Traci Gregory, Financier

We are an FHA Direct Endorsed Lender

I’ve read with dismay about the people giving up their houses, going to credit counseling, trying to make ends meet.

The biggest bill most of us pay is for rent or for our mortgages, and for some reason the news makes it appear that there is no mortgage money when in fact there is quite a lot.

The credit crunch could affect mortgage money availablity, but it has not. 

I’ve been a mortgage banker for 20 years . . . and I know that refinancing a $250,000 mortgage that is at 7% ($1630/month)  to 6% or less ($1498/month)  would make a positive change in any budget.

• People with questionable credit can refinance with an FHA loan, even if their loan isn’t an FHA backed loan now.
• Streamline refinances are done with no appraisal, and in a lot of cases, reduced fees, to help homeowners stay in their houses.  For conventional AND FHA loans.

This is a time to hunker down, figure out how we’re going to get through the next few years, and giving up the time and money we have invested in our homes is not a good way to start a hard run!

I understand that Cobb County’s revenues for intangible taxes and real estate filing fees was averaging between $2 and $3 MILLION a month in 2007.  Now, they are at less than $300,000 a month.  Even the local government is feeling the pinch of the fall in real estate business.

I recommend that everyone who owns a home and is paying more than they are comfortable with look hard at all the options for refinancing and lowering their payments, particularly if they want to get into a 30 year fixed rate, plain vanilla, feel-safe-to-everyone mortgage.

I also highly recommend that the Real Estate Professionals in the area get more familiar with FHA and for people outside Cobb County, Rural Development loans.  THAT MONEY IS WAITING TO BE SPENT!

There IS down payment assistance money – for homeowners who don’t have cash to close.  We can revive the economy on a local level, but only if we don’t give up on it.

CHANGES TO FHA MORTGAGE INSURANCE PREMIUMS

FHA Single Family Mortgage Insurance Starting Monday July 14, 2008, for the first time EVER, credit scores will determine loan terms on an FHA Loan Details are Borrowers with no score or at least  500 may get an LTV >90%; see matrix below. Borrowers with a score under 500 get a maximum LTV of 90%. Borrowers without scores will require manual underwriting. Depending on score, Upfront Mortgage Insurance Premiums will range from 1.25% to 2.25%. Depending on score, Monthly Mortgage Insurance will range from .50% to .55%. The premium is based on the borrower with the lowest score. If one of the borrowers has no score, then the Non-Traditional credit grade is used. Credit rescoring is allowed to improve a borrower's credit grade. All FHA Secure refinances >95% LTV with delinquencies have a 2.25% UFMIP and .55% MMI. These changes apply to purchases, cash-out refinances, rate & term refinances, and non-delinquent FHA Secure refinances. UPFRONT AND ANNUAL MORTGAGE INSURANCE PREMIUM RATES Effective July 14, 2008  for Loan Terms Greater than 15 Years
All premiums are shown in basis points - 0.01%
	Credit Score
LTV	300-499	500-559	560-599	600-639	640-679	680-850	Alternative Credit
Less than 90%	175/50	175/50	150/50	125/50	125/50	125/50	150/50
90.01% - 95%	Not Available	200/50	175/50	150/50	125/50	125/50	175/50
Over 95%	Not Available	225/55*	200/55	175/55	150/55	125/55	200/55
* First time Homebuyers WITH HUD APPROVED COUNSELING will be charged 200 basis points for the upfront MI

New FHA Loan Programs for People LATE ON THEIR MORTGAGES

Effective July 19, the FHA will expand the FHA Secure program twofold:

• People  with ARMs (adjustable-rate mortgage loans) who were late on two mortgage payments in a row, or twice in the last 12 months. FHA will require a 97 percent loan-to-value (LTV) ratio for these borrowers to refinance into a government-backed loan -- which in many cases would require lenders to write down some principal.
• Borrowers with ARMs (adjustable-rate mortgage loans) who were late on three mortgage payments in a row, or three different times in the last  12 months; the FHA will only go a 90 percent LTV for these borrowers.

It is estimated that FHASecure has helped 150,000 borrowers refinance since the program was launched and that these new guidelines will help as many as 500,000 homeowners.

FHA Reform Moves Ahead in Washington/Bradley Miller Bill to Broker Incentives to Work

Talk about conflicting agendas in the government:

The FHA Reform Bill is moving right along:

Passed full House by a vote of 348-72
Passed Senate Banking Committee by a vote of 20-1
Public Comments in the Senate closed October 22, 2007
Expected to pass the full Senate in November, 2007
President's signature expected in November, 2007
FHA commissioner confirms rapid implementation

Benefits of the FHA Reforms include Elimination of the audited financials and net worth requirements for BROKERS; Brokers can post a surety bond in lieu audited financials; Loan limits in high cost areas increased to at least $417,000; Minimum downpayment reduced to 1.5% or lower.

Ironically, moving through the same system, is Bradley Miller's Bill, H.R. 3915 the "Mortgage Reform and Anti-Predatory Lending Act of 2007, which will send Brokers the way of the dodo and dinosaur and is due to be voted on November 6.

The FHA is making it easier for Brokers to become approved to do their loans, which makes it appear that they would want us to stay in business and perhaps work to refinance the mortgages that everyone considers questionable for the borrower . . .

And Sen. Miller wants to legislate underwriting guidelines.  I guess his group feels they are better at underwriting mortgage loans than the industry (perhaps being a politician does that for one), and so they want to make their underwriting guidelines law.  And, they wants to re-arrange the way the market works, eliminating indirect pay to Brokers.

Too bad I'm not registered to vote in North Carolina.

Good News and Bad News to cure Sub-Prime woes

Bank of America, Citigroup Inc., Countrywide Financial Corp., Fannie Mae, Freddie Mac, First Horizon National Corp., GMAC ResCap, HSBC North America Holdings Inc., JPMorgan Chase & Co, National City, Option One Mortgage, SunTrust Mortgage Inc., Washington Mutual Inc., and Wells Fargo & Co. have signed up for HOPE NOW, a Bush administration initiative designed to assist homeowners who may be facing foreclosure.

The plan is that HOPE NOW will do national direct-mail to reach at-risk borrowers, with instructions to contact their lenders or a mortgage counselor to work out a repayment plan or restructuring of their mortgage to prevent foreclosure.

They also want to expand counseling capacity to make it easier to communicate with loan servicers.

I'm guessing picking up the phone and calling to ask if there is a way to restructure is too constricting, and that's why more people aren't doing it.

In September, FDIC Chairwoman Sheila Bair spoke at the Lied Center of the University of Nebraska Lincoln campus.  The subject was money and financial responsibility.

Speaking of  Mortgage responsibility she said, "... Regulators need to make sure that borrowers have what they need to fully understand the terms of the loan. And borrowers need to make sure that they fully understand the loan before they sign on the dotted line.”

I've read that she has pushed loan servicing companies to engage in wholesale conversions of adjustable-rate mortgages into fixed-rate loans where possible when borrowers are in danger of default.

Chairwoman Bair said, "Frankly, I'm frustrated that the servicing restructuring has not reached the level that I had hoped it would.  We have a huge problem on our hands. We can't just sit here doing this kind of case-by-case, laborious restructuring process with all these millions of subprime hybrid ARMs."

Unfortunately, mortgages are labor intensive and consist of legal documents that have to be revised, approved, signed and then recorded.  I agree that they could be converted to fixed rate products, but I don't see a quick or easy way of doing it.

Now the bad news ~~~~~

From a press release on Representative Brad Miller's website:

"Representative Brad Miller, North Carolina, and Rep. Linda Sánchez, California, ... introduced legislation that will prevent hundreds of thousands of Americans from losing their homes in bankruptcy."

Essentially, they want to give bankruptcy judges the authority to rewrite mortgages that are included in bankruptcies. 

Quoting the press release again: "According to the Center for Responsible Lending, a non-partisan, consumer advocacy group, the Miller proposal could help prevent up to 600,000 people from losing their homes in the next 24 months."  That's 25,000 bankruptcies a month. Handling that paperwork will keep a lot of people busy for a long, long time . . .

Rep. Miller goes on to say:

"Responsible lenders who made loans on reasonable terms have nothing to worry about in bankruptcy court, but predatory lenders will end up with the loans they should have made in the first place" That's because responsible lenders don't have any customers who would take unfair advantage of any law that he can put on the books, I'm guessing.

Rep. Sánchez comments: "As the subprime crisis heats up, it's high time we write legislation to help America's working families instead of helping the opportunistic lenders who took advantage of them. I look forward to moving this legislation swiftly through the Subcommittee on Commercial and Administrative Law."

On 10/4/2007 when this bill was forwarded to the Committee, it's sponsors had grown to 14:

Rep Cohen, Steve [TN-9] - 9/25/2007
Rep Davis, Artur [AL-7] - 9/26/2007
Rep Delahunt, William D. [MA-10] - 9/26/2007
Rep Ellison, Keith [MN-5] - 9/25/2007
Rep Frank, Barney [MA-4] - 9/20/2007
Rep Gutierrez, Luis V. [IL-4] - 9/27/2007
Rep Johnson, Henry C. "Hank," Jr. [GA-4] - 9/25/2007
Rep Lofgren, Zoe [CA-16] - 10/4/2007
Rep Maloney, Carolyn B. [NY-14] - 9/20/2007
Rep Miller, George [CA-7] - 9/27/2007
Rep Nadler, Jerrold [NY-8] - 9/25/2007
Rep Sánchez, Linda T. [CA-39] - 9/20/2007
Rep Sánchez, Loretta [CA-47] - 9/27/2007
Rep Watt, Melvin L. [NC-12] - 9/20/2007

Having written about the pawn shop mentality of some borrowers (If I don't pay for it, the bank will get it back), I'd like for these legislators to interview oh, fifty of their constituents who have loans going into default.  And, if they're really interested in the truth, they could interview the loan officers who did the loans, and review the loan files that those borrowers presented when they applied for the loans. 

This is America, where we want it all (and to quote my favorite refrigerator magnet) we want it delivered.  Credit is so-o-o easy.  Every college student in America is offered a new charge card a week (I know it is true, I have two living in my house and I shred their mail most days because COLLEGE STUDENTS DON'T NEED CREDIT CARDS.)

I bought my first house in 1971.  Yeah, I'm over 50.  I made a $3,000 downpayment on a $13,000 house!  That's a 23% downpayment.  I was 20.  Can you count on one hand the number of people you know who have made a 23%  downpayment on a house?  Can you calculate how long it would take the average American to accumulate a 20% downpayment with the price of housing in this country? 

I have clients in Europe who have always made 20% downpayments.  They are buying houses here with 25% downpayments.  Talk about having skin in the game . . . but we've come to expect that we can buy everything  NOW and pay later.  So for all those people with ARMS, it is later, and it is hard to keep that deal we made when we signed the loan docs.

Think I'm heartless?  I HAVE AN ARM.  The payment adjusted (upward) $700 in August.  No, I don't like it, its not comfortable, but I've got to grin and bear it til I finish the renovation on my house and get another mortgage.  I knew it was coming for three years . . . And so did everyone else who has one.

Dave Ramsey, where were you when we needed you??

More on FHA Secure

While the FHA Secure program is going to help people in default because their arms reset, I wonder about those people who took a second job, or a second and third job, and are eating cornbread and beans in order to make their mortgage payments rather than let them go into default . . . When is someone going to let them refinance for some relief?

More on the FHA Secure program:

"It's not the government's job to bail out speculators or those who made the decision to buy a home they knew they could never afford," said President Bush. "Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders or a little help from their government."

Homeowners must have 3% equity in their home and demonstrate that the original loan was being paid on a timely basis until it reset in order to qualify under the FHA Secure Program. Previously, the FHA would not guarantee refinances on loans with delinquencies. The loan must be within standard FHA loan limit guidelines, but the administration apparently supports legislation to raise the limits. The FHA plan is to charge slightly higher mortgage insurance premiums to address the additional risk

The FHA estimates that 500,000 of 2+ million arms set to adjust could go into foreclosure. Even with the 80,000 borrowers the FHA will bail out, it still estimates it will only assist about 250,000 with its current FHA programs.

Bush also indicated support for a Democratic bill pending in Congress that would temporarily alter tax law to allow homeowners to forego paying taxes on forgiven debt in loans being restructured by financial institutions. This could turn into a nightmare to manage . . .

In a previous press conference, Bush opposed helping consumers outright out of foreclosure. “We must show an enormous empathy," Bush said, but he didn't think the feds should give financial aid. "If you mean direct grants to homeowners, the answer would be `No, I don't support that,'" said Bush.

Sen. Charles Schumer suggested in a news conference this is a shift for an administration that favors the free market. "The president has gotten out of his ideological straitjacket and seen that in times of crisis, one of the jobs of government is to help," said Schumer.

What else could he do? Sit back and watch the homeless population explode?

FHASecure for Refinancing Adjustable Rate Mortgages in Default

As an FHA lender, we are happy to become part of the solution for the ARMS that are resetting and are in default.

In a press release issued by the Federal Housing Administration on Friday, the headline read BUSH ADMINISTRATION TO HELP NEARLY ONE-QUARTER OF A MILLION HOMEOWNERS REFINANCE, KEEP THEIR HOMES

The contents are highlighted here:

President George W. Bush announced on 8/310/7 that the FHA will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately.

Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing…

This is huge! Imagine, there were no options a week ago and now there is a refinance, that can include defaults and even go above FHA lending limits. Unprecedented!

In many cases homeowners may be permitted to include mortgage payment arrearages into the new loan amount, subject to existing geographical mortgage limits and the loan-to-value limit shown below. Before Friday, only borrowers who were current on their existing loan were allowed to re-finance into an FHA-insured mortgage.

Highlights of the FHASecure Initiative:

1. The mortgage being refinanced must be a non-FHA ARM that has reset.
2. The mortgagor’s payment history on the non-FHA ARM must show that, prior to the reset of the mortgage, the mortgagor was current in making the monthly mortgage payments.
3. If there is sufficient equity in the home, under additional eligibility instructions provided below, FHA will insure mortgages that include missed mortgage payments.
4. Under certain conditions, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2), the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing.
5. Lenders must determine, as part of the underwriting process, that the reset of the non-FHA ARM monthly payments caused the mortgagor’s inability to make the monthly payments and that the mortgagor has sufficient income and resources to make the new monthly payments under the FHA-insured refinancing mortgage.

Additional Information about the FHASecure Initiative:

What May be Included in the FHASecure Mortgage Amount:

FHA will permit the inclusion of the existing first lien, any purchase money second mortgage, closing costs, prepaid expenses, discount points, prepayment penalties, and late charges.

FHA will also permit arrearages (principal, interest, taxes and insurance) to be added into the new loan amount. Subordinate Financing under the FHASecure Initiative:

If the new maximum FHA loan is not enough to pay off the existing first lien, closing costs and arrearages, the lender may execute a second lien at closing to pay the difference. The combined amount of the FHASecure first mortgage and any subordinate lien may exceed the applicable FHA loan-to-value ratio and geographical maximum mortgage amount. If payments on the second are required, they must be included in qualifying the borrower. If payments are deferred, they must be so for no less than 36 months to not be considered in the qualifying ratios.

If you have an ARM that has reset and you can't make the payments, this may be your chance to recover!

We're licensed in Florida, Georgia, Alabama, South Carolina and Tennessee. Send me an email at traci@tracigregory.com and we will see if this will work for you! You may read the entire press release at: http://www.hud.gov/news/release.cfm?content=pr07-123.cfm.