Mortgage Loans & Refinancing

If you haven’t heard, Federal Housing Administration continues to provide the best FHA loans for refinance mortgages and home purchasing.  After replacing most of the loan products in 2006 for subprime lending, FHA continues to push the envelope for home financing because it is one of the few mortgage products that isn’t focused primarily on credit scores.  Then HUD introduced FHASecure refinancing to help the millions of borrowers who were struggling to refinance their adjustable rate mortgage.  Recently HUD rolled out a widely publicized FHA refinance loans, Hope for Homeowners program in an effort to provide mortgage relief with principal reductions and short refinancing for borrowers who were currently delinquent on their mortgage and did not qualify for the regular FHA mortgage product. 

Presently, FHA insures almost one third of the country’s mortgage loans.  Until recently, FHA loans did not have nearly the market share, at least not the in the last forty years. Beginning January 1, 2009, FHA will insure single-family home mortgages up to $271,050 in low cost areas and up to a maximum of $625,500 in high cost areas. Just last February, Congress passed the 2008 Stimulus Package that temporarily increased the FHA mortgage loan limit to $729,750 through December 31, 2008. The new $625,500 maximum, however, represents a significant increase over the $362,790 limit that was in effect prior to the Stimulus Package.  Higher FHA loan limits do not cost the government any money because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA-insured mortgage loans. 

Increased FHA mortgage limits do not cost the government any money because the FHA Insurance Fund is supported completely by premiums paid by borrowers who receive FHA-insured mortgage loans.  The Housing and Economic Recovery Act announced that the national conforming mortgage loan limit to a house price index chosen by the new FHFA. For 2009, the national conforming limit will remain at the current level of $417,000. This Financing Act says that the new FHA loan limits will be set at 115 % of the median house price in a given area, as determined by HUD, but cannot be lower than 65 % of the conforming loan limit. Also, the FHA mortgage limit cannot exceed 150 % of the national conforming loan limit.  FHA mortgage rates have reached record low recently with interest rates declining to 5% on fixed rate mortgages on thirty year terms.

Nationwide provides the best refinance terms and mortgage loans available based on market conditions and not all programs like the 203k loans will be available to all borrowers depending upon the state and whether or not the home is considered owner-occupied. 

FHA Loans – HUD rolled out several new FHA home loans in 2008, like the Hope for Homeowners loan also known as, H4H that is like a mortgage loan modification with a principal write-down to 90% of the fair market value. Take advantage of low down-payment requirements, no minimum credit score, lower mortgage insurance with no pre-payment penalty.

Home Equity Loans – Choose from fixed rate equity loans or flexible home equity lines that enable you to borrow and re-borrow as you see fit.  With our HELOCs, borrowers only pay interest on the portion they have accessed.

FHA First Time Homebuyers Loans - Our First-Time Homebuyer Specialists help you with FREE same day pre-approvals, low down payments, and savings on everything from appliances to moving expenses.

Second Mortgage – Leave your first mortgage alone and take out a 2^nd mortgage for bill consolidation, cash out or home remodeling. Our second mortgage rates are low as they get online with no upfront application fees.

Debt consolidation mortgage - Consolidate your variable rate debt into one low monthly home loan payment featuring a fixed interest rate.

Fixed rate mortgages – Benefit from secure simple interest amortization that guarantees a fixed interest rate and payment for the life of the loan.  

Adjustable rate refinance mortgages - Lower mortgage rates provide lower fixed payments for an initial period of time – Choose from interest-only options for 5, 7 or 10 years.

Interest only mortgage – I/O offer the lowest monthly payments possible. Minimum payments of interest only can increase your cash flow when times are tough.

Nationwide Mortgage Loans cannot guarantee that the mortgage rates or equity loan terms offered will be available unless a full credit package is submitted and reviewed by our underwriting department. Our lenders provide at the lowest interest rates available for mortgage refinancing, FHA loans and second mortgages.  

The federal government continues to make efforts to ease the credit markets an open mortgage lending.  Whether it’s a mortgage refinance or a home-equity loan, getting a for a home loan has been nearly impossible to qualify for in 2008.  The lending guidelines have tightened significantly this year and your credit score and income documentation have never been more important.  Stated income loans have nearly vanished as most borrowers are pursuing FHA home loans and HUD requires full income documentation with pay stubs, W2’s and full tax returns if you are self-employed.  Jumbo mortgage loans require a bigger down-payment when purchasing or more home equity if seeking a refinance mortgage.

In a few weeks ago, the federal government announced two new programs to jump-start home mortgage lending. First, the Federal Reserve agreed to buy $500 billion of mortgage loan securities. After the Federal Reserve cut interest rates, lenders reported a significant increase in refinance loan applications. Part two is a $200 billion program to lend money to private investors who buy securities backed by student and auto loans, credit card debt and small-business loans guaranteed by the Small Business Administration.  The only problem with this is that, mortgage lenders have not eased their guidelines for mortgage refinancing; they only make loans more accessible to borrowers with exceptionally high credit scores.

The Mortgage Bankers Association released a report highlighting that thirty-year fixed-rate mortgage loans declined to 5.47% this week. These interest rates were much lower than the 5.99% reported last week.  Mortgage rates on fifteen-year fixed-rate mortgage loans fell to 5.13% from 5.78%, the report said. The rate on a one-year adjustable-rate mortgage declined to 6.61% from 6.87%.

Mortgage Refinancing

On an unadjusted basis, the index increased 51.4% from the previous week; it was down 21.9% from a year earlier, the report said. While the loan application statistics were high, “this is more a refinance story than a purchase story,” said Mike Larson, real estate and interest rate analyst at Weiss Research.  FHA home loan applications increased and that was a great sign for mortgage brokers, because they have lost a lot of business to loan modifications in recent months.

The interest rate report’s Refinance Index increased 203.3% to 3802.8 from the previous week, and the seasonally adjusted Purchase Index increased 37.4%.  “While purchasing a home is a big commitment, mortgage refinancing is often a no-brainer,” Larson said. “You may be less inclined to go buy a house in this weak economy. Home refinancing will go forward if the gains can hold.”  In the short-term, the Fed “did manage to get quite a bit of bang for their buck,” Larson said. “Most things they’ve done so far have improved some credit spreads slightly, but you didn’t see the effect on Main Street. Now, these are big numbers, the biggest we’ve ever seen.”

Today’s FHA mortgage rates are lower because lenders’ standards are tighter, Larson said, so many buyers applying may not have the home equity they need for approval. As a result, more loan applications “might end up in the circular file rather than the closing tables,” he said.  Still, Larson expected the Fed’s actions will result in more staying power and success, giving stressed homeowners a bit of breathing room.  “The Fed gave us an early Christmas gift,” he said

Let’s face it…the mortgage industry is in shambles.  The only sector that might be worse is the US economy and the primary reason that it tanked is fueled by the mortgage crisis.  The American economy had become contingent on home equity.  Over the last decade, homeowners began using their home like an ATM machine.  Millions of homeowners would run up credit card bills and then consolidate them with a home equity loan or a cash out refinance.  After the sub-prime mortgage market crashed in 2006, most mortgage lenders pulled back their second mortgage products.  By 2007 there were no second mortgage products that enabled borrowers to take out cash above 90% combined loan to value.  In 2008 the few lending banks that still offered home equity loans required a 70% combined loan to value.

The FHA home loan was reborn in 2007 with new cash out requirements that enabled borrowers to qualify for cash out refinancing up to 95%.  In an effort to curb foreclosures HUD introduced the FHA Secure refinance that enabled borrowers who were paralyzed with a high rate adjustable mortgage to lock into a fixed rate loan that they could afford.  The homeowners that had enough equity began utilizing FHA home loans for debt consolidation and home improvement funding.  In 2008, Congress finally passed an economic bill that mandated FHA mortgage loan amounts to increase nationally.  High cost area were now able to refinance with loan amounts up to $729,750 in some cases.  Many of the FHA mortgage lenders began to get nervous as foreclosure rates soared and they collectively believed that FHA loans were quickly becoming the replacement for sub-prime refinance loans.  Even though FHA has never made credit score minimums, the lenders took the guidelines into their own hands and started making credit score minimums like 580 and 620 for mortgage refinance transactions.  This was a huge blow for homeowners because FHA loans has always been based on the compensating factors and they were truly pioneers of “outside of the box” mortgage loans. 

2008 has been a turbulent year to say the least for the mortgage industry.  Foreclosure rates shattered records set in 2007 and major banks like Indy Mac and WAMU began to fail.  The FDIC began bailing out banks and the country found themselves in the worst economic state since the great depression.  Congress passed a bill that called for an $800 hundred billion dollar bail-out that was created to reopen the credit lines so that banks would start lending again.  Meanwhile home values have been tanking across the nation with short sales and foreclosure driving down the property values every month. 

FHA just introduced the Hope for Homeowners Loan that is considered a “short refinance” because it is the first mortgage loan modification endorsed by FHA.  The Hope for Homeowner loans offer an incentive to FHA mortgage lenders to write down the mortgage balance to fair market value and then turn around an offer a loan to these homeowners at 90% loan to value.  There are some contingencies like; the borrowers need to be at least 90 days late on their mortgage.  The borrowers aren’t allowed to take out a second mortgage for 5 years and if they sell the property or refinance in the five years they have to pay some of it back to FHA. 

Here is the problem; the lenders expect these borrowers to have a debt to income ratio under 38%.  If that was the case, these borrowers would not be 3 months behind on their mortgage.  In the first 2 weeks, FHA reported that only 45 in the country qualified for the Hope for Homeowners program.  Unfortunately very few borrowers qualify for this new FHA mortgage and you have to wonder how long the public will put up with the lending act from the mortgage giants as they take hand-outs from the government bail-out without coming through with any meaningful loan programs that meet the needs of todays “no equity” economy.

The main stream media has grabbed hold of the foreclosure crisis and the mortgage meltdown.  Unfortunately many newspapers are only reporting the shams of the loan modification brokers.  Most articles I read are warning distressed homeowners not to pay the $3,000 to $5,000 in fees to have a professional renegotiate the mortgage terms on your loans, because they say there are many non-profit companies out there that will do it for free.  These non profit foreclosure prevention companies are overwhelmed, underfunded and quite frankly have no intention of helping homeowners modify their mortgages.  With all of the misinformation and poser mortgage products, many homeowners are left with little hope as the mortgage meltdown and foreclosure crisis have turned our economy upside down. 

Article written by Bryan Dornan.

It’s time that FHA mortgage brokers and lenders speak up and provide HUD some feedback for their mortgage refinance products.  Let’s be honest, the FHASecure and FHA Hope for Homeowner products have not been able to help the average homeowners struggling to refinance and stop foreclosure.  These FHA home loan products look great on paper but when they the lending banks, (ie. Countrywide, Wells Fargo, Chase, etc.) get a hold of these products they implement their additional lending guidelines.  As these mortgage lenders tighten the guidelines it makes these FHA loan products irrelevant, because very few homeowners qualify for them. 

HUD needs more to gear from FHA mortgage brokers.  Tell them why FHA Secure and Hope for Homeowners give the lending community no hope at all.  Let HUD know that their products are close to working, but the banks are restricting the refinance programs to a point beyond approving.  Let HUD know that if we don’t get some affordable refinancing products that are applicable with today’s economic struggles that we will all be selling mortgage loan modifications that could significantly undermine property values and home equity as we know it.  Don’t sit back quietly and let mortgage lending disappear.

Most homeowners, consumers and politicians do not realize that there are significant differences between FHA lending guidelines and the revised guidelines that the mortgage giants like Countrywide, Chase, Wells Fargo, Suntrust and B of A.  Clearly, FHA home loans have dominated the mortgage product line for prime, subprime and foreclosure prevention.  Unfortunately, most of these lenders are spending much of their time staffing up their loss and mitigation departments to provide mortgage loan modifications to their clients who are delinquent on their adjustable rate loans.

Even though FHA has set these changes to take effect on January 1st of next year, you can already see mortgage banks adjusting for HUD’s new FHA policies by shifting their lending requirements to benefit the bank and shareholders.  A select few of FHA mortgage lenders are enabled to implement these new provisions because they are allowed to introduce their own lending restrictions.

The 2009 FHA Mortgage Loan Limits have been set and since the foreclosure crisis continues to pull down comparable sales for appraisals across the nation, the temporarily increased loan limits from the 2008 Economic Stimulus Bill are exactly that–temporary.   The FHA mortgage loan limits will be decreasing in 2009 and so will the hope for many good borrowers who were planning for a mortgage refinance loans next year.  Many California mortgage refinancing opportunities will disappear…

Borrowers in high cost areas like Southern California, have to search for alternative lending options because as of January 1st 2009, FHA will no not insure mortgage loans above $625,500.  These jumbo mortgage loans will likely see higher interest rates and more borrowers could find themselves in line for a loan modification. 

Hopefully the new year will bring true mortgage refinance opportunities for homeowners who need it most.  The FHASecure program and Hope for Homeowners looked great on paper, yet very few homeowners were actually able to qualify for the foreclosure prevention programs because the lenders simply didn’t want to take the risk that FHA guidelines allowed.  Only time will tell, but maybe President elect, Obama can throw some optimism this mortgage brokers direction.

The Federal Housing Finance Agency announced the conforming loan limit will remain $417,000 for 2009 for most areas in the U.S. but specified higher limits in specific high cost cities and counties. The conforming home loan limit is the maximum size of loans that Fannie Mae and Freddie Mac can purchase in 2009. According to provisions of the Housing and Economic Recovery Act of 2008, the national mortgage loan limit is set based on changes in average home prices over the previous year, but cannot decline from year to year.  Home loan limits for two-, three- and four-unit properties in 2009 will remain at 2008 levels as well: $533,850, $645,300 and $801,950 respectively, for houses in the continental U.S.

The national mortgage limit was left unchanged at $417,000 based on declines in FHFA’s monthly and quarterly house price indexes over the past year. The monthly purchase-only index declined 5.9 % over the 12 months ending August 2008, and the quarterly all transactions index dropped 1.7 % from second quarter 2007 to second quarter 2008.  Virtually every other measure of house prices has also fallen, with many showing even larger declines.

FHA has not yet determined whether it will continue to use a currently existing FHA price index to gauge price movements in future years. For this year, however, all reliable metrics point to lower prices and a price decline of any size is sufficient to determine that the national limit will not change.  Following the provisions of HERA, FHFA has set FHA home loan limits for “high-cost” areas in 2009. These limits are set equal to 115 % of local median house prices and cannot exceed 150 % of the standard limit, which is $625,500 for one-unit homes in the continental U.S. The new limits affect loans purchased by an Enterprise in 2009, unless the home loans were made permanently eligible for purchase under the Economic Stimulus Act enacted earlier in 2008 and has generally larger limits. FHA said it might choose a different method in future years and will seek public comment on the best approach. 

Under rules set forth in the Stimulus Act, loans originated in 2008 and the second half of 2007 are subject to limits of 125 % of local price medians up to a maximum of $729,750. As a result of the difference in the formula for determining high-cost area limits, many of the high-cost area loan limits are different for 2009 than they were for 2008. They are generally lower because of the lower median price multiplier in HERA (i.e., loan limits are 115 % rather than 125 % of median prices) and the lower ceiling ($625,500 rather than $729,750). For mortgage loans originated during the period covered by the Stimulus Act, the higher of those limits and the 2009 limits will apply.  In calculating loan limits, FHFA used median house price estimates calculated by the Federal Housing Administration of the Department of Housing and Urban Development.

According to Erik Hand, president of John L. Scott Real Estate’s Response Mortgage Services Fannie Mae announced that they will impose additional restrictions for mortgage loans between $417,000 and the maximum loan limit. The new restrictions will reduce the maximum loan-to-value ratio from 97 percent of a home’s value to 90 percent.   Since home values have been declining dramatically nationwide, this is a huge setback for homeowners and mortgage lenders trying to provide refinancing solutions.   They plan to roll out more restrictions for cash-out refinancing and loans for investment properties. Hand said industry officials are pushing to have the larger loans treated just like any other conforming mortgages.  Conforming home loans are defined as that Fannie Mae and Freddie Mac agree to buy for their portfolio.  Jumbo mortgage loans will continue to feature higher interest rates because the risk for default remains greater.   

FHA will allow a 30-day appeals period for those wishing to contest its median price estimates. Appeals are to be based upon data suggesting a potentially higher price median for a given area. Details concerning the appeals process will be released today in an FHA mortgagee letter. To the extent that appeals are deemed valid and HUD’s median price estimates change in response to the one-time appeals process, the FHA loan limits will be changed to reflect the updated data.    

As in previous years, the 2009 maximum conforming limits are higher in Alaska, Hawaii, Guam, and the U.S. Virgin Islands than in the contiguous U.S. In those areas, as delineated in the attached list, loan limits vary from $625,500 to $721,050 for one-unit properties.  Link to 2009 High-Cost Area Loan Limits (PDF)

The new FHA loan program, Hope for Homeowners was created recently to help minimize foreclosures, but so far there are too many hurdles for the average distressed homeowner to overcome and very little borrowers have been able to qualify.  FHA continues to actively consider several mortgage loan modification plans and most lenders believe they will see a good mortgage refinancing solution in 2009.  The housing market is complex and when it comes to lending guidelines to decrease loan defaults and foreclosure there is a sharp contrast between loan guidelines and loan work-outs.  Hopefully FHA, Fannie Mae, Freddie Mac and the mortgage lenders will work together for a solution that provides foreclosure prevention and loan performing results that will get our economy and housing market back on track

FHA eliminated their down-payment assistance loan Programs on Oct. 1. These mortgage loans designed to help first time homebuyers enabled the seller to offer the buyer down payment assistance.  Housing Wire reported recently that FHA commissioner Brian Montgomery criticized DAP, reported the mortgage news site Here’s a clip from that story:  Montgomery recently stated, “Data clearly demonstrates that FHA home loans made to borrowers relying on seller-funded down payment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own down payments.”  These high risk mortgage loans presently make up one-third of the FHA’s loan portfolio.  Montgomery added that the agency booked an additional $4.6 billion in long-term losses when reassessing their annual figures.  “No insurance company can sustain that amount of additional costs year after year and still survive,” he argued. “Unless we make corrections to mitigate these losses, FHA will soon either have to shut down or rely on appropriations to operate.” 

On a more positive note, DataQuick recently announced a 62% increase since last year with 2,667 SFR home and condo sales were reported in September.  This is the largest 1 year gain since DataQuick started tracking this data in the last twenty years.  FHA mortgage lending continues to soar with 28.6% of August buyers using the program, up from 27.2% in July and 9.5% in August 2007.  According to the Census Bureau, FHA released data for new home sales indicating that homebuyers continued to use FHA home financing 17% of the time in the 3rd quarter which is up from 15% in the 2^nd quarter and 4% in the 3^rd quarter last year.

Obama says he will stop mortgage fraud from mortgage lenders and brokers.  He and Biden claims that under his watch, homebuyers get more information related to their mortgage loan options. He offers all this and a promise to provide additional tax credits to all middle-class homeowners.  How do you define “middle class” Mr. Obama?  $250,000 a year is the line they used on the campaign trail.  If stick to that – God Bless him! 

Seriously, please elaborate on your “mortgage credit” that is said to be a 10% home mortgage credit that enables homeowners to benefit if they choose not who do not itemize the mortgage interest with their tax returns.  They say on average that will yield $500 to 10 million homeowners.  One question Mr Obama…Wouldn’t the average homeowner get more back with present tax incentives already being practiced?  The answer is yes.  So is it a tax credit or increased tax on homeowners?

Obama’s website suggests that they have been examining the sub-prime mortgage lending issues for years.   This is good because it is imperative that the next president thoroughly understand the housing sector and mortgage financing.  Apparently, Obama introduced legislation to fight the war on mortgage fraud.   He vows to protect consumers against abusive mortgage lending practices. The STOP FRAUD Act offers a federal definition of mortgage loan fraud and increases the funding for federal and state law enforcement programs.  He vows to implement new criminal penalties for home financing professionals found guilty of fraud while requiring co-workers to report fraudulent activity.  Who can argue with this…People want to put a face with the housing crisis that has cost them the equity in their home and in some cases the home themselves. 

Obama says he will eliminate laws that prevent bankruptcy courts from introducing loan modifications. This is a good thing if banks are going to modify loans why not do it at this level as well.  Obama says he will introduce a HOME score which enables borrowers to compare several home loan products while better understanding the total cost of the mortgage.  This is what the Federal Truth and Lending Statement does.  It multiplies an average of the borrower’s monthly payment over the months they have the loan.  (ie.  3,000 a month over 360 months will cost you $1,080,000)   The truth in Lending Law is pretty darn clear.  We all should take some responsibility with this mortgage meltdown.  Whether you are a homeowner, loan officer, lender, bank or politician, we all played a role that led to this foreclosure epidemic.

Here is the problem Mr. President, the sub-prime meltdown and the foreclosure crisis problem is far more complicated than predatory lending from unscrupulous mortgage brokers.  Banks do not like mortgage brokers and for years they fueled the fire that mortgage brokers caused the sub-prime meltdown.  For the last decade, Banks have created mortgage guidelines that created a housing boom.  American homeowners prospered and what could go wrong.  Lending guidelines in 2005 and 2006 went too far in allowing no money down home loans for borrowers with little, no or bad credit.  The housing bubble bursted and jobs were lost.  The mortgage industry melted and banks tightened their guidelines to the point where average homeowners could not qualify top refinance into a fixed rate mortgage they could afford.  FHA home loans have started to require certain credit scores and lenders like to play appraiser and reduce their appraised value to the point where everyone has been wasting their time.  Home values plummeted and the foreclosure concerns became an epidemic.  Loan modifications have become the modern refinance loan and now when the Fed cuts interest rates, mortgage rates actually rise.  Welcome to my world Mr. President….I’m an unemployed mortgage broker who like to write about the truth. 

Article was written by Bryan Dornan who is the marketing director with Nationwide Marketing.