Those Who Wait Will Pay Thousands More This Spring

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

Imortant events and dates to keep track of:

March 14, Spring Ahead! Change your clocks forward
March 31, Feds cease current MBS purchasing policy
April 30, contract deadline for homebuyers’ tax credit
April 5, FHA new FHA financing deadline

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board's mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Firstly, let me explain why FHA financing is so vital today, whether you are a seller or a buyer,
FHA will do loans when the cedi scores are as low ad 560 in some cases
FHA has a rehab loan (203K) available for purchases or refinances with loan to values up to 96.5%
FHA allows for down payments as low as 3.5%

Here are some examples of FHA financed loans:

Right now in my office I have just gotten an FHA 203K loan approved. My client lives in a 3-bedroom home with no dining room. They also have only one bathroom. They wanted to add on to their home, a dining room, a bathroom and another bedroom. They are doing a lot of the work themselves so the cost is low, but they didn’t have the money. Their home is worth approximately$ 260,000 and they owe now $230,000. They cannot take money out of their home unless they did this construction mortgage. They are borrowing $310,000, well over the current value and with a cash-out to do the construction.

Another example. I took an application this week for a man who inherited a home. He and his sisters are 50% owners of their home and both live with their families in this 3-bedroom home. Now the sister wants to move out and on, so my client has to purchase her interest out of the home. The problem is, his credit score is only 630. Only FHA will do this loan at a very low rate.

Here are some of the changes to be aware of.

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

It is important to note that in order to be eligible for the lower cost up-front mortgage insurance, a lender has to order a case number from the FHA before April 5th. A case number can only be generated for loan applications where a property is involved and a fully executed purchase contract exists. Homebuyers who have been pre-approved but are not under contract will not be eligible for the reduced premium effective April 5th.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these "seller concessions" can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.

If I can answer any questions you may have about how these changes could impact you, call me. I appreciate your business.

Indymac/One West Bank Exposed. The Shortsale mystery SOLVED

This is a a shocking expose' on what is going on behind the scenes with deals being made between the large banks and the FDIC.

As most of you know in addition to Mortgages, I have been doing Short Sale negotiations. I work with various Realtors and I handle the Short sale paperwork. (Being in the mortgage business we are used to paper so this is a natural). I have found that sometimes it just seems like the banks are unreasonable, unresponsive and they just seem to not care if the home goes to foreclosure. This post explains it all. I think a grass roots movement is starting and all Realtors actively working in today's market should be aware of what is going on.

Please copy and paste the link in your internet browser

http://activerain.com/blogsview/1243528/is-the-fdic-killing-indymac-onewest-bank-short-sales-

The Mystery of Condo Mortgages

As I drive around Ramapo, I see massive construction. I see large buildings that have multiple doors and I would (if I wasn’t in my line of work), naturally come to the conclusion that these are multi-family properties with many rental apartments. The truth is, many of these properties are actually Condominiums.

What is a Condominium? A condo is a form of property ownership in which each owner holds title to his/her individual unit, plus a fractional interest in the common areas of the multi unit project. Each owner pays taxes on his/her property and is free to sell or lease it.
In plain English, each of the units in the large multi family structure is actually owned individually and once the sponsor, or the developer has completed construction and sold a specific percentage of the units, the management of the whole condominium project is turned over to a Home Owners Association formed and governed by the homeowners of the condominium and they determine monthly cost per unit to maintain the common areas and the insurance.

Condominiums can look like apartment buildings. They can look like garden apartments or like town homes or “row housing”.

When banks look to finance a property there is a whole different set of rules for condominiums. Firstly, the bank is very interested in information about the condominium development, for example, how long has it been a condo? How long has it been since the homeowners are controlling the Home Owners Association? How many units are in the development? How many of the units are owner occupied vs investor? Does any one investor own more than 10% of the total units? Are any of the homeowners behind in their monthly fees and are there any lawsuits pending against the development?

There are restrictions on minimum down payments allowed, and some financing is just not allowed at all on some condominiums. Most difficult to finance are small developments with 2-4 units, units with accessory apartments, and new construction.

If you are considering purchasing a Condominium, especially the small 2-4 units that are cropping up all over our community, and of course the larger new construction developments, it is very important that you ask the right questions and have your mortgage financing in place before you proceed.

If you have any questions regarding any mortgage issue, contact Ann Zeilingold, Branch Manager of First Meridian Mortgage Corp. Licensed Mortgage Banker NY, NJ, CT, PA banking departments. 1609 Route 202, Pomona NY 10970. 845-354-9700

Reality Mortgage Episode: The Ultimate Condo Conquest

About 2 months ago I was referred by a business associate a new client who wanted to refinance his home. When I called him to set the appointment he mentioned that his neighbor also wants to refinance. I thought to myself, Wow this is great, 2 loans not just one!! I met with him and I realized it wasn't as simple as it seemed. The first indication was when he mentioned that he has been working on this for over a year and he had been unsuccessful.He mentioned he had worked with a mortgage broker and he had been close to closing twice and it never worked out. He said the previous broker had tried 6 or 7 banks! He then explained he owned a condo, one of a two unit mini "condo complex". He and his neighbor had built it as a two family home, took a mortgage and then legally split the home into 2 individual condos. so when I refinanced him I had to simultaneously refinance the neighbor in order to pay off the mortgage.

Now for all those in the mortgage and real estate industry, you know how difficult condo financing has become, compound it with the challenges of a 2 unit complex, a self employed borrower who needs to do a No Income Verification loan, an difficult appraisal situation because this is a unique property type and there are no comparable sales at all in the area and a low credit score and then multiply it all by 2!

With the right programs and investors, the right appraiser, and of course, the right Mortgage Professional, the closings scheduled for this coming week. The referral source feels great. The timing is perfect. Their rates are really low and I now have 2 more happy clients.

My whole business is by referral. A lot of my Raving Fans' are clients that had been turned down or been given the runaround previously sometimes for weeks, months and in this case years. Home financing is complicated. It is very important, more than ever before, that you need to work with a mortgage professional who is versatile, innovative and accountable.

Reality Mortgage Episode: When The Right Hand Doesn’t Know What The Left Hand Is Doing!

As crazy as it seems, in the Banking world this seems to be the norm.
Let me give you some real life mortgage examples; I was working on a mortgage for clients purchasing short-sale and we had already had a commitment. I, and my client think, that we will be closing in 2 to 3 days. My client’s attorney gets an email from the seller’s attorney that the house was foreclosed on the day before and the deal is off!! It seems that the loss mitigation department didn't notify the attorney handling the foreclosure to cancel the auction!! Scary!!

Then I had a client purchasing a foreclosure. We were all set up to close and the documents had already been sent to the closing escrow agent, but when the bank tried to order the wire, the warehouse bank (this is how mortgages are funded, there is a wire from a lenders warehouse line of credit) the warehouse line bank said that this particular lender was not approved by this warehouse bank for FHA loans, so the lender had to scramble to get the approval they needed. They had to change fraud scan companies, provide the resume of their underwriters and electronically send the file to the warehouse bank for their review. What a mess!! Well it took one week and then we finally closed.

The worst was back in 2008, when I did a condo purchase mortgage through Chase. The night before the closing at 4:45 pm, I get a call from my AE that the file cannot close with 3% down as committed, but with 5% down since they couldn’t get PMI because their score was under 620. This is the night before closing. Then they said that the clients don’t have enough funds to close anymore. This one took more ingenuity to solve. 3% programs had already been deleted from the available programs; the clients didn’t have more money. I re ran credit and got a 6:40 score, I had Chase send it to another PMI company (Thank You RMIC for saving the day) and we closed 3 days later. I asked Chase, how do you issue a commitment and clear a file to close without finalizing the PMI? They said, that they usually do this before issuing the commitment and for some reason on this file they didn’t.

Well there you have it, incompetence at work.

This is why you need to deal with experienced, knowledgeable and tenacious professionals on the street level. Going to “Brand Name Bank” isn’t the answer all the time. The three banks in the 3 stories above were large well-known banks, Countrywide, BOA and Chase. A personal observation: I have found that the larger the bank and the stronger their “brand” the less likely they are to work for the average Joe and Jane homeowner. I really feel the people that you work with on the front-line is the key to a positive and successful home financing.

The Frozen Short-Sale

I have become an expert at Short-Sale Negotiations. I work with Realtors who have short sale listings, but do not have the knowledge, expertise and staff to properly put together and monitor their short sale negotiations. As a mortgage professional for over 20 years, I am used to intense follow up and dealing with the mortgage lenders and underwriters. I am used to loads of paperwork, specific stacking orders and adhering to deadlines. Now the Short-Sale process is drawn out and brutal. The banks can procrastinate for weeks…then months, and suddenly all of the documentation is expired and if you don’t have everything in within 24 hours, the file will be closed and you have to start all over again. Yikes.

Well, I am working a Short-sale. We got a call for the BPO and when the agent opened the door to the house, a squirrel came running out!! (This specific Agent once had a deer stroll out of a home!)Then the lights didn’t work. Thank goodness for blackberry flash lights (the cool way you turn your camera flash into a steady beam of light). And it was freezing!! The highlight of the “tour’ was when they went into the basement and their feet sank into 2 inches of ice water. Ughh!! I kid you not!!

The plumber went to the house. He shut the water and the Realtor with the owner arranged for heat and utilities to be turned on. Now we wait to see if the bank will accept the offer presented, but most importantly, I hope the buyer is still interested. I will keep you posted on the exciting end to another short sale saga.

Reality Mortgage Episode-Holy Foreclosure Tale

This began in the spring and ended in the fall. Tom and Lisa came in to me to be pre qualified for a mortgage. After doing my spiel, running credit, discussing income and assets I found out that Tom had very low credit scores (590), very very low income (self employed sheet rocker) and a large untapped Home equity line of Credit on their current home. I told them, take all the money out of the HELOC and park it in the bank. I told Tom what he needed to do to improve his credit score. And then I told them about the small regional savings bank that I have a relationship with, a bank that would do a No Income Verification loan in 2009 (and now 2010).

July 2009. Tom and Lisa found a home. It was a foreclosure. My antennae went up. I asked him, how is the condition of the property? He told me it was fair, it needed a little TLC but nothing to worry about. I asked, are there any safety issues? They said NO. I asked is the house broken or just ugly? They told me a little ugly. I asked how is the kitchen and bathrooms? They looked at each other and said some of the cabinets have been removed. I called the Realtor, and I asked the same questions. He told me, the house is in good condition, maybe a little cosmetic work and about the kitchen, I told him there needs to be a stove, a sink and some cabinets at the minimum or else they could not get a loan.

Once contracts were signed, at the end of August, I sent out the appraiser.and now the fun began. The appraisal came in with a 10,000 cost to cure. The pictures showed gaping holes, about 5 feet wide and 7 feet tall between the dining room and kitchen. Spindles were missing from the steps, the walls were bashed in and the front window next do the front door was boarded. The kitchen was vast, about 25 feet by 14 feet. On one side there was one bottom cabinet. There was a long countertop and one corner top cabinet. Somewhere in the middle was an exposed kitchen sink.. Someone had taken a bat and had a party in that house!!

We cleaned up the appraisal. She gave a minimal cost to cure, mentioned damaged sheetrock but eliminated the photo of the large hole in the wall. We are now at the end of September. The Listing agent sent me a form that he wanted me to fill out. It was a form that he had to send back to his asset manager. I filled out 2 sections, the name of the borrower, and the date the appraisal was completed. He called me SCREAMING that I must fill out all of the form including setting a closing date or my clients would lose the house and I am taking so long I must be the worst mortgage broker in the planet if I don’t have a clear to close for a borrower putting down 30%. I tried to explain to him that it is not 2005 but 2009, and he just didn’t get it.

Then the bank committed the loan, despite the low credit, despite the non verification of income but they required a final inspection from their approved appraiser showing that the utilities were on and the window was repaired and the sheetrock damage was repaired.

Well my guy was a contractor...All ended well.

The coup de grace was in one of our hostile conversations, where I informed the listing agent that I wouldn’t share my clients personal information with, nor would I fill out his paperwork to the asset manager and I would not set a closing date, only the bank attorney would, he gave me a little tip..”Ann, never deal with foreclosures since you are not good at them”

When we were clear to close, I said to him: Joe, I have a tip, when you list a foreclosure, do your research and save yourself the stress that you went through in this deal. Go through the home and inform the asset manager that when there are man sized gaping holes in the walls and broken windows, they need to be fixed prior to listing and marketing the house”

Contrary to "unpopular" opinion, lately I have been doing a lot of loans on foreclosure properties. Dorit Katz, a local REO agent with Realty Teams in Pomona told me “I take an appraisal into the house before marketing the house and I work with the asset manager so that the house can be marketed to all buyers, not just the cash buyer”. People all seem to want foreclosures, they think they will get a better deal, which they do in some cases, but beware of the issues that come up with the property condition!!