Eric McGowan

With all of the news it makes everyone think--- Hey, we have new rules and a new way to get the job done. WRONG!

I have gotten numerous calls about the new housing reforms and what is currently available. From what I have gathered the following rules reign true:

• Home-owner's can refinance Fannie Mae and Freddie Mac loans without appraisal in some instances making the value of the home a non-issue.
• Home-owner's will have mortgage insurance if the loan is over 80% of the value in the home.
• Current mortgage servicers will be the ones refinancing as it currently stands or modifying the borrower's current loan.

One caller yesterday actually informed me that she was to get no mortgage insurance, a rate of 4.25%, and could go to 105% in the value of her home. I advised her that no where did I see anything about not paying mortgage insurance, nor the given that she was to obtain a 4.25% rate at little to minimal cost.

If you have personally been affected, or either know of someone who is at risk, then please visit www.financialstability.gov. This site has many questions and answers and allows borrowers to input information to see if they qualify.

Also, please review the "Making Home Affordable" information from the U.S. Treasury I am including below:

The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. .... The program will allow much flexibility in getting loans through... The Home Affordable Refinance program ends in June 2010.

Whereas, when a modification is required. The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments.

Eligibility and Verification (taken from the U.S. Treasury Announcement)

• Participating servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation.
• Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive

- meaning that the net present value of expected cash flow is greater in the modification scenario - the servicer must modify absent fraud or a contract prohibition.

• Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and redefault rate assumptions.
• Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income (DTI).
• The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.

If we are going to save this country loans have to fixed, banks have to be able to lend money, and homes have to sell. Let us all hope that we are looking at a better year with these changes. The biggest positive changes seem to be in reducing the allowed monthly debt expenditures and allowing only one modification to an existing loan.

*Information reported from www. financialstability.gov and from "Making Home Affordable Guidelines" which covered the second half of this piece via the U. S. Treasury.

It's a winter world the first of March in Alabama.

I get this all of the time with customer's telling me "Well, they are only charging me ..."

Shortly after this it is is usually followed with "What is your best rate?"

and, lastly, my all-time favorite

"I do not pay closing costs!"

Once we look at the details it more often than not becomes quite clear some lenders do not disclose total closing costs as closing costs.

F.Y.I.

Normal Total Closing Costs = $2200-$3500 per $100,000 borrowed

Case in point, I had a customer call in the other day. He was dealing with his current mortgage company. He said "They are only charging me a quarter of a point to do this loan." After we got to talking that quarter of a point turned into much more as the loan was $374,000.

List of fees

Commitment Fee $ 575.00

Origination Fee .375 $ 1402.50

Tax Service Fee $ 79.00

Flood Certification $ 18.00

Application Fee $ 325.00

Mers (Electronic Registration) $ 5.00

Mortgage Release Fee $ 10.00

Mortgage Recording $ 69.00

Title Search Fee $ 275.00

Attorney Fee (Closing) $ 300.00

Document Delivery Fee $ 7.50

Title Insurance $ 611.00

Discount .25% $ 935.00

Appraisal (No Charge) ________

Total Charges $ 4612.00

Keep in mind as a valued customer he was only paying a quarter of a point in closing costs and was getting a free appraisal. This too was before any escrows which he wished to include. With a little more conversation, this little-to-no-cost loan was locked a half point higher than even a loan with "normal closing costs"was offering. His current lock was at 5.375%, and at $2800 in closing costs total (including an appraisal) on the day we spoke, he could have gotten a rate of 4.875% with him actually paying closing costs.

Loan amount $374,000 @ 30 years @5.375%=$2094.29 per month

Loan amount $374,000 @ 30 years @ 4.875%=$1979.24 per month

When evaluating closing costs one has to consider everything. Sometimes it makes sense, as a consumer, to pay no closing costs. However, many well intentioned borrowers are confused based on their own perception, previous transactions, or lack of knowledge. When considering a no closing cost option you should evaluate the following:

• How long do I plan to stay in this home?
• Am I expecting a large influx of money, ie, a settlement, or possibly an inheritance.
• Is this a home I need money to do work on and then try to sell?
• Would no closing costs make this loan work where closing costs included does not? (Example, taking from and adjustable rate mortgage to a fixed rate mortgage)

If you can answer yes to any of the above then a no closing cost option likely makes sense for you. My concern though is with consumers who refuse to pay closing costs as a general rule is that they do not fully understand those ramifications.

NO CLOSING COSTS EQUATES TO HIGHER RATES AND HIGHER MONTHLY PAYMENTS

Do you ever find yourself with not enough time to read the paper but you want to know about the news?

If this is the case then here is a great site for you. It is one of the most interesting websites I have come across http://www.newseum.org/todaysfrontpages/flash/.

Here is today's The Birmingham News (local for me).

NEWSEUM.ORG PRESENTS "TODAY'S FRONT PAGES"

• The Birmingham News, published in Birmingham, AL USA

Site Map • Buy Your Tickets • Privacy Statement • Copyright © 2009 Newseum

Once the main page loads simply pick the city that you are interested in. Then just put your mouse on that
city and the newspaper headlines pop up. Double click, and the page gets even larger.

If international news catches your fancy, and if you look at the European papers, the far left side of Germany will pop up as The Stars & Stripes (European edition, of course). And, this site
changes everyday with the publication of new editions of the paper. Hope you enjoy this as much as I do.

information from http://www.newseum.org/todaysfrontpages/flash/

Did you ever have one of those days where you thought to yourself

"Now just what did I get myself into here?"

Well, I can say that on Wednesday, December 17, 2008, yours truly, and another party were formally inducted into our local rotary. The Leeds Moody Rotary is still growing and we currently have approximately thirty members. I have been attending for months; however, they only induct new members about twice a year.

My fellow victim, Jane Caudle of Covenant Bank, (I will say that as we were basically Christmas hazed into the club) and I had to play "This Is Your Life" and sing our choice of Christmas carols. She got to sing "Silent Night" and I got to sing "Jingle Bells". Mind you though this was all in holiday fun and I, for one, really cannot sing. The co-induction chair did record our performances via his iphone. Therefore, my performance will likely haunt me via youtube or somewhere else down the line.

After our induction was over the whole group got together and we all sang one word each of "Jingle Bells" and ended our meeting year. I can say that this was quite a fun way to be brought into this great bunch of people.

Our local organization was able to help 11 needy children and their families, via the local Leeds City School District, this Christmas. We also contributed to a local food pantry that desperately needed help this year.

I look forward to seeing who I can get to join. And, I definitely cannot wait to see what we come up with for them to do in the next induction.

http://www.theleedsnews.net/news/local_story_358170425.html