In high-cost areas, the FHA national loan limit “ceiling” will increase to $636,150 from $625,500. FHA will also increase its “floor” to $275,665 from $271,050. Additionally, the maximum claim amount for FHA-insured Home Equity Conversion Mortgages (HECMs), or reverse mortgages, will increase to $636,150. This amount is 150 percent of the national conforming limit of $424,100.
We try to share real world scenarios with you to educate the public and the professionals alike in our industry. This week we have a buyer who qualifies all around. He works hard, gets overtime and can afford to buy. He is the perfect candidate. He has a child and lives with his girlfriend. And here is where it gets a little weird.
Most will agree that the modern family isn’t always a husband and wife and 2.3 kids anymore. In fact, more and more couples aren’t even married. But whether married or not, families have issues and arguements. and here is one case where an old wound rears its ugly head to throw a wrench in the mortgage process.
When qualifying for a mortgage we take into consideration all income, all credit report payments, and all loans and other items disclosed as liabilities, including alimony and child support.
In our case study, the buyer/borrower had a baby with a girl. Then he decided to go to college and play sports but decided not to pay his child support. The “baby momma” then filed a claim with the family court. These delinquent payments are reported on the credit report.
Since then the buyer has reunited with his “baby momma”, and it feels so good, they’ve decided to buy a home. All parties are getting along and that is great for the child and for the mother and father. However, they never update the family court and completed the proper filings releasing the father from having delinquent obligations.
Underwriters are tasked with making sure all borrower obligations and potential obligations are accounted for and documented as to why they are or are not included. Since there was no order updating the status of payments the buyer/borrower still appears to have outstanding child obligations, and delinquent at that.
It’s easy but takes borrower focus to get this rectified. If the mother and father simply go to the court and ask for new filings to update the credit bureaus and inform the underwriter of the current status of payments, if any, the mortgage process can be completed. With the borrower showing delinquent obligations and no current payments being made, the underwriter cannot properly account for the debt to income ratio and therefore not approve the loan to close.
Moral of the story, if you filing something with a city, county, state, or federal agency, make sure you update those agencies of any updates, like thefamily is together and all is good! So update those family orders and make sure you are prepared to buy.
By: Michael A. Foote
A frequent occurrence today in the life of a loan originator involves telling your optimistic potential borrowers that they don’t have enough equity to refinance and lower their payments. A fact that rubs salt in the wound is that the clients have undoubtedly made all their mortgage payments of time for many years.
To aid in helping underwater or low equity borrowers refinance into a new lower fixed rate interest rates, Fannie Mae and Freddie Mac have developed and launched a very successful refinance program. Fannie Mae’s program has seen wider adoption as LP Open Access was not pushed to many third party providers. Most likely the lack of interest was due to the banks potential losses from the program.
In any event LP Open Access is now more widely available from brokers and banks alike.
The program offers up to 105% LTV and unlimited CLTV which basically means if your home was worth $100,000 and you owed $105,000 on your first mortgage and $100,000 you would potentially be able to refinance that $105,000 first mortgage and leave the 2nd mortgage where it is at.
Although the second lien holder needs to subordinate, that lender has an incentive to approve the subordination since the borrower is most likely saving money on the first leaving an even less likely chance the borrower would default on the second mortgage.
So, if a borrower is at 6% fixed he could easily get a new mortgage rate in the 4% range with NO Mortgage Insurance. A full appraisal is required for this product and the existing loan cannot currently contain MI and the loan also must have been originated/funded prior to May 31, 2009. Minimum required FICO scores are also near or as low as 620. This program follows the temporary and permanent high cost loan limits. 1-Unit to $729,750 for another couple weeks then it will drop to $625,500 in high cost areas. 1-4 Units are eligible up to $1,403,400 and will drop to $801, 950 as noted earlier.
The program is clearly worthwhile and to find out if you are qualified you only need your mortgage professional to look-up your property address. This requires the last four numbers of the borrower as well.
If you are preliminarily qualified for the LP Open Access Relief Refinance Program, the process is very similar to getting a regular mortgage, in fact, it is almost identical.
Rates and programs are 30 and 15 year fixed are the only options available and rates are in the range of regular 30 year fixed agency paper. In some cases even lower.
So if you’ve been turned down recently for a refinance make sure you’ve looked at all options. Don’t fret. Call your local mortgage broker professional and ask about the LP Open Access Relief Refinance Program and its sister product, Fannie Mae DU Refinance Plus.
Michael Foote is a twenty plus year real estate and mortgage professional with multiple state licensing and over $1 billion dollars in personal production.