Tahiti... That would be nice.

Honestly, if I had a dollar for every time I’ve had to try to answer these questions over the last week – I could quit doing loans and take a long trip to Tahiti.  That would be nice…

Nevertheless, the question(s) still remain – what is going to happen on November 30th, 2009?  Will the world end as we know it?  Here’s what I think, combined with a little fact and other things I’ve read…

I believe the $8,000 first-time homebuyer tax credit will end as planned on November 30th.  Although there are several bills introduced in congress that include some sort of extension, expansion or modification of the tax credit – they are all (for the most part) stalled in one committee or another (and we know how that goes…).  At this point, the reality of actually passing a bill that would become effective in time to curb the expiration of the current tax credit seems to be slightly less than “slim to none”.  So, my advice to ALL first-time homebuyers is to take advantage of the opportunity while it exists.  You may have heard it from your parents over and over again, “A bird in the hand is better than two in the bush.” – in this case, those are word to live by.  There are absolutely no guarantees that the government will continue this program – especially once they start looking at recouping the $787B that they just got done spending…

Besides…  You may have heard – they’ve moved on to health care reform.

AND…  The economy is recovering (sic)

The fine line…  What you’re NOT supposed to know:

Here’s the reality – nobody wants potential homebuyers to know what’s going to happen with the tax credit.  Simply stated, there is a lot of concern that if the credit is extended, those potential buyers that are “ready, willing and able” to buy a home right now will decide to sit on the fence for a bit and wait for the “right moment” (whatever that is…).  So, the expiration of the tax credit creates a cause for urgency in consummating a transaction now – and that’s what the market desperately needs.  Buyers.  So, don’t expect anybody to actually break the code of silence on the tax credit.  Nobody wants to be single-handedly responsible for wiping out the progress (however minimal it is) of the housing market.

The crystal ball…  Your fortune revealed:

What it amounts to is this – once the deadline for the tax credit arrives, the pressure will really be on to act.  The true test of the strength of the nation’s housing sector will come in December (after the credit expires).  If people are still buying, there is justification that the tax credit really isn’t necessary.  on the other hand, if the housing market tanks – well, something will have to happen.  The question is, what? The answer, in my humble opinion – is a renewed tax credit.  And, although we may be hoping for the rumors to be true (a $15,000 tax credit for ALL homebuyers – which would be as nice as Tahiti…) – I think in all likelyhood, we’ll get more of the same (but, that’s where the crystal ball gets a little hazy).

Sound advice in an unsound market…

Despite what you may be “feeling” about home values, tax credits, the stock market and/or the economy as a whole – the time to act is NOW!  If you’ve been looking for a new home, or thinking that you’d like to purchase a home – there is no time like the present.  If you have any questions, refer to paragraph 4, sentence 5 of this article.  The opportunities may not be around for much longer.  Be it the tax credit for first-time homebuyers, low mortgage rates and/or great deals on prime properties.  Otherwise, you may find yourself saying, “should’a, could’a, would’a” in the end.

HUD will be changing some key guidelines to the FHA Streamline refinance programs as of November 18th, 2009.  All in all, these changes aren’t necessarily “bad” or “unwarranted” – but, they may prevent some consumers from taking advantage of a lower payment or interest rate on their home loan.  Some of the specific changes are as follows:

Seasoning

At the time of loan application, the borrower must have made at least 6 payments on the FHA-insured mortgage being refinanced.

How this affects you: Typically, most mortgage brokers/lenders don’t try to refinance a customer within 6 months anyways – but, I have run across the sparse few that continue to do it every 4-6 months for their clients which continually rolls up the overall loan balance until it becomes completely “out-of-whack” with the home’s true value.  However, if rates were to suddenly drop, it may prevent you from being able to refinance when the rates are most beneficial (at least on a streamline product).

Tangible Net Benefit

Reduction in Total Mortgage Payment: The new total mortgage payment is 5 percent lower than the total mortgage payment for the mortgage being refinanced. Example: Total mortgage payment on the existing FHA-insured mortgage is $895; the total mortgage payment for the new FHA-insured mortgage must be $850 or less.

How this affects you: HUD now stipulates the specific amount (by percentage) that qualifies for you to receive a “tangible net benefit” from refinancing your loan.  I do agree with the philosophy – however, I do believe it omits certain factors of true benefit in some transactions.  For some people, it is as simple as skipping a mortgage payment (which can help them get caught up with other bills), or others may believe that saving as little as $25/mo. is enough to justify refinancing.  So, although this isn’t necessarily “restrictive” – it is somewhat of a “one size fits all” approach.  What it amounts to is that you might not qualify unless you’re saving what is deemed to be “enough” by HUD.

Sourcing of Funds

If assets are needed to close, the lender must verify and document those assets.

How this affects you: One of the big advantages of doing a streamline program is the minimal documentation requirements that are necessary.  The philosophy being that if you’ve made all of your payments on time (at least for the last 12 months) then, you can probably afford to continue to make lower payments on the same loan at a better interest rate.  Seems logical.  However, with the new guidelines in play – it will be the “norm” to require “cash-to-close” for streamline transactions due to the new maximum mortgage calculations (see section Revised Streamline Refinance Transactions WITHOUT an Appraisal).  It hasn’t been required to source the funds to date (which typically amount to making your mortgage payment at close).  However, now they want to know where you plan to get the mortgage payment from…  So, this will ultimately end up operating very much like a full documentation loan.

Maximum Mortgage Amount (This is the big one…)

Revised Streamline Refinance Transactions WITHOUT an Appraisal

The maximum insurable mortgage cannot exceed:

(1) The outstanding principal balance[2] minus the applicable refund of the UFMIP,

PLUS

(2) The new UFMIP that will be charged on the refinance.

Revised Streamline Transaction WITH an Appraisal

The maximum insurable mortgage is the lower of:

a) Outstanding principal balance [2] minus the applicable refund of UFMIP, plus closing costs, prepaid items to establish the escrow account and the new UFMIP that will be charge on the refinance;

OR

b) 97.75 percent of the appraised value of the property plus the new UFMIP that will be charged on the refinance.

Discount points may not be included in the new mortgage. If the borrower has agreed to pay discount points, the lender must verify the borrower has the assets to pay them along with any other financing costs that are not included in the new mortgage amount.

[2] The outstanding principal balance may include interest charged by the servicing lender when the payoff is not received on the first day of the month but may not include delinquent interest, late charges or escrow shortages

How this affects you: The previous guideline on this allowed for the maximum mortgage to be the original loan balance plus the new UFMIP.  As a result, if you had been in the loan for a few years, there was sufficient equity in the transaction to allow for origination costs to be paid (in turn allowing the lender to extend a lower rate to the customer).  The new guideline does not allow for any costs to be “rolled in” to the loan amount (closing costs or others) which will inherently lead to most people not being able to afford the closing costs out-of-pocket, or not be able to take advantage of the lowest possible rates.  In addition, you will now be required to show your lender “where you are getting the money from” – which effectively nullified the basic principal of a streamline transaction.

To sum it all up…

Essentially, HUD wants to almost begin fully documenting FHA streamline loans.  Which (after the poor performance of mortgage-backed securities over the past few years) is reasonable.  However, it stands to reason that they are “punishing” (for lack of a better term) people that have performed well on their mortgage and have an opportunity to save a few dollars per month (which could, and likely would be spent other places – inevitably helping stimulate the economy).  The unfortunate part is – these changes ARE coming and we MUST learn to live with them.  The fortunate part is – you now about them and have the opportunity to act now to streamline your loan if you so choose.  So, if you’ve been considering refinancing your FHA loan – the time to act is BEFORE November 18th, 2009.

For more information, visit the HUD website at: http://www.hud.gov – or, to view the full Mortgagee Letter go to: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-32ml.doc 

The purpose of this post is to ask a very simple question that I think really lies at the core of the Agent/Lender relationship.  Sure, any lender is willing to promise the world to an agent in order to establish or maintain a relationship as a “preferred lender“.  But, at the end of the day the same old adage rings true – people do business with people they like.  The question is, why do you like them?  Or, what have they done for you… Lately?

How can we be better?

Looking at all of the marketing materials that are offered by various brokers & lenders – it seems like they all promise the same thing…  “Great Low Rates“, “Fast Closings“, or “Better Service“.  I’m curious how EVERYBODY can have that!?!  It sure doesn’t seem true most of the time anyways, does it?

So, how can you as a real estate professional make the best use of the Agent/Lender relationship?  What can help your business grow the most?  Is it access to daily rates, weekly rates, etc?  Is it somebody that treats your clients with the same respect that you would give them?  Or, is it the guy you’ve known forever that just seems to get it done (most of the time…)?  Beyond that, what is it that you WANT from a lender that can help you take your business to the next level?

(Your comments are greatly appreciated!)