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.

Bits and Pieces

So, the Donald is going to bail out Ed McMahon on his $4.8 mil mortgage.

Wonder how many regular guys he could bail out with that kind of money? 

~~~~~~~~~~

Countrywide Financial Corp. is the subject of yet another federal investigation: the Federal Trade Commission (FTC) is investigating for possible violations of federal laws in the servicing of its $1.49 trillion loan portfolio.

Aren't they the ones foreclosing on McMahon?

~~~~~~~~~~

From the Associated Press:
After a full six months of investigating appraisals in the US, an independent federal agency known as the Appraisal Subcommittee says the nationwide system set up to monitor appraisers because of the savings and loan crisis (?) did little to prevent appraisers, real estate agents and mortgage brokers from colluding to inflate home prices during the housing boom.

There just don't seem to be any appraisers with a backbone in this country . . . I read everywhere that they were coerced into high values . . . Please.

~~~~~~~~~~

From the Wall Street Journal:
Are Obama's tax cuts The New Tax Welfare? Is he proposing to create or expand government spending programs disguised as tax credits?

I didn't know he had thought up tax cuts - I thought he just wanted to make sure we were all at a 54% income tax level, in addition to paying for capital gains, and, oh, yeah, when we die . . .

Pax et bonum

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

Housing Economic Recovery Act advances in the Senate - Do they read the bills they vote on? Really?

FreedomWorks, American Conservative Union,  Americans for Tax Reform ,  Citizens Against Government Waste,    Club for Growth,  Competitive Enterprise Institute,  and the National Taxpayers Union   have come together to urge the Senate to say NO to the Housing Economic Recovery Act, commonly known as the Dodd-Countrywide bailout bill.

Here’s an excerpt from their letter:

“The Dodd plan creates a new housing trust fund that will collect more than $530 million a year through a new levy on Fannie Mae and Freddie Mac. The trust fund in turn makes these funds available to politically active community groups like ACORN outside the normal appropriations oversight.

“In addition, the Dodd plan creates a new $300 billion facility that allows mortgage lenders to cherry-pick their worst performing loans and roll them into the FHA, shifting 100 percent of the loan liability to the taxpayer.”

http://www.freedomworks.org/uploads/dodd-frank-coalition.pdf

The THREE HUNDRED BILLION DOLLAR BAILOUT went to the Senate Floor today and advanced in the Senate with overwhelming support.

I'm thrilled that they are shouting we don't need more taxes so that Countrywide and others are empowered to keep doing business as usual . . . (I say Countrywide because from all appearances Countrywide will be one of the prime beneficiaries of this bill due to the overwhelming business it did in the sub prime market.)

The Housing Economic Recovery Act, if passed, will, after adding  $300 billion to the taxpayer’s burden, probably send those banks' worst loans to the FHA, which, you guessed it, will create another FIVE HUNDRED MILLION DOLLARS IN TAXES ON GSE's. (GSE's are Federal Home Loan Banks, Freddie Mac, Fannie Mae, Ginnie Mae, Federal Farm Credit Banks, Federal Agricultural Mortgage Corporation.)

These same issues are supported by findings released earlier this week by the Congressional Budget Office’s (CBO) scoring of legislation.

"Mortgage holders would have an incentive to direct their highest-risk loans to the program," the agency noted.

But the Congressional Budget Office thinks the FHA plan might only have a modest impact.

Despite up to $300 billion in loan guarantees, CBO's analysis of the Senate bill projects demand for only $68 billion through 2011.

"CBO estimates that approximately 400,000 loans would be guaranteed under this legislation with an average loan amount of $170,000 each. Thus, CBO estimates that FHA would require about $68 billion in loan commitment authority through 2011 to implement the program. "(The legislation would authorize FHA to provide up to $300 billion in loan guarantees under the new program)

AND   "...35 percent of the loans refinanced through the program will eventually default anyway."

CBO estimates that enacting this legislation would increase revenues by about $8.0 billion over the 2009-2018 period, net of income and payroll tax offsets. Over that period, we estimate that direct spending from those proceeds would total about $7.2 billion. The additional revenues would thus exceed direct spending by an estimated $800 million." Read the full text of the CBOs findings

So they've figured out how to arrive at a surplus in the budget, rather than a deficit by creating this whole new way of life for originators, lenders, sellers, servicers  . . . How about we just SPEND LESS MONEY?? Isn't that what you do when you don't have it?  You spend less.

Where do revenues come from for the federal government?  Regardless of who writes that last check,  ultimately, revenues come from taxpayers . . .

These bills are NOT going to improve the quality of life for most people . . . they will help lenders, who knew they had a parachute when they made these risky loans (REMEMBER THE S&L BAILOUT - they were bailed out with tax dollars).

And it will help people who probably shouldn’t have gotten a loan in the first place and may not pay it back even after this second chance.

Write your representatives. 

Stand Up and Be Heard, or you’re going to be paying for it for the rest of your life.

And, sadly, so will your kids.

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.

2008 and the New Year didn't bring much cheer, did it?

I've gotten through Christmas, new baby, new year's, groundhog day, and lots of political rhetoric about the mortgage mess, and essentially my business remains in a state of near madness . . . I've read dozens of books about the economy, wall street, the mortage business, and I've stayed with my conclusion that the problems we're involved in now are the result of greed, or a lesser vice, that being the American urge to consume . . . at the bottom of the food chain: homeowners in problem mortgages, I think probably they just wanted to do the best they could for the families (don't we all?), and for the top: Wall Street Bankers who created the funds for "exotic mortgage products", they just wanted to make money.  It is what they do, and they did it well. 

As you probably know, we've gotten back to stern guidelines for owner occupied properties - FHA, the original sub-prime mortgage is making a comeback (and well it should!  520 credit scores and a 97% mortgage for 6.125, 30 years fixed!! Why would you go anyplace else with that score??)

Mega Jumbo ltvs are down, although those loans still get done. 

Conventional rates are lower than they've been in . . . three years?  05 saw rates like this, in the 5's.  And while we talk about 18% in 1981, I get the impression that people who were born in the 80's don't really believe it!

If you're in an ARM, now is the time to refinance, rates are so good, you probably should move now.  If you're in a loan that is in default, there are options for you - exercise them!  No one should be losing a house right now with so many options to save them.

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?

Finally, Some Love for Mortgage Brokers!

In an interview David Bach did with Bankrate.com, he discusses the cost of mortgage refinances.  (David Bach is the author of the Automatic Millionaire series of books, and is, not incidentally, a former senior vice president at the Wall Street investment firm Morgan Stanley.)

"You have to factor in all the closing costs for a refinance. There is no such thing as a no-cost loan. The loan documents, the HUD-1 settlement statement details it all."

And my favorite: "...There are more good mortgage loan people out there than bad. It's a very regulated industry."

You can read the full article at http://www.bankrate.com/

In an interview David Bach did with Bankrate.com, he discusses the cost of mortgage refinances.  (David Bach is the author of the Automatic Millionaire series of books, and is, not incidentally, a former senior vice president at the Wall Street investment firm Morgan Stanley.)

"You have to factor in all the closing costs for a refinance. There is no such thing as a no-cost loan. The loan documents, the HUD-1 settlement statement details it all."

And my favorite: "...There are more good mortgage loan people out there than bad. It's a very regulated industry."

You can read the full article at http://www.bankrate.com/