No more 100% Financing
It looks like the days of no money down home purchases are finally behind us. CLTV's (cumulative loan to value) which is the term applied to the total value of a first mortgage combined w/ a second mortgage divided by the value of the home, have been reduced to 90% or lower, and now the mortgage insurance companies no longer will provide MI for 100% financing for one loan . This isn't really a bad thing though...I mean come on. shouldn't a homeowner have some skin in the game?
Summary:Due to recent MI company restrictions, Homecomings Financial announces changes to the Conforming program effective March 28, 2008. Conforming ProgramOur MI partners recently announced that they will no longer insure loans with LTV/CLTVs greater than 97%, regardless of the DU recommendation. This restriction will hold true for both LPMI and BPMI. Because of this restriction, the maximum LTV/CLTV will now be 97.000%. The RLM will be updated as soon as possible to reflect these changes.
Posted on Friday, March 28, 2008 at 10:38AM by Rich Post a Comment
Fannie and Freddie not helping as promised
I had a nice conversation last week w/ Colin Gustafson of the NYSun about how frustrating the new super conforming loan programs sponsored by Fannie and Freddie are turning out to be for our mortgage clients. The fees are high and the credit requirements and loan to value limits are tough. Take a look at the article below from today's NYSun....it appears as though other New York mortgage brokers agree.
New Government Mortgage Program Said To Be ‘Useless’ CMG in the NYSun
By COLIN GUSTAFSON, SPECIAL TO THE SUN March 26, 2008
Mortgage lenders are beginning to offer a new type of mortgage associated with President Bush’s stimulus package that is intended to offer potential buyers lower rates, and so far the program has not been effective, brokers claim.
Chase Lending Bankand Wells Fargo have begun implementing fees and guidelines for mortgages of up to $729,750 that will now be guaranteed by the quasi-government home loan agencies Freddie Mac and Fannie Mae, while other large lenders, including CitiMortgage and Washington Mutual, are expected to follow suit in the days ahead.
It had been that Freddie Mac and Fannie Mae could guarantee loans only up to $417,000, but the stimulus package ups the guarantee limits to provide relief for more homeowners. The going rate on the new, so-called super-conforming loans is about 6.6%, compared with 5.9% on mortgages that are less than $417,000.
These super-conforming loans come with several restrictions: They are limited to condominium and single-family homeowners, shutting out buyers of co-ops, which make up a majority of New York housing stock; there is a limited window for applications before the program expires at the end of the year, and there are limits on cash-out refinancing, a common practice where buyers refinance their mortgages for more than they currently owe on the loan and pocket the difference.
With so many restrictions, less than 10% of New Yorkers will be eligible for the lower-rate loans, the owner of the Manhattan Mortgage Co., Melissa Cohn, said.
The limits on cash-out refinancing are especially burdensome, brokers say. While Fannie Mae prohibits most cash-out refinancing, Freddie Mac will allow it up to $100,000, and only to refinance no more than 75% of the home’s value. To borrow at this 75% benchmark, the buyer also must have a credit score of at least 720.
Manhattan attorney Ariyike Diggs, for example, had been planning to cash out on her $400,000 mortgage by taking out a lower-interest $440,000 loan — but her mortgage broker was unable to seal the deal because her credit score was 10 points shy of Freddie Mac’s cutoff, according to a principal at mortgage firm Commodore Mortgage Group, Richard Bouchner.
In addition to the lending caveats, the lenders themselves are tacking on additional fees. Chase Home Lending, for instance, has announced it will add between a 2% and 3% fee on broker commissions that will likely be passed on to the borrowers in the form of higher rates.
“The new loan limits were supposed to save a lot of borrowers,” Mr. Bouchner said. “Now that the banks have allowed Freddie and Fannie’s guidelines to trickle down into their system, we’re seeing that this isn’t the life preserver that homebuyers had expected.”
While there are caveats, and the rates are not as cheap as the smaller mortgages that Freddie Mac and Fannie Mae guarantee, they are lower than mortgages that are not backed by these agencies. The going rate for a mortgage of about $700,000 is more than 8%, brokers say.
Still, mortgage experts had hoped the new program would help insulate the New York housing market from a slowdown. With home prices in New York remaining high — the median price for condos is $1.35 million, compared with the national median home price of just $195,900, according to the National Association of Realtors — they say this incentive was especially important.
Now, the new mortgage program is “essentially useless,” the senior vice president of Preferred Empire Mortgage Co., Jeffrey Appel, said. “If you’re not getting that much of a break on your rates and if there’s no cash-out option, then you have to wonder, what’s the point?”
Posted on Thursday, March 27, 2008 at 09:45AM by Rich in Mortgage Post a Comment
The Principal of the Matter
There is an article in today's NYTimes business section that addresses a phenomena that seems to be somewhat specific to real estate: Sellers who won't cut their price. If airlines have empty seats, they lower their prices. If a company announces lower earnings, shareholders lower their prices. If a home won't sell...what do most sellers do...they refuse to lower the price. Too many emotions and not enough reasoning. if you ask me.....
http://www.nytimes.com/2008/03/26/business/26leonhardt.html?ex=1364270400&en=0b14a88f5032e300&ei=5124&partner=permalink&exprod=permalink
Economic Scene
Be It Ever So Illogical: Homeowners Who Won’t Cut the Price
By DAVID LEONHARDT
Published: March 26, 2008
For both economic and psychological reasons, there is no asset more conducive to hopeful overvaluation than real estate.
Posted on Wednesday, March 26, 2008 at 01:36PM by Rich in Real Estate Post a Comment
What's up with Fannie and Freddie?
Wearing my mortgage broker's hat, I find the new "Super-Conforming" loan programs very frustrating and view them as another typical political PR stunt. According to Barney Frank and Sec Hank Paulson, the increased loan limits were created to allow more homeowners to qualify for Fannie and Freddie backed loans, thus providing liquidity to the mortgage market until the jumbo loans become more available. Sounds good on the Sunday news shows, right? Well as usual, the reality is a bit different than the rhetoric. So far. we have not been able to qualify one client for these new programs. (and these are folks w/ good income and strong credit) The guidelines are too restrictive. FICO scores requirements are too high, and loan to values are too low. Also, the lenders are including such huge price hits, that borrowers who do qualify will either get a rate in the 7 or 8s, or they will need to pay 3 or 4 points to obtain a market rate. It will be interesting to see how many of these loans actually get done. Oh yeah, by the way, if you live in New York in a coop, forget about getting into one of these products all together. Why? The rules don't allow coops in these programs at all.
Posted on Wednesday, March 26, 2008 at 09:32AM by Rich in Mortgage Post a Comment
