Mortgages are cheap, Time to Refinance!

NEW YORK (CNNMoney)

American homeowners are quickly fulfilling their New Year'sResolution to refinance their mortgages.

Mortgage applications rose nearly 50% last week, the strongest weekly gain since November 2008, according to the Mortgage Bankers Association, which tracks housing market data.

It's a closely watched metric because mortgageapplications are a key indicator of not just the real estate market, but the overall U.S. economy, says Diane Swonk, chief economist at Mesirow Financial.

Related: Everybody is moving to Oregon

"We're looking for housing to come back this year," Swonk says. "There's no other single change in the economy other than home buying that has such a large effect on spending."

Mortgage rates are at their lowest levels since May 2013. The rate on a 30-year fixed rate mortgage was down to 3.86% in December from 4% in November, and 4.46% a year ago, according to Freddie Mac.

Many homeowners rushed to refinance at these rates. People refinancing their mortgages made up over two-thirds of last week's application surge, MBA reported.

Rates are dropping because of low inflation, a strong U.S. dollar and lackluster housing demand over the holidays, Swonk says.

Related: FHA to lower cost of mortgage insurance

The low rates are also creating more jobs. Home-building employment increased 7% in December from a year ago. Home-building employment peaked last year in September at 677,500 jobs, the highest number since the recession ended, according to the Federal Reserve Bank of St. Louis. Still, home construction jobs are far below their 2006 high.

Looking ahead, Swonk sees 2015 as the year that many Millennials, long stuck with poor job prospects, will become home buyers.

"We are at a tipping point where we're finally going to see some of those Millennials leave their parents' homes, grow some wings and leave the nest," Swonk says. "They'll either rent or buy, but the arbitrage is really to buy."

Former NFL Player Pleads Not Guilty to Mortgage Fraud

A former NFL player and his mother have pleaded not guilty to participating in a $690,000 mortgage scam.

Prosecutors say that Irving Fryar, 51, and his 80-year-old mother, Allene McGhee, submitted fraudulent information to lenders in order to get five loans on McGhee’s home within a six-day period, according to the New York Daily News.

Fryar, who is currently the pastor of a church he founded in New Jersey, was a wide receiver who played for four NFL teams between 1984 and 2000. He also served as a high school football coach until his indictment last year.

Prosecutors allege that Fryar received or spent more than $200,000 of the loan money they say he gained from the fraudulent mortgages, but Fryar’s attorneys say he and his mother were the victims of a mortgage scam rather than its architects, the Daily News reported.

Mark Fury, attorney for McGhee, said Fryar and McGhee were implicated by a man named William Barksdale, who pleaded guilty in 2011 to wire fraud. As part of the plea deal, Barksdale agreed to cooperate with authorities. Fury said that Barksdale was untruthful when he implicated Fryar and McGhee, according to the Daily News.

“The feds leaned on this person to find a name or two or three or 10,” Fury said.

Fryar has rejected a plea deal that would have landed him in prison for five years. McGhee has rejected a similar deal that called for three years in prison, the Daily News reported.

FHFA Changes Their Minds and Delays the Fee Increases!

FHFA delays Fannie, Freddie fee increases

January 8, 2014, 11:19 AM

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The new regulatory chief for Fannie Mae FNMA  and Freddie Mac FMCC has directed the mortgage buyers to delay raising certain fees, explaining that he wants to investigate whether the increases would hurt mortgage-credit access, officials said Wednesday.

The move is Mel Watt’s first action as director of the Federal Housing Finance Agency, and follows up on his recent announcement that he planned to delay the fees.

Analysts say Watt, as head of the FHFA, can be expected to support policies that expand homeownership while Congress continues its protracted work on housing-finance-reform legislation. At least one analyst opined that Watt could usher in arevival of 40-year mortgages, and other products crafted to support affordability.

Watt was the administration’s choice to replace Ed DeMarco, who was liked by Republicans for his refusal to direct Fannie and Freddie to allow principal reductions for troubled mortgages.

Interest Rate Are Going Up, Act Now!

Mortgage Rates to Take Big Hit from Fee Hikes

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Fannie Mae and Freddie Mac ("the GSEs") Tuesday released new pricing adjustments that dramatically raise costs for borrowers in 2014.  The new fees are mandated by the Federal Housing Finance Agency (FHFA) as a part of their strategic plan to encourage private capital to reenter the mortgage market, which is currently dominated by the GSEs.
There are two parts to the fee increase.  The first of which has already been seen on three occasions (2 from the FHFA and 1 to pay for the payroll tax extension) and involves a permanent increase of 0.1% to the RATE (on average) for all new loans.  This is a known quantity for the mortgage market and similar increases are mandated every year until 2021.  No surprises there.
The added layer of complexity comes from the upfront portion of the fee increase.  While the ongoing fees don't vary based on strength of a loan file (borrower credit and loan details), the upfront fees, known as "Loan Level Price Adjustments" (LLPAs) can vary greatly.
In the original announcement about the fee increases, the FHFA said that LLPAs would be changing to more appropriately align costs with credit risk, but that did little to prepare mortgage market participants for the magnitude of the changes.  What sounded like a bit of shuffling was revealed yesterday to be an across the board hike for anyone borrowing more than 60% of their home's value. In some cases, these hikes are severe.  The blanket base increase of 0.25% will end up netting out to 0.00% in many cases due to the removal of 0.25% "Adverse Market Delivery Charge" (AMDC) in all states except CT, FL, NY, and NJ.
Current LLPAs range from a credit (meaning some borrowers receive a cost discount) of .25% of the loan amount (or $250 on a $100,000 loan) to a penalty of 3.25% (a hefty $3250 cost for a $100,000 loan) for borrowers with lower credit scores and less equity.  Substantial additional charges are incurred for cash out refinances, investment properties, and loans with subordinate financing.
Borrowers with credit scores over 740 currently receive Fannie Mae's lowest LLPA's, but the new standards raise the score required for best pricing to 800, significantly above any prior industry requirements. By comparison, in 2007 a 680 score qualified buyers for best loan pricing.
As shown on the table below, depending on the combination of credit score and LTV (the ratio of a borrower's loan to the value of the home or the purchase price in the case of a purchase), some borrowers will face well over a point in additional fees above and beyond the existing LLPAs.  Interestingly, costs for lower credit scored borrowers were not increased, while those in the 680-759 score range (the majority of borrowers) face the stiffest hikes.  A home buyer with a 720-739 score who borrows $200,000 and puts down 10% faces a whopping 1.25% increase ($2500), and that's just in the up-front fees.  The 0.10% increase in the ongoing fee makes for an additional fee over the life of that loan of more than $4000.
Net Change in LLPAs (no AMDC)  in 2014  (FL, CT, NY, NJ add 0.25%)

FICO	LTV	60.01 – 70.00%	70.01 – 75.00%	75.01 – 80.00%	80.01 – 85.00%	85.01 – 90.00%	90.01 – 95.00%	95.01 – 97.00%
800+		0.00%	0.00%	0.00%	0.25%	0.25%	0.25%	0.00%
780-799	0.00%	0.00%	0.00%	0.00%	0.25%	0.25%	0.25%	0.00%
760-779	0.00%	0.00%	0.00%	0.25%	0.50%	0.50%	0.50%	0.00%
740-759	0.00%	0.00%	0.25%	0.25%	1.00%	1.00%	1.00%	0.00%
720-739	0.00%	0.00%	0.50%	0.50%	0.75%	1.25%	1.25%	0.00%
700-719	0.00%	0.00%	0.50%	0.50%	0.75%	1.00%	1.00%	0.00%
680-699	0.00%	0.00%	0.75%	0.50%	0.75%	1.00%	1.00%	0.00%
660-679	0.00%	0.00%	0.00%	0.00%	0.25%	0.25%	0.25%	0.00%
640-659	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%

The fee increases to borrowers come even as the Consumer Protection Finance Bureau enacts new limits on the costs borrowers can be charged to obtain loans.  The limits, however, do not include fees charged by FHFA.
In addition to the hikes on Conforming Loans, FHA recently increased their upfront and monthly insurance premiums and made them effective for the life of the loan (drastically impacting borrowers' lifetime costs), stating an intent to effectively drive loans to the private sector.  While some credit unions, banks, and other private lending institutions will certainly expand their private lending portfolios, they're not waiting in the wings with rates and fees even remotely close to current market levels.
The widespread fee hikes come as the Federal Reserve continues to purchase $40 Billion per month in Mortgage Backed Securities to boost the economy by supporting the recovering housing market.  But the Fed is widely expected to begin reducing these purchases soon.  Ironically, the time frame in which most economists see this happening is the same as the time frame in which the mortgage fee hikes will be rolled out.
This is a potentially debilitating one-two punch for many borrowers and it raises serious questions as to the unintended consequences of these ambitious fee hikes.  The changes are set to go into effect for loans sold to the agencies beginning in April 2014.  That means lender rate sheets may start adjusting for the new fees shortly into the new year.
The last time the ongoing fee was increased, some lenders adjusted rate sheets literally overnight and with little rhyme or reason as to the timing.  The only known is that virtually all borrowers will soon face higher costs and rates, and a fragile housing recovery will deal with yet another major challenge.

Obama's new FHA plan allows you to Refinance for Less!

President Obama has introduced a new refinance plan for homeowner's who hold FHA loans that were originated prior to June 1, 2009. Please see the link below for more details. This is the best of both worlds for any FHA loan holders. The monthly mortgage insurance is lowered from today's rate of 1.15% to the old factor you are currently paying of .55%, so the lower rate will not be washed away by increased monthly mortgage insurance like it had been. Also, you do not have to pay FHA a large up front amount, starting April 1, new FHA loans will have a fee of 1.75% of the loan amount, see blog below, but currently FHA loan holders whose loans originated prior to June 1, 2009 can refinance for a fee of .1% to FHA, on a $200,000 loan this is a savings of $3300. FHA streamline refinances do not need an appraisal and do not have any lender fees. Call or email if you are interested. Or apply online at http://jimsteel.marketplacehome.com

Here is the article....

NEW YORK (CNNMoney) -- Borrowers with some federally insured mortgages will be able to refinance into lower interest rate loans more easily and cheaply under a plan unveiled Tuesday by the Obama administration.

At a news conference, President Obama announced that the Federal Housing Administration will cut upfront fees for refinanced loans it already insures.

The new fees are for borrowers whose FHA loans were issued before June 1, 2009. An estimated 2 to 3 million borrowers could take advantage of the savings, which could reduce mortgage payments for the typical FHA borrower by about a thousand dollars a year, according to the administration.

"It's like another tax cut in people's pockets," said President Obama.

Borrowers who refinance their existing FHA loans will pay an upfront insurance premium equal to 0.1%, the lowest allowable rate, of the mortgage amount -- $100 for a $100,000 loan -- plus an annual fee of 0.55%.

The new refinancing fees contrast sharply with the cost of obtaining a FHA loan, according to Jaret Seiberg, an analyst with the Washington Research Group. A borrower making a 3.5% down payment on a home purchase as of April 1 will pay a 1.75% upfront fee and a 1.25% annual fee. Those purchase fees were raised barely a week ago to improve the FHA's capital reserve.

Has Obama's housing policy failed?

Still, lowering refinancing fees "should be broadly positive for housing and the economy by reducing foreclosures and freeing up income for consumers to spend on other goods and services," Seiberg said.

The new policy will also make it easier for the banks to refinance loans because it directs the FHA not to count the loans toward the lender's "compare ratio." That calculates the performance of loans issued by the lenders and compares it to the performance of other lenders.

Some lenders have not wanted to refinance FHA loans because many of them were made during years of high default rates, according to Seiberg.

Knowing that the FHA will not hold refinanced loans against them should they fail to perform could make lenders more willing to refinance loans for borrowers at a higher credit risk, according to Jay Brinkmann, chief economist for the Mortgage Bankers Association.

FHA TO IMPOSE NEW FEES APRIL 1!

Beginning April 1, 2012, HUD is increasing its up-front mortgage insurance premium by .75%. Currently the fee is 1% and for any case numbers issued after April 1, 2012, the new fee will be 1.75%. See story from HUD below. Please call or email me with questions or how this may effect you.

HUD No. 12-037 HUD Public Affairs (202) 708-0685

FOR RELEASE Monday February 27, 2012

FHA TAKES ADDITIONAL STEPS TO BOLSTER CAPITAL RESERVES
New premium structure will help protect FHA’s MMI fund

WASHINGTON – As part of ongoing efforts to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante today announced a new premium structure for FHA-insured single family mortgage loans. FHA will increase its annual mortgage insurance premium (MIP) by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount. Upfront premiums (UFMIP) will also increase by 0.75 percent.

These premium changes will impact new loans insured by FHA beginning in April and June of 2012. Details will soon be published in a Mortgagee Letter to FHA-approved lenders.

“After careful analysis of the market and the health of the MMI fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market,” said Galante. “These modest increases are one of several measures we are taking towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain a valuable option for low- to moderate-income borrowers.”

The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent. This change is effective for case numbers assigned on or after April 1, 2012. FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500. This change is effective for case numbers assigned on or afterJune 1, 2012.

The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount. This increase applies regardless of the amortization term or LTV ratio. FHA will continue to permit financing of this charge into the mortgage. This change is effective for case numbers assigned on or after April 1, 2012.

FHA estimates that the increase to the upfront premium will cost new borrowers an average of approximately $5 more per month. These marginal increases are affordable for nearly all homebuyers who would qualify for a new mortgage loan. Borrowers already in an FHA-insured mortgage, Home Equity Conversion Mortgage (HECM), and special loan programs outlined in FHA’s forthcoming Mortgagee Letter will not be impacted by the pricing changes announced today.

Taken together, these premium changes will enable FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance (MMI) Fund, contributing more than $1 billion to the Fund, based on current volume projections through Fiscal Year 2013.

Save Money On Your Monthly Mortgage For Free!

No gimmicks! If you have an FHA loan and took this loan out over the last 18 months, you are a very good candidate, to take advantage of FHA's Streamline Refinance program. Under this program, you are able to refinance without having to get an appraisal, and in most cases we do not need to collect any income documentation, making this a true streamline refinance. In many instances you are able to refinance without any costs as they are picked up by your lender. If you would like more information on this program or the other great programs available for purchasing or refinancing a home, visit my website at http://jimsteel.marketplacehome.com, send me an email at jsteel@marketplacehome.com or call 763-432-4655.