FANNIE MAE INTENSIFIES PENALTIES FOR STRATEGIC DEFAULTERS

Seven-Year Lockout Policy for Strategic Defaulters

We would like to share this current update on recent Fannie Mae policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. This change will affect homeowners who decides to do a “strategic default,” -- when borrowers are walking away from their homes based on the sheer fact that the property is currently worth less than what is owed, even if they are able to afford their monthly mortgage payments. This phenomenon isn’t looked upon kindly, as it unnecessarily adds to the growing number of foreclosures across the nation.

Under these changes, defaulting borrowers who walk away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the day of foreclosure.

In addition, Fannie Mae said it will take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company said it will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.

“We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, executive vice president for credit portfolio management. “Walking away from a mortgage is bad for borrowers and bad for communities, and our approach is meant to deter the disturbing trend toward strategic defaulting.”

On the flip side, Edwards said borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.

According to Fannie Mae, troubled borrowers who work with their servicers and provide information to help the servicer assess their situation can be considered for foreclosure alternatives, such as a loan modification, a short sale, or a deed-in-lieu of foreclosure. Fannie Mae said borrowers with extenuating circumstances who work out one of these options with their servicer could be eligible for a new mortgage loan in three years and in as little as two years depending on the circumstances.

Here is the verbiage from the FN Bulletin:

Currently, the waiting period that must elapse after a borrower experiences a
foreclosure is seven years. However, Fannie Mae allows a shorter time period –
five years – if certain additional requirements are met (e.g., minimum down
payment and credit score, and occupancy requirements).

These requirements are being modified to remove the five year option. Unless the foreclosure was the result of documented extenuating circumstances, which only requires a three-year waiting period (with additional requirements), all borrowers will now be required to meet a seven-year waiting period after a prior foreclosure to be eligible for a new mortgage loan eligible for sale to Fannie Mae."

Don't miss the section that says borrowers who have extenuating circumstances may be eligible for new loan in a shorter timeframe.

You can check out the full text of the announcement here: Fannie Mae's Selling Guide Announcement SEL-2010-05.

WILL THE NEW MORTGAGE DISCLOSURE ACT CHANGE YOUR CLOSING TIMES?

This news just in courtesy of one of our trusted lenders, Aaron Gordon at Bank of America: In an effort to provide consumer protection and transparency when the buyer gets a mortgage, the Government has made law changes to mortgage loan processing and disclosures that take affect on July 30, 2009. Referred to as the MORTGAGE DISCLOSURE IMPROVEMENT ACT OF 2009, it is part of the Government’s commitment to making sure borrowers completely understand the terms and conditions of their mortgages and are given ample time to review what they are agreeing to.

If you are a homebuyer, here is what you need to know about it.

These changes will affect the processing times of loans. By being proactive and understanding the new Act, your closing dates should still occur in the usual 30 to 45 day timeframes that it takes for a transaction to complete, thereby minimizing the added stress of delayed closings.

Initial disclosures must be provided to an applicant within three days of loan application. No fees can be collected during this three-day waiting period, except for a reasonable credit report fee.

When a borrower makes an application, the lender will present them with initial disclosures. The disclosure package includes the Good Faith Estimate, Truth in Lending disclosure, and other legal forms as required by law.

The lender will not be able to collect any fees for appraisals until the borrower has had at least three days after getting the disclosures for review. This means that the appraisal report cannot be ordered until after the three-day waiting period after initial disclosures.
The borrower must get these disclosures again at least seven business days before he signs his loan documents. If he doesn’t, the closing will be delayed until he does get them and the seven-day period for review has passed.

The borrower must be provided a copy of his appraisal a minimum of three days prior to his loan closing. If he doesn’t, your closing will be delayed until he does get a copy and the three-day window for review has passed.

Any increases in fees that result in an APR change of 0.125% of the loan amount require re-disclosure. The borrower must then get his new disclosures and wait at least three days for review to close. Once again, this is being done to make sure the borrower has time to review what he is getting and be comfortable with it.

What if there are “surprise” costs at closing time? When that happens now, if the numbers are too far off from what was disclosed, he will have to leave the closing table, get new disclosures, get time to review, and will be unable to return for three days.

The only exception to this will be if it’s an emergency, such as if the home will be foreclosed on.

Also, keep in mind that if you change lenders in the middle of the process, the new lender will have to start the disclosure process once again. Changing lenders in the middle of the transaction could result in lengthy extensions.

Many borrowers today are often too busy to come to the office to make the application. These borrowers do it conveniently by phone or online. In these cases, the disclosures are mailed to them. As a result, the timeframes and wait period will be slightly longer.
Most lenders are estimating these changes could add three to 10 days to your closing times. Please plan accordingly.

So, let’s say you want to close as quickly as possible. What can you do to be proactive and make sure the closing time is fast as possible?

1. Make the application with your lender in person.
2. Get a fully executed, clearly legible copy of the purchase agreement as soon as it’s available from the lender.
3. Be ready to pay for the appraisal when asked.
4. Prepare and be ready to submit all requested documentation (pay stubs, W2’s, bank statements, etc.) within a day or two of application.
5. Carefully review the disclosure package and notify your lender of any corrections immediately.
6. Lock your loan at the time of application or early in the transaction.
7. Choose a credible, reputable, ethical lender you can trust to honor the rates and fees they disclose. Surprises at the closing table will result in lengthy delays.
8. Choose a lender whom you have confidence in. Changing lenders while in escrow will result in a lot of these disclosure clocks starting over.
   

If you do all of the above, there is no reason that your 30 to 45 day closing times should be affected by this Act.

It’s important to understand that this Act has been put in place so the buyer has sufficient time to make good, sound, responsible decisions about his loan. It is not meant to delay the process but rather, when taken into consideration, should justify that the loan is for his best interest. If you need straightforward real estate advice or a referral to any of our trusted lenders, please contact The Dulcie Crawford Group at 702-285-1990.

MORTGAGE RATES REACH HISTORIC LOWS!

Many homebuyers are still on the fence whether to buy now or wait for rates and prices to go down further. The big question is: have we reached rock-bottom yet? That’s a question that no one can predict, and it is not going to be a simple answer as market conditions change on a daily basis.

The great news is, mortgage rates have reached an all time low and it would be most sensible to lock in the rates now if it fits within your budget. We have not seen rates like these in 52 years – and we don’t know how long this opportunity will be available to well-qualified borrowers. The bottom line is, do not take a chance and play a waiting game if you are ready to buy and has found a property you like.

The following information is provided by one of my preferred lender Aaron Gordon of Countrywide Home Loans:

“As the government announces more purchases of mortgage-backed securities, rates continue to plummet.

Interestingly, if you are still sitting on the sideline waiting for rates to drop further, the head of Freddie Mac came out this week and said he believes rates are at the bottom and any further drop will be minimal.

Plan on around:

• 4.375% WOW! (APR 4.508) FOR A 30 YR FIXED CONVENTIONAL LOAN with ONE POINT, NO ORIGINATION!
• 4.750% (APR 4.862) FOR A 30 YR FHA / VA LOAN, WITH ONE POINT, NO ORIGINATION!
• 5.750% (APR 6.024) ON A 30 YR JUMBO LOAN OVER $417,000 with ONE POINT, NO ORIGINATION!
• 5.125% (APR 5.262) ON A 5 YR JUMBO AR M with ONE POINT, NO ORIGINATION!

NO ORIGINATION FEE ON ANY OF THE LOANS ABOVE. These rates are for purchases only. Refinance rates are slightly higher.

NEW GUIDELINE ANNOUNCEMENTS THIS WEEK:

FHA announced new limits to cash-out refinances. They used to allow cash-out up to 95%. It’s now been lowered to 85%. Here are the rules:

• Must have owned the property at least 12 months
• You cannot be behind in your mortgage.
• You cannot have a non-occupying co-borrower to qualify for the new cash out limits.”

Here are more good news from Paula Clark, also a preferred Home Mortgage Consultant from Wells Fargo Home Mortgage:

“Friday's news showed that consumers are being understandably cautious with their finances, as the Personal Savings rate remained above 4% once again in February and among the highest savings levels seen in a decade.

Meanwhile, the government continues to make bold moves to help our economy. On Monday, Treasury Secretary Geithner unveiled a plan to remove toxic assets from financial institutions by using money from the $700 Billion TARP fund. The government will help mitigate the risk by offering private investors Billions of dollars in low-interest loans to help finance the purchases. Indeed, it's a bold strategy - let's see if it pays off!

And...there's room for cautious optimism on the economy, as good news was noted on several fronts last week. The housing market received good news when both Existing Home Sales and New Home Sales came in stronger than expected. Additionally, Durable Goods Orders for February came in better than expected, showing the first increase in six months, and the Core Personal Consumption Expenditure Index (Core PCE) showed inflation is presently at tolerable levels. Plus, the US Dollar received a boost when China said it will continue to purchase US Treasuries.

Bonds were jostled around mid-week, but home loan rates ultimately ended the week very close to where they began...near historic lows.”

You can read Paula’s full bulletin at http://www.mmgweekly.com/w/w.html?SID=81ca0262c82e712e50c580c032d99b60

Paula can be reached at tel. 702.868.3920, Cell 702.277.3554, email at paula.l.clark@wellsfargo.com, or on the web at http://paulalclark.com/.

Overall, the market is showing some robust activities in the last weeks. We at The Dulcie Crawford Group are always at the forefront to bring you the latest updates and will be happy to answer any questions you may have and assist you in your homebuying process. Call us today!

Nevada Department of Business & Industry Names Short Sales as One Alternative to Foreclosure

There are a number of ways that upside-down homeowners can avoid foreclosure. Short Sales are an important alternative among them.

SHORT SALE

In a short sale, you sell the house for less than you owe. You can't do a short sale without the lender's permission.

With a short sale, you make necessary repairs to the house; pay the real estate commission, taxes and government fees; and give the lender whatever money is left over -- a partial payment.

Read more...

If you want more information on Short Sales & Bank-Owned Properties, visit Understanding Foreclosures Las Vegas.

Short Sales and Your Credit Score

From a great article on Short Sales & Credit:

It is quite possible to do a short sale and still have decent credit afterwards. When you do a short sale, you can sometimes negotiate with the bank about two major issues: how they report your credit, and how whether they can go after you later for their financial losses.

The reason you can sometimes negotiate this is that you are not letting your house go through the foreclosure process and leaving it to the bank to deal with. When you do a short sale you are helping the bank. You are getting rid of a problem for them.
Most people don't realize that when they tell the bank that they are not going to be able to pay their mortgage anymore, the bank has a problem. And by selling the house, you are saving the bank tens of thousands of dollars they would otherwise spend going through the foreclosure process, getting the house back and fixing it up, marketing it and selling it.

Since you are doing this for the bank, you can make some requests in return. Especially if you have someone sharp helping you with the short sale.

If you want more information on Short Sales & Bank-Owned Properties, visit Understanding Foreclosures Las Vegas.

Credit Crunch Puts Squeeze on Specialized Mortgages

While the fact is that this is a buyer's market and a great time, especially, to invest in housing in Las Vegas, it is no fiction that lending has changed due to recent downturns and challenges in the banking industry. The LA Times had a great article yesterday discussing ways in which mortgages have changed in the past couple of years.

Highlights:

In a move scheduled to take effect for all loans delivered after Aug. 8, Freddie Mac will restrict financing to second-home and investment purchasers who already have "individual or joint ownership" interests in multiple properties. In the case of second-home buyers, they will be ineligible for new mortgages through Freddie if they have ownership interests in more than four properties securing debt, including the one they propose to finance.


Why the continuing rollbacks, and how long could they continue? Lenders and insurers are carefully studying the sources of their greatest losses from mortgage vintages between 2003 and 2007. In the areas where they see inordinate risk, they are reacting by eradicating that risk. Some of those high-loss loan products -- mass-marketed option ARMs with minimal down payments and "stated" incomes, for instance -- probably never will be seen again. Others are likely to return only with tougher underwriting standards and higher fees tied to credit and geographic risks.

Nehemiah Wins Court Support for Down Payment Assistance

Good news. The lawsuit brought by Nehemiah fighting a proposed US ban on seller-gifted down payment assistance won court support yesterday. Such down-payment assistance, a huge benefit for many homebuyers, will continue.

Fact Sheet: The Mortgage Forgiveness Debt Relief Act of 2007

President Bush Signs Legislation Protecting American Families From Higher Taxes When They Refinance Their Homes

"When your home is losing value and your family is under financial stress, the last thing you need is to be hit with higher taxes. So I'm working with members of both parties to pass a bill that will protect homeowners from having to pay taxes on cancelled mortgage debt."
─ President George W. Bush, 9/1/07

Today, President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007, which will help Americans avoid foreclosure by protecting families from higher taxes when they refinance their home mortgages. This Act will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. Under current law, if the value of your house declines, and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as income that can be taxed.

This Act will increase the incentive for borrowers and lenders to work together to refinance loans and allow American families to secure lower mortgage payments without facing higher taxes.

This Act Is A Good Step To Address The Housing Market, But Congress Has More Work To Do

Congress needs to complete work on responsible legislation modernizing the Federal Housing Administration (FHA). This bill will give FHA the necessary flexibility to help hundreds of thousands of additional families qualify for prime-rate financing.

Congress needs to pass legislation permitting State and local governments to help troubled borrowers by issuing tax-exempt bonds for refinancing existing home loans. Under current law, cities and States can issue tax-exempt bonds to finance new mortgages for first-time homebuyers.

Congress needs to pass legislation to reform Government Sponsored Enterprises (GSEs) like Freddie Mac and Fannie Mae. GSEs provide liquidity to the mortgage market that benefits millions of homeowners, and it is vital that they operate safely and soundly. The President has called on Congress to pass legislation that strengthens independent regulation of the GSEs and ensures they focus on their important housing mission.

The Administration Has Moved Forward On Targeted Actions To Assist Homeowners That The President Announced In August

The President and his Administration have launched a new initiative at the Federal Housing Administration (FHA) called FHASecure. FHASecure expands the FHA's ability to offer refinancing by giving it the flexibility to work with homeowners who have good credit histories but cannot afford their current payments. By the end of 2008, the FHA expects this program to help more than 300,000 families refinance their homes.

Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson have assembled the private-sector HOPE NOW alliance. HOPE NOW recently mailed hundreds of thousands of letters to borrowers falling behind on their payments and is supporting a toll-free mortgage counseling hotline, 1-888-995-HOPE.

HOPE NOW has developed a plan under which up to 1.2 million homeowners could be eligible for assistance. The HOPE NOW plan will help subprime borrowers who can afford the current, starter rate on a subprime loan, but would not be able to make the higher payments once the interest rate goes up.

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Are Stated Income Loans Illegal in Nevada?

NO!A Letter From Our Mortgage Lending Division Commissioner
by Aaron Gordon

I have gotten a lot of calls in the last few weeks from very nervous real estate agents who have asked me if stated income loans will become illegal in Nevada as of October 1, 2007 when the new Nevada Lending Law goes into effect.

Others have told them that they will be illegal and they are panicked.

These agents are wondering if they need to start looking for other careers as stated income loans are so prevalent in our city due to the number of "tipped" employees we have.

The answer in "NO!" Stated income loans are not illegal and will not become illegal when Assembly Bill 440 (Nevada Lending Law) goes into effect on October 1, 2007.

In a letter dated, Thursday September 13, 2007 to all Mortgage Banker and Broker Licensees from Joseph L. Waltuch, Commissioner of the Mortgage Lending Division in Nevada, he confirmed this.

Here are some parts of his letter.

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EXCERPTS FROM THE LETTER FROM COMMISSIONER WALTUCH:

The Mortgage Lending Division (the "Division") has become aware that there exists some confusion amongst licensees regarding certain amendatory language to the new Nevada Lending Law.

Effective October 1, 2007 it will be an unfair lending practice for a lender to:

"(b) Knowingly or intentionally make a home loan, other than a reverse mortgage, to a borrower, including, without limitation, a low-document home loan, no-document home loan or stated-document home loan, without determining, using any commercially reasonable means or mechanism, that the borrower has the ability to repay the home loan."

Many licensees have expressed concern as to the meaning of "commercially reasonable means or mechanism" in the context of determining that the borrower has the ability to repay the home loan.

This does not prohibit specific mortgage products or types of documentation that may be utilized in the making or underwriting of home loans.

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