat”, and the remaining banks said guidelines “tightened somewhat”.
It’s the second straight quarter in which fewer than 5 percent of banks tightened guidelines, and the first quarter in nearly 5 years in which the number of banks that loosened guidelines equaled the number of banks tightening them.
The easing in mortgage lending is a positive development for the housing market; and for buyers of Lake Geneva real estate and nationwide. Looser lending standards means that more buyers will be approved for home loans, and that should spur home sales forward across the region.
However, don’t confuse “looser standards” with “irresponsible standards”. It’s much more difficult to get financing today as compared to 2006. Delinquencies and defaults have altered how a bank reviews a loan application.
Today, underwriters are more conservative with respect to household income, total assets and overall credit scores. Even as compared to just 6 months ago:
- Minimum credit score requirements are higher
- Downpayment/equity requirements are larger
- Maximum allowable debt-to-income ratios are lower
If you can get approved, though, your reward is that mortgage rates are especially low. Since early-April, both conforming and FHA mortgage rates have been on a downward trajectory, and pricing is near a 6-month low.
Home affordability is at an all-time high, too.
Looser guidelines and lower rates should help fuel home demand through the summer months. If you’re in the market to buy, your timing appears to be excellent.
Lake Geneva Mortgage Conforming ARMs From 2004-2006 Are Adjusting To 3 Percent
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When a Lake Geneva real estate mortgage applicants chooses an adjustable-rate mortgage over a fixed-rate one, he accepts a risk that — at some point in the future — the mortgage’s interest rate will rise. Lately, though, that hasn’t been the outcome.
Since mid-2010, conforming mortgages have adjusted below their initial “teaser” rate consistently, giving homeowners in Lake Geneva, Wisconsin and nationwide reason to ride their respective adjustable-rate mortgages out.
For example, this month, conforming 7-year and 5-year ARMs are adjusting near 3.011 percent based on the most common loan terms of 2004-2006. It’s because of how adjustable-rate mortgages are structured.
Adjustable-rate mortgages follow a defined lifecycle. First, the ARM’s mortgage rate is pegged; held fixed for a set number of years. This period ranges from one year to 10 years; periods of five and seven years are most common.
When the initial fixed-rate period ends, the mortgage rate then adjusts based on a pre-set formula. The formula is established by contract in the mortgage closing paperwork, and is commonly defined as:
(Adjusted Mortgage Rate) = (2.250 percent) + (Current 1-Year LIBOR)
Next, every 12 months, based on the same formula as above, the ARM adjusts again until 30 years have passed and the loan is paid is full.
It’s important to recognize that in the above equation, LIBOR is a variable so as LIBOR goes, so goes your adjusted mortgage rate. And because LIBOR is ultra-low right now, adjusted mortgage rates are ultra-low, too. LIBOR is expected to stay this way until the global economy has recovered more fully. Analysts predict a higher LIBOR by mid-2012.
So, if you have an adjustable-rate Lake Geneva mortgage that’s due to reset this season, don’t rush to refinance. For at least one more year, you can benefit from low rates and low payments. As for the next adjustment, though, that’s anyone’s guess.
After this week ends, the FHA is raising mortgage insurance premiums on its new Lake Geneva mortgage borrowers. It’s the FHA’s third such increase in the last 12 months.
Beginning with FHA Case Numbers assigned April 18, 2011, mortgage insurance premiums will be higher by 25 basis points per year, or 0.25%.
Against a $200,000 loan size, the MIP increase adds $500 to an FHA-insured borrower’s annual cost of homeownership. All new FHA loans are subject to the increase — purchases and refinances.
Existing FHA-insured homeowners across Wisconsin are unaffected. Premiums do not rise for loans already made.
The FHA is increasing its mortgage insurance rates because, as a group, the FHA is insuring a much larger percentage of the U.S. housing market.
In 2006, the FHA held a 4 percent market share. By 2010, that share ballooned to 19 percent and, today, it’s estimated to be even higher.
In its official statement, the FHA says that the quarter-point MIP bump will “significantly strengthen” its reserves which are depleted because of delinquencies and defaults. By law, the FHA’s capital reserves must meet certain levels.
Therefore, to meet these requirements, the FHA is rolling out its new mortgage insurance premium schedule:
- 15-year loan term, loan-to-value > 90% : 0.50% MIP per year
- 15-year loan term, loan-to-value <= 90% : 0.25% MIP per year
- 30-year loan term, loan-to-value > 95% : 1.15% MIP per year
- 30-year loan term, loan-to-value <= 95% : 1.10% MIP per year
In order to calculate what your FHA monthly mortgage insurance premium would be, multiply your beginning loan size by your insurance premium in the chart above, then divide by 12.
The FHA also charges a 1 percent, up-front mortgage insurance premium at closing. That figure remains unchanged.
Loan Fees Set To Rise For Conforming Lake Geneva Real Estate Mortgage Applicants
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Beginning April 1, 2011, Fannie Mae is increasing its loan-level pricing adjustments. Conforming Lake Geneva real estate mortgage applicants should plan for higher loan costs in the months ahead.
If you’ve never heard of loan-level pricing adjustments, you’re not alone; they’re an obscure mortgage pricing metric and, thus, are rarely covered by the media. That doesn’t make them any less relevant, however.
LLPAs are mandatory closing costs assessed by Fannie Mae and Freddie Mac, designed to offset a given loan’s risk of default. LLPAs were first introduced in April 2009.
This April’s amendment is the 6th increase in 2 years. LLPAs can be costly.
In addition to an up-front, quarter-percent fee applied to all loans, there are 5 additional “risk categories” in the LLPA equation:
- Credit Score: Lower FICO scores trigger additional costs
- Property Type: Multi-unit homes trigger additional costs
- Occupancy: Investment properties trigger additional costs
- Structure: Loans with subordinate financing may trigger additional costs
- Equity: Loans with less than 25% equity trigger additional costs
Adjustments range from 0.25 points (for having a 735 FICO score) to 3.000 points (for buying an investment property with just 20% downpayment). And they’re cumulative. This means that a borrower that triggers 3 categories of risk must pay the costs associated with all 3 traits.
Loan-level pricing adjustments can be expensive — up to 5 percent or more of your loan size in closing costs. The fees can be paid a one-time cash payment at closing, or they can be paid in the form of a higher mortgage rate.
The loan-level pricing adjustment schedule is public. You can research your own loan scenario at the Fannie Mae website, but you may find the charts confusing.
Phone or email your loan officer if you’re unsure of what you’re reading.
Lake Geneva Real Estate Mortgage Guidelines Starting To Loosen?
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Lake Geneva mortgage lending appears to be loosening. At least for now.
In its quarterly survey of member banks, the Federal Reserve asks senior loan officers around the country whether their “prime” residential mortgage guidelines had tightened within the last 3 months.
A prime borrower is one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.
Of the 54 responding banks, just 2 said its guidelines had tightened during the period October-December 2010. That’s less than 4 percent. And, by comparison, 95 percent of banks said guidelines remained “basically unchanged.”
The remaining banks reported a loosening. Walworth State Bank has seen neither loosening nor tightening of underwriting guidlines at this point.
It’s a positive sign for the housing market, and for Lake Geneva real estate home buyers and nationwide. If banks have stopped raising the hurdles of home loan approval, in theory, more would-be buyers will be approved.
It’s much tougher to get a home loan versus 5 years ago. Delinquencies and defaults have changed how banks review loan applications. Today’s underwriters are more conservative with respect to household income, total assets and overall credit scores.
Even as compared to January 2010, approval standards are higher:
- Minimum credit score requirements are higher
- Downpayment/equity requirements are larger
- Maximum allowable debt-to-income ratios have been lowered
Although mortgage rates remain low, qualification standards do not. Based on last quarter’s banking survey, however, mortgage applicants in the Lake Geneva, Wisconsin area may find approvals easier to come by soon. Low rates don’t matter, after all, if you’re not eligible to get them.
The housing market is strong and lending looks to be loosening. It should help fuel the demand for homes in 2011, which will push supplies down and lead prices up. F or homeowners that qualify, therefore, the best time to purchase a home may be sometime this spring.
Lake Geneva Mortgage Fannie Mae
Fannie Mae rolls out new Lake Geneva mortgage guidelines Monday. Therefore, if you’re in the process of applying for a conforming home loan, consider giving your complete application by the close of business Friday. APPLY HERE
All Fannie Mae applications taken on, or after, December 13, 2010, are subject to the changes.
As compared to mortgage guidelines updates of the last 3 years, Monday’s roll-out is relatively small. There is no change to the maximum debt-to-income ratio, for example; nor is there an increase in the minimum FICO score requirement.
Most Lake Geneva mortgage applicants and nationwide will be unaffected.
Others, however, will find getting approved to be more difficult.
The most major change is with respect to revolving and installment debt. This category includes credit cards, charge cards, and student loans, among others. Going forward:
- Debt with fewer than 10 payments remaining must now be included in an applicant’s monthly obligations.
- Debt not reporting a monthly payment must be assigned a payment equal to 5% of the outstanding credit balance.
These edits will raise applicants’ debt-to-income ratios, and may push some of them beyond the maximum allowable limits, resulting in a denial. People with relatively large car payments are especially susceptible.
Another change relates to receiving gift funds for a purchase. Unlike debt calculations, though, the “gifting” process is getting easier.
Under the new Fannie Mae guidelines, buyers of owner-occupied, 1-unit properties (i.e. single-family homes, condos, townhomes) can forgo Fannie Mae’s customary, minimum 5% downpayment contribution from personal funds. Downpayments can be comprised 100 percent of gifted and/or granted monies.
Buyers of second or investment homes, or multi-unit properties must still make a 5% downpayment from their own funds.
And, lastly, Fannie Mae is easing some of its documentation requirements. Salaried applicants from whom commissions and/or bonuses paid account for less than 25% of annual income will have fewer paystubs to produce for underwriting.
Fannie Mae’s complete guideline changes are available online at http://efanniemae.com.
Lake Geneva Mortgage – Fannie Mae Rolls Out New Lending Rules December 13, 2010
Posted by: | CommentsStarting Monday, December 13, 2010, Fannie Mae is changing its mortgage lending guidelines.
For some mortgage applicants of Lake Geneva real estate, the loan approval process will simplify. For others, it will toughen. How you’ll be affected personally will depend on your credit profile and your loan characteristics.
Among the biggest changes from Fannie Mae is a new set of guidelines for gift funds. When the new rules roll out, accepting cash gifts for downpayment will be easier.
Under the new guidelines, buyers of owner-occupied, 1-unit properties (i.e. single-family homes, condos, townhomes) can forgo Fannie Mae’s typical, minimum 5% personal downpayment contribution. Downpayments on homes meeting the above criteria can be comprised of 100% gifted and/or granted funds.
Buyers of second homes and multi-unit properties, however, are not exempt.
There’s also two changes pending with respect to revolving debt.
- Debt with less than 10 payments remaining may no longer be waived in debt-to-income ratio calculations
- Debt lacking a monthly payment on credit must be assigned a payment equal to 5% of the outstanding balance
Both of the above should increase the number of Lake Geneva loan denials in 2011.
And, lastly, Fannie Mae changes some of its documentation requirements, the most noticeable of which will be with respect to income verification. Salaried workers and applicants whose commission/bonus accounts for less than a quarter of their income will have fewer paystubs to produce for underwriting.
Lake Geneva loan applications taken prior to December 13, 2010 are exempt from the new rules.
Fannie Mae’s complete guideline changes are available online at http://efanniemae.com.