3%-Down Payment Loans Make Strong Debut

Freddie Mac’s new mortgage product that allows borrowers to put down just 3 percent is off to a strong start, says Freddie Mac’s Chief Executive Donald Layton.

Lawmakers had expressed concern about Freddie Mac’s 3 percent down payment option loans, which debuted in March, arguing that it could lead to losses at the government-backed company. The Federal Housing Administration also supports low down payment loans but requires more insurance from home owners than Freddie Mac’s.

By the end of June, Freddie Mac’s post-2008 business has increased to 63 percent of its single-family credit guarantee portfolio. Also, its single-family serious delinquency rate – loans that have payments late by 90 days or more — stood at 1.53 percent in the second quarter, the lowest since November 2008 and below the national rate of 4.24 percent.

Source: “New 3%-Down Mortgage Off to ‘Good Start,’ Freddie Mac Chief Says,” MarketWatch (Aug. 4, 2015)

Why Buyers May Find Mortgages Easier to Get

Good news for potential home shoppers: A Mortgage Bankers Association index shows lender requirements regarding credit scores, down payments, and other key terms are finally loosening up. Some lenders are even expanding the types of mortgages they offer. These moves come after years of lenders tightening loan requirements.

The newly-released MBA index shows recent improvements in lending are mostly tied to the government’s efforts to ease regulations and improve affordability in the housing market. For example, mortgage financing giant Fannie Mae is now allowing purchases of conventional mortgages that have down payments as low as 3 percent; Freddie Mac is planning to do the same for mortgages closed on or after March 23.

Also, the Federal Housing Administration, which insures loans with down payments as low as 3.5 percent, reduced its upfront mortgage insurance premiums last month, which is expanding eligibility for home purchases to thousands of potential home shoppers.

Source: “Lenders Begin Easing Requirements to get a Mortgage,” The Los Angeles Times (Feb. 22, 2015)

HUD: ‘2015 Is Year of Housing Opportunity’

Housing and Urban Development Secretary Julian Castro sees big opportunity in the housing market this year, with the easing of credit opening the door to more buyers.

“I see 2015 as the year of housing opportunity, particularly home ownership,” Castro told CNN.  “A good example of that is the reduction in the FHA mortgage premium.”

Castro points to the recent move of the Federal Housing Administration, which reduced its insurance premiums from 1.35 percent to 0.85 percent. The reduction is expected to amount to about $900 per year for borrowers. Castro says the reduction in premiums will likely spur a quarter of a million more home buyers in the next three years.

Also in expanding home loan opportunities, mortgage financing giants Fannie Mae and Freddie Mac recently announced they will allow FHA mortgage premium to qualify for loans with down payments as low as 3 percent.

Source: “2015: The Year to Buy a House,” CNNMoney (Feb. 2, 2015)

FHA ‘Fee Cuts’ Expected to Boost Home Sales

What type of impact will the Federal Housing Administration’s move to lower insurance premiums really have on the housing market? Housing experts are making predictions that the lower fees could translate into thousands of new home sales this year and next.

The Federal Housing Administration recently reduced its annual mortgage insurance premiums from 1.35 percent to 0.85 percent. According to estimates by the National Association of REALTORS®, the lower rates could result in big savings over time for borrowers. For example, a borrower with a $200,000 mortgage could unlock a savings of nearly $1,000 over the first year. By year five, the borrower may have saved nearly $4,800, and over 30 years potentially about an $18,000 savings.

The FHA’s lower pricing will likely draw thousands of credit-worthy borrowers back into the market, NAR notes. NAR Research has estimated that the fee reduction will price an additional 1.6 million to 2.1 million renters, along with many trade-up buyers. This could result in 90,000 to 140,000 additional annual home purchases, NAR estimates.

Estimates by Moody’s Analytics shows the reduction in the FHA premiums could amount to 45,000 additional new- and existing-home sales in 2015, and that single-family housing starts will rise by 20,000 as a direct result of the FHA reduction in premiums. But the maximum impact of the FHA’s premium cut likely won’t come to fruition until mid-2016, according to Moody’s report. Then, it expects home sales to increase by 100,000 due to the FHA reduction, with 40,000 additional single-family housing starts in 2016 due to it.

Source: “Moody’s: FHA Premium Cut Will Increase Home Sales By 45,000 This Year,” HousingWire (Jan. 28, 2015) and “FHA Lowers Pricing to Reflect Less Risk,” National Association of REALTORS® Economists’ Outlook Blog (Jan. 8, 2015)

70% Unaware of ‘Loan Down-Payment Assistance’

Seventy percent of adults in the U.S. say they’re unfamiliar with down-payment assistance programs for middle-income home buyers in their community, according to a NeighborWorks America survey of 1,000 people. But plenty of help is available.

NeighborWorks organizations provided 6,000 buyers with more than $100 million in down-payment assistance last year. NeighborWorks expects to increase its assistance this year, too. Many local and state organizations offer down-payment assistance as well, and there are specialized programs for military vets through the Veterans Affairs loan program, for first-time buyers through the Federal Housing Administration, and for rural home buyers through the U.S. Department of Agriculture.

“Down-payment assistance programs make home purchasing more accessible for first-time buyers,” says Marietta Rodriguez, vice president of Homeownership Programs and Lending at NeighborWorks America. “In addition, because many down-payment assistance programs require home-buyer education, these purchasers tend to be more successful in the long-term. Research has shown pre-purchase counseling helps reduce mortgage default and equips home owners with the information they need to budget for other expenses and maintain their property.”

Source: NeighborWorks America

Sellers May Use their FHA, VA Loans as Marketing Tool

Home owners who have a mortgage insured by the Department of Veterans Affairs or Federal Housing Administration are often unaware of one feature: The buyers may be able to take over the home owner’s loans under the same terms. This prevents the buyer from having to take out a new mortgage, and may be an incentive that can be used as a marketing tool to sell a home — particularly at a time when mortgage rates are on the rise, The New York Times reports.

“You could now have a seller saying, ‘I have a great house to sell you and a great mortgage to go with it, which is better than my neighbor, who only has a great house,’ ” Marc Israel, an executive vice president of Kensington Vanguard National Land Services and a real estate lawyer, told The New York Times.

The advantage to buyers is that they may be get a lower mortgage rate by assuming the seller’s loan. It also can be cheaper than applying for a new one with fewer settlement fees. An appraisal is not required, but buyers must  prove their creditworthiness.

Another potential perk to assuming the seller’s loan may be that buyers then will be further in the amortization schedule than on a new loan, which could mean more of the monthly payment would go toward the principal.

Source: “Taking Over a Seller’s Loan,” The New York Times (Sept. 19, 2013)

Foreclosed Home Owners may get “Second Chance”

The Federal Housing Administration is giving some former home owners another shot at home ownership. The FHA sent a letter to mortgage lenders stating that it would offer mortgage insurance to borrowers who once filed for bankruptcy, or who lost their homes through foreclosure or short sale during the recession.

Still, potential borrowers must show they can meet all other FHA requirements and that they are no longer financially constrained. Borrowers also will have to undergo housing counseling and FHA is requiring lenders to verify that at least a year has passed since the foreclosure or “economic event” that caused the foreclosure or bankruptcy.

“FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage,” according to the letter FHA sent to lenders.

Source: “FHA offers mortgage backing to the once bankrupt,” HousingWire (8/16/2013)

Will the FHA need a Bailout?

The Federal Housing Administration may require bailout money from the federal government to stay afloat, media outlets are reporting. The FHA insures mortgage lenders against losses.

A high number of mortgage delinquencies is at blame, according to sources.

“The FHA insured nearly 739,000 loans that were 90 days or more past due or in foreclosure at the end of September, an increase of more than 100,000 loans from one year ago,” The Wall Street Journal reports. “That represents around 9.6 percent of its $1.08 trillion in mortgage guarantees.”

The FHA is expected to report later this week that it has run through its reserves and will require a government bailout, The Wall Street Journal reports. If this takes place, it would be the first time that the FHA has ever needed a government bailout. Your comments?

Source: “FHA Nears Need for Taxpayer Funds,” The Wall Street Journal (Nov. 14, 2012)

Rehab Home Loans are “Growing Among Lenders”

Distressed homes sometimes need a lot of work, and so more lenders are offering loan options to help home owners or investors rehab the properties, Inman News reports.

More lenders are offering 203(k) loans, which are backed by the Federal Housing Administration, for renovations. These loans provide funds for the rehabilitation and repair of single-family homes.

“With so many REO and foreclosure properties available today, renovation lending has grown from a niche product to one of the best financing solutions in today’s market,” says Doug Long, president of Prospect Mortgage Retail and Correspondent Lending, which is opening a new correspondent lending division to help lenders serve more customers who seek an Indeed, “with 70 percent of America’s housing stock being built before 1992 and too many foreclosed properties damaged and uninhabitable, we see a tremendous opportunity to meet the demands of an underserved market,” says Impac Mortgage President William Ashmore. Starting this month, Impac Mortgage is offering standard and streamline FHA 203(k) loans through its consumer lending division. The company has also teamed up with RenovationReady, which provides services to buyers who want to renovate or rehabilitate a home.

Source: “More Lenders Offering FHA 203(k) Rehab Loans,” Inman News (Sept. 14, 2012)

Report raises questions over “Racial Lending Disparities?”

Seven consumer advocacy groups say their analysis of mortgage data raises questions about whether lenders are steering minority borrowers into government-backed loans that are slightly more expensive than conventional mortgages.

The report looked at data disclosed by banks under the 2010 Home Mortgage Disclosure Act. “The findings indicate persistent mortgage redlining and raise serious concerns about illegal and discriminatory loan steering,” according to a recent report.

The majority of government-backed loans are issued by the Federal Housing Administration, allowing borrowers to make down payments of 3.5% and remains virtually the sole source of low down-payment mortgages for homeowners today.

FHA loans require borrowers to pay mortgage insurance premiums no matter how much equity they have. Conventional loans, meanwhile, typically require mortgage insurance when borrowers have less than 20% in equity. Insurance premiums vary depending on the borrowers’ credit score and other risk factors.

“It’s not that the [FHA loan] isn’t a good product,” said Spencer Cowan, vice president at the Woodstock Institute, a Chicago-based research organization. The problem, he said, is that “to the extent that a borrower who could qualify for conventional financing is instead offered an FHA product, that person is being disadvantaged.”

More information at source: http://blogs.wsj.com/developments/2012/07/19/report-raises-questions-over-racial-lending-disparities/