Mortgage rates sank this week, to their lowest levels since spring. This is as good a time as any to refinance because Uncle Sam will make it more difficult and more expensive to refi in a few months.

The benchmark 30-year fixed-rate mortgage fell 11 basis points to 5.25 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.31 discount and origination points. One year ago, the mortgage index was 6.41 percent; four weeks ago, it was 5.41 percent.

The benchmark 15-year fixed-rate mortgage fell 10 basis points to 4.64 percent. The benchmark 5/1 adjustable-rate mortgage fell 11 basis points to 4.69 percent.

Weekly national mortgage survey
Results of Bankrate.com’s Oct. 1, 2009, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed 15-year fixed 5-year ARM
This week’s rate: 5.25% 4.64% 4.69%
Change from last week: -0.11 -0.10 -0.11
Monthly payment: $911.14 $1,274.08 $854.76
Change from last week: -$11.27 -$8.49 -$10.94

The 30-year fixed is low, but has been lower. In Bankrate’s weekly survey conducted April 1 this year, it fell to an all-time low of 5.13 percent — no foolin’. Even though rates have been lower than this in recent history, people are still refinancing. According to the Mortgage Bankers Association, almost two-thirds of applications last week were from homeowners who wanted to refinance.

Not too long from now, it’s going to be harder to refinance.

In December, Fannie Mae will raise fees and tighten lending standards on some mortgages bought by the government-controlled financial titan. And at the beginning of 2010, the Federal Housing Administration will make it harder to get a “streamline refinance.”

Beginning Dec. 11, Fannie won’t buy a loan with a credit score under 620, which means lenders won’t underwrite them. For most loans, the minimum credit score will be even higher than that. For example, if you refinance a loan on a single-family house and you have less than 25 percent equity, the minimum credit score is 660. That’s also the minimum score if you’re buying a house with less than 25 percent down.

Fannie also will boost fees (called “loan level price adjustments”) that it charges to compensate for risk. For borrowers with marginal credit scores who get “expanded approval” loans, these fees will increase by $250 for each $100,000 borrowed. This change takes effect Jan. 1.

Fannie’s changes will affect buyers and refinancers. The FHA’s changes will affect refinancers. In short, the FHA’s streamline refinance program won’t be quite as streamlined.

FHA’s streamline refi program is for homeowners who already have FHA-insured mortgages. Streamline refis haven’t required credit checks or employment verification. They haven’t required appraisals if the new loan amount doesn’t exceed the original loan amount.

Those rules change Nov. 17. Borrowers will have to verify that they have paying jobs, and the FHA will gather credit scores. And more borrowers will have to get appraisals.

Under the old streamline refi guidelines, an appraisal was unnecessary if the new loan didn’t exceed the original loan amount. The new standard moves the goal posts a little bit. An appraisal will be necessary if the new loan amount exceeds the old loan’s outstanding balance. That’s less than the original loan amount.

Here’s what this policy means. Let’s say you got an FHA-insured loan a few years ago for $100,000. Now you owe $85,000. Under the old streamline refi plan, you could borrow up to the original loan amount of $100,000 without having to pay for an appraisal. Under the new policy, you will have to get an appraisal if you borrow more than $85,000.

The new policy will make it difficult or impossible to avoid getting an appraisal if you want to roll closing costs into the new loan amount. And if you do have to pay closing costs out of pocket, instead of rolling them into the loan amount, you’ll have to document that the money is yours and not a loan or gift.

FHA’s revised policy leaves mortgage loan officer Dan Green scratching his head in puzzlement. “The FHA is insuring the loan regardless,” says Green, of Waterstone Mortgage in Cincinnati. “They should want the lowest payment they possibly can.”

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I am sad to see this happening, I thought we were done w/the bank failures..

The closure follows actions taken by HUD yesterday in response to TBW’s failure to submit a required annual report and to disclose “certain irregular transactions that raised concerns of fraud.”  HUD also proposed to bar two members of senior management from dealings with the US Government for 18 months owing to HUD’s allegation the two submitted false information to the agency.

According to correspondence received by market participants, today is the last day of operations and most employees will be terminated by close of business.  The precipitous nature was also noted in the communications from senior management in which it was said that all steps were taken to try to prevent the closing of the doors.

As has been a common theme in the wave of mortgage bank closures over the past 2 years, many employees when questioned this morning, had nothing to offer besides “business as usual…”  Normal morning emails with rate sheets, guidelines, and turn-times for underwriting went out this morning, and many employees told us directly or indirectly they didn’t know anything about TBW closing their doors.

Perhaps an even more disturbing common theme for certain parts of the mortgage origination community is to see yet another king of the “private mortgage company” hill go out of business.  In 2006, Aegis Wholesale touted their status as the largest private mortgage company in the US.  More specifically, this means that non-bank/wholesale origination channels are dealt another severe blow as they are now losing the biggest player in that segment.  

A closure like TBW, combined with the potential precedent set not only by HUD’s actions, but also their aggressive verbiage, adds to the already sizeable concern that the wholesale channels will continue to get pushed out of the picture in favor of the largest retail banks.  Although that is likely a bleak outlook for some, giant banks like Wells Fargo “remain supportive of the wholesale channel”—at least for now.  

TBW is the third largest endorsement lender of FHA-insured loans and the eighth largest Ginnie Mae issuer with $24 billion, or 3%, of current outstanding Ginnie Mae fixed rate securities.

According to JP Morgan, Bank of America will take over TBW’s loan servicing duties.

Article found at:

http://www.mortgagenewsdaily.com/08052009_tbw_shuts_down.asp

To review the report go to:

http://www.makinghomeaffordable.gov/pr_08042009.html

Making Home Affordable Program Report

A further change to lender procedure is that the borrower must be given a copy of the appraisal at least three business days before closing. If this does not happen, it could delay the close unless the borrower waives receipt of the appraisal.

For more details, see “New Federal Rules Protecting Applicants for Home Loans Take Effect July 30th.”

New Federal Reserve regulations to protect consumers are due to go into effect on July 30th. Soon, lenders will be required to provide borrowers with an estimate of their mortgage costs within three working days of the loan application. In addition, the only upfront cost that may be collected prior to this disclosure is an appraisal fee that is not excessive. If rates increase by more than an eighth of a percentage point, the lender must prepare and deliver a new estimate within three business days.

A further change to lender procedure is that the borrower must be given a copy of the appraisal at least three business days before closing. If this does not happen, it could delay the close unless the borrower waives receipt of the appraisal.

For more details, see “New Federal Rules Protecting Applicants for Home Loans Take Effect July 30th.”

Buyers who wish to use this program must be purchasing a home as their residence.  Investors may not participate.  There are no minimum or maximum income restrictions, etc.  Anyone can take advantage of this unique program.

• The first step toward using a 203K loan begins once you have a home under contract
  

• A 203K approved consultant will conduct a home inspection for you and identify what repairs must be completed in order to meet minimum property & safety standards.
  

• You then decide what additional work you would like to have done.  Examples would be adding a deck, new kitchen, new carpet, etc.
  

• The 203K consultant will then prepare a write up for your lender detailing the costs and breakdown of each of the repairs.
  

• The total cost of these repairs is added to your loan amount.  For example if you have desired repairs of $20,000 added to a sales price of $100,000, your total loan amount would be roughly $120,000.
  

• The down payment for this exciting program is only 2-3% and you have up to 6 months to have the work completed

•  What eligible improvements are acceptable under the $5,000 minimum requirement?

• A. Structural alterations and reconstruction (e.g., repair or replacement of structural damage, chimney repair, additions to the structure, installation of an additional bath(s), skylights, finished attics and/or basements, repair of termite damage and the treatment against termites or other insect infestation, etc.).B. Changes for improved functions and modernization (e.g., remodeled bathrooms and kitchens, including permanently installed appliances, i.e., built-in range and/or oven, range hood, microwave, dishwasher).C. Elimination of health and safety hazards (including the resolution of defective paint surfaces or lead-based paint problems on homes built prior to 1978).D. Changes for aesthetic appeal and elimination of obsolescence (e.g., new exterior siding, adding a second story to the home, covered porch, stair railings, attached carport).

  E. Reconditioning or replacement of plumbing (including connecting to public water and/or sewer system), heating, air conditioning and electrical systems. Installation of new plumbing fixtures is acceptable, including interior whirlpool bathtubs.

  F. Installation of well and/or septic system. The well or septic system must be installed or repaired prior to beginning any other repairs to the property. A property less than 1/2 acre with a separate well or septic system is not acceptable; also, a property less than 1 acre with both a well and a septic system is unacceptable. Lots smaller than these sizes, usually have problems in the future; however, the local HUD Field Office can approve smaller lot size requirements where the local health authority can justify smaller lots. The installation of a new well or the repair of an existing well (used for the primary water source to the property) can be allowed provided there is adequate documentation to show there is reason to believe the well will produce a sufficient amount of potable water for the occupants. (A well log of surrounding properties from the local health authority is acceptable documentation.) Refer to HUD Handbook 4910.1, Appendix K, for additional information.

  G. Roofing, gutters and downspouts.

  H. Flooring, tiling and carpeting.

  I. Energy conservation improvements (e.g., new double pane windows, steel insulated exterior doors, insulation, solar domestic hot water systems, caulking and weather stripping, etc.).

  J. Major landscape work and site improvement (e.g., patios, decks and terraces that improve the value of the property equal to the dollar amount spent on the improvements or required to preserve the property from erosion). The correction of grading and drainage problems is also acceptable. Tree removal is acceptable if the tree is a safety hazard to the property. Repair of existing walks and driveway is acceptable if it may affect the safety of the property. (Fencing, new walks and driveways, and general landscape work (i.e., trees, shrubs, seeding or sodding) cannot be in the first $5000 requirement.)

  K. Improvements for accessibility to a disabled person (e.g., remodeling kitchens and baths for wheelchair access, lowering kitchen cabinets, installing wider doors and exterior ramps, etc.). Related fixtures such as new cooking ranges, refrigerators, and other appurtenances, as well as general painting are also eligible; however, it must be in addition to the $5,000 requirement. <back to top>

For more information visit the FHA official site:

http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm

The FHA 203K loan is just one of the special programs we have to offer you.  If you would like to learn more about other programs we offer such as contact me at www.cobaltfinancialcorp.com/elitaea