Living In Tucson Blog

Get Your Government Hands Off My Mortgage Industry!

Bank regulators and Congress are looking to make more changes to guidelines for conventional and FHA mortgages. Congress would like to privatize Fannie Mae and Freddie Mac. The timing of these changes is challenging, considering the struggling housing market and anemic economic recovery. Among the proposed changes being proposed are increasing the minimum down payment for conventional loans to 20%, setting higher income and credit qualifications and reducing the maximum loan limits. FHA proposals include increasing the minimum down payment to 5%. These changes will certainly eliminate potential buyers, causing the housing market to take a longer time to recover.

Short Sales Aren’t Alway Short!

In my mortgage practice, a large percentage of my deals are “short sales” or bank owned properties. Recently, I had a customer that offered to buy a home with a short sale. The listing agent set the sales price, the buyers agreed and  after several weeks, the bank declined the offer. The house will be foreclosed instead. It is likely that another buyer could buy this house on the steps of the courthouse for a lower price than the short sale offer than my customer had offered on the home. I guess the bank decided they could make more money foreclosing the property than accepting the short sale offer. Why else would they turn down a qualified buyer. In fact, he decided to pay cash for the house and the bank still turned him down. Another factor that makes short sales so tough to execute is junior liens. In other words, the current owner of the house has a first and second mortgage and both lien holders have to agree on the sale. This dynamic usually means the junior lien holder (second mortgage or HELOC), is taking a beating on the balances owed on their loans.

I had another interesting deal that closed a few weeks ago. The buyer was buying a short sale and it took months for the first and second lien holder to agree on the terms of the sale. Once it was finally approved, we put the loan in process. The listing agent requested that we close the loan within three weeks of the short sale approval. During those three weeks, we find out that Fannie Mae was going to auction off the house in a foreclosure acout a week before we were scheduled to close. We were able to stave of the foreclosure with a lot of persuasion from the REALTORs involved with the sale and the buyer was able to get the house. The first mortgage lender probably should not have approved the short sale if they knew the investor (Fannie Mae) had begun foreclosure proceeding.

Foreclosures are much easier to buy. The lenders are offering terms to sell the homes. For example, Fannie Mae (FNMA) has a program known as HomePath. They typically will offer 3.5% of the sales price as a concession to the buyer for a primary residence or a second home. The offer 2% for investors. The program does not require an appraisal and there is no mnortgage insurance required if you have a down payment below 20%. A million foreclosures are anticipated again this year. Half of the homes in Arizona have negative equity and home values continue to go south. Hang in there as time heals all wounds. The first quarter of 2011 has been robust for home sales in Tucson.

Tucson Is #4!

According to Inman News, Tucson is considered a top five best markets for investors thanks to the declining housing prices. Of the top ten, only two cities were out west (Tucson and Salt Lake City). The report looks at economic data, housing and demographics including the median price of homes, loan data and foreclosure sales.

If you have any questions about real estate in Arizona, contact David Wolsky at 520-275-2536 or david@davidwolsky.com.

Total applications for FHA insured mortgages are down 30% through March in 2011. Most FHA buyers choose the minimum down payment of 3.5% of the sales price for a purchase transaction. Effective Monday, April 18th, changes to FHA loans were implemented. One big change is a higher monthly mortgage insurance premium. Borrowers will now be paying 25 basis points more each month. This is the second increase in the past six month. The new premium is 1.15% up from .90%. For example, the new premium for a $150,000 mortgage is $1725 annually charged in monthly premiums of $143.75. The previous premium was $1350 or $112.50 per month which is an increase of $31.25 per month! There were no changes to the  1% premium up front premium that is financed in the mortgage. The government insures FHA mortgages with these premiums. The higher premiums are squeezing some buyers out of the housing market. Borrowers with a 720 credit score (In Arizona) can still obtain a conventional mortgage with a 5% down payment and private mortgage insurance.

PHH Home Loans and Coldwell Banker Home Loans has announced new minimum credit scores guidelines for FHA loans. Applications are now being accepted with credit scores as low as 500 with a 10% down payment, assets of at least two monthly house payments verified in addition to the 10% down payment and debt ratios of 31% of the gross income for the house payment and 36% for all debt including the new house payment. The minimum credit score for a 3.5% down payment, is now 600 (down from 620). These terms can vary lender to lender. Other mortgage banks use 580, 620 or 640 for their minimum scores.

What’s next? Congress has passed a bill to eliminate FHA! I doubt that it will ever become law. It is more likely that Fannie Mae and Freddie Mac will be spun off from the government. Personally, I think these proposed changes will devastate a very shaky housing market. FHA loans already account for a major percentage of all home loans. Spinning of Fannie and Freddie would result in much tighter underwriting guidelines including 20 to 25% minimum down payments. You can expect FHA to raise the minimum down payment to 5%.

I’m David Wolsky and I can answer any questions you may have regarding various loan programs available at PHH Home Loans and Coldwell Banker Home Loans. The email address is david@davidwolsky.com or call (520) 275-2536.

With declining home values, rising interest rates and FHA, Fannie Mae and Freddie Mac changes around the corner, now is the time to take advantage of the Tucson housing market and buy that house! Even waiting 60 days could cost you thousands.

The Obama administration released their “white paper” this past week on the housing market. The impact of their proposals could launch major changes in the mortgage industry. FHA has already announced .25% higher mortgage insurance fees effective on April 18, 2010. You can expect monthly payments to rise $30 per month for a $150,000 mortgage. It is my understanding that the government would like to reduce FHA’s exposure from its 30% market share of mortgages down to 10%. It is unclear where homebuyers can turn to for loan programs that will be similar to today’s FHA mortgages. Tomorrow’s FHA home loans will consider raising the minimum down payment which are currently 3.5%. As you can imagine, most people are already strapped for down payment money. The report also suggested that higher down payments should also be considered for conventional loans. A 10% down payment was recommended. The current terms allow a 3% to 5% down payment depending on the borrower’s qualifications. Other changes include reducing the maximum loan amounts under FHA and conventional mortgages in the so-called “high cost areas”. Those changes do not appear to impact loan limits in Tucson or Phoenix. Fannie and Freddie have raised their fees charged to lenders to guarantee pools if their mortgages for resale to bond investors. Lenders will pass along those charges to consumers. The hits just keep on coming! Fannie and Freddie recently began charging additional fees for borrowers with a credit score below 740 and down payments less than 25%. Those charges will translate to slightly higher rates or points for consumers.

If you are on the fence to buy that house, don’t wait! Call me, David Wolsky for mortgage advice. I can be reached at (520) 275-2536 or at david@davidwolsky.com. My company, PHH Home Loans is offering a $350 lender credit towards are closing costs which are already amongst the lowest in the business.

The President signed legislation to extend loan limits for the 2011 fiscal year. As a result,  FHA loans above $271,050 will continue in 2011. The FHA loan limit in Pima County is $316,250 for a single family dwelling.  However, a few select counties will have a limitation on the maximum loan amount available.

As for conforming loans, the limit is still $417,000 for most of the country. In higher cost areas such as Califonia, there are Conforming Plus loans with higher loan limits up to $729,750.

FHA has some good news and bad news for borrowers. The good news is lower UFMIP – Up Front Mortgage Insurance Premium. The new rate is 1% down from 2.25%. The bad news is the MIP – mortgage insurance premiums are now .9% (per year) up from .55% for loans of 95% to 96.5% of the sales price. The MIP is .85% for loans with a down payment greater than 5%. This change represents about $30 more per month for a $150,000 loan amount. The hits just keep on coming!

Call David Wolsky at 520-275-2536 to help you through the mortgage maze!

Wow, the weeks have blown by since my last post. Lots of things have been happening in our industry and for me personally.  My family and  I spent the first half of July in South America and had an amazing time. We were there on a personal trip to visit our son Adam who has been living in Uruguay since January. We spent time in Buenos Aires, Iguazu Falls (Click here to check out my youtube video!) and Montevideo. It was a great trip and we had the opportunity to meet several cousins from my father’s side of the family for the first time! My Great Uncle Isidor had immigrated to Argentina in the early part of the 20th century and we spent time with his daughter and grandchildren. (Uncle Isidor pased away in 1981.)

Back in Tucson, my mortgage license was approved. All originators (except for the originators in those big banks like Wells Fargo, Chase and Bank of America) needed to be fully licensed in Arizona on July 1st to continue taking loan applications. National licensing is also required for originators including a background check. Several thousand loan originators have left the business because of the licensing requirement and thousands have been forced to the sidelines while going through the licensing process.

FHA announced some good news and some bad news. The upfront mortgage insurance premium has been reduced from 2.25% to 1%! The bad news it the monthly premium has rise to .9% from .55% for most transactions. Please get off the fence if you are thinking about purchasing a home with a FHA loan! You will save about $40 per month for a $200,000 loan. The implementation date is scheduled to be September 7th, but I have heard that it may get postponed until October 4th.

In other mortgage news, interest rates have been continuing to drop to record low levels in Freddie Mac’s weekly surveys. Freddie Mac has been reporting the weekly average of mortgage rates for over forty years. The phones have been busy with refinance and purchase applications. Unfortunately, not every applicant will qualify these days. The most common reasons for denials include credit issues, lack of down payments or lack of  equity for refinances, inability to verify income or assets and insufficient work history. Don’t despair! We are getting our qualified borrowers approved! I welcome your inquires and referrals.

For further information, contact David Wolsky at david@davidwolsky.com or call 520-275-2536. I have over 16 years of experience!

Like the banking sector, FHA must maintain capital ratios and with the increased popularity of FHA in the absence of other alternative products, they now insure about 30% of all new loans. FHA is nearing the limits of loans they can make based on their capital ratio. In an effort to fix this problem, FHA will be raising their upfront mortgage insurance premium to 2.25% from 1.75%. Additionally, they have requested approval for an increase in the monthly fee as well. They are maintaining the 3.5% down payment requirement unless the credit score is under 580 in which case a 10% or greater down payment is required.

To get a free pre-approval for a FHA, VA or conventional loan, call David Wolsky at 520-275-2536 or email me at david@davidwolsky.com.