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.

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