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refinance

HARP 2 not ready until March 15th – Why?

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HARP 2 – Not ready until March 15th, 2012
Minneapolis, MN: There is a lot of consumers interested in a HARP refinance in MN and WI. The Home Affordable Refinance program allows home owners who have lost value to still refinance their homes are today’s low HARP  refinance rates.  HARP has been available since mid 2009.  HARP 2, which was announced in November 2011 removes some restrictions, and should help many more home owners refinance their home loans.

Officially, the the HARP 2 program started December 1. Unofficially, most lenders won’t be offering it until after March 15th, 2012. Let’s explore and understand why?

The original HARP program, which allows a home owner to be underwater on their home mortgage loan up to 125% loan-to-value is available today.

THE BIGGEST DELAY: Simple. Software. When a lender “underwrites” a loan, they actually do so through an AUS, which stands for Automated Underwriting Systems. The computer software evaluates the application, and gives an answer. The underwriter then verifies the computers decision. For example, the software may give a YES answer, then ask for pay stubs to verify income. The underwriters job is to then review the pay stubs to make sure the submitted income is the actual income.

Both Fannie Mae and Freddie Mac need to reprogram their computers, and they’ve indicated this will become effective March 15th.

BENEFITS TO LENDERS OF AUS: Can a lender “manually” underwrite a file?  Sure, but the biggest benefit of submitting a file through the automated systems is all about liability. Contracts with Fannie Mae and Freddie Mac protect a lender against liability for underwriting mistakes made by the lender of the original mortgage if the software said YES. Therefore smart lenders are not likely to take on the additional risk of a manual underwritten file.

THE RULES: Another major issue is simply getting the rules written, and distributed up and down all the lender channels. While Fannie Mae and Freddie Mac have indicated what their rules are, remember that they don’t actually lender to consumers. Lenders lend. Fannie Mae and Freddie Mac simply buy loans from lenders. Therefore there is still a large amount of risk to lenders. Each individual lender needs to review new rules, consider the risk, decide if they even want to participate in the enhanced HARP 2 program, then write their rules and push them out to the Loan Officers on the street.

THE BOTTOM LINE: Look for most lenders to start pushing out HARP 2 Refinance rules about the middle of February 2012, but not actually doing them until after March 15th, 2012.  Furthermore, expect a huge rush of customer looking to take advantage of the program, creating massive delays with the banks.

FED leaves Funds Rate Unchanged

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THE FED LEAVES RATES UNCHANGED

Minneapolis, MN: Today the FED (Federal Open Market Committee) voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

Mortgage bonds are mostly unchanged since the Fed’s announcement, giving mortgage rates in Minnesota and Wisconsinlittle reason to move significantly in any direction.

Check live Minnesota Mortgage Insterest RatesWHAT IS THE FED FUND RATE? It is the interest rate at which a depository institution (Bank) lends immediately available funds (balances at the Federal Reserve) to another depository institution (Bank) overnight.  It has NO DIRECT BEARING on what you the consumer will get as a mortgage interest rate.

WHAT ARE MORTGAGE INTEREST RATES BASED ON?  The primary answer is mortgage-backed bonds, better known as Mortgage Backed Securities (MBS). Bonds issued by Fannie Mae and Freddie Mac (MBS) and the trading performance of those bonds will determine the direction of mortgage rates. Finding the catalyst that causes mortgage bonds to move will give you the keys to finding out what makes mortgage rates rise or fall.

Mortgage rates remain bouncing near all-time lows. If you’re thinking of buying or refinancing a home, it’s a good time to lock a great mortgage rate.

In its press release, the Federal Reserve said that the the U.S. economy is improving, noting that since its November 2011 meeting, the economy has been “expanding moderately”. The Fed also added that domestic growth is occurring despite some “apparent slowing in global growth” — a nod to ongoing uncertainty in  Europe.

The Federal Reserve expects a moderate pace of growth over the next few quarters, and believes that the jobs market will continue to improve, but slowly.

Other potential soft spots within the economy include :

  1. A slowdown in business investment
  2. A “depressed” housing market
  3. Strains in global financial markets

The Federal Reserve added no new policies at its December meeting, and made no changes to existing ones. It re-iterated its plan to leave the Fed Funds Rate within its current range of 0.000-0.250 percent “at least until mid-2013″ and re-affirmed “Operation Twist” — the stimulus program through which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.

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

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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?

 

HARP 2: Another Obama Housing Refinance Failure?

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The Federal Housing Finance Agency plan to revamp the Home Affordable Refinance Program will result in just 17% of Fannie Mae and Freddie Mac 30-year loans qualifying for refinancing, according to one analyst.

Sarah Hu said there are some benefits of HARP 2.0, which is how bond investors refer to the plan, but also believes hurdles remain.

READ THE FULL STORY

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HARP 2. Underwater Refinance Program changes announced

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FHFA, Fannie Mae and Freddie Mac Announce HARP Changes to Reach More Borrowers

Washington, DC – The Federal Housing Finance Agency, with Fannie Mae and Freddie Mac (the Enterprises), today announced a series of changes to the Home Affordable Refinance Program (HARP) in an effort to attract more eligible borrowers who can benefit from refinancing their home mortgage. The program enhancements were developed at FHFA’s direction with input from lenders, mortgage insurers and other industry participants.

“We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach,” said FHFA Acting Director Edward J. DeMarco. “Building on the industry’s experience with HARP over the last two years, we have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by the Enterprises.

Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets.” Fannie Mae and Freddie Mac have helped approximately 9 million families refinance into a lower cost or more sustainable mortgage product, approximately 10 percent of those via HARP.

HARP is unique in that it is the only refinance program that enables borrowers who owe more than their home is worth to take advantage of low interest rates and other refinancing benefits. This program will continue to be available to borrowers with loans sold to the Enterprises on or before May 31, 2009 with current loan-t0-value (LTV) ratios above 80 percent.

The new program enhancements address several other key aspects of HARP including:

  1. Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
  2. Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
  3. Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
  4. Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
  5. Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.

An important element of these changes is the encouragement, through elimination of certain risk-based fees, for borrowers to utilize HARP to refinance into shorter-term mortgages. Borrowers who owe more on their house than the house is worth will be able to reduce the balance owed much faster if they take advantage of today’s low interest rates by shortening the term of their mortgage.

The Enterprises plan to issue guidance with operational details about the HARP changes to mortgage lenders and servicers by November 15.  Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.

Borrower Eligibility

In general, borrowers must meet the following criteria:

  1. The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
  2. The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  3. The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  4. The current loan-to-value (LTV) ratio must be greater than 80%.
  5. The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.

Homeowners can determine if they have a Fannie Mae or Freddie Mac loan by going to:

FANNIE MAE LOOKUP or calling 800-7FANNIE (8 am to 8 pm ET)

FREDDIE MAC LOOKUP or 800-FREDDIE (8 am to 8 pm ET)

Winning or losing – How to play the Mortgage Interest Rate Game

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Mortgage interest rates — just like stock prices — change price daily and you can win big or lose big if you don’t know what you are doing.

#1 Mortgage Interest Rate and Lender Shopping Tip | MN and WI Mortgage Rates | Quote, Float, or Lock? |

For the home buyer that is “shopping” for a mortgage, or waiting for rates to fall, or just “hasn’t gotten around to it”, we suggest you almost always lock, and to do it quickly. The sooner you lock your rate, the less chance you have of losing in the Mortgage Rate game.

If you are refinancing, you can gamble a bit more, but if you have a signed purchase contract in hand, lock your rate as soon as possible.  There is no better way to protect yourself from the fickle mortgage markets. Holding out for 1/8th – 1/4% more is just not worth the risk! If you want to gamble… go to Vegas.

What is a Rate QUOTE? When buying a home or refinancing, it is common to call around to many lenders to get a rate quote. A quote is not a guaranteed rate. Another common issue with getting a quote is you often get one from Lender A on Monday, Lender B on Tuesday, and Lender C on Wednesday. Rates can change daily, sometimes multiple times, so unless you get all your quotes at the same time, you don’t have accurate information. THE ONLY QUOTE THAT MATTERS IS THE DAY YOU LOCK. Many lenders quote you low to get you to stop shopping, knowing that you will usually NOT be locking the same day of the quote – especially for any purchase loans. Be wary of anyone significantly lower than anyone else.

What is a Rate Lock Period? The lender will usually quote rates along with a rate lock period, usually 15, 45, or 60 days. The loan must close within this period. The longer the rate period, the higher the interest rate.

What is a Rate Lock? When you “LOCK” your interest rate with your lender, you and the lender agree this is the guaranteed rate you will receive, and that no matter what the markets do before closing, you will not be charged a higher rate if rates go up, and you will not be able to get a lower rate if rates go down. Your rate lock should be in writing.

What Does It Mean to Float? Floating your rate means means that while your loan is in progress, the rate is NOT yet guaranteed. You are taking the risk that interest rates will either not go up or that they will fall. If rates have been dropping, then you might want to take a chance that rates will be lower by the time you close your loan than they are today. Discuss the floating with your Loan Officer. Sometimes it is worth the gamble, sometimes it isn’t.

Dont worry about credit inquiries when shopping for a mortgage loan

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Shopping for a mortgage loan? DON’T worry about inquiries on your credit report

We’ve all heard it before. Having someone pull your credit will reduce your credit score. Sadly, many people end up making some poor decisions based on half truths, and bad information.

The fear of reduced credit scores with the occasional pull from a creditor is the most annoying, misleading, and misunderstood thing I hear every week in the mortgage business. If you are worried about “inquiries on your report”, this isn’t the concern most people think it is.

What to know about mortgage rate shopping.
Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring.  So, if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping.  In addition, the score looks on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period was any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span.

Furthermore, inquiries, even under the worst of situations, could only account for 10% of your overall score. Most people should have absolutely NO CONCERN whatsoever about inquiries on your credit report unless you have applied with 10, 15, or even 20 lenders in the past 90-days.

Visit MyFico.com to find out the truth about inquiries and your credit score, and STOP WORRYING!

 

Government to step in with new refinance options?

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Minneapolis, MN: Many reports have surfaced recently that the government is seriously considering a wide range of ideas to assist consumers in refinancing their homes loans owned by Fannie Mae and Freddie Mac to take advantage of today’s amazing low interest rates. For a variety of reason, mostly to due to negative equity or current tighter credit underwriting guidelines, large numbers of these homeowners have been left to the sidelines.

As a Loan Officer, I have never fully understood some of the silliness in some underwriting guidelines, and have a few suggestions.

If Fannie Mae or Freddie Mac (you and I since the government took the over during the peek of the credit crunch) already “own your loan”, you are current with your payments, and your basic financial position is OK, what does it matter if your home is underwater? They already own the the loan, and have all the risk. Wouldn’t lowering their payment reduce the risk and simply make sense?

While allowing these people to refinance, I would add one rule…  That being that you couldn’t “go backwards”. In other words, if the homeowner currently has a 30-yr fixed mortgage with 26-year remaining, they would not be allowed to have a new loan longer than 26-years.

While it is little know, and even less used as most people select a very traditional 15-yr, 20-yr, or 30-year mortgage, many mortgage lenders (including us) allow you to select any number of years you wish. If you want a 17-yr fixed, or the aforementioned 26-yr fixed, no problem. We can do that.

For FHA loan holders, a quick, immediate fix is possible to help those people refinance by simply changing a mortgage insurance rule. Allow people with existing FHA loans to refinance with their current mortgage insurance rate.

Everyday I speak with homeowners with FHA loans, where I could easily lower their interest rate by 1% – 1.5%, but it makes no financial sense for them to do it.

FHA loans all have mortgage insurance. Up until recently, the cost of the insurance, which is included in their monthly payment, was just 0.55% of their loan amount. A simple way to understand the cost, is on a $200,000 mortgage loan, the insurance costs $110 per month.

Last year, FHA increased the insurance to 1.15%. So on the same $200,000 loan, the monthly cost is now $230! YIKES. The higher insurance cost eats up most, if not all of their potential monthly savings, leaving many FHA homeowners unable to take advantage of today’s low mortgage rates.

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THOUGHTS? Log in and post. We want to hear what you think!

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Home lost value? Yes you can refinance

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(edited: New rules took effect 10/24/2011 – Click here to view new rules)

HARP – Special Affordable Refinance Program

Has your home LOST VALUE?

THIS IS YOUR BAILOUT!

The funds the Obama Administration has made available for this program come from YOUR tax dollars. Take advantage of this program while it is still available!

Do you have a Fannie Mae or Freddie Mac loan and cannot refinance due to declining property values or a loss of income?

Would you like to reduce the cost of your monthly mortgage payments or move into a stable fixed rate mortgage? We may be able to assist through the Homeowner Affordability and Stability Plan.

A special HARP Affordable Program, which is designed to help up to 9 million American families refinance their loans to a payment that is affordable now, and into the future.

One of the initiatives in this program is aimed at helping responsible homeowners “refinance” their loans to take advantage of historically low interest rates.

Here are some common Questions and Answers about the Refinancing Initiative in the program.

Who is eligible?
You may be eligible, and we can assist you if:

  • You own and currently occupy a one- to four-unit home.
  • Your mortgage is owned or controlled by Fannie Mae or Freddie Mac.
  • You are current on your mortgage payments.
  • The amount you owe on your first mortgage is about the same or slightly less than the current value of your house.
  • Your first mortgage is 105% or less
  • And, you have a stable income sufficient to support the new mortgage payments.

How do I know if my loan is owned or controlled by Fannie Mae or Freddie Mac?
Simply call or email me. I’ll help you determine if your mortgage is backed by Fannie Mae or Freddie Mac.

If I am delinquent on my mortgage, do I still qualify for the Refinance Initiative?
No. But the good news is, you may qualify for the Modification Initiative. Contact the company you currently make payment at to discuss your situation and review your options.

I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable?
Maybe. As long as the amount due on the first mortgage is less than 125% of the value of the property, borrowers with more than one mortgage may be eligible for the Refinance Initiative.

Will refinancing lower my payments?
That depends. If your interest rate is much higher than the current market rate, you would likely see an immediate reduction in your payment amount.

However, lowering your monthly payments isn’t the only criteria to think about. If you have an adjustable mortgage (ARM) or are paying interest only on your mortgage, you may not see your payment go down. BUT… you will be able to avoid future mortgage payment increases and may save a great deal over the life of the loan.

What are the terms of the refinance and what will the interest rate be?
All loans refinanced under the plan will have a 30- or 15- year term with a fixed interest rate. The interest rate will be based on market rates at the time of the refinance. Currently, interest rates are at historical lows, which makes this a good time to examine your refinancing options.

Will refinancing reduce the amount that I owe on my loan?
No. Refinancing will not reduce the principal amount you owe. However, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

Can I get cash out to pay other debts?
No. Only transaction costs, such as the cost of an appraisal or title report may be included in the refinanced amount.

How do I apply for the Special HARP Refinance Initiative in MN or WI?
Call 651-70-LOAN1 (651-705-6261) or E-mail us today to discuss your specific situation and to examine your options. If this plan is right for you, we can begin working on your refinance immediately. You can help us help you by filling out out ONLINE APPLICATION. Remember, we lend in MN and WI only.

As part of the discussion, we may need to look at the following information:

  • Recent pay stubs to help determine your gross (before tax) household income.
  • Your most recent income tax return.
  • Information about any second mortgage on your house.
  • Account balances and minimum monthly payments due on all of your credit cards.
  • Account balances and monthly payments on all other debts, such as student loans and car loans.

As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or E-Mail me to set up an appointment.

If you are a homeowner who is current on your mortgage payments but unable to refinance to a lower interest rate because your home value has decreased, you may be able to refinance.

Do I qualify for an Affordable Refinance? Answer these questions:

  • Is your home your primary residence?
  • Do you have a Fannie Mae or Freddie Mac loan? If you don’t know contact:
  • Are you current on your mortgage payments?
    • “Current” means that you haven’t been more than 30-days late on your mortgage payment in the last 12 months.
  • Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?

Refinance your upside down mortgage while rates are low

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Just when you considered housing loan rates could not go down anymore, they have strike record low levels once again this week, and every homeowner should take other look at their stream situation.

Homeowners refinance for many not similar reasons. Some wish to lower their payments. Some wish to shorten the life of their mortgage. Some wish to obtain some cash out. Some wish to pay off a Home Equity Line of Credit.

There are still great mortgage programs available in today’s market. One of those allows homeowners who have lost value to still refinance in to a descend rate. Freddie Mac and Fannie Mae have allow homeowners to refinance, even if they owe up to 125 percent of the appraised value of their home. It is estimated that more than 25 percent of homeowners in the U.S. owe more than their home is worth.

However, only Freddie Mac and Fannie Mae allow for the 125 percent limit, many banks and housing loan companies only enable homeowners to refinance if they owe up to or reduction than 105 percent of the value of their home (including us). Of course, all your standard other requirements still apply (debt-to-income ratios, credit scores, etc).

Click here to see who really holds your loan (it usually isn’t who you make payment to).

Homeowners who have a second mortgage can also refinance, but no cash is allowed.

There are many factors to ponder if a refinance makes sense. One is closing costs. Many people take a NO COST loan, but we suggest you not agree to a “no cost” loan unless you entirely comprehend the differences between a standard “cost” loan and the “no cost” loan. Neither option is right or wrong, but you can pay dearly for selecting the wrong one for your individual situation.

Most Refinances are “Rate and term” only

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“Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 50 years to lock in interest savings,” said Nothaft. “Over the first half of 2011, fixed-rate mortgage rates hit a low during June, with 30-year product averaging 4.50 percent and 15-year averaging 3.68 percent over the last four weeks of June

Freddie Mac has released the results of its second quarter refinance analysis showing homeowners who refinance continue to strengthen their fiscal house. The analysis shows that 77 percent of homeowners who have refinanced have been able to maintain or reduce their mortgage debt in second quarter of 2011.

READ THE FULL STORY

 

Modified Mortgages Ineligible for Refinancing

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Previously Modified Mortgages Under Attack and maybe Ineligible for Refinancing

St Paul, MN: For many reasons, a lot of home owners have attempted and succeeded in getting their current home mortgage loan modified. Modifications come in many forms, including reduced interest rates, both short and long-term, principal forgiveness, etc.

Modifications, and short-sales, terms never heard of just four years ago, are now commonplace. Lenders have struggled on how to deal with this phenomena in terms of underwriting guidelines for future credit. Short-sales for example, are generally treated by lenders as a foreclosure. While there are some exceptions, those doing short-sales generally have no benefit credit-wise over a true foreclosure.

Now lenders are starting to deal with modified mortgages, and the determination isn’t good for the consumer. While it is still the beginning of a new credit requirement, lenders are starting to refuse to refinance any customer who currently has a modified loan. Research with lenders shows significantly more restrictive guidelines for refinancing mortgages that were previously modified for the purposes of assisting the borrower (defined as “restructured loans” by Fannie Mae and other investors).

Simply put, if you have a “modified” mortgage loan, expect that you may not be eligible to get refinanced in the future!

(Definition: A restructured loan is one in which the terms of the original transaction have been changed, resulting in absolute forgiveness of debt or a restructure of debt through either a modification of the original loan or origination of a new loan that results in one or all of the below:

  • Forgiveness of a portion of principal and/or interest on either the first or the second mortgage.
    Application of a principal curtailment by or on behalf of the investor to simulate principal forgiveness.
  • Conversion of any portion of the original mortgage debt to a “soft” subordinate mortgage.
  • Conversion of any portion of the original mortgage debt from secured to unsecured.

Refinancing? Common mistakes to avoid

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Mortgage Interest Rates are near historic lows. You want to refinance?
Common mistakes, and what NOT To Do

There are a lot of things “not to do”. I will point out only the 3 most common mistakes I see people make.

  1. Setting an unrealistic goal. I always get inquiries from people who say something like, “I have a 30 year fixed rate loan at 5.875% and I will refinance ONLY when rates get to 4.0% with no closing costs”. Sometimes I call people back and say, “Why 4%? why not 3% or 2%? They say, “Well rates are not going to go that low”. Right and they are unlikely to go to 4% with no closing costs also (“no closing cost” loans typically cost anywhere from 1/2% to .75% higher than the going interest rate) You should first succumb to the fact that once you can lower your rate with no out of pocket expense, you should probably refinance. Don’t draw unrealistic interest rate lines in the sand. They get blown away too easily.
  2. The “Once rates start dropping, they are going to continue to drop and I’m smart and I am going to lock when rates hit the bottom of the market” syndrome. It is very hard to guess the interest-rate cycle, and pretty hard to catch the bottom. Remember that rates can rise fairly quickly.
  3. “If the rate goes down just another 1/8th percent, then I’ll lock” This one just kills me! I see people lose all the time over this theory. If your current rate is 5.875% and today’s rate is 4.875%. LOCK & CLOSE! Most people have what I call “interest rate block”. They get a rate stuck in their head, and that is the rate they want, no matter what. Most people fail to realize (and most loan officers fail to show them), that the difference on the average loan over 1/8th a percent is usually less than $15 per month. If you can save $150 per month on your loan at today’s rate, why gamble? Why hold out for another $15 when the odds are against you?

Don’t get piggy. Work with us. Set a goal and lock when it gets there. Are we going to hit the bottom? Probably not. Are we going to save you money? Yes. If you can save money with no out of pocket costs, than you have nothing to lose. If you want to gamble go to Las Vegas. It’s a heck of a lot more fun. Apply Now

Extra Tricks to Save Money When Refinancing

The purpose of most refinance loans is simply to save money. The goal is to minimize your expense over the life of the loan or to minimize your monthly payment in the near future.

If you can swing it, don’t roll every cost of refinancing into your new loan. Most people escrow for taxes and insurance. If you do, your current lender must give you escrow refund within 30 days of paying off their loan. Your new lender, be it us or someone else, must take the equivalent amount of money (or more) at closing to start the new escrow account.

Remember that you always get to skip a month of payments. If you close June 5th, your first new payment is August 1st.

Knowing this, paying some of your closing costs out-of-pocket will save you even more money in the long run. Why roll in $4000 in closing costs, when you really only need to roll in $2000 ($1000 escrow refund + $1000 missed payment = $2000). Paying that $2000 over 30 years doesn’t make sense if you don’t have too.

On the other hand, some people love the fact that they didn’t pay anything out of pocket to refinance, got a nice escrow refund check, then got to miss a mortgage payment. They use the ‘extra’ money to pay bills, go on vacation, etc.

Picking a Lender & Closing Costs

Shopping for a home loan is confusing. No matter what we’re looking for — from cars to refrigerators’ — there’s a built-in element of confusion. Why? Lack of knowledge. An unfortunate rule of thumb is that the less we know about something we need to buy, the more we can expect to pay for it.

Shopping for a mortgage in Minneapolis, St Paul, Duluth, Rochester, Madison, Milwaukee, and throughout all of Minnesota and Wisconsin is complex at best — even for the savvy previous home owner. Daily rate changes, time-sensitive lock-in periods, points, lender’s fees… plus the emotional element of probably the largest financial deal any of us will ever make. Throw in to this already murky stew the ingredients of tricky internet mortgage rate advertising, commissions for every officer, agent and broker who ‘helps’ in your transaction, and the obscure differences between ‘rates’ and ‘fees.’ It’s no mystery that many buyers settle for a home loan that exceeds their monetary means out of sheer exasperation!

Please review our information on closing costs and “BAD Good Faith Estimates“. There is currently a large number of fly-by-night lenders doing some incredibly misleading rate & closing cost advertising. Remember, if it sounds too good, it probably is! Also check out my article “Best Rate or Lowest Cost” for more loan comparison information.

The Bottom Line
Remember, the first rule is that there are no rules. You should refinance if it makes sense for you. Every person & situation is different. What makes sense for one family, may not make sense for you. Call me today to discuss your wants, needs, and goals. Together we’ll determine if refinancing makes sense for YOU.

Click here for more information on the actual loan process.
Click here for 10 Tips to a Smooth Closing
Click here for 10 Mistakes to Avoid

NAR fees are up, and I’m on a budget

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NAR fees are up, advertising costs are up, real estate sales are down, but as a Real Estate Agent, you need to find more clients, and you need to do it on a budget. Here are a few simple tools to increase your business and make more money from Joe Metzler at Cambria Mortgage, and the Mn Real Estate Daily Show.

Thoughts? Log in and Post!

MORTGAGES for SELF-EMPLOYED, and COMMISSIONED INCOME Clients

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MORTGAGES FOR THE SELF-EMPLOYED,   COMMISSIONED, or TIPPED INCOME Clients

Self employed individuals often ask … “Why is it so difficult to qualify for mortgage financing?”

Minneapolis, MN:  Self-employed borrowers, those who work on commission, or those who receive tipped income present one of the most challenging areas of mortgage underwriting. Qualifying self-employed people often requires significant extra time, energy, and patience. A fair and honest pre-qualification requires a special set of Loan Officer skills and expertise.

Long gone are the days when any Loan Officer could give a low doc, no doc, or stated income loan to a self-employed borrower, commission, or tipped income client without any training or special consideration.

Generally speaking, it’s tougher for the self-employed buyer to qualify for a mortgage because it is hard to answer the question: “What is your income?”

What did you earn, what did you write off? Taking advantage of tax laws to reduce income is great for reducing tax liability, but also shows you make less money, making a potential home mortgage loan approval difficult.

Next lenders are looking to see a income history. Is income increasing, decreasing, or stable? This all comes into play for self-employed, commissions, and tipped income home buyers and those same type clients interested in a refinance of their existing home loan.

Today, lenders are back to the old way of providing mortgage loans, and the vast majority of Mortgage Companies, and especially Mortgage Loan Officers are either afraid to work on a self-employed persons home loan, or simply lack the extra knowledge and skill required to get self-employed people a home loan.

Reading, understanding, and qualifying a buyer off of tax returns is not for the weak of heart, or unlicensed bank reps working at a call center.

Self-Employed and Commissioned DOCUMENTS REQUIRED:

Be prepared to send us the following documents. We will be unable to assist you or evaluate you mortgage loan qualifications without them:

  • Last two years personal tax returns (all pages, All schedules)
  • Last two years business returns if employed through a corporation (all pages, all schedules)
  • Current Year-to-Date P&L (Profit and Loss Statement) and Balance Sheet

We will also require the traditional standard home loan approval documents:

OTHER INCOME

  • Copy of most recent two (2) years W-2 statements (for you and any co-borrowers)
  • Copy of pay stubs covering the last (30) thirty days (for you and any co-borrowers)

ASSETS

  • Copy of most recent monthly bank statements (ALL PAGES. If it says “page 1 of 3”, I need all 3 pages no matter what is on them.
  • Copy of most recent statements on 401K, IRA, or Mutual Fund Accounts
  • Copy of most recent brokerage statement for any stocks, bonds or certificates of deposits (or copies of actual certificate)

LESS THAN 2-YEARS SELF-EMPLOYED? YES, it is possible… But it is an exception and NOT easy to get approved. You will need to have worked in the exact same field, with a similar income, and have at least 1-yr of self employed Federal Tax Returns