The Early Years Of a Mortgage Are Interest-Loaded

For homeowners, a mortgage amortization schedule's most important trait is how it renders mortgage payments interest-heavy at the start. There is very little principal that's goes back to the bank each month.

If you've ever looked at your mortgage statement after a few years and thought, "I haven't paid this thing down a bit!", it's because of amortization. Amortization schedules are decidedly "bank-friendly".

At today's rates, it would take 20 years to reduce the 30-year, fixed-rate mortgage's amount owed by half.

Having said that, amortization schedules can benefit to homeowners, too. Because mortgage interest is often tax-deductible, the early, interest-heavy years of a loan can provide larger tax benefits than the loan's later years.

Furthermore, an amortization schedule can be accelerated with "extra" mortgage payments. Years can be shaved off a loan's life with just some basic planning.

Fannie Mae Guidelines To Change December 13, 2010

Mortgage Guidelines Are Changing

Conforming mortgages are loans that, literally, conform to the lending standards set forth by Fannie Mae and Freddie Mac.

What's New With The Guidelines : A "Cheat Sheet"
Effective December 13, 2010, Fannie Mae adds new bumps to the lending landscape, and takes others down.

Guidelines are changing across 9 separate areas of the mortgage approval process. Collectively, the updates figure to impact nearly everyone in want of a conforming home loan. They run the gamut from income and assets to documentation and reporting.

A few of the more major changes:

•The 97% "Flexible Mortgage" is eliminated, replaced by a standard 97% loan subject to loan-level pricing adjustments
•Borrower "minimum contributions" are eliminated for 1-unit purchases with at least 3% down. Gifts and grants are permissible sources for a downpayment.
•All revolving debt must be included in debt-to-income ratios, regardless of whether there's "10 Payments Or Less". If there's debt, it must be counted.
•A 5% monthly payment against the balance must be assumed when no minimum monthly payment can be verified via the creditor, or the credit bureaus.
Furthermore, the new guidelines contain a note that former homeowners with a foreclosure on record must wait 7 years before re-applying for a conforming mortgage.

Bank of America Halts Foreclosures

Now Bank of America (BoA) has joined the crowd by freezing home foreclosures in 23 states as it investigates whether there were flaws in its process. "We have been assessing our existing processes," Bank of America said in a statement. "To be certain affidavits have followed the correct procedures, Bank of America will delay the process in order to amend all affidavits in foreclosure cases that have not yet gone to judgment in the 23 states where courts have jurisdiction over foreclosures." Bank of America did not have an estimate of the number of homeowners that will be affected by the delayed process. The announcement comes two days after JP Morgan Chase said it will also halt foreclosures for about 56,000 homeowners after learning that its employees may have approved foreclosures without personally reviewing loan files.

Property Taxes Decline

Civic property tax revenues started to decline in 2010 after years of growth, according to a report released by the National League of Cities on Wednesday. Cities expect property tax revenues to fall by 1.8% in 2010, after rising by 4.2% in 2009. This drop lagged the housing market collapse because property tax bills are based on assessments, which are slow to adjust to market value changes. But the worst is yet to come, according to the league's report. The full brunt of the housing bust won't be felt until 2011 and 2012 as more property values are reassessed. And commercial real estate values may dive in 2012, exacerbating the problem. Though income taxes are expected to rise 1.8% this year, relatively few cities have income levies. Instead, sales and property taxes dominate their revenue streams.

Tighter Guideline Restrictions Announced

Fannie Mae announced this week a host of changes to their underwriting policy for loans sold to them. As in the past, Freddie Mac will most likely match them. Here are some of the key changes that could affect your next loan.

The waiting period a buyer must wait to purchase another home after a foreclosure has been extended from 4 years to 7. If you had a short-sale, also known as a pre-foreclosure, you now must wait two years. Previously, there was no time restriction.

If you are purchasing a 2nd home, a 2-4 unit property, or obtaining a Jumbo Conforming loan, you must contribute a minimum of 5% of the down payment from your own verified funds. In the past the down payment could have all been gift funds from a family member.

HAMP A FAILURE, DEFAULTS ON THE RISE

According to a federal report released Friday, only 36,695 homeowners received long-term mortgage modifications in July under the Obama administration's Home Affordable Modification Program, known as HAMP. This brings the total to 434,717 borrowers who have successfully made it out of the trial phase. A month ago, 51,205 delinquent borrowers were given long-term assistance, but the number of people falling out of the program is on the rise. Some 12,912 homeowners had their permanent modifications canceled in July, 272 of whom paid off their loans. "While there has been some stabilization in the housing market, it remains clear that we have more work ahead," said Raphael Bostic, assistant housing secretary.

Mortgage Fee Trigger Raised

On Friday, the Federal Reserve Board of Governors raised the dollar amount of mortgage fees that triggers mortgage disclosure requirements under the Truth in Lending Act and the Home Ownership and Equity Protection Act of 1994 (HOEPA). The Fed raised the trigger 2% to $592, from the current $579, beginning in January 2011. The trigger amount is now 48% higher than the $400 originally set by HOPEA in 1994. HOEPA restricts credit terms such as balloon payments and requires additional disclosures when total points and fees payable by the consumer exceed the fee-based trigger (initially set at $400 in 1994 and adjusted annually) or 8% of the total loan amount, whichever is larger. Beginning in 2011, if a borrower is charged more than $592 in mortgage points and fees, the lender is required to disclosed credit terms. Every year the Fed adjusts the dollar amount that triggers disclosure requirements. This "trigger," which aims to increase transparency of fees charged to mortgage borrowers, is based on the annual percentage change reflected in the Consumer Price Index.

Foreclosed Homes Sell at 27% Discount

Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc.
A total of 232,959 homes sold in the period had received a default or
auction notice or were seized by banks, RealtyTrac said in a
report today.
The discount reflects the average sales price of homes in
the foreclosure process compared with the average sales
price of properties not in distress. About 31 percent of all
U.S. sales in the quarter were of homes in some stage of
foreclosure, RealtyTrac said.

Government Control Of Fannie Mae Dictates New Rules

In showing it’s hand in controlling Fannie Mae, new rules were announced this week that require EVERYONE involved in a Fannie Mae financed real estate transaction to be checked against a national database of “Excluded Parties”. If any party appears on the list, the loan is not eligible for a Fannie Mae loan. The new regulations take effect June 1st.

Who is everyone? The borrowers, Loan Officers, Underwriter, Appraiser, Listing Agent, Listing Agent’s company, Selling Agent, Selling Agent’s company, Escrow Officer, Escrow company, Title Officer and Title Company.

The database contains roughly 3,700 pages of names of individuals that are anything from suspected terrorists to those convicted of drug offenses. The list also includes people who have been convicted of violating federal procurement laws, housing discrimination, and wage violations on Federal projects. To see if you or a potential client is on the list, here’s the website: https://www.epls.gov.

No one wants to aid a terrorist, but the mortgage market has long been private enterprise at its best. Fannie Mae and Freddie Mac used to be private government sponsored entities. This new requirement demonstrates that residential mortgages sold on the secondary market (90% of all mortgages) are now controlled by the Federal government.

The Foreclosure Rate...What is it doing?

Despite the drop in foreclosure rate, banks are still repossessing homes at an alarming rate -- over 92,000 homes were reclaimed in April. Home buyers, however, are snatching them up.

According to the National Association of Realtors®, distressed homes accounted for 35 percent of all April home resales with a typical discount ranging near 15 percent.

That's good value if you can find REO that's in decent condition.

Trade In Your Case-Shiller Index For Real-Time Real Estate Data Instead

The Case-Shiller Index is flawed for 3 major reasons and better real estate decisions start with better data. No matter where you live, you should be getting these free weekly market reports -- no question.

Adjustable Rate Mortgages

Adjustable Rate Mortgages Are An Absolute Steal Right Now. Have You Checked The Rates Lately?Home buyers would be behind to not at least consider the 5-year ARM right now. As compared to the 30-year fixed, the 5-year ARM is an absolute steal.
Courtesy of The Mortgage Report.

Re - Pre-Approval / Prequalification Letter

Planning To Use The $8,000 Tax Credit? It’s Time For A Re-Pre-Approval.
If your pre-qualification and/or pre-approval letter is more than 8 weeks old, get yourself "re-pre-approved". Mortgage guidelines have been in flux and your original lender letter may now be invalid.

LOCK RATES - NEGOTIATE A LOWER INTEREST RATE

How To Use Rate Locks To Negotiate Yourself A Lower Mortgage Rate.
Whether you're buying a home in Cincinnati or refinancing one, there's several ways to make a play for lower mortgage rates or fewer loan fees. (1) Have a higher credit score, (2) Make a larger downpayment, (3) Do your Good Faith Estimate homework. But, sometimes, the easiest way to save money on your mortgage is to pick a better closing date.

Lowest Mortgage Rates of 2010

The Lowest Mortgage Rates of 2010 Will Be Locked In March And April
Mortgage rates tend to climb with the mercury. It's been the case in each of the last 3 years. As spring months turn into summer, the average 30-year fixed mortgage rate rises. This year should be no different.

Furthermore, the price of gas is rising. It's up 20 cents per gallon in the last 30 days. No doubt you've noticed. Rising gas prices are inflationary and when gas prices rise, we find that mortgage rates are usually right behind.

My First Blog

Aloha my Bloggers,

I just wanted to take a moment and invite myself into your world. Today, I post my first Blog, but soooo much more to come. I will introduce myself in my 'about me' space, until we meet again, look for me EVERY Monday with a new Blog...my intent is to have written something every Sunday, or Saturday night if I know the following Sunday will be spent alone with my Heavenly Father...you get the jest.

Again, thank you for having me...FISHER PROPERTY ENTERPRISES, INC.

Aloha,
Denean