•Desert
•Cactus
•Scorpions
•Rattlesnakes
These are all the things that come to mind when you normally mention the name Arizona. Having been born and raised in Arizona, there are many more things to do here. At the time of writing this article it's 113 degrees outside in Phoenix. This is the time of year to find a nearby lake like Lake Pleasant, Canyon Lake or Saguaro Lake and enjoy some water activities. There is also a newly built water park, Wet-N-Wild, that just opened in July to take the kids to for keeping cool. Another popular activity often referred to as "Arizona's Floating Picnic" is tubing down the Salt River.
During the winter months, you can enjoy skiing at Arizona Snobowl in Flagstaff and Sunrise Park Resort in Greer. These facilities are also open in the summer months for activities such as hiking, mountain biking and just enjoying nature on a scenic lift ride. Oak Creek Canyon and Sedona provide nice weekend getaways for golfers, nature enthusiasts and even power shoppers. Sedona is often referred to as "Red Rock Country" because of the beautiful red-rock monoliths named Coffeepot, Cathedral and Thunder Mountain that surround the city.
A popular local hangout is the newly constructed Westgate, in Glendale, located adjacent to the Arizona Cardinals stadium. Westgate offers activities such as dining, shopping, a fountain park for the kids, and a movie theater.
Known primarily for the "Grand Canyon" this beautiful state has much more to offer for someone looking to purchase a home in Phoenix. With real estate prices in some Phoenix neighborhoods dropping to prices not seen since 1997 and favorable interest rates, now may be the time to take advantage and buy the home you have always dreamed about. First-time homebuyer loan programs and the $8,000 tax credit is also currently available to applicants who qualify.
Saturday, July 11, 2009
Monday, July 6, 2009
Appraisal and Property Requirements - FHA Loans
1: Home Inspections: Borrowers are encouraged to obtain a detailed home inspection of the property. Borrowers should research home inspector's qualifications and designations to ascertain that they feel comfortable with the individual they hire. I recommend asking your Realtor for a referral of a qualified Home Inspector.
2: Repairs and Alterations: Deficiencies, required repairs, alterations and/or required inspections must be reported within the appropriate section of the applicable appraisal reporting form. (See Mortgagee Letter 2005-48 and 2005-34)
Required Repairs: Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants, A.K.A. the three S's:
Safety: protect the health and safety of the occupants
Security: protect the security of the property (security for the FHA insured mortgage.)
Soundness: correct physical deficiencies or conditions affecting structural integrity
Properties in Poor Condition: If the subject property is in such poor condition that it may be cost prohibitive or impractical to bring it up to FHA's minimum property requirements, the appraiser should recommend rejecting the property and contact the Lender before continuing with the assignment. If continuing:
Complete the appraisal on an "AS IS" basis, clearly marking the report as recommended for rejection for Section 203(b) and provide reasons for the rejection;
Provide a list of all major deficiencies and state that the list should not be considered all-inclusive. Additional items may be required before acceptable for FHA Insurance; and
Provide photographs of deficiencies to support recommended action.
3. Code Enforcement for Existing Properties: As stated in HUD Handbook 4150.2 HUD has neither the authority nor responsibility for enforcing code. This rests with the local municipalities.
4. Clearing Conditions on Existing Homes
All repair items required by the appraiser or underwriter must be inspected and the clearance documented.
A professionally licensed, bonded, registered engineer, licensed home inspector or appropriately registered/licensed trades person, as applicable, must provide documentation that all deficiencies have been acceptably corrected upon completion of repairs. "As applicable" has been determined to mean any individual who the lender deems to be qualified, which might be the appraiser.
Professionals as defined above may use their company's forms and letterhead to make the certifications. Appraisers and Compliance Inspectors are to use the Compliance Inspection Report, form HUD-92051. The individual signing Section II must be the person who actually performed the inspection. Section III or IV, as appropriate, is to be signed by the Direct Endorsement Underwriter.
Mortgagee Certification: When a Mortgagee Certification is used to clear minor conditions the HUD-92051 is not required.
Mechanical Certifications: Please see: Heating & Electrical section of this manual.
5. Refinances: Standard refinances require a complete appraisal with deficiencies and repair conditions reported. Although HUD does not require completion of the repairs on a streamline refinance, except lead-based paint repairs, the lender may require completion of repairs. A streamline refinance may be insured with or without an appraisal. Please see:Handbook 4155.1, Rev. 4 Chapter 1
6. Appliances: The Valuation Protocol (page D-26 of Appendix D, Handbook 4150.2) requires the appraiser to note the appliances that are present in the home at the time of inspection and whether the appliance is considered personal property or part of the real estate. The protocol further directs the appraiser to treat non-functioning appliances/equipment as deferred maintenance in the valuation process.
The manner in which an appliance is attached to the dwelling would determine whether or not an appliance should be considered part of the real estate. In some real estate markets, it may be typical and customary for certain appliances to convey with the real estate. In these situations, those appliances should be considered real estate and treated as such in the valuation of the property.
In some cases, such as that of REO properties, all or some of the appliances may be missing and there may be damage to the floor, wall or ceiling finish as a result of the removal. Depending upon the magnitude of the damage, the appraiser is expected to treat the damage to the home as deferred maintenance and reflect such in the conclusion of value. Missing appliances must be addressed by the appraiser in the valuation process, particularly when the comparable sales included a full complement of working appliances.
In cases where appliances are missing and minor repairs may also be needed, lenders are encouraged to have the borrower take advantage of the Streamlined 203(k) loan product, which has no minimum repair cost threshold and is designed to cover such improvements/replacements.
2: Repairs and Alterations: Deficiencies, required repairs, alterations and/or required inspections must be reported within the appropriate section of the applicable appraisal reporting form. (See Mortgagee Letter 2005-48 and 2005-34)
Required Repairs: Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants, A.K.A. the three S's:
Safety: protect the health and safety of the occupants
Security: protect the security of the property (security for the FHA insured mortgage.)
Soundness: correct physical deficiencies or conditions affecting structural integrity
Properties in Poor Condition: If the subject property is in such poor condition that it may be cost prohibitive or impractical to bring it up to FHA's minimum property requirements, the appraiser should recommend rejecting the property and contact the Lender before continuing with the assignment. If continuing:
Complete the appraisal on an "AS IS" basis, clearly marking the report as recommended for rejection for Section 203(b) and provide reasons for the rejection;
Provide a list of all major deficiencies and state that the list should not be considered all-inclusive. Additional items may be required before acceptable for FHA Insurance; and
Provide photographs of deficiencies to support recommended action.
3. Code Enforcement for Existing Properties: As stated in HUD Handbook 4150.2 HUD has neither the authority nor responsibility for enforcing code. This rests with the local municipalities.
4. Clearing Conditions on Existing Homes
All repair items required by the appraiser or underwriter must be inspected and the clearance documented.
A professionally licensed, bonded, registered engineer, licensed home inspector or appropriately registered/licensed trades person, as applicable, must provide documentation that all deficiencies have been acceptably corrected upon completion of repairs. "As applicable" has been determined to mean any individual who the lender deems to be qualified, which might be the appraiser.
Professionals as defined above may use their company's forms and letterhead to make the certifications. Appraisers and Compliance Inspectors are to use the Compliance Inspection Report, form HUD-92051. The individual signing Section II must be the person who actually performed the inspection. Section III or IV, as appropriate, is to be signed by the Direct Endorsement Underwriter.
Mortgagee Certification: When a Mortgagee Certification is used to clear minor conditions the HUD-92051 is not required.
Mechanical Certifications: Please see: Heating & Electrical section of this manual.
5. Refinances: Standard refinances require a complete appraisal with deficiencies and repair conditions reported. Although HUD does not require completion of the repairs on a streamline refinance, except lead-based paint repairs, the lender may require completion of repairs. A streamline refinance may be insured with or without an appraisal. Please see:Handbook 4155.1, Rev. 4 Chapter 1
6. Appliances: The Valuation Protocol (page D-26 of Appendix D, Handbook 4150.2) requires the appraiser to note the appliances that are present in the home at the time of inspection and whether the appliance is considered personal property or part of the real estate. The protocol further directs the appraiser to treat non-functioning appliances/equipment as deferred maintenance in the valuation process.
The manner in which an appliance is attached to the dwelling would determine whether or not an appliance should be considered part of the real estate. In some real estate markets, it may be typical and customary for certain appliances to convey with the real estate. In these situations, those appliances should be considered real estate and treated as such in the valuation of the property.
In some cases, such as that of REO properties, all or some of the appliances may be missing and there may be damage to the floor, wall or ceiling finish as a result of the removal. Depending upon the magnitude of the damage, the appraiser is expected to treat the damage to the home as deferred maintenance and reflect such in the conclusion of value. Missing appliances must be addressed by the appraiser in the valuation process, particularly when the comparable sales included a full complement of working appliances.
In cases where appliances are missing and minor repairs may also be needed, lenders are encouraged to have the borrower take advantage of the Streamlined 203(k) loan product, which has no minimum repair cost threshold and is designed to cover such improvements/replacements.
Thursday, June 11, 2009
First-Time Homebuyer Tax Credit - Can You Access the Money Sooner Than Waiting to File Your 2009 Tax Return?
By now, most of you have heard of the $8,000 tax credit available to first time homebuyers purchasing a primary residence before December 1, 2009. The question that seems to be on everyone’s mind is whether or not the money can be obtained sooner and if so, what can it be used towards? There have been many announcements and subsequent revisions that have made it all a little confusing. Here is a breakdown of some of the current policies set forth.
At the end of May 2009, HUD announced that it will allow “monetization” of the tax credit. This simply means that the anticipated tax credit can be applied towards the purchase of the home immediately rather than waiting to receive the refund. The guidelines authorize the monetization in a few different ways.
For starters, homebuyers that believe they qualify for the credit are permitted to reduce their income tax withholdings. This will allow buyers to accumulate more cash reserves for a down payment by increasing their take home pay. Individuals must be cautious because if the purchase does not occur, the IRS could impose interest and penalty charges on the repayment.
Some state housing finance agencies and other government entities have introduced programs that will provide homebuyers with short-term loans that can be used towards the FHA minimum 3.5% down payment. Longer term loans that are secured by a second lien on the property are also permitted. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs that can be found at http://www.ncsha.org/section.cfm/3/34/2920. At this time, Arizona does not have any of these programs available.
In addition, FHA approved lenders are allowed to provide bridge financing to the buyer that is secured by the anticipated tax credit. This amount is permitted to cover closing costs, prepaid expenses and down payments above the FHA minimum of 3.5%. Unfortunately, there are no lenders participating in such programs at this time. The broad consensus in the industry is that these loans are not anticipated to surface in the near future.
At the end of May 2009, HUD announced that it will allow “monetization” of the tax credit. This simply means that the anticipated tax credit can be applied towards the purchase of the home immediately rather than waiting to receive the refund. The guidelines authorize the monetization in a few different ways.
For starters, homebuyers that believe they qualify for the credit are permitted to reduce their income tax withholdings. This will allow buyers to accumulate more cash reserves for a down payment by increasing their take home pay. Individuals must be cautious because if the purchase does not occur, the IRS could impose interest and penalty charges on the repayment.
Some state housing finance agencies and other government entities have introduced programs that will provide homebuyers with short-term loans that can be used towards the FHA minimum 3.5% down payment. Longer term loans that are secured by a second lien on the property are also permitted. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs that can be found at http://www.ncsha.org/section.cfm/3/34/2920. At this time, Arizona does not have any of these programs available.
In addition, FHA approved lenders are allowed to provide bridge financing to the buyer that is secured by the anticipated tax credit. This amount is permitted to cover closing costs, prepaid expenses and down payments above the FHA minimum of 3.5%. Unfortunately, there are no lenders participating in such programs at this time. The broad consensus in the industry is that these loans are not anticipated to surface in the near future.
Tuesday, June 9, 2009
First-Time Homebuyer Tax Credit
With housing prices at an all time low, first-time homebuyers are in a prime position to maximize their opportunities in today’s real estate market, especially with the authorization of the $8,000 tax credit by the American Recovery and Reinvestment Act of 2009. The following is a brief summary of some of the key factors.
1. The tax credit is equal to 10% of the purchase price up to a maximum credit amount of $8,000.
2. Applies to “first-time homebuyers”, which is classified as a buyer that has not owned a primary residence in the last three years.
3. Residence must be purchased after January 1, 2009 and before December 1, 2009.
4. Any single family residence, including condos and townhouses are eligible.
5. The full credit amount is available to individuals with an AGI less than $75,000 ($150,000 for joint return). There is a phase out period for an AGI up to $95,000 ($170,000 for joint return).
6. The tax credit is refundable. The credit amount is used to reduce or eliminate the tax liability and the remaining balance is then refunded to the purchaser.
7. The credit does not have to be repaid unless the home is sold within three years of purchase. Then the entire credit amount is recaptured upon the sale.
At the end of May 2009, HUD authorized the tax credit to be utilized to cover closing costs and prepaid expenses through state housing authorities, FHA approved non-profit agencies and bridge financing. However, at this time there does not appear to be any lender participation in this type of loan.
1. The tax credit is equal to 10% of the purchase price up to a maximum credit amount of $8,000.
2. Applies to “first-time homebuyers”, which is classified as a buyer that has not owned a primary residence in the last three years.
3. Residence must be purchased after January 1, 2009 and before December 1, 2009.
4. Any single family residence, including condos and townhouses are eligible.
5. The full credit amount is available to individuals with an AGI less than $75,000 ($150,000 for joint return). There is a phase out period for an AGI up to $95,000 ($170,000 for joint return).
6. The tax credit is refundable. The credit amount is used to reduce or eliminate the tax liability and the remaining balance is then refunded to the purchaser.
7. The credit does not have to be repaid unless the home is sold within three years of purchase. Then the entire credit amount is recaptured upon the sale.
At the end of May 2009, HUD authorized the tax credit to be utilized to cover closing costs and prepaid expenses through state housing authorities, FHA approved non-profit agencies and bridge financing. However, at this time there does not appear to be any lender participation in this type of loan.
Wednesday, June 3, 2009
The Price of Procrastination
Everyone Wants a Lower Price, But What About the Impact of Interest Rates?
When shopping for a home, the natural tendency of any buyer is to want to pay the lowest price possible. It's important to keep in mind, however, that the sales price is not the only factor that determines what your monthly payment will be. In fact, the impact of higher interest rates can easily nullify any benefit of waiting for a lower price.
Why Should I Rush to Buy?
While you may have heard discussions in the media about the decline of property values in Phoenix, the rate of decline appears to be stabilizing.
That being said, it would not be unreasonable for you to want to hold out for an additional decline of 10%, hoping to capture the best possible price. However, as property values have declined in many areas in Phoenix to 2003 levels or lower, waiting longer to pull the trigger could be a mistake. Phoenix, and many other areas with lower values, has been bringing out investors and the result has been multiple offers on many properties. Properties priced correctly are not declining and, in fact, are creating a lot of interest.
Interest Rate Complacency
The problem is that many home buyers have been lulled into a sense of complacency because of extremely low interest rates. Since the Federal Reserve initiated its program of buying mortgage-backed securities, which control the rates people pay for their home loans, rates had been range bound, bouncing between 4.50% to 5.00% for a 30-year fixed-rate loan.
But do not be confused by this. These rates are artificially low! Historically, interest rates have been above 6.00%. And any rate obtained below this number is a great deal, especially on homes with price tags from 2003!
Markets are Unforgiving
The last two weeks of May showed just how unforgiving the markets can be for people who choose to procrastinate. In just five days, interest rates from many lenders increased anywhere from .50% to 1.00% as fixed-income investors demanded more for their money.
For anyone who was waiting for prices to drop even more, a 1.00% increase in your interest rate would bring a higher monthly principal and interest payment on a home, even if the price of that same home had fallen an additional 10% in value.
If you're waiting for home prices to fall even lower, be aware that while holding out for a lower price may help you win the battle, you could lose the war in terms of monthly payments and overall affordability. With the Federal Reserve scheduled to end its buying of mortgage-backed securities this year, rates only stand to go higher for those that wait. In fact, interest rates are already on the rise and could go higher from here.
Clock is Ticking on Free Money
If you, or someone you know, is planning on purchasing a home this year, be aware that you must take possession before 12/01/2009 to be eligible for a tax credit of up to $8,000. In a survey conducted in March by Move.com, nearly 50% of home buyers are currently unaware that this free money exists in the marketplace. And since over 50% of all buyers are first-timers in today's market, this could impact a lot of people who aren't in the know.
When shopping for a home, the natural tendency of any buyer is to want to pay the lowest price possible. It's important to keep in mind, however, that the sales price is not the only factor that determines what your monthly payment will be. In fact, the impact of higher interest rates can easily nullify any benefit of waiting for a lower price.
Why Should I Rush to Buy?
While you may have heard discussions in the media about the decline of property values in Phoenix, the rate of decline appears to be stabilizing.
That being said, it would not be unreasonable for you to want to hold out for an additional decline of 10%, hoping to capture the best possible price. However, as property values have declined in many areas in Phoenix to 2003 levels or lower, waiting longer to pull the trigger could be a mistake. Phoenix, and many other areas with lower values, has been bringing out investors and the result has been multiple offers on many properties. Properties priced correctly are not declining and, in fact, are creating a lot of interest.
Interest Rate Complacency
The problem is that many home buyers have been lulled into a sense of complacency because of extremely low interest rates. Since the Federal Reserve initiated its program of buying mortgage-backed securities, which control the rates people pay for their home loans, rates had been range bound, bouncing between 4.50% to 5.00% for a 30-year fixed-rate loan.
But do not be confused by this. These rates are artificially low! Historically, interest rates have been above 6.00%. And any rate obtained below this number is a great deal, especially on homes with price tags from 2003!
Markets are Unforgiving
The last two weeks of May showed just how unforgiving the markets can be for people who choose to procrastinate. In just five days, interest rates from many lenders increased anywhere from .50% to 1.00% as fixed-income investors demanded more for their money.
For anyone who was waiting for prices to drop even more, a 1.00% increase in your interest rate would bring a higher monthly principal and interest payment on a home, even if the price of that same home had fallen an additional 10% in value.
If you're waiting for home prices to fall even lower, be aware that while holding out for a lower price may help you win the battle, you could lose the war in terms of monthly payments and overall affordability. With the Federal Reserve scheduled to end its buying of mortgage-backed securities this year, rates only stand to go higher for those that wait. In fact, interest rates are already on the rise and could go higher from here.
Clock is Ticking on Free Money
If you, or someone you know, is planning on purchasing a home this year, be aware that you must take possession before 12/01/2009 to be eligible for a tax credit of up to $8,000. In a survey conducted in March by Move.com, nearly 50% of home buyers are currently unaware that this free money exists in the marketplace. And since over 50% of all buyers are first-timers in today's market, this could impact a lot of people who aren't in the know.
Thursday, May 28, 2009
First-Time Homebuyers Infiltrating the Foreclosure Market
PHOENIX –AZ The foreclosure market in the Phoenix Area has sparked national attention and caused a dramatic increase in home sales. According to an article published by the Arizona Republic, investors trying to reap the benefits of the bargain priced foreclosures jump started the area’s housing market in the first part of 2009. In April, investors consisted of approximately 19 percent of the Valley’s home sales. Recently, the new front runner’s for home purchases belongs to the first-time homebuyers.
Market analysts believe that first-time homebuyers will soon account for half of the area’s home purchases. It is said that the federal housing plan’s $8,000 tax credit to first-time homebuyers and other neighborhood stabilization programs are providing huge incentives to help people purchase these foreclosure homes as primary residences.
The major increase in purchases is for residences priced below $150,000. Many of these properties are receiving multiple offers, which are helping the overall prices to climb. Today the median home price in the Valley is $116,500, which is up 1.3 percent since the end of April. The median price per square foot also increased 2.4 percent, reaching $84.86 per square foot in May.
Where investors dominated the market during the housing boom, accounting for 35 to 40 percent of Phoenix home sales, today lends a very different housing market. Investors are either paying cash or being forced to contribute large down payments in order to receive financing. Mortgage financing is more favorable to individuals purchasing primary residences and placing larger requirements on investors to deter potential future foreclosures.
If you are thinking of purchasing your first home……NOW is the time to seize all of the opportunities available!!!
Market analysts believe that first-time homebuyers will soon account for half of the area’s home purchases. It is said that the federal housing plan’s $8,000 tax credit to first-time homebuyers and other neighborhood stabilization programs are providing huge incentives to help people purchase these foreclosure homes as primary residences.
The major increase in purchases is for residences priced below $150,000. Many of these properties are receiving multiple offers, which are helping the overall prices to climb. Today the median home price in the Valley is $116,500, which is up 1.3 percent since the end of April. The median price per square foot also increased 2.4 percent, reaching $84.86 per square foot in May.
Where investors dominated the market during the housing boom, accounting for 35 to 40 percent of Phoenix home sales, today lends a very different housing market. Investors are either paying cash or being forced to contribute large down payments in order to receive financing. Mortgage financing is more favorable to individuals purchasing primary residences and placing larger requirements on investors to deter potential future foreclosures.
If you are thinking of purchasing your first home……NOW is the time to seize all of the opportunities available!!!
Tuesday, March 17, 2009
Obama Plan - Can You Benefit?
Fannie Mae and Freddie Mac have just released details on how they will handle refinance transactions authorized by the Home Affordable Refinance program. The complete details of both programs can be found by accessing the program guides from Fannie Mae and Freddie Mac, but we will discuss some of the highlights below.
You probably have seen already that lenders and investors are in a holding pattern, as they determine if, when and how they will accept these transactions. Even though this legislation has passed - they are not all required to participate. For right now, your very first step is to contact your existing servicer, and get information from them as to their participation.
In the case of all loans, th ey have to be delivered back to the existing owner of the loan today. Meaning, if Fannie Mae is the owner of the loan, the loan must be delivered to Fannie Mae and underwritten according to their guidelines. The same is true for Freddie Mac.
You must determine who owns the loan. A borrower has the ability to do this by contacting their servicer and asking...or by using the links below. Note that the property address must be entered exactly as the agency has it on file, or it may not be found (ie: Rd or Road? St or Street? You may want check how it appears on your statement.)
Does Fannie Mae Own Your Mortgage?
Does Freddie Mac Own Your Mortgage?
Let's look at the guidelines for both Fannie Mae and Freddie Mac and point out some of the key factors we see that will impact or enhance your ability to participate.
One key point to remember is that these are the guides as they are originating from the agencies. And just as participation in the programs is voluntary, individual investors and servicers may choose to implement constraints that deviate from the guidelines, much in the same manner that we are seeing additional underwriting overlays in the processing of loan files today.
Fannie Mae
Let's look at the difference between the types of refinancing available from Fannie. The primary difference for originators is as follows between the two programs..
DU Refi Plus
Available to all Fannie Mae approved lenders using DU; borrower must credit qualify.
Available across all lending channels (retail, wholesale and correspondent).
Refi Plus
If a client does NOT qualify for DU Refi Plus, they may still be able to refinance, but would have to work directly with the current servicer, or one of the servicer's affiliates or retail channels.
Many of the guidelines are similar for both DU Refi Plus and Refi Plus. Similarities include:
That the borrower must be receiving either a lower mortgage payment or moving to a more stable type of product like an ARM to a Fixed-Rate. ARM programs are available but must have initial fixed periods of five years or greater.
The maximum LTV is 105%. There is no limitation on CLTV, but 2nd lien holders will need to re-subordinate.
If PMI does not exist on the loan today, it will not be required on the new loan, regardless of LTV. If PMI does exist on the loan, the loan will be required to be re-insured through the existing PMI company.
LLPA's (loan level pricing adjustments) exist for both loans, see guides for details or consult your investors.
The availability for appraisal waivers will exist in limited situations.
Freddie Mac
The Freddie Mac guidelines are somewhat similar to Fannie Mae's, but if you go through the detailed guidelines linked above, you will see they are a bit more vague at this time. Although Freddie Mac initially stated that these refinances may ONLY be originated by the servicer or one of their retail or affiliate channels, right as this article of the release of this article, we have learned from a source at Freddie Mac that they are looking at options that could enable more originators to be involved in refinances under this program.
One potential area that could cause a problem is that while no cash out is allowed, funds extended to cover closing costs may not exceed $2,500.
Additional Resources:
Does Fannie Mae Own Your Mortgage?
Does Freddie Mac Own Your Mortgage?
You probably have seen already that lenders and investors are in a holding pattern, as they determine if, when and how they will accept these transactions. Even though this legislation has passed - they are not all required to participate. For right now, your very first step is to contact your existing servicer, and get information from them as to their participation.
In the case of all loans, th ey have to be delivered back to the existing owner of the loan today. Meaning, if Fannie Mae is the owner of the loan, the loan must be delivered to Fannie Mae and underwritten according to their guidelines. The same is true for Freddie Mac.
You must determine who owns the loan. A borrower has the ability to do this by contacting their servicer and asking...or by using the links below. Note that the property address must be entered exactly as the agency has it on file, or it may not be found (ie: Rd or Road? St or Street? You may want check how it appears on your statement.)
Does Fannie Mae Own Your Mortgage?
Does Freddie Mac Own Your Mortgage?
Let's look at the guidelines for both Fannie Mae and Freddie Mac and point out some of the key factors we see that will impact or enhance your ability to participate.
One key point to remember is that these are the guides as they are originating from the agencies. And just as participation in the programs is voluntary, individual investors and servicers may choose to implement constraints that deviate from the guidelines, much in the same manner that we are seeing additional underwriting overlays in the processing of loan files today.
Fannie Mae
Let's look at the difference between the types of refinancing available from Fannie. The primary difference for originators is as follows between the two programs..
DU Refi Plus
Available to all Fannie Mae approved lenders using DU; borrower must credit qualify.
Available across all lending channels (retail, wholesale and correspondent).
Refi Plus
If a client does NOT qualify for DU Refi Plus, they may still be able to refinance, but would have to work directly with the current servicer, or one of the servicer's affiliates or retail channels.
Many of the guidelines are similar for both DU Refi Plus and Refi Plus. Similarities include:
That the borrower must be receiving either a lower mortgage payment or moving to a more stable type of product like an ARM to a Fixed-Rate. ARM programs are available but must have initial fixed periods of five years or greater.
The maximum LTV is 105%. There is no limitation on CLTV, but 2nd lien holders will need to re-subordinate.
If PMI does not exist on the loan today, it will not be required on the new loan, regardless of LTV. If PMI does exist on the loan, the loan will be required to be re-insured through the existing PMI company.
LLPA's (loan level pricing adjustments) exist for both loans, see guides for details or consult your investors.
The availability for appraisal waivers will exist in limited situations.
Freddie Mac
The Freddie Mac guidelines are somewhat similar to Fannie Mae's, but if you go through the detailed guidelines linked above, you will see they are a bit more vague at this time. Although Freddie Mac initially stated that these refinances may ONLY be originated by the servicer or one of their retail or affiliate channels, right as this article of the release of this article, we have learned from a source at Freddie Mac that they are looking at options that could enable more originators to be involved in refinances under this program.
One potential area that could cause a problem is that while no cash out is allowed, funds extended to cover closing costs may not exceed $2,500.
Additional Resources:
Does Fannie Mae Own Your Mortgage?
Does Freddie Mac Own Your Mortgage?
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