The Mortgage Porter

President Obama's Refi Plan for Non-HARP Qualified Homeowners

On last week's State of the Union Address, President Obama announced a plan to help underwater homeowners who do not qualify for a Home Affordable Refinance.  In order to qualify for a Home Affordable Refi (aka HARP 2.0) the home owner's mortgage needs to have been securitized by Fannie Mae or Freddie Mac prior to June 1, 2009 and meet other qualifications.  If the home owner currently has a jumbo loan, they are instantly disqualified for HARP 2.0. since jumbo mortgages are non-conforming (not Fannie or Freddie programs). HARP is also restricted by existing conforming loan limits and in the greater Seattle area, the current conforming loan limit is $506,000.  Even if you have a conforming loan amount of $567,500 (last year's conforming loan limit in Seattle), current HARP guidelines limit you to a $506,000 loan amount.

President Obama's proposal is to help underwater home owners who have made their mortgage payments on time and who do not qualify for HARP 2.0 is to allow them to have an FHA insured mortgage without an appraisal.  FHA insured mortgages have different loan limits than conforming. In the Seattle area, the FHA loan limit is $567,500. Obama's new refi program, should it come to fruition, will be limited to FHA loan amounts. 

FHA mortgages are a great program, however they're also very expensive when compared to conventional loans.  This is because they have both upfront and monthly mortgage insurance fees, which are constantly being raised by Congress. FHA mortgages have both upfront and monthly mortgage insurance regardless of the loan to value of the property. 

As of 8:30 this morning, an FHA rate on a loan amount of $567,500 in Seattle - Bellevue with a 720 or higher credit score is 3.750% for a 30 year fixed rate (apr 4.767).  Principal and interest with the financed UFMIP is $2,654.46 and the monthly mortgage insurance premium is an additional $515.85 for a total (PIMI) payment of $3,170.31, not included property taxes and insurance.  This PIMI payment equals an interest rate in the low-to-mid 5% range if you compare it to a conventional mortgage.

This program is also costly as Obama plans to pay for it by charging banks additional fees and we all know that this trickles down to the consumer. The Temporary Payroll Tax illustrates how banks have increased mortgage rates AND the cost to extend a rate lock commitment.

It's reported that the new program will not require an appraisal or proof of income and will be available for primary residences only. Employment will need to be verified and mortgage payments must have been made on time for the last 6 months.  Although this is "Obama's Refi Plan", we have to wait and see if Congress approves it and how the big banks and lenders will embrace this program.

If you currently have an FHA insured mortgage, you don't need to wait and see if Obama's refi plan will help you. You may already be able to refinance with an FHA streamlined refi without an appraisal. 

If you would like to stay informed of mortgage programs like this, please subscribe to my blog (upper right corner) or follow me on Twitter and Facebook.  You can unsubscribe anytime!

If you are interested in a mortgage for a home located anywhere in Washington state, I'm happy to help you! I have been originating all types of loans at Mortgage Master Service Corporation since 2000.  Click here for your no-hassle mortgage quote on your Washington property.

Mortgage Update for the Week of October 10, 2011

Today we recognize Christopher Columbus which means that the bond markets are closed. Did you know that October 9th is Lief Erikson Day?  Speaking of Europe, the DOW is up 277 as I write this post (10:35 am) since it looks like Europe may be getting closer to solving their financial crisis.  There are no economic indicators scheduled to be released today.

Here is what's scheduled for the remainder of the week:

Wednesday, October 12:  FOMC Minutes

Thursday, October 13:  Balance of Trade and Initial Jobless Claims

Friday, October 14: Retail Sales and Consumer Sentiment (UoM)

Remember, typically good news for the stock markets tends to drive mortgage rates higher as investors will trade the safety of bonds (like mortgage backed securities) for the greater returns possible with stocks. Last Friday was an example of this when the Jobs Report was released with better than expected data.

While we hope for good news for our economy and signs of recovery, keep in mind that this may cause mortgage rates to trend higher. Signs of inflation will also drive mortgage rates higher.

Although rates are still historically low, they have been trending higher over this past week. 

With the bond markets closed for Columbus Day, some of our lenders are taking the day off and we do others available should you decide you want to lock in a mortgage rate today for purchase or refinance in Washington.

Happy Columbus Day and belated Leif Erikson Day.

"Going Above and Beyond" is Doing Our Jobs

I received a really nice thank you card from Shannon Ressler at Findwell Realty last week that I want to share with you. We recently helped Shannon's clients buy a vintage bungalow that was a short sell in the Magnolia neighborhood of Seattle using an FHA insured mortgage. Being a short sell and an FHA insured loan, there was no shortage of paper work and the transaction was coming "down to the wire".  

Closing was set to take place on Friday...and early Thursday morning, I received a message from one of our buyers saying he was flying out at noon for a family event...he'd be back on Monday. Luckily Mike was able to reschedule his flight until four, however, we were still in a crunch to get docs out.  NOTE:  I normally like to have loan docs out several days before signing...but sometimes transactions (especially short sales) don't happen that way.

Extentending contracts with short sales can be a chore since in addition to dealing with a buyer and a seller, you also have the seller's lender.  Adding to this, I had renegotiated our clients interest rate lock lower and the lender I had the rate locked with charges a higher extension fee once a rate lock has been renegotiated.  We really needed to close on time.

We were able to rush loan docs out to the escrow company.  As a correspondent lender, we prepare our loan docs at our main office in Kent and we make our own underwriting decisions (following guidelines, of course)...escrow was gracious receiving loan docs last minute AND THEN, their system crashes.  I have to say, I've never had this happen!  Mike's flight out was rapidly approaching.  We were running out of time and escrow's computers were not cooperating.

Marilyn Porter, President of Mortgage Master Service Corporation (and my sister-in-law) had an additional set of their loan docs printed and we arranged to meet our buyers at Sharps Roasters by SeaTac Airport.  While we were heading to Sharps, Mike and Mary obtained their cashiers checks for the estimated amount due for closing. Marilyn even had a couple orders of sliders and fries waiting for everyone...figuring with all the rushing around, they'd probably be hungry.

By the time we were done with the signing, escrow's system was back up and they emailed their docs (escrow instructions, estimated HUD-1 Settlement Statement) to our clients to sign and return. I created a video review of their estimated HUD since escrow was not able to review it with them.  

Our job wasn't over. Escrow needed the buyer's cashiers checks before 4:00 that day in order to have them in time for funding tomorrow. We wound up having the wire instructions emailed to our phones and we deposited the buyers checks directly into escrow's accounts.  

And, I'm happy to say that we DID fund and close on time. 

I am so proud of the crew I work with at Mortgage Master Service Corporation. 

Thank YOU Shannon, for your recommendation and thoughtful card!  Shannon was an asset throughout this transaction, it was a great team effort from all.

Mortgage Loan Originator Compensation Changing on April Fools

I'm going to start this post by saying I can bet certain people are going to chime in that this needed to happen and LO's will still thrive and do fine...and I can also bet that those who will sing that song have not recently been a mortgage originator.  They may be exposed to mortgage originators from being employed in the real estate industry, but in my opinion, they are "arm-chair quarterbacks" at best.  Enough said...on to my post.

Effective April 1, 2011 rules regarding how mortgage originators (anyone who takes a residential loan application) may be compensated will be implemented.  Currently most mortgage loan originators (MLO) are paid by the consumer (points), by the wholesale lender (rebate pricing) or a combination of both.  MLOs may also be paid a salary and receive additional compensation based on volume (many banks pay this way).  These rules are created by the Fed through modifications to Reg Z.  Even though the rule goes into effect on April 1, 2011; lenders will probably enact deadlines in advance (sometime in March). 

It's no surprise to me that there are two different sets of rules based on if the mortgage loan originator is employed by a bank or true corresponent lender (like Mortgage Master Service Corporation) verses a mortgage broker.  MLO's who are employed by a bank or true correspondent are not paid directly by the consumer, they are paid by their employer (also referred to as the "creditor").  Mortgage Brokers are once again kicked in the teeth with the changes to Reg Z.  I do wish we all had the same set of rules (including all being licensed) as consumers should not have to determine the type of originator and varying set of the regulations that apply.

Mortgage Brokers will no longer be allowed to receive "dual compensation".  This means that MLOs employed by a mortgage broker will only be able to recieve compensation paid by the consumer OR paid by the wholesale lender.  Let's say that today, a rate priced with zero points is 5.000% (rebate pricing is 1 pt to the broker) and priced with 1 point origination fee paid by the consumer buys the rate to 4.75% (zero rebate from the lender), a mortgage broker could offer these scenarios.  If the consumer decided they would like to have the rate of 4.875% and are willing to pay 0.5% in origination fee with the broker receiving 0.5% from the wholesale lender in rebate, this is not allowed per Reg Z.  From my understanding, retail mortgage loan officers (employed by banks and true correspondents) will still have this option because the consumer is not directly paying the mortgage originator.  I'm very thankful that I work for a correspondent lender, however it's really not fair for the mortgage brokers.

Mortgage Loan Originators may not be paid based on the terms and conditions of the loan.  The loan amount is not considered a term or condition however the interest rate is.   This rule also prohibits "steering" a consumer to lender offering less favorable terms in order to increase the loan originator's compensation".  

Owners of mortgage companies are currently scrambling trying to figure out how to compensate their mortgage originators.  

In my opinion, changes to RegZ seem to favor how many big banks have been paying their mortgage originators: volume.  How does a consumer benefit when the MLO who is taking care of their purchase or refinance is compensated by how many loans they can close in a specific period of time?  Banks will continue to pay their MLOs less per transaction as they complete as many loan applications as possible as they sit and wait for next trusting bank customer to walk into the branch.  In my opinion, banks want to pull the industry (quality of mortgage originator) down to their level so they have less competition.

I'm wondering which industry will our government get into next to control how one is paid?  With what's gone wrong in the housing industry, are the commissions paid to a real estate agent low hanging fruit?

Related post:

If your bank doesn't charge an overage or points, what do you call this? 

How am I paid? (2007)

How Much Info Can Your Mortgage Originator Share - Part 2

I asked Jillayne Schlicke of CE Forward to chime in on a question (below) that I received from one of my readers.  I'm happy to say, she wrote an entire page and therefore, I'm sharing this post, written by Jillayne with you.  Part 1 of this article, where I address the question, can be read by clicking this link.

As a loan originator, is it ethical to deny someone for a loan and then turn around and share not only that the loan was denied, but the EXACT reason the loan was denied (for example: too many NSFs, large deposit in checking account, hours cut back at work, etc.) with the applicant's Realtor as well as the listing agent who in turn shares it with the sellers?

Jillayne's response:

When trying to figure out an ethical dilemma, many try to oversimplify for purposes of being efficient such as, "do the right thing," or "follow the golden rule," or even "if I won't be able to sleep at night I know it's not ethical." Some people turn to their favorite religious book for the answer. But with the above question, these tactics fall short. Not everybody agrees on the definition of the word "right." Regarding reciprocal treatment, sometimes people want to be treated BETTER than how we treat ourselves and sociopaths sleep just fine at night while committing mortgage fraud during the day. There are thousands of different religions in the world so whose religion would we follow as a group of loan originators? For example, we like it when others treat us with respect but respect in action form can look different from one religion and culture to the next. So what can a loan originator do when facing an ethical dilemma? Here is a methodology loan originators can use to solve ethical dilemmas:

(1) Define the problem and frame the issue.

(2) Collect facts.

(3) Reframe the issue if necessary.

(4) Is there a clear statement of law that directly addresses the issue?

(5) Are you a corporate manager? If yes, apply managerial ethics.

(6) Are you a partner in a partnership? If yes, you have fiduciary duties to your partners.

(7) If you are a member of a professional organization with a written code of ethics, apply those principles.

(8) Identify relevant principles (in and out of the code), look at possible consequences, identify intrinsic values (for example, honesty, responsibility, respect, justice, compassion, etc. and examine the relation between these values and the person you want to become.

(9) Are there any formalized policies and procedures or a code of ethics at your mortgage company? If so, apply.

(10) Consider all alternatives. Make sure all relevant considerations are addressed.

(11) Assess the rightness and wrongness of each alternative. Provide reasons for each justifiable alternative.

(12) Decide justifiable alternatives.

(13) Act.

(14) Reflect. Consider whether anything was lacking in the resolution of the case. Discuss objections to reasons offered. Consider how this problem or situation could be avoided in the future. Could policy changes or better communication prevent cases like this one?

To solve the above ethical dilemma, we pause at step 4 and consider the Graham Leach Bliley Act, also known as The Privacy Act: 

"Except as otherwise provided in this subchapter, a financial institution may not, directly or through any affiliate, disclose to a nonaffiliated third party any nonpublic personal information, unless such financial institution provides or has provided to the consumer a notice"

Going back to step 2, does the loan originator have written permission in the file to share the details of this loan with the seller and Realtor?

Moving back to step 4 we could also check state law. In Washington State, if the loan originator works for a mortgage broker, fiduciary duties are owed to clients.

 

"A mortgage broker must act in the borrower's best interest and in the utmost good faith toward the borrower"

But all loan originators are required to follow the federal SAFE Mortgage Licensing Act  See number 8 under 1502, Purposes:

 

"Establishes a means by which residential mortgage loan originators would, to the greatest extent possible, be required to act in the best interests of the consumer."

So this is not an ethical question, it is a legal question. Hopefully the consequences of having private information shared were not too severe for this consumer. Loan originators do make the mistake of believing the Realtor is their primary client. Having a direct, open discussion with Realtors about client boundaries and what a loan originator can and cannot do is important because this sets up a relationship grounded in respect. Licensed real estate brokers should understand this concept anyways because it is a part of their real estate agency relationship.

I am struggling to come up with a good reason when sharing private information regarding adverse action on a file would be in the best interest of a consumer or a client although I'm sure we could stretch and reach some outlier reasons. Since the home seller is in an adversarial position from the homebuyer and the homebuyer may wish to seek financing from another lender, it is best to keep private client information private.

Thanks, Jillayne!

Disclosure Periods: Three Days Counted Three Different Ways

Anyone who's refinanced a home they live in probably remembers having to wait a couple days after signing before their loan can close.  This is called the Three Day Right of Recsission.  Thanks to all our new guidelines over the past year, we now have waiting periods triggered if your rate changes (for better or worse) with MDIA and once you receive your appraisal thanks to HVCC.   All of these waiting periods are for three days and each one is counted differently--go figure!   Here's a quick overview.

Home Value Code of Conduct. (HVCC) On residential transactions where there is an appraisal, we are required to provide the borrower a copy of the appraisal three full days before signing.  This is very similar to the right of recession where it's "postal days" that are counted.  A rush transaction can be put into a pinch if the appraisal is received late.   Receive the appraisal on a Friday, and the earliest the borrower can sign is Wednesday.

Three Day Day Right of Rescission:  This applies to refinances of a primary residence and is triggered the day of signing.  Three, what I like to call "postal days" must pass after you sign before your transaction can fund.  So if you sign on Monday, the earliest the loan can fund (close) is Friday; sign on Tuesday, the earliest your mortgage can fund is Monday.  

Mortgage Disclosure Improvement Act:  MDIA has two waiting periods: how soon a mortgage originator can collect funds after an application--depending on how an application is taken AND a redisclosure period if your APR (annual percentage rate) changes by an 0.125% for fixed rates and 0.25% for an adjustable rate.   The redisclosure period is also three days however the first day starts after the redisclosure and the earliest a borrower can sign is on the third day.  Most Seattle area real estate contracts have language providing an automatic extension of the closing date should closing be delayed due to MDIA (this is different than your rate lock extension).

Lately I've been renegotiating rate lock commitments for my clients, and even when I'm improving their rate, I need to redisclose and trigger the MDIA waiting period.  If it's a refinance, I need to be especially careful of not causing a lock extension if we run out of time due to the MDIA disclosure AND the Right of Rescission time period.

What was done "for the best interest of the consumer" has caused some transactions to be delayed.  It's important to be aware of the various timing factors that may be involved with your transaction.  Delaying your appraisal or not being able to get to your signing appointment in time with a refinance can wind up costing in the form of an extension fee when you factor all the timing periods...which everyone wants to avoid (and is why I like to lock a little longer when possible).

If I can help you with a mortgage on a home located in Washington state, please contact me.  Click here if you would like a rate quote for your home located in Washington.

Mortgage Rates and Locking

The Mortgage Reports author Dan Green created a concise video stating pretty much exactly what I was about to write about on my blog about mortgage rates and locking...in less than 2 minutes. 

If I can help you lock in a life-time low mortgage rate on a home located in Washington, please contact me. 

Remember, you can follow my live mortgage rate quotes on Twitter.  Twitter is free and you can "unfollow" me at anytime.

Related post:

Mortgage Interest Rate Locks 101

Extenstions: When Time is Up with Your Lock

Why You Should Be Following Me on Twitter

How to Shop for a Mortgage Originator When They Won't Provide a Good Faith Estimate

I just received this excellent question on a post I wrote at Rain City Guide about why Loan Originators are hesitant in issuing a Good Faith Estimate without all the required information:

...I am a new buyer with a question regarding the GFE. I am brand new to this world, so I apologize if this is a dumb question.

I read that I should shop around to a few banks and get a GFE to see who can give the best deal. I was pre-qualified by my personal bank but my Loan Officer denied me a GFE. She stated she cannot give me one until my offer is accepted for a home.

How am I supposed to shop around for the best deal, if they won't give me a GFE until I've found a home & been accepted? My intent of the shopping around is to be ready when the home comes along.

I've been meaning to write a post about how to select a mortgage professional since my original articles on this topic are a little out of date with the introduction of HUD's Good Faith Estimate at the start of this year.

Currently, if a mortgage originator issues a good faith estimate without the property address (when someone is shopping for a home), the addition of a property address does not create a "changed circumstance".  The only time a mortgage originator can issue a new or revised Good Faith Estimate after the initial GFE is if there is a qualified "changed circumstance".   Since the 2010 GFE has certain liabilities associated with various fees that are quoted, a mortgage originator is at risk for having to shell out hard earned cash if there are differences between the Good Faith Estimate issued and the HUD-1 Settlement Statement at closing.  I say "currently" because I do hope that HUD recognizes this significant flaw and that they correct this soon because a home buyer does not have their future home address will be hard pressed to obtain a Good Faith Estimate from any mortgage originator--which defeats the purpose of why HUD created this document!

So how can a home buyer "shop" for the person who is going to help them with one of their largest debts secured to where possibly their most significant asset?   Here's what I recommend:

• Ask for a rate quote sheet or work sheet.  Lenders may have different names for this but HUD does allow us to provide rate quotes as long as they do not look like a good faith estimate.   If you are going to do this--it's imperative that you do in a short amount of time and provide each LO the same criteria as rates are a moving target.  Currently we're experiencing 2-3 rate changes per day. 
• Determine if your mortgage originator is licensed or registered and if this is important to you.  Licensed Mortgage Originators are held to higher standards per the SAFE Act than Registered (bank or credit union) Mortgage Originators. If you visit www.consumeraccess.com you can verify a license and see your mortgage originators history.
• Consider what type of mortgage company the mortgage originator works for.  What this boils down to is do they have in-house underwriting?  Where are the decisions on your loan going to be made?  Is the processing down in a far away "processing center" or does the processor work in the same office with the loan originator.   There are differences between correspondent lenders, mortgage brokers, mortgage banks and credit unions.
• Google your possible mortgage originators.  A Google search may reveal rants or raves about the person you're considering to help you.  You may learn more about the mortgage professional.  Just enter their name into the search box--you might have to add the word "mortgage" if their name is common.
• Is the mortgage originator or their company affiliated with a builder (the seller) or real estate agent's office?   If the mortgage originator is a builder's site agent, they may be naturally more incentized to look out more for who feeds them the most business--which isn't you.  If they are cozied up in the real estate agents office, make sure they are committed to not disclosing information that you may not want the real estate agent to have (for example, the maximum amount you may qualify for).   If you're comfortable with not having someone intendant of attachments to work with, then this point may not be a huge issue...but it is something to think about.

These are just a few suggestions to help you select your mortgage originator.  Mortgage rates and closing costs are important, but there are other considerations to factor as well. 

If I can answer your questions or help you with a mortgage for a home located in Washington state, please contact me.  I've been originating mortgages for the past ten years and I'm happy to help!

Who Does Your Loan Originator Really Work For?

I often wonder how a consumer can truly trust a mortgage originator who sits in a housing development or a real estate office.  Yes, it's convenient when you're checking out that new home and the loan originator that works with the builder or real estate company just happens to be sitting there waiting for you or the next person who'll walk through their door.  Is that the best option for you?

HUD is questioning this with regards to builders with in-house lenders and if this arrangement is a RESPA violation.  It is harmful to consumers if the closing costs or rates are increased to compensate for what the lender may have to shell out to be that builder's preferred lender. Often times, you may find that the builder has built any cost to bribe you to work with their lender by increasing the sales price of the home.  RESPA violations aside, I've always felt that if you work with the builder's lender, you're providing your personal information to the "seller" or the more specifically, the employee of the seller.   The loan originator may be employed by a bank, but when they're constantly fed by the builder...where do their loyalties rest?

I feel the same way about loan originators who work as "joint ventures" with real estate companies.  They may be paying rent inside your real estate agent's office or just be on their preferred providers list with some sort of business arrangement.  I believe most of the big real estate brokerages in the Seattle area have an arrangement made to steer you to their lender, title or escrow company.   When a loan originator, title rep or escrow officer are constantly fed or partially owned by a real estate company--where are their loyalties?  If you only want to get approved for a $400,000 sales price, and can afford to much higher--do you think the LO who's shacked up with the real estate agent will let that agent know when they press the LO for more info on you?

Yes, you pay for their origination, title or escrow fees, but who are these people really work for.  Shouldn't you have more of a choice?   Some real estate agents will tell you that there isn't much difference in rate or fees--which they may truly believe; however, it may not be accurate. 

I "work for" Mortgage Master Service Corporation.  I'm paid by the consumer when we close a mortgage transaction together.  My business is dependent on my clients referring me to people they know who need a mortgage in the greater Seattle area.  I also have clients who find me from reading my blogs.   I am not part of any joint venture or arranged business agreements.  I'm not paid based on volume, quotas or selling a certain type of program.

Bottom line as a borrower in one of the largest transactions you may ever make in your lifetime, it is your responsibility to make sure you have the right team working for you.  Do as much research as possible before you've entered into a real estate contract.

Photo credit:  Sarah G... via Flickr

Mortgage Buybacks and How It Impacts You

I was invited by Amtrust Mortgage to hear a presentation by Jackson Nafziger on "A State of the Industry Update".   My biggest take away from yesterday's event in Seattle was the huge amount of buy backs (aka repurchasing) of loans that are taking place.  A "buy back" is when a lender is forced to repurchase the loan from Fannie Mae or Freddie Mac typically because it's not performing.  It's reported that in 2009, over $30 billion in troubled mortgages were repurchased.   From 2008 to 2009, this is an increase of 320%!   According to the seminar, Bank of America/Countrywide, led the buy-back pack in 2009 followed by Chase/Washington Mutual, Citigroup and Wells Fargo. 

If you're considering a mortgage to purchase or refinance home, be aware that it's a different process than it was just a few years ago.  I still help people obtain financing on their homes every day.  My point is to be prepared for more paperwork (even the Good Faith Estimate has gone from 1 to 3 pages) and tougher underwriting guidelines.  

What can you do to help improve your mortgage process?

• Select your mortgage professional and get preapproved early.  This allows you to create a game plan, if needed, such as working on your credit or funds for closing.
• Be prompt in providing documentation or information that your mortgage professoinal requests.
• Be prepared for the process to take possibly take a little longer.  Everything is being scrutinized from your bank statements to your appraisal.

The mortgage loans that are being originated today are of a much higher quality than recent years past. 

If you have a question about today's mortgage process or are interested in a home loan for a property located in Washington, I'm happy to help.