Don’t move your ASSets – The search for source and seasoning

Written by Michael A. Foote, CMB on . Posted in Uncategorized

Assets, or in the our case liquid assets are monies used for purchase down payments, closing costs, principal reduction, prepaids as well as gift funds. A common problem in the loan process happens when a buyer/borrower transfers money from one account to another. While this seems innocuous this single act can result in an underwriter adding multiple conditions on the loan. Often these conditions can include: new bank statements, copies of checks deposited into accounts, proof of ownership of said accounts, letters of explanation and the list literally can go on and on. All because an underwriter needs to verify source and seasoning of all funds into the transaction for the borrower. Why you ask? Here are a couple of scenarios.
Buyer gets money from Realtor to buy a home with a grossly inflated price. Buyer borrows down payment in the form of a personal loan resulting in a secretly higher debt to income ratio – which creates greater risk the lender. You get the point. It goes to the strength of the transaction. Money that is properly sourced seasoned results in lower risk. So remember when you are preparing to purchase a house – DON’T MOVE YOUR ASSETS!

It’s not FHA’s DeFault

Written by Michael A. Foote, CMB on . Posted in Uncategorized

Apparently, the FHA is doing a poor job of screening lenders that enter the program, an internal audit has found and recently announced.

Last month, the Department of Housing and Urban Development’s inspector general completed an audit. It concluded that the Federal Housing Administration had deficiencies in its controls to make sure lenders meet the agency’s tough standards.

About 20-30 percent of new loans today are backed by the FHA depending on what window in time you look at, up from as low as 2 percent during the subprime loan boom. The FHA does not make loans directly, but insures loans from outside lenders which are generated by Bank, Mortgage Bankers, Brokers and Credit Unions in some cases

“The agency approved nearly 3,300 lender applications in fiscal 2008, more than triple the year before. But the number of workers evaluating applications remained the same. In a review of 22 approved applications, the audit found that only one contained all the necessary documents.”

As ddelinquency has continued to increase, the agency’s ability to manage its participating lenders is a big concern because there are growing fears that the agency will need a taxpayer bailout. Last month the FHA said its financial reserves had sunk below mandatory levels for the first time in its 75-year history. Additional defaults could hinder the ability to cover losses without an influx of government cheese may be needed.

In its official response to the report, HUD official Joy Hadley wrote that the agency “remains committed to ensuring that only responsible, financially sound lenders with integrity become approved as FHA program participants,” It important to note FHA provides almost half of all mortgage made to black and hispanic borrowers.

Last month the FHA said it will raise the financial requirements for lenders and request annual audits, and officials have been cracking down on lenders suspected of fraud. These adjustments however, are relatively insignificant. The real need to enforce the same rules for all originators of these loans.

FHA is having some issues

Written by Michael A. Foote, CMB on . Posted in Uncategorized

It seems recently FHA has been running a little low on cash. Not surprisingly FHA delinquencies have been ratcheting up due to quite a big surge in demand from 2007-2009 YTD. AS delinquencies rise, the cash needed for the FHA slush fund gets lower.

If an effort to stem the tide of defaults FHA has recently announced it will require income documentation from FHA streamline clients as well as Lenders will be required to maintain audited net worth abouve $1 million, up from just $250,000. However, they have also recently announced Mortgage Brokers will no longer be required to register with FHA or carry any type of net worth. The liability it seems will fall squarly on the correspondent lender.

The moral? get your streamlines in now before it tightens up again…I mean what are you waiting for anyway – rate are ridiculously low.

Seasoning??? Is this FHA or a BBQ?

Written by Michael A. Foote, CMB on . Posted in Uncategorized

It’s not just what you flavor your food with.

Seasoning is an ever more important factor in financing. When you are buying a home with financing a lender will do many things to verify the transactions is arms length and otherwise a legitimate transaction. One of those procedures is verifying the seller has owned the property for a minimum period of time. Currently that is 90 days for FHA. IF your seller has not held the property (on title) for at least 90 days BEFORE the transaction started the loan will be rejected. Moral of the story, when buying a property make sure the seller has owned the property for a minimum period of time or risk losing the property.

FHA Basics

Written by Michael A. Foote, CMB on . Posted in Uncategorized

Why FHA? FHA financing offers buyer and borrowers alike the opportunity to acquire and finance properties and borrowers that would not typically qualify for conventional financing.
FHA also has fantastic rate and fee combinations – the product is not inherently expensive although some will tell you it’s much more difficult to process or underwrite. And because of that some lenders and mortgage brokers layer high fees and costs under the assumption FHA is just more expensive. You don’t have to pay large discount and loan origination fees. You can get FHA no points financing you need to just educate yourself and be prepared.

FHA Non Occupant Co-Borrowers

Written by Michael A. Foote, CMB on . Posted in Uncategorized

Another huge advantage to the FHA product is that co-borrowers do not need to occupy the property and while typically the primary borrower needs a minimum 60% DTI before consideration is given to the co-borrower, FHA does not. The overall qualifying ratio is what matters. This really give FHA a huge advantage in typical co-borrower scenarios.

FHA Streamline

Written by Michael A. Foote, CMB on . Posted in Uncategorized

It is important to know that FHA streamlines are only available IF you (borrower) receives payment benefit. If you don’t then a lender technically shouldn’t offer you a streamlined program. SOOOoooo if you receive an approval for FHA streamline, you know that you should receive a real payment benefit. Don’t forget that all borrowers from the original FHA loan need to be parties to the new FHA streamline loan.

FHA High Balance Loan Limits

Written by Michael A. Foote, CMB on . Posted in Uncategorized

It’s important to remember that the FHA lending limit for Orange County, CA 1-unit properties is 729,750 and it goes up from there for 2-4 unit properties. This number is even higher in Hawaii and little less in other states. Why is this important? Because just a few years ago these loan amounts would be considered Jumbo and even Super Jumbo. And you want to know why else this is important? Because jumbo loans are relatively non-existent these days and certainly not available with any serious leverage. But FHA allows LTV’s up to 96.5%.
And you wanna know something else FHA offers VERY competitive rates and terms.

So next time you are thinking no have no options for your jumbo home loan, call an FHA Lender and see what they can do…and of course you can call mine,
HomeSecure Mortgage Lending 888-450-HOME, a direct FHA lender

The secret to mortgage shopping

Written by Michael A. Foote, CMB on . Posted in Uncategorized

Ok. You want to know the real secret to finding the best loan. Here it is. Figure out what rate you really want/need to have. One that provides you the payment or savings that you want. Then call a couple of direct lenders and ask for a quote at that rate and if THAT CAN BE LOCKED and when. Then compare those quotes directly. Here is where most people miss it. Rather than worrying about processing fees, underwriting fees, closing fee, title, points, etc. simply require a detailed good faith estimate that includes third party fees. Then simply add ALL the fees together and determine which fees are lower for the same rate. Obviously the lower the fees the better the loan. Then make sure the lender offers a best price mortgage guarantee and lock policy to make sure they do not “pull the carpet out from under you at closing”. If they can’t meet these requirements, run!

How do I know this, because my company offers all these services for free.

Written by Michael A. Foote, CMB on . Posted in Uncategorized

FBI and HUD Issue Reverse Mortgage Scam Warning
The FBI and the Department of Housing and Urban Development recently issued a warning for senior homeowners to be cautious of fraud schemes when seeking reverse mortgage products.

If you are seeking a reverse mortgage simply take these few steps to ensure your working with an approved direct lender:

1. Verify the Lenders license through online governement databases
2. Search the internet for references good and bad.
3. make sure everything is in writing AND that you read it all.
4. Seek a second opinion from your trusted financial advisor

If you take these step you’ll avoid the majority of these scams.