The New Good Faith Estimate is here.

Starting January 1st 2010, lenders will start using a new Good Faith Estimate(GFE). The 2010 GFE is HUD's attempt to make it easier for borrowers to understand the fees and terms of their home loan. There is only one thing it has really done, made it more confusing for borrowers.

First, the old GFE was one page, 2010 GFE is now 3 pages long.
Second, the old GFE gave the borrower all the information needed to see how much the closing costs are, the rate, the amount needed for closing and the total of payments on the new loan. 2010 GFE requires additional disclosures to tell the borrower how much the down payments are, how much the total payments are, a signature disclosure for the borrower to accept the terms of the 2010 GFE, but (if you can believe it) the 2010 GFE does not have a signature line.

There are some good changes that the 2010 GFE offers.
First, the fees cannot change more than 10% (zero change on some fees) from the first time the 2010 GFE is given to the borrower. The GFE will only be issued once a property address is established. For purchases NOVA Home Loans will issue a disclosure that is very similar to the old GFE so borrowers have all the details of the transactions. Once a property is established, the 2010 GFE will be issued within 3 days. For refinances the new GFE will be issued within 3 days of the application date.

Second, any changes to the loan must be requested by the borrower in writing. If the lender needs to change the loan terms, it must be because of a change in legitimate circumstance. Lenders and Loan Officer cannot just make changes in order to charge more fees closer to closing.

Third, the 2010 GFE has a section that allows the lender to show 3 different pricing options for the borrower to choose from. The first option will be a proposed loan, the second will be a option for lower settlement cost/a slightly higher rate and the third will be for a lower interest rate/slightly higher closing costs. These options will show the borrower the difference in the payments for paying a discount or premium for their loan. This will be very help full for the borrowers in choosing the right loan for them.

Economic Stimulus Plan for Housing and Mortgage Industry

Economic Stimulus Plan Benefits the Housing and Mortgage Industries
Revised February 17, 2009

Just signed and sealed…a $787 Billion Stimulus Plan made up of tax cuts and spending programs aims at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II.

Home owners and potential homebuyers stand to gain from key provisions in this stimulus plan. Here is what we know as of today...


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Tax Credit for Homebuyers
First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.

The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.


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Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.


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More Help for Homeowners in the Future
Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.

According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.

While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.

The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.

As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.

New Tax Credit for Buyers

TAX CREDIT OVERVIEW

Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.


What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a Tax Credit?

A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
They do not use the home as your principal residence.
They sell their home before the end of the year.
They are a nonresident alien.
They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.


Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.

Your Way Home Arizona is running low on Money!

In 2009, Arizona Department of Housing started Your Way Home Arizon to help homeowners purchase forclosed homes. Over the last month Your Way Home Arizona has cut off several Arizona Counties form the progam and last week started limiting zip codes in the remaining counties. Your Way Home Arizona started out with $22 million for 2nd mortgages for buyers of forclosed propertes in Arizona. Hundreds of Arizona homeowners took advantage of this program to purchase these home but now this program is running out of money. Check with your loan officer for up to date details for Your Way Home Arizona.

How Credit Scores are being lowered by your Credit Limits. Rescoring to the Rescue!!

Over the last 6 month, I have seen an alarming problem for borrower’s credit scores in which they have no control over. Many credit card companies are lowering the credit limit for card holders as the balances are being paid down. I have written several times about how the ratio of a credit card balance to the credit limit can affect your credit score negatively. One way to increase your credit scores is to have less than 30% usage of your credit limit. For example if you have a credit card that has a balance of $300 and your limit is $1000 your credit scores are not going to be affected. If your balance is $900 and your limit is $1000 then your scores are going to be lowered because you are “close to being Maxed” Credit Scores don’t like you being “Maxed Out”


With the “credit crunch” we are currently in many banks are lowering the credit limits on some of their card holders as the balances are being paid down. Banks are doing this to limit their credit exposure, reduce their risk. In doing this, it is directly having a negative effect on the card holder’s credit score because it looks as if they are maxed out even when they are paying down their balances. I am not sure how credit card companies decide on how to reduce theses card holder’s limits but if it is based on credit scores they are adding to the problem.


For several of my clients who are trying to increase their credit scores by paying down their credit usage to under 30%, I have figured out a solution that is not effected by the credit card companies attempts to lower balances.


Rescoring is a process that updates information on credit reports with current information. I pull a credit report on a client who has a credit card (more than one) with a balance that is above 30% usage of credit limit. We then ask the customer to pay down the balance to less than 30%. The customer provides us a statement (usually an on line statement) that show the new balance less than 30%. We take that statement and provide it to our credit reporting company and they forward it to the Credit Bureaus. They Credit Bureaus verify the balance and adds the new balance to the credit report. Then a new credit report is pulled with the new, higher scores. We do not update the credit card limit, so it is not reduced, only the balance is.


This process takes less than a week and can make the difference in receiving an approval or getting a lower rate on your home loan. I have had great success with this process, just yesterday I was able to issue a First Time Home Buyer an Approval after months of trying to pay down balances only to have the banks lower his credit limits. It is very important to work with a loan officer who is experience in this process. There are very specific steps that have to be followed and if they are not your scores will not increase.

Two Very Important Updates

I have two important announcements for you!

First, I am thrilled to announce that I can offer your qualified clients a 95% LTV on conventional primary residence financing and 90% LTV on conventional second home financing. Clients must meet certain requirements but this is an option that they will not be able to find anywhere else! Call me for more details.

Also, as you know, I am committed to keeping you up-to-date with all of the changes in the mortgage industry. Recently, Fannie Mae released an announcement that may affect your clients. The following changes will be implemented on new loan files submitted on December 12th.

• The minimum credit score required for loans underwritten using DU has increased from 580 to 620.
• The maximum debt to income ratio allowed for loans underwritten using DU is lowered to 45%, with flexibilities offered up to 50% for certain loan casefiles with strong compensating factors.
• Borrowers with foreclosure completion dates of more than 5 years, but less than 7 years from the credit report date will need 10% down and a minimum credit score of 680 to purchase a principal residence; the purchase of a second home or investment property will not be permitted; and cash-out refinances will not be permitted for any occupancy types.
• If a deed-in-lieu of foreclosure is reported within 4 years of the credit report date, the loan will receive a Refer with Caution recommendation; additionally, a principal residence, purchase transaction submitted to DU with an LTV or CTLV greater than 90% on a loan that has a deed-in-foreclosure action that was completed more than 4 years, but less than 7 years from the credit report date will receive an Ineligible recommendation.
• Loan files where DU identifies a Chapter 13 bankruptcy discharged within the last 24 months, dismissed within the last 48 months or filed within the last 48 months will receive a Refer with Caution recommendation. Loan files where DU identifies a non-Chapter 13 bankruptcy that was filed, discharged or dismissed within the last 48 months will receive a Refer with Caution Recommendation.
• Two-unit owner occupied property purchases or limited cash-out refinances must have an LTV less than or equal to 80%.
• Two Unit non-owner occupied property purchases and limited cash-out refinances must have an LTV less than or equal to 75%. Two Unit non-owner occupied property cash-out refinances must have an LTV less than or equal to 70%.

If you have any clients that have not yet been pre-approved and may be challenged by any of the issues above or if you have any clients that have been approved and an LSR has been issued, but they are still looking for a home, they may be affected by these new guidelines. Please have them call me immediately. If we open a loan file for them before December 12th, we may be able to avoid these new changes. Should you have any questions, please don't hesitate to contact me.

USDA loans finance 100% of the purchase price or appraised value, which ever is more. Yes which ever is more. Current rates are in the low 5's for 30 year!