The Mortgage Porter

An Awkward Time of Year for Closing Refinances: 1st Half Taxes Due

On April 30th, first half of real estate taxes are due for properties located in Washington State.   For those homeowners who are refinancing with a closing in April to mid-May, this can cause an inconvenience.   Lenders, the title insurance company and the escrow company need evidence from the County that the taxes for the first half of the year have indeed been paid. 

Unless your reserve account is waived, taxes are collected on a monthly basis in your mortgage payment and then paid when they are due: first half is due by April 30th and the second half is due by October 31st.  

The County typically has a lag time before the processed payments appear once they receive the payment from the mortgage servicer.  King County's website states:

"It may take up to two weeks for your property tax payment to be reflected in our records after receiving your payment".

For refinances closing before it is reflected in County records that taxes have been paid; they have a few options:

• Pay six months of taxes at closing towards your payoff.  The mortgage servicer will refund the balance (overage) a few weeks after closing with their existing reserve account balance.
• Pay six months taxes at closing; the escrow company might hold funds for the 6 months taxes as an escrow hold-back and refund them to you once County records show the taxes are paid.
• Delay the closing until the taxes show as being paid per County records (this could cause an extension fee).

Folks closing their refi's in October to mid-November will be in the same boat with their property taxes.

Making Home Affordable Refinance - Can I Help You? Maybe...Maybe Not.

NOTE:  This program is still "evolving". Wholesale lenders/banks and private mortgage insurance companies are still issuing and revising their guidelines.  I'll try to update this post with current information as I receive it.

Fannie Mae will be implementing the Making Home Affordable Refi starting April 4, 2009.  Some home owners will be free to use any mortgage professional (as long as they are Fannie Mae approved) and others will be forced to return to their mortgage servicer.

First of all, I am only licensed to provide residential mortgages for homes located in Washington State.

Currently, for the Home Affordable Refinance, Freddie Mac is requiring that home owners return to their mortgage servicer.  To determine if your mortgage is owned by Freddie Mac, click here.   If it is owned by Freddie, proceed to who you're currently making your mortgage payments to.  Many mortgage servicers have call centers designated to help you with your Freddie Mac mortgage.  If your mortgage is owned by Freddie Mac, I probably cannot help you with an Making Home Affordable refinance.   However if your current mortgage is owned by Freddie Mac and you have home equity (you're not upside down); I may be able to help you.   Fannie Mae has a larger market-share than Freddie Mac...odds are in your favor, but check Freddie Mac first.  UPDATE:  Since writing this post, one major bank has informed us they will allow us to originate Home Affordable/Freddie Mac mortgages as long as we broker the loan back to them. 

If your mortgage is not owned by Freddie Mac, the next step is to see if it's owned by Fannie Mae. You can determine that by clicking here.   Unlike Freddie Mac, Fannie Mae is allowing home owners to use eligible mortgage brokers, bankers and correspondent lenders of their choice.  If your mortgage is owned by Fannie Mae (and your home is in WA); I may be able to assist you with your Home Affordable refinance.

Here are some important pointers about Fannie Mae's Home Affordable refinance (homes at a higher loan to value):

• Second mortgages must be subordinated.  They may not be included (paid off) with the home affordable refinance.
• Borrowers on the existing mortgage must match the new mortgage.  Borrowers may be added but they may not be removed. 
• In the event of a divorce or death of a borrower, the home owner may be required to use their mortgage servicer for a manual underwrite with the Fannie Mae Home Affordable refinance.
• If a borrower currently has lender paid mortgage insurance (a slightly higher rate that financed private mortgage insurance) they may have to return to their mortgage servicer (who they make their mortgage payments to) for a Home Affordable refinance.  LPMI refi's may be possible with any loan originator of your choice on a case by case basis.

What if your existing mortgage is FHA or VA?  You may qualify for a FHA or VA Streamline refinance which may not require an appraisal or income verification (you will need a mid-credit score of 620 or higher).

Lenders are currently inundated with refinance and purchase business due to the current low mortgage rates.   I encourage you to apply early and be very patient.   Washington State home owners can apply using my secure on-line application under "Favorite Links".

The bottom line is, if your home is in Washington I can at the very least help point you in the right direction and at the most, I can help you with your new refinance.

The Wild Cards of Refinancing

In years past, refinancing was a fairly simple task.  Homeowners would contact me wanting to restructure their mortgage to either reduce their monthly payments or perhaps to take equity to improve their home or pay off debts.  Back then, a 680 credit score was considered decent (anything over 720 was great) and people had a good idea of what their homes would appraise for and if they didn't, I could usually determine a value by obtaining sales comps from a title insurance company.  It's just not so anymore.  Refinancing can be trickier because there are "wild cards" involved that may not be revealed until you are deeper into the transaction.

Credit Score.  Your rate with a conventional mortgage is impacted by your credit score.  Lenders use the middle score of a borrower and if there are two borrowers, the lowest middle score will determine your rate (along with other factors).   Low-mid credit scores of 740 and higher receive the best rate available.  If your middle credit score is 720-739; you're paying 0.25% higher in fee (may be absorbed in the rate) with an 75.01-80% loan to value. Just the fact that it's the middle score that's being used is a "wild card"...at least the score used is determined in the beginning of the refi process.

Appraised Value.  The lender views the value of your home based on what homes similar to yours have recently sold and closed for--this is referred to as a sales comparable or comp.  In a market with fewer sales, there's less for the appraiser to work with.  Factor in that many of the sales that are taking place may be short sales or foreclosures--or sellers who have greatly reduced prices and your home is probably appraising for less than you expected.  Since appraisals are based on closed sales, there will be a lag time once the market turns around and home values stabilize.   There is no way for lenders to know for certain what your home will appraise for until they have the appraisal.  Thanks to WaMU and the New York Attorney General, mortgage originators are not allowed to ask appraisers for a "value check" to see if the home will come in at a value which will support the refinance.  Unfortunately, appraisals are generally provided about 10-14 days into the refinance transaction.  Worse case scenario, if an appraisal comes in low enough to "kill" the refinance, the borrower is out $400-$500 (the cost of the appraisal).  So far, I've experienced rates being re-priced due to lower than expected home values.   

Employment. Many of our local employers are reducing staff in this economy.  If we are relying on your income for qualifying, a verification of employment is done prior to funding your new mortgage.  Sadly, even if the refinance is going to put you in a better position by reducing your monthly payments, without the income used for qualifying, the transaction will be put on "hold" until you secure new employment in a similar field.

Underwriting guidelines.  Lenders and private mortgage insurance companies continue to tighten up their guidelines and/or adding price hits to certain mortgage scenarios possibly making refinancing less attractive (such as the 0.75% hit to fee condos have if they have less than 25% equity based on their appraised value).  

The bottom line is the longer you wait to refinance, the higher the odds are that the deck will be stacked against you. 

If you're considering refinancing your home located in Washington State, I'm happy to help you.  You can apply on line under "Favorite Links".  If your property is not located in the State of Washington, please find a local mortgage professional to help you.

New FHA Limits on Cash-Out Refi's

If you're considering refinancing and you're interested in taking cash-out to pay off debts, make home improvements or to eliminate a second mortgage that you did not obtain when you purchased your home; you have more reason than ever to start now.

Effective on FHA case numbers issued on or after April 1, 2009; FHA will only insure cash-out refinances when the loan to value is 85% or lower than the appraised value.  Your appraised value is not based on what you feel your home is worth -- it's based on what your neighbor's have sold their homes for in the past few months.

If you have owned your home for less than 12 months, FHA is limiting cash out refinances to which ever is lower: 85% of the appraised value or 85% of the original sales price. 

According to HUD's Mortgagee Letter 2009-08, this is currently a temporary requirement:

"Given the continued deterioration in the housing market, and FHA's need to limit its exposure to undue risk, this reduction to the maximum LTV for cash-out refinances is being instituted on a temporary basis while FHA further analyzes the housing and mortgage industry as well as its own portfolio to determine whether permanent measures should be taken."

Well, what are you waiting for?  You have two weeks as of today for FHA's expanded cash out guidelines of 95% loan-to-value with loan amounts up to $567,500 in King, Pierce and Snohomish counties.   If your home is located in the State of Washington, and you're interested in refinancing, you can apply on line (under Favorite Links).  By the way, I have been originating FHA mortgages for nine years and we have in-house FHA underwriters at Mortgage Master...as I mentioned, I can only help you if your home is in Washington.

Where Should Homeowners Go to Refi Now?

More details to President Obama's Making Home Affordable Refinance and Modification Options that was unveiled yesterday.  Fannie Mae issued an announcement that they will be able to purchase refinances under this plan on April 1, 2009.  This means that lenders will be able to start originating these loans now.   Homeowners with mortgages who are interested in refinancing or a loan modification fall into a couple different categories.

If you have equity in your home and you qualify for a refinance, you do not need this program.  The Making Home Affordable Refinance does not allow cash-out--this would be a standard refinance which is still available.

You may be eligible for a Making Home Affordable Refinance if:

• You own and live in your home (which may be 1-4 units).
• The amount you owe on your mortgage is close to the current value of your  home (80.01-105% loan to value).
• You have stable income.
• Your current mortgage is owned by Fannie Mae or Freddie Mac. If your home is not owned by Fannie Mae or Freddie Mac, you may qualify for a FHA refinance as long as your loan to value does not exceed 95%.
• Your current mortgage balance(s) is below $567,500 (in King, Pierce and Snohomish Counties).  For other conventional loan limits, click here.
• You are current on your mortgage payment (if you are not current, you're a candidate for the loan modification program**).

If you meet the above conditions for a refinance or Making Home Affordable Refinance, contact your local mortgage professional. Details about how the home affordable refinances will be priced have not yet been announced.  Currently Fannie and Freddie have price hits based on loan to value and credit scores.

If your home is located in Washington State, I'm happy to help you with any type of residential mortgage. You can begin the process by completing a loan application which I have on line under my photo (to the left) under favorite links.  Be prepared to provide the following:

• Most recent paystub.
• Your most recent W-2 and possibly your last complete tax return.
• Details about your current mortgages including any second mortgage or HELOC.

Refinances are most likely taking longer than the last time you obtained a mortgage due to the volume of business during a time when every aspect of the mortgage and real estate industry has fewer people employed.  Please be patient.

With home values depreciating in most areas, I do not recommend delaying your refinance.  The higher your loan to value (mortgage balance divided by home value), the more challenging the transaction will be.

**If you own a home and are having a difficult time making your mortgage payment because you have less income or your payment has increased and if you do not qualify for a refinance; you're probably in the loan modification camp.  Start today with contacting who you make your mortgage payments to (the loan servicer).  You can also call HOPE NOW at 1-888-995-HOPE (4673).  You do not need to pay someone (a loan mod "specialist") to assist with modifying your mortgage.

Loan modifications are available through the Making Home Affordable Modification program if you are at risk of "imminent default" or currently delinquent on your mortgage payment.  Your servicer may or may not decide to modify your mortgage--there are no guarantees but you must take action now.   Click here for more information about the Making Home Affordable Modification.  

More Details to the Goverments Refi Plan

As promised, this morning some of the details have been announced from the Treasury regarding the plans to help responsible home owners via refinancing or loan modifications in the "Making Home Affordable Program".  From this mornings Press Release:

"Today, we are providing servicers with the details they need to begin helping eligible borrowers," said Treasury Secretary Tim Geithner. 

The Making Home Affordable program addresses refinancing existing mortgages and loan modifications.  From the summary of guidelines:

The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

GSE lenders and servicers already have much of the borrower’s information on file, so documentation requirements are not likely to be burdensome. In addition, in some cases an appraisal will not be necessary. This flexibility will make the refinance quicker and less costly for both borrowers and lenders. The Home Affordable Refinance program ends in June 2010.

Update 11:00 am: this program should be available in April.  Fannie and Freddie have to implement the new guidelines into their system before lenders have ability to provide refinances over 80% loan to value without private mortgage insurance.  More information will follow as it becomes available.  Get your loan application in now!

The Home Affordable Modification program does not involve a refinance (which is a new mortgage replacing the existing mortgage).  With a loan modification, the terms of the existing mortgage are modified.  You can read the borrower qualifications by clicking here.   This applies to borrowers who are dealing with "financial hardship" and this is a "full document" transaction including providing income documentation and verification that the home is owner occupied.  Families with high debt levels may be required to complete financal counceling through a HUD approved counselor. 

This program factors in the High Cost areas, like Seattle, Bellevue, Tacoma and Everett.  The newly revised High Balance loan limit for our area is $567,500.  Which it looks like as of today, may actually be available.

Treasury announced today that the Making Home Affordable program will also include additional incentives for efforts made to extinguish second liens on loans modified under this program.

In an effort to keep mortgage rates low, the Treasury is also stepping up its Preferred Stock Purchase Agreements to $200 billion each (to Fannie and Freddie) from $100 billion.  These funds are coming from the Housing and Economic Recovery Act and are not a part of TARP.  

If the Government really wants to reduce mortgage rates, they should look at suspending some of Fannie Mae and Freddie Macs price hits (LLPA) which are not working "in concert" with the efforts of the Treasury. 

There is certain a lot of "efforts" being made by our Government.  The next step is to have the Fannie and Freddie implement these plans AND THEN it trickles down to the banks.  We'll see how quickly this process will be.

How to Watch Mortgage Rates Go Up and Down

If you're considering taking advantage of the historic low rates and you're not quite ready to commit to working with a Mortgage Professional, I suggest you watch this short presentation.  I'll share a few tips to help you gauge which direction rates are trending and when you're ready, I'm happy to do the rate watching for you.

My Mortgage Consulting services are only available for residential property located in Washington State.

Upside down in your home with good credit? March 4, 2009 may be an important date for you.

Just received this email, which I'm sure echos the thoughts of many home owners:

"Been meaning to contact you to get your take on the recent wholesale changes that are coming hard and fast at the mortgage bankers out there and, of course, see if there can be any benefit to a re-fi given the new lending "rules" (for lack of a better term). We're horribly upside-down on our current loan balance vs. current home value, so we don't know what can happen for us, if anything. But if there's a way to get that rate down and send out less each month. we're listening! What do you think about all this?"

Last week, President Obama announced his plans to help stimulate the economy and help provide stability with America's housing.  With the Homeowner Affordibility and Stability Plan, home owners who are "credit worthy" may be able to refinance their home up to 105% loan to value. 

On March 4, 2009, more details are suppose to be announced.  Here's what we understand so far:

• The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

• First mortgage may not be more than 105% of the value of the property. 

• Borrowers with a second mortgage may still be able to refinance if the second mortgage lien holder is willing to remain in second lien position and if the borrower still qualifies.

• The program will offer 30 year or 15 year fixed interest rates based on market rates.

• The program only applies to the home you live in.  It does not apply towards vacation or second homes or investment properties.

According the the Treasury, this program will not be available until March 4, 2009.  Lenders will become even more buried with refinance business once this happens.  It is to your advantage to be prepared.  By gathering the following information:

• 2008 W2s (if self employed or paid commission, 2 years of complete tax returns)
• Most recent paystubs covering 30 days of income.

• Most recent mortgage statements.

• Information on current monthly debts including amount paid monthly and amount owed.

• Most recent bank statements/asset accounts (all pages).

If your home is located in Washington State, you can apply on line now by clicking the link under my photo.  However, I don't anticipate having more details until March 4, 2009.

More to follow.

Auburn, Washington Homeowner Asks: Will Obama's Plan Help Me?

They bought their home with 10% down payment back in 2007 using two mortgages which only required interest only payments for the first 10 years.  They opted for this route because they wanted to buy this home before their other property sold (buying simultaneous)...the other property never sold and is now a rental.  This morning I received an email asking:

"Please advise how the stimulus package can help me.  I would like to lower my monthly mortgage payments and not have interest only loans."

March 4, 2009 is when we are suppose to have the details on how President Obama's plan will work.  From The White House Blog:

I have both a first and a second mortgage.  Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan.  Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage. 

Will refinancing lower my payments?

The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan.  Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments.  Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate.  These borrowers, however, could save a great deal over the life of the loan....

I am not an appraiser...when I look at what's recently sold in this homeowner's neighborhood, it looks like home values are down roughly 15% from when they bought two years ago.  Appraised values are based on what other homes in your neighborhood have sold for in the past few months.  Since they put 10% down two years ago with interest only products, they are underwater on their mortgages.

The first and second mortgage combined are around the 105% loan to value...but it sounds like this will be up to who ever the mortgage servicers are for both the first and second mortgages and if the new program will be limited to true conforming limits of $417,000 or if it will include those areas that qualify for the conforming high balance limits ($506,000 for King, Pierce and Snohomish counties).  At least they have a 8 years remaining on the interest only period of the mortgage.

There are still more questions than answers at this stage.  This homeowner's investment property will not be included in this plan.

I'm hopeful that the new plan to be revealed in early March will help this family.  At this point, they cannot refinance without it.   

The FHA Streamlined Refinance

If your existing mortgage is FHA, you may qualify for a streamline refinance to take advantage of today's lower rates.  "Streamline" means that there is less documentation involved for the borrower which allows the transaction to close quicker than a typical refinance.  With a FHA streamline refi there is:

• no income documentation or verification.
• no minimum credit score requirements. 620 minimum credit score required by most lenders.
• no verification or documentation of assets (like bank statements, retirement accounts, etc).
• an appraisal may not be required.   When an appraisal is used for an FHA Streamline, the loan to value is limited to 97.75% (this is also true for refinancing a non-FHA loan to a FHA insured loan).  When an appraisal is not used, there is no "loan to value" ratio.
• upfront mortgage insurance is reduced to 1.5% of the base loan amount (instead of 1.75% for a non-streamline FHA refi). 
• cash back to the borrower is limited to $500. 

The following are some of the requirements for a home owner to qualify for a FHA refinance:

• the existing mortgage that is being paid off must be an FHA insured mortgage.
• the borrower may not have been late (30 days or more) on their mortgage payment in the past 12 months.
• non-occupant co-borrowers are not allowed (aka co-signers).
• the new loan amount is subject to FHA loan limits.  Note: if you have an FHA mortgage that was acquired in 2008 where your geographical loan limit was higher than the current 2009 limit, you may still qualify for the streamline refi as long as your new loan amount does not exceed the original loan amount and the loan to value is 97.75% or less.

If a property has been converted to an investment property with a FHA insured underlying mortgage, it may also qualify for a FHA Streamline refi with no appraisal and only for the outstanding principal balance.

Last but no least, make sure that your Mortgage Originator works for a company who is HUD approved.  Some loan originators are not and may try to illegally broker your loan to a company that is.  I have been helping Washington State families with FHA financing since 2000 and Mortgage Master is a Direct Endorsed HUD approved lender with our own "in-house" FHA underwriters.  They've been helping home owners in the Pacific Northwest since 1976!

If you're interested in obtaining a FHA Streamline refinance for your home located in the State of Washington, please email me with the following information: 

• Property address (estimated property taxes and home owners insurance is a plus).
• Original FHA mortgage balance from when the mortgage was obtained.
• Current FHA mortgage balance.
• Estimated home value (appraisal may not be required).