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Update 8/15/08
Hello Friends—
It has been two months since my last ‘E-date’, and once
again, what a two months they have been! Last week the
President signed what is most likely the most significant
piece of legislation ever enacted pertaining to the Mortgage
and Housing industry. Weighing in at several inches thick,
and a whopping 3094 ‘Sections’ long, HR Bill 3221 is not a
casual read! Two days ago I sat in on a ‘Web-inar’
sponsored by the CMPS Institute, during which they distilled
the more key and pertinent items in the Bill to our Industry
to six pages of single spaced outline. I am going to
distill that even more for you here, enough I trust to give
you a taste of the meat of the matter. For more information
on the bill, please feel free to call me.
I am going to break this down into 8 main sections. Here we
go.
I.
Fannie Mae and Freddie Mac—the
two largest purchasers of Mortgage backed Securities, like
all Mortgage related ‘players’ have be hit by the high
foreclosure percentages. A new Regulatory Agency has been
formed called the Federal Housing Finance Agency (FHFA).
This is not a government agency, but funded by fees assessed
Fannie and Freddie, so is much more independent and
unbiased. Has access to the Treasury—i.e. Unlimited
government line of credit for 18 mos. to be used in
emergency situations only.
a.
A side note—The appetite continues to sour for Jumbo loans
(i.e. Chase just pulled out of the market). Over the next
year, look to your Broker (us!) to help you with ‘options’
to Jumbo $$...
II Loan Limits—Beginning Jan. 2009,
Conventional Conforming loan limits are increased in
Maryland to $533,000. Limits adjusted again in 2010 based
on FHFA home price index.
II.
HOPE for homeowners—new FHA ‘bail-out’
program—Key
components are:
a.
Current lender to write down the loan balance to 90% of
current appraised value.
b.
Borrowers to share in future appreciation with government on
a sliding scale yrs. 1-5—
i.
100% of equity appreciation if borrower sells or refinances
within 1 yr
ii.
90% in yr. 2
iii.
80% in yr. 3
iv.
70% in yr. 4
v.
60% in yr. 5
vi.
50% anytime after first 5 yrs.
c.
must be Primary Residence
d.
Current loan must have been originated on or before Jan. 1,
2008
e.
Borrower must be unable to afford current payments i.e. has
not intentionally defaulted to qualify for new loan and
cannot have made any false statements on loan application
f.
Must have a DTI (Debt to Income) ratio of over 31%
g.
Fixed rate loan
h.
Up front MI of 3% and monthly of 1.5%
i.
No second liens for 5 yrs.
Note: There may be
situations where this is not the best option for your
client. For options to this program, call me.
IV Loan
Modifications—Mortgage Servicers have a fiduciary
responsibility with ALL Investors to modify loans if:
a.
Default has occurred or is reasonably foreseeable
b.
Property is Owner Occupied
c.
Net present value of anticipated recovery through
modification or work-out plan exceeds the net recovery
expected through foreclosure
V.
New FHA Guidelines—
a.
Loan Limits--Same limits per County
as ‘Conforming Jumbo’. Baltimore, Baltimore City, Harford,
Anne Arundel, Howard and Carroll Countys $560,000 (a note
of caution—not all Lenders offer this. Check with me first)
b.
Min. required Investment 3.5%--(up
from 3%). This can be in the form of a Gift, or a
secured 2nd up to CLTV of 100%.
c.
MIP Increase of .75% (?) on UPFRONT MI. (we
are looking for clarification on this and will keep you
updated)
d.
Effective Oct. 1, cannot come from seller, or any DPA
program i.e. HART, New Life, AmeriDream etc. (pending
legislation to reverse this, so check with me)
e.
Expansion of the FHA Reverse Mortgage Program (which we now
offer)
f.
One year moratorium on FHA ‘Risk-Based Pricing’ effective
Oct. 1, 2008.
VI.
Down Payment Assistance Programs (DPA)—Unless
reversed by current pending legislation, Effective Oct. 1st,
2008 these programs will no longer be allowed.
VII.
National Mortgage Licensing system for
Bankers and Brokers--
A National Registry for ALL loan originators with I.D.
numbers so loans can be tracked back to the originator.
More stringent background checks along with enhanced
continuing education are mandated.
VIII.
Tax Incentives—First Time Homebuyer Tax
Credit of up to 10% of the purchase price—not to exceed
$7,500. ‘Refundable’ credit means that, if they qualified
for the max, and the actual tax liability was, say, $5,000
the purchaser would have the entire $5,000 liability wiped
out plus they would receive a tax credit refund of $2,500.
a.
First time Homebuyer is defined as not owning a home in 3
years.
b.
In the case of two or more individuals who are not married,
the total tax credit cannot exceed $7,500.
c.
Income Limits—Phase out if $75,000 single, $150,000 if
married filing jointly. Completely illuminated if income is
$95,000 single or $190,000 married filing jointly.
d.
Applies to purchases made between April 9, 2008 through July
1st, 2009.
e.
Standard deduction for non-itemizers increased by up to $500
($1,000 if married, filing jointly) for property taxes.
So there you have it. First and at the front you help you
keep your edge in this uncertain marketplace.
Obviously, before you meet with a client, or when you first
do, I would recommend that you and or they speak with me to
be clear on the effects of these new laws and how they
directly effect them. These are changing times we are in.
As the Professional, you owe it to your clients to guide
them in the right direction with the latest and most
accurate information possible. If you do, you will be
remembered for life. Isn’t that what we all aspire to?
To your success!
David
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