Fred's Mortgage Blog

The HOPE for Homeowners (H4H) loan modification program was changed last week by HUD. HOPEfully, these changes will invigorate the program with the jumpstart that it needs to make it more viable. Possibly it will become the way to help more distressed borrowers refinance into affordable, government-back mortgages that it was designed to do. Foreclosure avoidance is possible.

At the risk of gathering the ire of Jeff, the Mortgage Man, again, I didn't think the program would work the way it was written and it hasn't. HUD is already making changes to the program because they had only received 111 application nationwide according to a recent blog by CNBC's Diana Olick.

The changes are supposed to reduce the program costs for consumers and lenders alike while also expanding eligibility by driving down the borrower's monthly mortgage payments.

Modifications to HOPE for Homeowners include:

• Increasing the loan to value ratio (LTV) to 96.5 percent for some H4H loans;
• Simplifying the process to remove subordinate liens by permitting upfront payments to lien holders; and
• Allowing lenders to extend mortgage terms from 30 to 40 years.

"These changes will further encourage lenders to take a hard look at this program before heading down the path to foreclosure and will provide families with another resource to refinance into a loan they can afford," said FHA Commissioner Brian D. Montgomery. "HOPE for Homeowners will continue to serve as another loss mitigation tool that can be used to help families keep their homes."

HOPE for Homeowners will only be available as government-insured fixed rate mortgages, based on a family's long-term ability to repay the mortgage. Only owner-occupants are eligible for FHA-insured mortgages.

As I stated in my previous blog, the H4H program left a lot to be desired in getting the current mortgage holder to want to participate. It was fairly apparent that the mortgage holder would make out nearly as well if not better by going through with the foreclosure. This change should help in that perception. Jeff and I clearly disagreed as to what subordinate lien meant in the original wording. I think this change makes that pretty clear. "Clearly, meaningful changes were needed. These modifications should increase lender participation and help more families who are having difficulty paying their existing mortgages, but can afford a new affordable loan insured by HUD's Federal Housing Administration," said U.S. Housing and Urban Development Secretary Steve Preston.

The program will increase the loan-to-value ratio (LTV) on H4H loans to 96.5 percent for borrowers whose mortgage payments represent no more than 31 percent of their monthly gross income and household debt no more than 43 percent. This change will expand the number of eligible borrowers. Raising the loan-to-value ratio reduces the gap between the existing loan balances and the new H4H loan and decrease losses to the existing primary lien holders. Alternatively, the program will continue to offer borrowers with higher debt loads a 90 percent loan-to-value ratio on their H4H loans. This LTV ratio will include borrowers with debt-to-income ratios as high as 38 and 50 percent. In conjunction with the LTV change, H4H will eliminate the trial modification that was previously required. This measure was too complicated and required delicate (to say the absolute least) negotiations among the existing lien holders, the new H4H lender, and the borrower.

H4H will offer subordinate lien holders (I continue to read this as 2nd and 3rd lien holders, not the 1st lien holder) an immediate payment in exchange for releasing their liens, to permit more borrowers access to the program. Previously, subordinate lien holders who released their liens were only eligible to receive a small recovery payment when the home owned by the H4H borrower was sold. Given the amount of time that would pass between the creation of the H4H and the ultimate sale of the home, as well as the tremendous market uncertainties, subordinate lien holders were not guaranteed any return at all. To address this problem, the subordinate lien holders may now receive an immediate payment at the time the H4H loan is originated.

To assure that borrowers are put into the most affordable monthly payment possible, HOPE for Homeowners will permit lenders to extend the mortgage term from 30 to 40 years. For borrowers with very high mortgage and household debt loads, extending out the amortization period may reduce their monthly payments enough to make it possible for them to qualify for this rescue product and save their homes.

Consistent with statutory and regulatory requirements, borrowers must continue to meet the following criteria:

· Their mortgage must have originated on or before January 1, 2008.

· They cannot afford their current loan.

· They must have made a minimum of six full payments on their existing first mortgage and did not intentionally miss mortgage payments.

· The loan amount may not exceed a maximum of $550,440.

· The Upfront Mortgage Insurance Premium is 3 percent and the Annual Mortgage Insurance Premium is 1.5 percent.

· The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.

· They do not own a second home.

· They did not knowingly or willfully provide false information to obtain the existing mortgage, and they have not been convicted of fraud in the last 10 years.

· They must follow FHA's long-standing and strict policy of fully documented income and employment.

In my original blog post on Oct. 16, we had a heck of a discussion. On Nov. 1, one response was from a participating lenderthat said they were attending training on Nov. 13 & 14. No post as to the results of that training yet. I have no doubt they are buried in work from that meeting....but inquiring minds want to know. lol

Here is a quote from Mark MacKenzie in Phoenix that I thinks sums up another problem with the program: ".... this proposal assumes that the borrower could even afford a new FHA 30-year fixed rate mortgage as opposed to the teaser rate that they originally purchased the property with.  There is a reason why they didn't use this type of financing in the first place, they couldn't afford it."

I searched the blogs on Active Rain and haven't seen anything recent that has addressed my original issues about lenders, rates and whether or not the program was viable. I would still like to know what the rate on this is supposed to be. With the increased mortgage insurance premium, even with the lower loan amount, the rate is crucial to affordability. The FHASecure has a significantly higher rate, won't the H4H have the same type of rate? Higher? Lower? The Same? I have posted blogs recently about the modification programs started by Fannie Mae, Freddie Mac, CitiBank, JP Morgan Chase and IndyMac (FDIC). I think those programs have more chance of succeeding than the H4H. So, I guess, I will wait and see.

I still have a lot of difficulty with the program. No national lender, so far, to my knowledge has rolled out the program to their brokers and investment partners. I have heard rumors of this happening soon. So far, I have no lender partner to sell this loan to or to even price the loan. I know there are lenders taking H4H applications now, but I won't until I know where and how to place the loan. The big statement on the HUD site is that you must have agreement from your current lender before you can do this loan. It is a voluntary program and the current lender is not being forced to participate. I hope this adjustment helps make the program work up to its name, "Hope for Homeowners," but I will continue to withhold judgment.

There has been discussion on the blogs about why FHA loans are coming to prominence, but I haven't seen a side by side comparison, so I thought it was about time that we did that. FHA Mortgage Loan vs. a Conventional Mortgage Loan with a limited down payment. How do they compare?

First, the assumptions, you can't make a comparison without knowing what the parameters are. Needless to say, these are arbitrary, but fair to both types of loans. I am also going into this without knowing the result, just knowing my product. Here they are:

                                                 FHA                                        Conventional

• Purchase Price                  $200,000
• Down Payment                 3% FHA                                 5%
• Credit Score                       620
• Taxes                             $1800 year
• Insurance                         $300 year            
• Interest Rate                     6% FHA                           *7.25% + .5% cost
• UFMIP                                  1.75%                                    0
• Monthly MI                        .5% (82.05)                          1.2% ($190)
• Seller Pd C/C                      $6,000                                   $6,000

• Gross Loan                          $197,395                              $190.000

   
• P&I                                  $1183.48                              $1296.13
• Taxes                              $  150.00                              $  150.00
• Insurance                        $    25.00                              $   25.00
• Monthly MI                       $    80.83                              $  190.00

• Total Payment                   $1439.31                               $1661.13
• APR                                    6.537                                     8.479

 * Credit Score Adjustment

So, first glance, FHA wins hands down.  Part of this is due to Credit Score adjustments, so what happens if credit is excellent? Rate and MI changes for conventional, FHA stays the same. Monthly MI changes to $148.83 and rate changes to 6%/APR 6.871. So, conventional payment is now $1462.98 plus an additional $4,000 in down payment in both cases.

Additionally, standard closing costs are about 3.5% of the purchase price, and this can vary quite a bit depending on taxes, insurance, flood insurance, inspections, etc. With a conventional 5% down, you are limited to 3% of the purchase price. With FHA, you can have up to 6% of the purchase price for closing costs. That means you can use part of that to buy the rate lower and have even a better deal.

Now, to me, this means that overall, FHA mortgage loans beat conventional mortgage loans when you have a limited down payment. If you have 20% down and good credit, this comparison changes dramatically, but how many people have 20% down in this market.

Rates and terms subject to change without notice. Maximum loan amounts vary by state, county, and property type . Subject to review of credit and/or collateral; not all applicants will qualify for financing. It is important to make an informed decision when selecting and using a loan product; make sure to compare loan types when making a financing decision.

 authored by Fred Chamberlin, senior mortgage consultant,

Eugene/Springfield Oregon, 541-342-7576 

I think that Gerry summed up for me about why I am in this business too. There is nothing like helping someone get into their first home and the USDA program is fantastic with so much of our area qualifying for the program. Thanks Gerry!

I thought a long time (for me anyway) about whether to write this blog or not. I didn't want to come across as if I were tooting my own horn just to hear it toot. I changed my mind about that when I was talking with a Realtor® that I really trust on the Springfield Board of Realtors® and she convinced me that it was the right thing to do, so here it is.

On Tuesday, the Springfield Board of Realtors® (SBOR) announced their 2008 Affiliate of the Year and it was me. To say that I was surprised was an understatement. For one of the very few times in my life, I was speechless. All I could say was, Thank You! For those that know me, I am as wordy in person as in my blog.

Why is this important? I joined the SBOR, not as an affiliate member as part of my company, but as me. At the time, I was working for a national bank but I wanted to be part of the vibrant city that I live in. I am a proud resident of Springfield and support the growth plan for the city that is being helped through SBOR.

The definition of affiliate (noun) is: to associate oneself; be intimately united in action or interest. There are a lot more listed, but this sums up my position. I really like the "intimately united" part, because we are. We are all pulling for the growth of our city, county and state.

I like the people I associate with on SBOR, they are honest, hard working, caring and capable people. So, again, Thank You, Springfield Board of Realtors. This is an honor I will long remember.

Fred Chamberlin, senior mortgage consultant, Springfield/Eugene Oregon, 541-342-7576

I know this is going to be a company by company thing, however, my company has announced that they will not be accepting loan locks on FHA "increased" loan limits after December 5, 2008. This means that any FHA Real Estate Loans going into our system after that date must conform with the 2009 FHA Loan Limits.

Since Lane County will be falling under the new minimum FHA Loan Limit of $271,050, from our current limit of $343,750, this will be a reduction of $42,700 in loan amount. At this time, I am not aware of other lenders cut off date for acceptance of the enhanced loan limit. I am sure this information will be forthcoming. I expect most lenders will be following pretty closely to this announcement.

Customers on the fence regarding their purchase in this price range should make certain they don't get left at the terminal when the train pulls out. Also of note, FHA minimum down payment goes up Jan. 1, 2009 to 3.5% from the current 3%.

Feel free to call me to discuss options under this program. I am always available for advice or just to talk.

authored by Fred Chamberlin, senior mortgage consultant, Eugene/Springfield Oregon, 541-342-7576

Dave Woodson is a mortgage professional in Indiana and has hit the nail on the head about using professionals. You wouldn't try to fix a broken circuit box, why try to sell your own home.

The City of Springfield administers a program to help low to moderate income purchasers get into their first home. It is called SHOP which stands for Springfield Home Ownership Program. This assistance program was created to encourage home ownership in Springfield by assisting low income residents with their first-time home purchase.

The Springfield home ownership program is designed to help first time home buyers with the down payment and closing costs in their purchase. A $10,000 interest free, payment free second mortgage is available for this purpose. The loan is accepted by FHA as a viable method of obtaining down payment money and is also accepted on some conforming products.

Prospective SHOP recipients are required to complete The ABC's of Homebuying seminar. The course is designed to help you decide if buying a home is right for you and to understand the home buying process. The class is presented by NEDCO (Neighborhood Economic Development Corporation) and taught by experienced volunteers. The class is generally scheduled for one Saturday each month. Please check NEDCO for details.

Basically, the rules are pretty simple. First, the buyer must qualify based on income, currently from $31,100 to $51,500, depending on family size. Next, you must be pre-approved for a loan program that will accept this form of down payment and closing cost assistance. SHOP most often works best with an FHA loan, but I have also used it with a VA loan. The conventional loans are a bit harder, but can be done if the credit is good. It may or may not work with an FHA 203k streamline. The FHA program will accept SHOP but SHOP might not accept the repair option.

Then, find the house that suits you. If you need a Realtor, I am more than happy to recommend one.  There are housing requirements. For instance, it must be owner occupied or vacant, unless you are renting it. The program funding these loans does not want to force current renters out on the street. SHOP has funds at this time, but that is subject to change as the funds are used. However, it appears unlikely that the Springfield program will run out of money. Here is the link ot SHOP.  Please note the list of lenders is dramatically out of date. A lot of the lenders on the list don't exist any longer. We, Alpine Mortgage Planning, are approved to work with the program.

Buying a home is a major step in anyone's life. That is one of the reasons the program requires the ABC's of Homebuying seminar. It is a great program for anyone to partake, even if you aren't applying for one of these loans.

 These programs are funded with money from HUD and are excellent ways to help first time home buyers. With the elimination (probable) of the Down Payment Assistance (DPA) programs, we need to find every way possible to help our new buyers in this market place.

One interesting side note if the buyers has a non occupant co-buyer on an FHA loan, the co-buyer can help the buyer qualify (income) for the primary loan but that income is not counted for qualifying for the secondary loan. Additionally, all household income is counted when determining if someone qualifies for the no interest loan. There are, as always, some exceptions. I am always here to answer questions. Also, this program requires an investment of $1,500 from the buyer. This can be a gift. 

authored by Fred Chamberlin, senior mortgage consultant, Eugene/Springfield Oregon, 541-342-7576

I got an interesting e-mail this weekend from the Federal Bureau of Investigation. I was really surprised to find out (according to the e-mail) that they had an AOL address. I guess they needed the SPAM protection.

Anyway, the e-mail proceeded to tell me that they had been monitoring an illegal transaction between me and a Nigerian entity. Then gave me instruction on what I needed to do to keep out of trouble with the FBI and help with our national security.

Of course, I followed their instructions to the letter (tongue in cheek time) and sent my financial information as soon as I could so that we could capture these bad guys. Really, what I did was forward the e-mail to the FBI which is at FBI.gov, not an AOL address afterall.

It is really interesting what one of the last paragraphs had to say: "

"Since the Federal Bureau of Investigation is involved in this transaction, you have to be rest assured for this is 100% risk free it is our duty to protect the American Citizens. All I want you to do is to contact the ATM CARD CENTER via email for their requirements to proceed and procure your Approval Slip on your behalf which will cost you $250.00 only and note that your Approval Slip which contains details of the agent who will process your transaction.

CONTACT INFORMATION
NAME: MR. DANIEL SMITH
EMAIL: danielsmithng@yahoo.xxx (I didn't want anyone to accidently send an e-mail)

This e-mail is a continuation of the old Nigerian Letter scam that actually started with a real letter, post to post. It originated in Nigeria because their banking regulations are such that once the money hits their shores, it is gone forever. I am always surprised when I hear of someone falling for one of these e-mails, obviously they don't remember their parents telling them, "If it sounds too good to be true, it probably is!" So, this is just a bit of a warning, their e-mails keep turning up, using different locations and now using the FBI. Spoofs (attempting to get personal information) are big business and you should always report them to the bank, agency or company being spoofed. Most large organizations have a dedicated e-mail with something like spoof@company.com.

Just be careful of your information and when asked for personal information in an e-mail, check to make sure it is coming from where you think it is. E-mail addresses can be misleading.

authored by Fred Chamberlin, senior mortgage consultant, Eugene/Springfield Oregon, 541-342-7576

Sandy Shores from Florida has some insightful information about what it takes to re-educate those that take the media at face value. This is an excellent post. If you have comments, I suggest you give them to her. Thanks,

I got the news yesterday that Frontier Home Mortgage was closing in Eugene. Since they are in the same building as us, that was communicated though the grapevine that all buildings seem to have. I am not sure how long Frontier was in business but I know they were in operation when I started as a lender in Eugene and that was in the Stone Age.

They had management change when the owner of the company Jay Dent, a Eugene mortgage pioneer, died a few years ago. Helping with the operation was his son, Mark Dent, and then Mark passed away also.

I just wanted to take a moment and say goodbye to a loyal competitor. You will be missed and I am sorry to see you go.

Authored by Fred Chamberlin, a senior mortgage consultant, Eugene/Springfield Oregon, 541-342-7576.