FHA and IRS finally to allow Electronic Signatures

Amen…  FHA and the IRS decide to finally move into the 1980’s… in 2012

The Mortgage Bankers Association said one of its recent priorities has been to get FHA and the IRS to finally accept electronic signatures, which both currently do not for mortgage related activities. Loan application documents, per FHA, must currently have wet signatures, which seriously slows down the loan process in the digital age.

The IRS refuses to accept digital signatures on a mortgage loan application document called a 4506-T (also known as the Request for Transcript of Tax Return), which all lenders must get signed and send in to the IRS to verify a home loan applicants W2, or tax return income, for fraud. Because of this, many mortgage lenders have not moved to more efficient e-signature technology.

It has been reported that  the Federal Housing Administration and Internal Revenue Service will begin allowing electronic signatures on FHA loan documents and the 4506-T form in 2012, according to the Mortgage Bankers Association.

An electronic signature, or e-signature, is any electronic means that indicates either that a person adopts the contents of an electronic message, or more broadly that the person who claims to have written a message is the one who wrote it (and that the message received is the one that was sent). By comparison, a signature is a stylized script associated with a person. In commerce and the law, a signature on a document is an indication that the person adopts the intentions recorded in the document. Both are comparable to a seal.

Increasingly, encrypted digital signatures are used in e-commerce and in regulatory filings as digital signatures are more secure than a simple generic electronic signature. The concept itself is not new, with common law jurisdictions having recognized telegraph signatures as far back as the mid-19th century and faxed signatures since the 1980s. In the United States, electronic signatures have the same legal consequences as the more traditional forms of executing of documents.

Currently we use e-signature technology for our MN mortgage loan application documents on conventional loans, which people can just sign on their computers. Then we must send them the 4506-T separately to get a real signatures, seriously slowing down the application process, and increasing consumer costs. On an FHA loan, we must send everything out to the client for real signatures.

Moving into the 1980’s, streamlining the application and processing of mortgage loans is long overdue, will reduce client costs, improve processing times, reduce lost paperwork, reduce signature fraud, and generally make the process more satisfying for everyone.


January 2014.  FHA finally has officially announce and OK’d electronic signatures on FHA Mortgage loan Applications effective immediately

What do you know about your Mortgage Loan Officer?

What do you know about your Mortgage Loan Officer?

All Mortgage Loan Officers are required to register with the Nationwide Mortgage Licensing System (NMLS) & Registry. The Registry assigns each Loan Officer a unique identifier number that stays with them throughout their career. Using this number you can review professional background information for a Loan Officer through the NMLS database prior to doing business with them.

The display of an NMLS number tends to lead most people to believe all Loan Officers are licensed. This is far from the true. Only about 20% of Loan Officers are actually licensed, the rest are simple registered.

Licensed Loan Officers are required to have pre-employment mortgage education, must pass criminal background checks, must pass a difficult Federal Licensing test, must pass a difficult State Licensing test in EACH state they wish to do business, and must complete yearly continuing education requirements.

Simply registered Loan Officers could have been flipping burgers last week, and doing Loans today. While their employer may have some sort of internal hiring and training system, there are no mandatory state or federal licensing requirements, and no educational requirements.

Now I am not saying that simply registered Loan Officers are bad people, but when you are working on the largest financial transaction of the average persons life, who would you prefer? Licensed or unlicensed? Another way to look at it is to assume you are sick. Sure, you can go online to WebMD, self-diagnose your illness, go to the pharmacy, buy a scalpel, and attempt self surgery. Or you can go to the Doctor.

So how do you verify if a Loan Officer is Licensed or simply Registered? It only takes minute to find out.

  1. Simply go to www.NMLSConsumerAccess.org.
  2. Enter the Loan Officers Name, or their NMLS #
  3. Click on their name

Scroll to the bottom of the page.

  • If it says STATE LICENSES/REGISTRATIONS, then lists one or more States – They ARE A LICENSED Loan Officer
  • If it says FEDERAL REGISTRATION, then says Federal Mortgage Loan Originator – They ARE NOT LICENSED.

Licensed or simply registered? I think the choice is clear for smart homeowners.


Minnesota home sales jump higher

Minnesota Home sales jump dramatically higher

Minnesota first time home buyersIt appears the things are changing in the housing market as Minnesota’s home sales shot up 24 percent in October from a year earlier.

It appears the pent up housing demand, combined with historically low mortgage interest rates in Minnesota, and home prices that are (on average) about equal to 2002 values, has finally gotten home buyers off the fence.

Another recent report indicated that first time home buyer numbers have begun to fall off as many of those people have already taken advantage of their buying opportunities, so who is buying the homes? Clearly move up buyers – those selling an existing home and buying something different have surged the last six months.

Surpassing most areas of the state, sales in the seven-county metro area jumped 34 percent.

For the sixth month in a row, statewide pending sales have increased, rising 33 percent versus October 2010.

In October, homes were on the market an average of 120 days. Inventory is decreasing, with new listings down 10 percent versus October 2010.

HARP 2.0 Refinance – Quick breakdown of underwriting guidelines

The Federal Housing Finance Agency (FHFA), who oversees Fannie Mae and Freddie Mac, released the HARP 2.0 “Obama Refinance” guidance to lenders this week. The new HARP (Home Affordable Refinance Program) program is a concerted effort by the government to refinance more homes and reduce monthly payments for home owners that are underwater and can’t obtain a traditional refinance. This is being accomplished by expanding the guidelines to more accurately reflects the current state of the real estate market.

Now that lenders have guidance from FHFA they will develop their own guidelines, or “overlays”. An example of an overlay is Fannie Mae says an appraisal is not needed but the lender requires it to reduce their risk, or Fannie Mae says “this loan program is available to borrowers with credit scores down to 580” but the lender sets their threshold at 620.

This means while the program is “available” as of Dec 1, 2011, no lender has actually provided their guidelines – and the loan product is NOT officially available anywhere just yet.


So here are the highlights of the new HARP 2.0 program as told by FHFA. These could change and requirements could be different from lender to lender, though.

  • Applications for HARP 2.0 refinancing will be accepted after December 1, 2011.
  • Deadline for application for a refinance under HARP has been extended to December 31, 2013.
  • Most loans owned by Fannie Mae and Freddie Mac will be eligible for a HARP 2.0 refinance. Loans that are not are subprime loans and those that allow negative amortization, such as Option ARMS.
  • Loan-to-value limits for all occupancy types:
  • No maximum LTV for fixed-rate mortgages with terms up to 30 years.
    105% for fixed-rate loans with terms greater than 30 years and up to 40 years
    105% LTV for ARMs with initial fixed periods greater than or equal to five years and terms up to 40 years (as permitted by the ARM plan).
  • Borrowers must not have any late mortgage payments in the past 6 months.
  • One 30-day late mortgage payment is permitted in the prior 7 to 12 months.
  • The waiting period to refinance after a bankruptcy and for reestablishment of credit has been lifted.
  • The borrower must receive a benefit in the form of either a reduced monthly mortgage payment or a more stable loan product, such as refinancing a adjustable-rate mortgage into a fixed-rate mortgage.
  • If the current loan has mortgage insurance, mortgage insurance will also be required on the new mortgage.
  • If the current loan does not have mortgage insurance, mortgage insurance will not required on the new loan.
  • Loans that currently have lender-paid mortgage insurance (LPMI) are eligible for HARP 2.0 based on some restrictions. I found under HARP 1.0 that loans with LPMI are eligible on a case-by-case basis determined by the terms of the loan set by the lender Fannie Mae or Freddie Mac bought the loan from. So check with a mortgage professional who will have to contact Fannie Mae or Freddie Mac in regards to the eligibility of your loan with lender-paid mortgage insurance being refinanced under HARP 2.0.
  • Unless the payment is increasing by 20% or more (such as could happen by moving to a 20 or 15 year loan) or funds must be brought-in to the closing for some reason or another, the borrower should not have to re-qualify in regards to credit, income and assets to receive the mortgage refinance. In other words, no income and asset documentation will be needed in most cases. This could change by lender based on their overlays.
  • An appraisal may not be needed, but as noted above, each lender will detail their guidelines for items such as this.
  • Fannie Mae is significantly reducing the maximum amount of loan-level price adjustments that apply to “HARP” mortgage loans. Loan-level price adjustments, or LLPAs, are those factors that result in a borrower with lower credit scores and/or higher loan-to-value’s receiving a higher interest rate than borrowers with higher credit scores and/or lower loan-to-values. In short, they are “risk-adjusters”: The higher the risk to the lender, Fannie, Freddie and Wall Street, the higher the interest rate for the borrower. What this all means to you is that although you may qualify at a higher interest rate because of a lower FICO score, that rate won’t be as high as it was under HARP 1.0.

We’ll see how all this shakes-out with the loan servicers, banks and lenders in a couple of weeks.

HARP II Guidelines Released

HARP II – The Home Affordable Refinance Program has released the updated program guidelines.

St Paul, MN:  The HARP program, while not perfect, has been one of the few success stories in the governments attempt to help home owners.  HARP has helped close to 1,000,000 homeowners refinance, and a few tweaks to the program have just been announced. No one who closely follows the mortgage industry is expecting HARP 2.0 to generate much in the way of additional refinance opportunities in the real world over the existing HARP program – but HARP IS STILL AN AWESOME PROGRAM for those who qualify.

That view seemed to be reinforced after yesterday’s release of the specific program guidance from both Fannie Mae and Freddie Mac to lenders (see links to release below)

It appears the updated HARP programs latest program changes and enhancements aimed at allowing underwater borrowers with Fannie / Freddie mortgages to take advantage of low mortgage rates don’t appear to represent a major departure from the old requirements.

The updated basics are that the loan to value cap has been lifted, certain fees in certain situations have been removed and for borrowers who have loans owned by Fannie or Freddie and who have not been delinquent more than 1 x 30 days in the past twelve months (0 x 30 in the most recent six months) they may find refinancing available to them even if they are underwater on their mortgage to equity ratio.

However, until March 2012 Fannie and Freddie will not even accept delivery of any loan with an LTV > 125%.  And, the new loan program continues to be available only to borrowers whose loans are owned by Fannie Mae or Freddie Mac on or before May 31, 2009.

Given the lifting of the Loan-to-Value cap as a major selling point, it appears that since nothing above 125% can be delivered before March this will hamper a program that already has performance characteristics that may make it unavailable to many who could really use the program.

While a handful of lenders who offer HARP already have started to promote HARP refi opportunities, it seems a bit premature as it remains to be seen who lenders will actually implement the new guidelines.  Remember, lender overlays play a huge rule in today’s mortgage world.  Just because Fannie Mae, Freddie Mac, FHA, VA, or any other program says lenders can, doesn’t mean they will.

View the actual HARP 2 release information in PDF format:

Time will tell over the next few months as lender roll out their actual guidelines.  Stay tuned.

 Click HERE to apply for a HARP Refinance on properties in MN or WI


You DON’T need 20% down to buy a home!

Do I need 20% down payment to buy a home?

I saw it again on the news this morning.  Some talking head “Real Estate Expert” was telling the national audience that lenders require 20% down payment.

Generally speaking, this couldn’t be further from the truth, and needing 20% down is a huge misconception in the marketplace today. For the average home buyer, there are numerous options for obtaining financing with less than 20% down.

DON”T ASSUME! Contact a local licensed mortgage loan officer and let them professionally review your individual situation. Click here to learn how to shop for a lender.


VA Financing – Here is a big thank you from the government. As a Vet, you are eligible for zero down payment, 100% financing on a home purchase. You either need to be an active or honorably discharged member of the armed forces or national guard. The seller can pay your closing costs and there is no mortgage insurance, saving you a lot of money monthly on your home. Click here for more information on VA home loans.

USDA/Rural Development – The Guaranteed USDA program offers zero down payment 100% financing for qualified borrowers purchasing a home in a rural area.  There are many locations just outside of major metropolitan areas that are eligible for this program.  The program has household income restrictions for their program, so Click here to see if the area you’re looking is USDA Rural Development eligible and if you income qualify.


FHA Financing – FHA offers home loans with as little as 3.5% down.  FHA has no income limits for the household, but does have loan limits, based on the county in which you are purchasing the home.  Click here to check on the limits for your area.  FHA is one of the more lenient programs in regards to qualifying, and the down payment can be received as a gift from an eligible source (parents, state or local program, etc).

Local and State Bond Money Programs – Many states and even some larges cities have down payment assistance programs that can be used in conjunction primarily with an FHA loan. These programs vary widely, but if available in your area, are a great tool for those who qualify. Contact a local lender to inquire what programs may be available in the area you want to buy a home.

Conventional Financing – Fannie Mae and Freddie Mac both still offer programs with as little as 3% down.  For example, FannieMae offers HomePath financing on eligible FannieMae foreclosures.  For those with acceptable credit, many conventional loans are available with just 5% down.


  • Investment properties typically require at least 20% down
  • JUMBO loans, which are loans generally over $417,000, generally require at least 20% down

Shopping for a mortgage loan? Beware of bad lenders, bait-n-switch, and outright fraud

Are you searching for the lowest refinance mortgage rates?

Have you shopped and think you’ve found the lowest refinance mortgage rates and closing costs?

Are you sure you found a deal, or did you find the crooked bait-n-switch lender?

A lot of consumers like to “shop around” to find the best interest rate they can for their loan. As a result, white lies, factual omissions, and out-and-out misleading statements are commonplace among loan officers in today’s insanely competitive lending market. That’s why it’s important for you, as a consumer, to understand the classic bait-and-switch technique of many lenders and loan officers. It’s basic economics—if a bank or lending institution offers consistently uncompetitive interest rates, they won’t make any loans and they won’t make any money. Last time I checked, mortgage lenders and banks are not charitable organizations. What does this mean for borrowers? This means that if one lender is quoting you significantly better than everyone one else, buyer beware!

Bait & Switch is alive and well and still living in the mortgage industry, especially from the big online internet lenders. Wasted time, lost real interest rates, and money spent on upfront fees are some of the costs of dealing with the wrong lender – and that is if you DON’T use them.

THE REALITY: Shop til you drop. All mortgage lenders are basically the same. They all get their money from the same sources, the interest rates are based on the same bond market, transfer the loan to Fannie Mae Freddie Mac or FHA, and the third parties fees they need to collect and pass through (appraisal, credit report, underwriting, title company, etc) are all the same. True mortgage interest rate differences will never be more than 1/8th (0.125%) to 1/4 (0.25%) difference between all lender across the country.

THE GAME: If lenders advertised “We are the same as everyone else”, who would you use? Therefore the game is to capture your attention and get you to call them. This is done primarily with two claims.

  • Super low rate. To quote the super low rate, these bad lenders usually are hiding in discount points and other fees in order to buy down the interest rate they are quoting, or the small print says you need a credit score over 800 something.
  • Super low closing costs. To quote super low closing costs, they simply forget to tell you how much higher the interest rate will be to offset those low closing costs.

Here’s a classic example of how it works at the less-than-respectable mortgage company or bank. The bank simply takes advantage of YOUR IGNORANCE when you’ve “shopped” for the best mortgage rates.

The company (or loan officer) scans today’s REAL interest rates and sees that they can realistically offer a 4.25% rate at par (no points paid by borrower) and they know this is approximately what the competition is offering. The lender see’s that if the borrower pays 2.25 points (2.25% of the loan amount), the borrower could get a 3.75% interest rate. So the loan officer or the companies automated web site quote system will tell a consumer that is shopping interest rates that he can do 3.75%. Beating all others. The lender tells the client they can’t lock the interest rate until they get an appraisal and all their documents.

Excited, the borrower believes he or she has found a diamond in the rough and agrees to do business with that lender. The lender asks for the borrower’s credit card information and takes a $500 deposit for the appraisal and gets started. The borrower sends in all their documents.

Awesome… You think you are getting an amazing deal.  A week later, the appraisal has already been done, and your paperwork shows up to be signed.  Wait a minute. The closing costs are nowhere near the original quote.  Usually thousand of dollars higher. Then when the client is ready to lock his or her interest rate, the loan officer apologizes and says that the 3.75% rate is no longer available because interest rates have changed since the quote was made (the lender is not legally obliged to give any interest rate until a GFE has been produced and a rate lock has been entered into).

Pissed off borrowers usually at this point start calling other lenders again, only to find out that they are all quoting about the same as the company they are already working with is now really quoting. Since the borrower has already paid a $500 deposit, has made a tedious loan application, and has likely already produced documents for processing and underwriting, the borrower almost always grudgingly accepts that rates have simply risen and agrees to finish the loan process with that lender.

The classic bait-and-switch. Mislead the person shopping, rope him in with a ridiculous rate quote, and lock the person in with a substantial deposit for an appraisal. This bait-and-switch tactic is used thousands of times each day by lenders nationwide. 

CLUES: Most people don’t find out they are working with a predatory lender until well into the transaction, and usually after they’ve spend money on an appraisal, or non-refundable application fee.  There are some clues to look for:

  • Requiring up-front money other than appraisal or a small amount for a credit report
  • Not being able to lock your interest rate until AFTER you send in paperwork and the loan is approved
  • Relying on ANY ONLINE SYSTEM that gives you any rate quote as a real quote

AVOID THE PERILS of mortgage rate shopping with a little homework.

  • Get off the internet. No internet lender has anything better than the mortgage company down the street
  • Google the name of the company plus the word fraud or scam. What do you find?
  • Contact a local lender with an office you can drive to and do business with them.
  • Check their reputation. Not just their advertised interest rates.

Want to see something scary? All over the internet are advertisements for amazing interest rates from an internet company called AmeriSave. Best mortgage rates anywhere that completely blow away the competition.  But before you jump, read this about them, and take my advice to Google their name plus the word fraud. Still want to work with them?


What are you actually buying, a townhome or a condo?

What are you buying, a condo or a town house?

Looks like a townhome, acts like a townhome – but its a condo, and that makes a big difference in mortgage financing!

People, including many Real Estate Agents, mistakenly assume a property legally platted and developed as a condominium is a town house. In the mortgage financing industry, there is a difference in both interest rates, and the time and ability to get a loan for a condo versus a town house.

Minnesota Mortgage Broker - Best Interest rates - Condo financingWhen you buy a home, there are two major aspects:

  1. The lender “credit qualifies” the buyer
  2. The lender “qualifies” the home with an appraisal.

What many people miss is that if you are buying any property with an association (townhome or condo), the lender also has to qualify the association.

A townhome, often referred to in the industry as a PUD (planned unit development) is much easier to get approved, and the interest rate the buyer receives is usually the same as a single family home.

A condo on the other hand is much different. The interest rate depends on the down payment, number of stories, and a few other factors. It is usually 1/8th (.125%) to 1/4 (.25%) HIGHER than a single family home. Furthermore, the process to approve a condo association is much more complex, takes significantly longer, and usually requires the buyer to pay $200 – $300 in additional fees to get the documents from the association the lender needs to approve the loan.

Should this scare you away from buying a condo?  Of course not.

Financing rates and options depend on your knowing … Condo or Townhouse?  Does your mortgage lender know the difference?  Does your agent?  Do they take the time and make the effort to find out?  If not, you’re working with the wrong person …

You can save a lot of headache and hassle down the line if you know the rules, and if you are working with a Realtor and
Mortgage Loan Officer who understands the differences, and can properly guide you along your way to a
successful home purchase.