Who Would Finance Mortgages If Fannie, Freddie Disbanded? – CNBC
US NewsPage 1 of 3 | Next Page
Show Entire ArticleWho Would Finance Mortgages If Fannie, Freddie Disbanded?CNBC.com | July 02, 2010 | 11:44 AM EDTBig changes are in store for the banking system should Fannie Mae and Freddie Mac be revamped or eliminated—both of which are being discussed by housing experts and government officials to deal with the distressed real estate market.
As the system works now with the two entities, Fannie [ FNM 0.3226
-0.0224 (-6.49%) ] and Freddie [ FRE 0.3661
Fannie and Freddie guarantee the mortgage payments, so that the MBS buyer, be it the Chinese government or an American pension plan, has the security of the US government behind them. Their only risk is in the interest rate.
“It helps them make deep and liquid, and it expands, dramatically, the pool of capital that’ll come in and will play and support our housing market,” said Peter Fisher, BlackRock’s managing director and co-head of fixed income.
This system worked great for years. In fact, so great that Fannie and Freddie shareholders got rich because the companies borrowed money in the markets with an implied government guarantee.
Page 1 of 3 | Next Page
Show Entire Article
On the surface ..Interestly reading .. Through the eyes of a true professional with years of experience? Down right scary!
As I’m writing this post, there are basically a handful of ways left to actually buy a home with financing.
1. Private Mgt from family or friends
2. Private investor or Portfolio lender*
3. Small or local bank or credit union
4. Large bank or financial institution
Seems like there are plenty of options right? Not so much!
Understand, other than the personal loan, small local bank or portfolio lender, these “retail suppliers” of equity/liquidity are all going back to the same wholesaler with the same guidelines and restrictions. Ok, you are all very smart. Guess who?
Yes, Uncle Sam…ok kind of, uh ?
So, obviously, they aren’t showing up to the treasury and saying hey “we gave the American people loans to buy homes, were out of money to loan can you help?”
Enters Fannie and Freddie… In my personal experience in over one hundred personal transactions in the last twelve months, 98.5 % of the people financing a home, ultimately the deal needed to meet the guidelines of of either Fannie, Freddie, or Veterans Administration guidelines.
Obviously, the company providing the loan is requiring the property meet the guidelines on the onset so they can eventually package the individual loan into a commercial mortgage bank security only to be resold to Uncle Sam!
Ok, smart people, simple math, that’s more than 90% of deals!
Don’t worry, we’ll be fine. Sure …you don’t mind if I get my helmet do you?
Hope this helps. Another “on the street translation”.
Federal Reserve Raises Key Interest Rate
The Federal Reserve raises the short term interest rate in attempt to force lenders, banks and financial institutions to use private funds!
Is this the beginning of the secondary mortgage market making a comeback?
When the Fed would eventually raise interest rates has been of great debate among economists, although most didn’t expect to see it happen this soon even on this level.
Commercial Mortgage Backed Securities (CMBS): last time we heard that term it was on the Antique Road Show!
Stay tuned!
To view the full article, please visit csmonitor.com.
As seen above, interest rates won’t last forever. Now is the time to take advantage. Please contact Sean T Shallis at The Shallis Group for a personal consultation on your buying or selling needs at 201-427-1032.
New York Tax Credit for First-Time Home Buyers
In an effort to stimulate home sales in New York, the state will offer a federal income tax credit to first-time home buyers.
This new tax incentive called the New York State Mortgage Credit Certificate (MCC) allows first-time home buyers to get a tax credit equal to 20% of their annual mortgage interest costs. A first-time home buyer could see an average savings of about $1,500. The New York State tax credit comes as an extension to the federal government’s First-Time Home Buyer Tax Credit of $8,000, which is a part of the American Recovery and Reinvestment Act of 2009 and is effective until November 30, 2009. For a limited time, some home buyers will qualify for both.
New York Governor David Paterson said, “The New York State Mortgage Credit Certificate will make it easier for first-time home buyers to buy their first home and will help stimulate the State’s economy. It also means some form of federal tax credit will be available for home buyers even after the federal government’s tax credit program expires in November.”
Who administers MCC?
The State of New York Mortgage Agency (SONYMA) will act only as the administrator of the Mortgage Credit Certificate. They are a State agency that provides affordable home ownership opportunities to low and moderate income residents. It is important to note that home buyers who receive a SONYMA mortgage are not eligible for the Mortgage Credit Certificate.
How do I apply?
Applications at participating lenders should be available as early as September. First-time home buyers may apply for the Mortgage Credit Certificate at the same time they apply for a fixed-interest rate mortgage at a participating lender. In order to qualify for the Mortgage Credit Certificate, applicants must meet SONYMA’s income limit and home purchase price requirements. For more information on qualifications and participating lenders, please visit nyhomes.org.
Between existing and new tax incentives, low mortgage rates and home prices, this could become a buyer’s paradise and finding the right real estate help is essential. Please contact Sean T Shallis at The Shallis Group for a personal consultation on your buying or selling needs at 201-427-1032.
(source: ny.gov)
Mortgage Rates Continue to Drop for July
Mortgage rates fall for the third time in four weeks.
The 30-year fixed mortgage rate fell to 5.39% last week, down from the previous week. This is the third time in the last month that rates have continued drop. With the unemployment rate reported at 9.5% for June and forecasted to be at 10.9% by the end of the year, combined with low quarterly earnings, investors are still unsure of the market and where it’s headed. The 15-year mortgage rate is holding at 4.78%. So far, the averages continue to lower even further according to bankrate.com. Compared to last year’s figures, 30-year fixed mortgage rates were at 6.48%, a difference of more than 1%.
Adjustable rates are also following suit with 5-year ARMs down to 4.82% from 4.88% and 1-year ARMs at 4.82% down from 4.94% according to Freddie Mac.
Between historically low mortgage rates and home prices, this could become a buyer’s paradise and finding the right real estate help is essential. Please contact Sean T Shallis at The Shallis Group for a personal consultation on your buying or selling needs at 201-427-1032.
(source: money.cnn.com)
Consumer Protection Rule Takes Effect July 30
New Federal Reserve regulations aimed at protecting consumers goes into effect July 30, 2009.
New regulations coming from the Federal Reserve places new requirements on lenders to provide mortgage loan applicants with initial disclosures of the estimated mortgage costs within the first three business days of a loan application. If a lender fails to provide an applicant with this information, an applicant has the right to cancel the process. The lender also cannot collect any of the major out-of-pocket fees until the estimated mortgage costs have been disclosed. In addition, until an applicant receives the truth-in-lending disclosures and an annual percentage rate (APR) calculation, there will be no out-of-pocket costs to the applicant. Currently lenders ask for certain fees up-front such as appraisal costs, which could add up to hundreds of dollars to the applicant.
Mandatory Waiting Periods
Loans will also have a mandatory seven day waiting period in which the applicant has the right to terminate the agreement. Another significant change starting July 30 is that if the APR increases by more than 0.125 percent from the initial truth-in-lending disclosure, the lender is now required to re-disclose or provide the applicant with a corrected truth-in-lending disclosure of which the applicant has an additional seven business days to consider the new loan arrangements. The new required waiting periods will have an effect on the timing and possible delay of a settlement.
Appraisal Changes
Another added regulation starting July 30 will require lenders to send a copy of the real estate appraisal to the applicant three business days before the loan is scheduled to close. However, if an appraiser is backlogged and cannot provide the lender with the appraisal report in a timely manner, the closing of the loan is sure to be delayed.
These new regulations have been put in place by the Fed in an effort to allow consumers more access to the financial details of the loan and more time to consider if this important financial decision is right for them. If you need help navigating through this process or for more information on real estate and a personal consultation, please contact Sean T Shallis at The Shallis Group at 201-427-1032.
FICO Score: Improve Your Mortgage Interest Rate
Your FICO credit score is one of the most integral factors in determining what interest rate you qualify for. A FICO score is a statistical numeric score developed by the Fair Isaac Corporation based on a consumer’s credit history such as outstanding debt, timeliness of debt payments and other factors. The three credit reporting agencies used in order to see an individual’s credit history are Experian, Equifax and Trans Union. Lenders examine and utilize these scores in order to determine a person’s risk factor in repaying the debt.
How to find your score:
Experian, Equifax and Trans Union are required to provide one free credit report a year if requested. However, these reports give you an individual credit history but not your FICO credit score. If any misinformation is shown on any of the three reports, there is a dispute section provided in order to resolve the discrepancy. FICO scores can be purchased from Fair Isaac or other various credit agencies. Credit scores generally fall in the range of 350-800+ with 350 on the poor or low end and 800+ excellent or the highest rating.
How to improve your credit score:
The first step in taking charge and improving your credit score is to analyze your three credit reports in order to ensure an accurate credit history. Many individuals find small discrepancies that can make an impact on their score. Each report will provide a dispute section in which the discrepancy will be re-evaluated and changed if necessary. You will be notified by the agency of their decision to alter the disputed information or retain it on your report.
If your credit report is accurate and your credit rating could use improvement, here are some tips on improving your score:
- Be sure to make loan, credit and debt payments on time.
- Limit taking on new debt such as credit cards. Even if a credit card balance is at zero, credit reporting agencies still view it as potential debt.
- If you are having difficulty in making payments on time, call your creditor to make alternative payment arrangements. Do not ignore your bills since lenders will take action on your account regardless of your participation.
- Keep your debt low. Mortgage lenders will look at your debt to income ratio when considering a loan.
- Keep a low balance on credit cards. Even if you have a high credit limit, credit scores will take into consideration how much of a balance is being carried month to month.
- Be sure to limit the number of credit applications.
Building a good credit history takes time, diligence and awareness but the payoff could make a significant difference in your mortgage or car payment. Please visit myfico.com for more tips on improving your credit score.
Please contact Sean T Shallis at The Shallis Group for a personal consultation on your individual situation at 201-427-1032.
FHA Condo Approval Process–Guideline Changes and How They Affect Your Purchase
Developers of condo projects and existing condo owners who want to get approved for FHA financing will be facing a challenge after October 1st 2009! Interestingly enough, we are already starting to see the effects of these changes. The details are outlined in the Mortgagee Letter 2009-19 that was issued on June 12th by HUD. In this latest Mortgagee Letter, FHA is announcing dramatic changes to their Condo Approval Process and the elimination of the Spot Approval Process. While these changes reduce the documentation and requirements for Full Condo Approval, it will place more work and responsibility on the lenders. So what will it take to get FHA approval?
Here are the more important questions:
1. Are you thinking of selling your condo in the next 90 days?
2. Does my unit and or building qualify according to the new guidelines?
3. If my property doesn’t qualify, do I still have time to sell and close with a FHA Spot Loan?
If these questions are raising concerns for your personal situation, call me immediately for a personal and confidential conversation. My private and direct line is 201-427-1032. We are here to help you!
Guidelines:
The Lender will have 2 options:
- HUD Review and Approval Process (HRAP)
- Direct Endorsement Lender Review and Approval Process (DELRAP), outlined in this Mortgagee Letter. This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects.
The processing options stated above will be applicable to condominium developments that are:
- Proposed/Under Construction
- Existing Construction
- Conversions
Certain types of projects will be ineligible. They are:
- Condominium Hotel or “Condotels”
- Timeshares or segmented ownership projects
- Houseboat projects
- Multi-dwelling unit condominiums [i.e. more than one dwelling per condominium unit]
- All projects not deemed to be used primarily as residential
One very negative aspect of these new guidelines is the elimination of the “Spot Loan Approval” process. According to HUD, “The DELRAP and HRAP processes have been streamlined to allow for uncomplicated condominium project approvals eliminating the need to approve units on a “spot loan” basis.” But this new approval process may add a significant amount of time to approving a condo project compared to the current quick “Spot Approval” process. Current loans in process may be in jeopardy because lenders may be worried they may not be able to sell “spot approved” loans back to FHA if they don’t get them submitted soon enough.
I am sure there will be a number of real estate professionals (are you listening NAR?) who will challenge the elimination of the Spot Loan Approval process that has given quick and needed financing options to quality condos on a case-by-case basis.
Getting a Property to Sell
Why a Home Won’t Sell and What Can Be Done
With the current economic climate impacting the real estate market, getting a home to sell can be an overwhelming task. Foreclosures are at an all time high leaving buyers with plenty of choices and amazing deals to be had. There are certain factors to consider if your property has been sitting on the market for a lengthy period of time. First and foremost it is important to set an appropriate and attractive price. This is perhaps the primary reason for turning off perspective buyers. With the help of an experienced real estate agent, a competitive selling price can be determined based on similar home sales in the neighborhood.
Another factor to consider is the condition of the property such as its curb appeal, cleanliness and show room appearance. Not only is a home competing against others of its kind in the neighborhood, it is also competing against new builds with incredible move-in incentives. Quick fixes can be relatively inexpensive. However, the key is to make sure your money is being spent in the right place. With the help of your real estate agent, they can direct you on what changes would make the most impact with a buyer such as new fixtures, fresh paint or updated appliances.
Marketing
Marketing also becomes more important than ever in a “buyer’s market” where competition is tough and exposure can make a tremendous impact. With current marketing trends it is important to utilize multiple marketing mediums such as listing tours, open houses, newspaper and possible TV ads. Another important marketing strategy is the utilization of the internet through real estate listing websites. The National Association of Realtors estimates that over one-third of home buyers search for property on the internet.
Quick Fixes
There are plenty of minor improvements that can be done to a home that will have a tremendous impact on the buyer. Packing up clutter and creating a more generic look to the house will help the buyers envision the homes potential in meeting their needs. Having a spotless house is also a priority in getting it sold more quickly. Carpets are impeccably cleaned, walls need a fresh coat of paint and pet odors must be eliminated. Staging a room has also become a growing trend in helping a home sell more quickly. Furniture can be used to highlight certain features of a room or it can be detracting. There are professionals available that can assist in designing a home to sell.
Ultimately, finding the right real estate professional can be a key factor in the length of time a house sits on the market. For a personal and confidential consultation on what can be done with your property, please contact Sean T Shallis of The Shallis Group at 201-988-1393.
Mortgage Rate News: rates jump for week ending June 4th
Mortgage rates suddenly skyrocket for weekending June 4th. This comes after months of record breaking low interest rates.
The recent results of Freddie Mac’s Primary Mortgage Market survey, shows that the 30-year fixed-rate mortgage (FRM) for the week of June 4th averaged 5.29 percent with 0.7 point.
Not since December 18, 2008 when rates reached an average of 5.19 percent has the 30-year FRM reached this high. This new rate average is an increase of 37 basis points over the previous week, which had an average of 4.91 percent with 0.7 point.
The 15-year FRM increased 25 basis points from the previous week to average 4.79 percent. Fees and points were unchanged at 0.7. The 15-year was last at these levels during the week ended February 12 when the average was 4.81 percent.
Also on the rise, although not as dramatically was the five-year Treasury-indexed hybrid adjustable-rate mortgage or ARM. The average last week was up .03 percent to 4.85 percent with 0.6 point. Not to be left out, the one-year ARM jumped 0.12 percent from 4.69 to 4.81 percent with fees and points remaining at 0.6 point.
![Regional Map [NJTransit]](http://www.njtransit.com/images/hb_final_1031.gif){kind=link}