FHA Needs $1.7 Billion Bailout

FHA (Federal Housing Administration), provider of mortgage insurance of low down payment loans, is asking the Congress for $1.7 Billion from the Treasury to stabilize its long-term finances and cover potential losses from loans they insured from 2007 - 2009.  FHA is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.

The amount is higher than the estimate since it is now insuring fewer loans than before. Additionally, Obama administration expected the bailout since April and has proposed $943 million budget for bailout fund by Sept 30, but the requested bailout was almost double the expected.

This is the first time since the agency's inception that it has required money from the government for its Mutual Mortgage Insurance Fund (MMIF). However, this bailout is so much less than the nearly $200 billion that the mortgage giants Fannie Mae and Freddie Mac required to stay in business during the housing bust.

Fannie Mae and Freddie Mac have recently posted record profits.

FHA Commissioner Carol Galante stressed that the agency does not need to pay claims at this point. It still has more than $30 billion in reserves. However, the law requires the agency to have enough reserves to pay off all claims over the next 30 years.

Big percentage of FHA losses (around $70 billion), were from loans originated from 2007 to 2009 and from its reverse programs.

For any question, please don't hesitate to contact me.

Ways to Fund Your Down Payment and Closing Costs

Afraid that you won't be able to find the funds you need for your down payment or the closing costs to buy a home? Think again! There just might be some ways to find it.

You can buy a home with a 3.5% down payment through FHA (Federal Housing Administration) loan.  For conventional loan, you are required to have at least 5% down on the purchase of a home.

There are at least 5 different ways you can come up with the down payment and closing costs so you can buy a home:

1. Gift Money

Gift of funds or gift money is a monetary gift that is given by a relative or a close friend. He/she must sign a gift letter, provide a copy of a bank statement showing that he/she is financially capable of gifting the down payment money and he/she must show proof that the funds came from and has been withdrawn from his or her account and deposited to your account.

2. Loan from 401 (k) or Retirement Fund

You can borrow funds from your 401(k).  If you borrow, just keep in mind that it will be considered a loan and the lender will include it in your total debt obligations and include the total monthly repayments in your total debt-to-income ratio. 

3.  Sale of a Personal Asset

You can sell your car, stamp or coin collection, jewelry, art or an RV or any other assets you may have and use the proceeds from the sale to purchase your new home.  Take note, that you need to provide proof of the transactions. 

4.  Trust Funds, Lottery Winnings etc.

If you receive money from your trust funds, lottery wins or other means, you can use this money as a down payment and/or closing costs on the purchase of a home.

Again, all paper trails must be presented.

5.  Loans Made Against Assets

If you can secure your loan with an asset, then there's no problem in obtaining a loan as long as use these assets to secure your loan.  These assets can include stocks, bonds, mutual funds and real estate (separate from the property being purchased).

Funds borrowed from cash value of life insurance policies can also be used for down payment and closing costs. 

Consult with a mortgage lender if you will be receiving any funds to help you with the down payment and/or closing costs on the purchase of a home.  This will save you a HUGE amount of time and headache!

 

 

Loans Now Available To Previously Troubled Borrowers

FHA recently announced a new mortgage rule that will benefit borrowers that have experienced foreclosure, short sale, deed in lieu or bankruptcy.  In the new Back to Work - Extenuating Circumstance program, borrowers with a record of foreclosure, short sale, deed in lieu or bankruptcy will still be able to get a new FHA loan in 12 months instead of the standard three year waiting period.

For a borrower to qualify, they must prove that major economic event like job loss or at least 20% income reduction (for at least 6 months) was the main reason in losing their home.  Furthermore, borrowers will also need to prove that they have recovered from their situation and they must have a satisfactory credit score.  And lastly, potential borrowers will need to complete a one hour one-on-one housing counseling session.  BUT, borrower's MUST have a satisfactory credit score and in good standing prior to the said major economic event. 

Borrowers "MUST" satisfy the following criteria in a minimum of 12 months to be considered borrower with "SATISFACTORY CREDIT":

- No delinquency payments on rentals.
- No more than one 30-day late payment due to other creditors.
- No collection accounts/court records reporting (other than medical and/or identity theft)

Back-to-Work program is now available until September 30, 2016. Once the borrower qualifies the program, the same 3.5% minimum FHA required down payment will apply. Mortgage insurance and closing costs will also apply.

Reverse mortgages are ineligible for Back to Work program.  In reverse mortgage, the home owners can borrow money against the value of his or her home.  No repayment will be applied until the borrower dies or the home is sold.

However, even with the new Back to Work program, the final decision to lend the borrower is still up to the lender.  So, it is VERY important for the borrowers to prove that they can satisfy all requirements for them to be able to obtain a loan. 

If you want to fast-track your home ownership but has trouble in obtaining a loan because of your previous record, then I can help. Don't hesitate to call.

FHA, Bailout is Still a Possibility

As a result of the housing crash, private investors pulled out of the housing market.  FHA, the government mortgage insurer, helped stabilize the housing market.  Its market share increased to 25% from 3% market share during the boom. A lot of first time home buyers have turned to FHA to make home buying a possibility during the housing bust.  However, FHA's delinquency rate is still high at 8.22%, while the delinquency rate for all loans is at 5.88%.

It is hard for the low down payment market to get a loan without the help of the government.  The government helps make the availability of the capital on a large scale.  However, with mortgages getting more expensive, even with the help of FHA, home buyers may still have a difficult time afford a home of their own. And if the delinquency rate still goes up, then FHA might also need a bailout in the future.

If you're thinking of getting your new home, NOW is the time to act - before the rules get stricter and mortgage rates increase again. 

For more information on how to take advantage of the current market situation, please feel free to contact me.

The New 43% Loan Cap in Qualified Mortgage Rule

Getting approved for a mortgage loan has become so difficult as compared to few years back, prior to the housing collapse.  However, Federal regulators are issuing more new lending rules that could possibly make it harder for both existing and potential borrowers to obtain loans.  Effective January 10, 2014, Consumer Financial Protection Bureau (CFPB) will implement the new Qualified Mortgage (QM) Rule. The new QM rule will require new borrowers to have a debt-to-income ratio (DTI) not exceeding 43.

The new lending rules will limit potential borrowers from taking out a mortgage or refinancing an existing one that puts their overall household borrowing at more than 43% of their income. The Debt-to-income cap of 43% means that all the debt expenses (this includes total mortgage payment) do not exceed 43% of the borrower's gross income (income before taxes). That new debt cap also includes a wide swath of common forms of debt that count toward the total, including student loans, most fees and points related a home purchase, and property taxes. It also tightens rules on documentation, and lenders who improvise to give customers easier terms will be open to consumer lawsuits if the loans go bad. (Source: http://money.usnews.com/money/personal-finance/mutual-funds/articles/2013/08/20/fewer-easy-mortgages-under-us-consumer-agency-rules)

The following groups may be affected by the new Qualified Mortgage rule:

- First time home buyers, especially those who are carrying college loans.  College loans will be counted towards the 43% debt-to-income cap.
- Home owners that want to refinance but lost their equity due to the housing bust.
- Retirees with limited savings.

The new credit restrictions can result to a more expensive, harder-to-arrange loans or outright disapproval for qualified borrowers.

With mortgage interest rates on the rise, increase in house prices and combined that with tightening credit standards, how can a average Joe afford the American dream of owning his own house?

If you want to own your new home, NOW is the time to act! In 4 months, the new Qualified Mortgage rule will take effect and acquiring a home may be more expensive and more difficult by then. If you want to take advantage of the more relaxed rules and buy your new home, please feel free to contact me.

Closing Down Fannie Mae and Freddie Mac Could Increase Mortgage Rates

Home buyers will feel the burden of increase in mortgage rates once the Congress shuts down both Fannie Mae and Freddie Mac, the government-controlled mortgage guarantee giants that were rescued by a $187 billion taxpayer bailout during the financial crisis. (Source:http://realtormag.realtor.org/)

The House Financial Services Committee passed a bill called the PATH (Protecting America's Taxpayers and Homeowners) Act which would mean phasing out the two mortgage giants - Fannie Mae and Freddie Mac. On the other hand, the Senate's bipartisan plan would also phase out Fannie and Freddie but, unlike in the House, the federal government would remain as an insurer of last resort. In the House bill, there is no plan to get the federal government involved in mortgage financing except through a much-modified FHA. (Source:http://realtormag.realtor.org/)

Both proposed bills would phase out the two mortgage giants in a 5-year time frame, limit the government's intervention into "just" guaranteeing mortgage securities and at the same time transfer the mortgage financial risks from the government to the private sector - this will prevent the use of taxpayer's money for future bailouts again. Once the Congress shuts down Fannie Mae and Freddie Mac, borrowers will be paying a slightly higher mortgage rates.

According to Mark Zandi, chief economist at Moody's Analytics, on a $200,000 loan with 20% down payment, typical borrowers could pay about $75 extra per month in interest payments in the Senate's bipartisan plan. While borrowers could pay $135 more under the House plan. Adding up all the extra monthly payments all through out the life of the loan could sum up to a significant amount for the borrowers.

If you have questions, please feel free to contact me. I will gladly assist you in achieving your dream of owning your new home at the least possible cost for you!

Buy-to-Rent is Anticipated to Grow

Buy-to-Rent Market is set to have a major growth in the coming years, according to Morgan Stanley Housing Research Report. Morgan Stanley analysts predict that the buy-to-rent market will grow from $17B today to more than $100B in the future.

Morgan Stanley analysts recommend four different ways investors can take advantage of the current Real Estate market:

1. Invest in a single-family real estate.  This is the most popular type of home among renters.
2. Invest in home rehab company investments. Although Morgan Stanley analysts predicts that this strategy will be less successful.
3. Invest in mortgage lenders.
4. Invest in non-agency mortgage bonds with front-pay tranches that benefit from an institutional investor base.

With interest rates still at historic lows, Real Estate is still a wise investment.  And mortgage lenders are also easing on the borrower requirements.  NOW, is definitely the right time to get into the Real Estate business.

If you are interested in investing in Real Estate, please feel free to contact me. I will be happy to help!