Phewwww, it’s been a little while since I have written a post, matter of fact we found out my site wasn’t compliant and we had to shut it down temporarily! We had to rethink our strategy, the bottom line is that we wanted to make sure we were not confusing consumers about who they were doing business with. Since then, between my compliance team at NOVA® Home Loans and I we have corrected the issue.
So what am I going to rant about now? Well, it’s actually something optimistic about the mortgage business (did I just say that?), and thank God for capitalism as this is the only reason something like this will soon exist. The Dodd-Frank Bill has brought out a ridiculous amount of regulation to our industry, there is really some logic behind it, in my opinion it is to keep the government from having to bail out another mortgage entity.. In this case it was Fannie and Freddie who were the biggest culprits, we should have let them fail completely but the good news is that Fannie just paid off her debt and is in the black…
Back to what I was saying (my ADD was acting up)… With the Dodd-Frank Bill new regulations came out recently (beginning of January) called the QM/ATR or Qualified Mortgage and Ability to Repay guidance. This was a way of making the “lending BOX” a bit smaller so that banks have a safe harbor to lend within those guidelines and that if they wrote mortgages within this guidance they could never be “sued” by the homebuyer down the road in the event of some kind of default.
The problem is that this was a step in the wrong direction, there are MANY qualified buyers who don’t fit in that box and are currently left to renting or paying cash. Recently a company called Fenway Summer was started by a gentleman named Raj Date, a former member of the CFPB (the finance industry police that stemmed from the Dodd-Frank Bill) that lead the QM/ATR guidance rollout. After Raj left the CFPB, Fenway Summer was started as a means to fund NON QM/ATR loans, or the loans that DIDN’T fit in the box… Genius right?
Rumor is now hitting the streets about new private funds getting into the mortgage market, funds designed to help people who can actually afford to be a homeowner but do not fit into the new QM/ATR Box. Products like stated income for self employed borrowers, 12month bank statement programs, stuff like that… These are the loans that make sense in certain cases, we need these, and I am sure they will come with a bit of an interest rate and fee premium but that has to be expected on a loan that is not being subsidized by the government.
Capitalism and free market is the answer, this will help us restore the mortgage lending industry and you better believe that as soon as these new programs hit the shelves I will be blogging!!! Share away!
R.I.P. 97% Loan to Value: I can’t believe what I just read, I mean all of these new loan programs coming out and the market heading in the right direction and now this? I now know of companies offering Stated Income loans and companies that will offer loans the next day after your bankruptcy or foreclosure but the last person on the planet I thought would pull back would be Fannie Mae. Over the past couple years, I have seen the MI companies (mortgage insurance companies) get more aggressive with their guidelines allowing more and more homeowners to qualify for mortgage loans. I mean, the market has seen a somewhat stabilizing trend so it’s expected that more players are going to get in the game and offer some new loan products but Fannie Mae must have had enough?
The 97% Loan To Value maximum that Fannie Mae allowed on their conventional loans allowed me to compete with FHA, whose Mortgage Insurance Factors are through the roof by the way, but this 97% program is going to be gone soon. My suggestion is that if you are going to do this program you better do it really quick. Fannie Mae is implementing the changes to their automated systems effective the weekend of November 16th 2013 however the max loan to value of 97% will be disappearing on January 10th of 2014. I guess this gives us a little time to prepare?
Well, here’s the deal… It’s not the end of the world, it really is not. Personally as a Phoenix Loan Officer I rarely EVER offer this program… Why you may ask? Well, because I can NEVER over promise and under deliver… The fact is that unless you have stellar 740 credit, low debt to income ratios and some reserves (money after your cash to close is taken into account) you most likely will not even qualify for the 97% loan to value anyways. Usually when structuring a low down conventional mortgage I suggest to my clients that they need to have 5% down and if for some reason the stars align properly I might be able to pop them into a 97% loan to value program if they so desire it.
I guess what threw me for a loop was the fact that all of these new loan programs are evolving, and my theory is that new investors see opportunity in the stabilizing housing market and they are ready to play ball, but the biggest investor of all says no way, we are pulling back. Do they know something we don’t? Mini housing bubble again? Not too sure but it could be an accurate theory.
Really at this point, I am not really going to lose any sleep and neither should you… If you look at the average mortgage insurance premium on the 97% loan to value program totals to be about 1.15% annually based on the loan amount, for a $300k loan that is a payment monthly of $287.50/mo. In comparison to the .67% average for a 95% loan at $167.50/mo it usually makes a lot more financial sense to take the 95% route anyway.
I’m done rambling for the day, that’s all I got… Don’t lose sleep and if you want to work with local mortgage professional you know where to find me!
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