Legislation

New Rules for Mortgage Transfers – Are You Confused Yet

With all the media buzz about Fannie Mae and Freddie Mac reform on Capitol Hill today, you may have missed an important press release from the Federal Reserve that will affect all homeowners with a mortgage. The press release was the issuance of a final rule amending Regulation Z about the notification of mortgage loan sales or transfers.

What exactly is Regulation Z?

Regulation Z, also known as the Truth in Lending, seeks to promote the informed use of consumer credit by requiring disclosures about its costs and terms. It seems that the government solution to every issue is the big “D” word. That’s right, more disclosures.

Stop! Do you know who owns your mortgage loan right now?

Unlike the Servicing Disclosure Statement that discloses who will be collecting your payments, the new rules for mortgage transfers will help disclose the legal owners of your mortgage.

The Federal Reserve is determined to make sure that every homeowner who has a home loan (i.e. first mortgage, home equity loans and/or home equity lines of credit) on their primary residence to receive proper notification. Within 30 days of the sale or transference of your home loan, the new company who has acquired your home loan must disclose…

• New Owner’s Identity, Address and Telephone Number
• Date the Loan was Transferred
• Contact Information of the Agent Authorized to Act on Behalf of the Owner

Why would you want to know who owns your mortgage?

The Federal Reserve believes it would be in the your best interest to know the actual owners of your home loan who can handle certain issues, including payment disputes and loan modifications.

Sounds great in theory. Unfortunately, the owner of the mortgage may or may not be the servicer of the home loan. A Chinese company, for instance, may own your mortgage but your loan payments are paid to Chase.

Who do you call when you have issues or questions about your mortgage?

If you’re like the vast majority of homeowners you only deal with your loan servicer. At the end of the day, you as the homeowner simply want to know to whom do you send your payment.

Another discrepancy with the new disclosure for mortgage transfer is the fact that it DOES NOT apply to loans on second homes, vacation homes, investment properties nor business properties.

Regardless of who owns or services your home loan, the terms of the recorded note cannot change. If you would like the personal touch through the home buying process and mounds of new disclosures, contact us.

Negative Home Equity? Learn How to Refinance Now!

The Federal Housing Finance Agency has extended the government’s Home Affordable Refinance Program by 12 months.

HARP’s new end date is June 30, 2011.

Originally known as Making Home Affordable, HARP aims to help homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.

There are 4 basic HARP criteria every borrower must meet:

1. The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
2. Your home must be a 1- to 4-unit property
3. You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
4. Your first mortgage balance must be 125% or less of your home’s market value

If you’re not sure whether Fannie Mae or Freddie Mac back your mortgage, you can look it up. Fannie’s website is http://www.fanniemae.com/loanlookup; Freddie’s is http://freddiemac.com/mymortgage.  If you don’t locate your loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.

For homeowners that meet HARP’s criteria, there are some underwriting details of which to be aware.

First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either — regardless of your new loan-to-value.

Second, all HARP refinances require income verification. It doesn’t matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.

And, lastly, second (and third) mortgages may not be “rolled in” to a new first mortgage loan balance. Junior lien holders must agree to remain in a junior lien position, regardless of combined loan-to-value.

There is a thorough HARP FAQ section on the government’s website, but it’s for general questions only. For specific Home Affordable Refinance Program information, first make sure you’re program-eligible, then pick up the phone to call your loan officer. 

HARP is complex enough that you’ll want to talk with a human before taking a proper next step.

Contact James K Barath in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

New FHA Guidelines Will Be Tougher and More Expensive

Securing an FHA mortgage is about to get more expensive.

In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.

For consumers in Northwest Indiana, the changes mean higher costs.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
2. Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent
3. Seller concessions are being limited to 3%, down from today’s allowable 6%

Furthermore, FHA has appealed Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

To read the FHA’s statement, it’s clear what the group is trying to balance.  On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.

To that end, FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.

Also in its new policies, the FHA is introducing a “termination clause”. If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.

As a result, homebuyers in Chesterton, Crown Point, Highland, Munster, Portage, Saint John, Schererville and Valparaiso should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”.  Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.

Some have other guideline overlays, too.

The FHA’s new guidelines don’t go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you’re going to need an FHA home loan in the next few months in Northwest Indiana, consider moving up your time-frame.

If nothing else, you’ll save some money at closing.

Contact Benchmark Mortgage in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

Congress Expands And Extends The Home Buyer Tax Credit

Congress both extended and expanded the First-Time Home Buyer Tax Credit program Thursday. 

The White House says the President will sign it into law today.

The up-to-$8000 tax credit’s expiration date has been pushed forward to spring, requiring homebuyers to be under contract by April 30, 2010, and to be closed by June 30, 2010.

The program’s basic eligibility requirements remain the same:

• Buyers can’t purchase the home from a parent, spouse, or child
• Buyers can’t purchase the home from an entity in which they’re a majority owner
• Buyers can’t acquire the home by gift or inheritance
• All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 

For one, the definition of “first-time home buyer” has been expanded to include most homeowners with at least 5 years in their current home.  “Move-up” buyers like these are now eligible for IRS tax credits, but with a cap at $6,500.

This means that you don’t have to be a true first-time home buyer to claim the “first-time home buyer tax credit”.

Other eligibility changes include:

• The subject property’s sales price may not exceed $800,000
• The subject property must be a primary residence
• Income thresholds raised to $125,000 for single-filers and $225,500 for joint-filer

And remember, the First-Time Home Buyer program grants a tax credit as opposed to a deduction.  This means that a tax filer would receive a cash payment of $2,000 from the U.S. Treasury if his “normal” tax liability totals $6,000 and he was eligible for all $8,000 available under the new law.

The complete list of qualifying criteria is posted on the IRS website.  Be sure to review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

It’s 5 months away.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Good or Bad – The New Good Faith Estimate

The First-Time Home Buyer Tax Credit: Use It By December 1, 2009 Or Lose It

The government’s First-Time Home Buyer Tax Credit expires December 1, 2009. 

If you expect to use the program in conjunction with a home purchase, therefore, you may want to consider yourself officially “on the clock”. 

Assuming a 60-day window between contract and closing, there are now 77 days left to find a home and go under contract for it.

The First-Time Home Buyer Tax Credit refunds up to $8,000 at Tax Time for qualified home buyers.  A few of the program’s qualification criteria include:

• Home buyer must not have owned a primary residence in the past 36 months
• The home may not be purchased from a family member
• The household adjusted gross income must be below $95,000 for single tax filers and $170,000 for joint tax filers

The tax credit itself is limited to $8,000 or 10% of the purchase price, whichever is less. 

Remember, though: The refund is a true tax credit — not a deduction.  This means that a taxpayer owing $8,000 to the IRS and claiming the $8,000 First-Time Home Buyer Tax Credit would owe the IRS nothing on April 15, 2010.

The complete list of qualifying criteria is posted on the IRS website.