HVCC & HERA Could Slow Your Ability to Purchase a Home.
Maple Grove, MN - It's no secret that many facets of mortgage lending and real estate have changed as a result of the credit crisis. In addition to tightened lending practices that resulted from rising mortgage delinquencies, Washington has been heavily involved in altering the way lenders do business today. Two individual pieces of legislation impacting our business need to be taken into account when determining closing dates for purchase transactions.
Home Valuation Code of Conduct - The Home Valuation Code of Conduct (HVCC) went into effect May 1, 2009. Intended to shield appraisers from undue influence from loan officers and lenders, this legislation installed a "firewall" between those individuals directly involved in the origination of the loan from the selection of and contact with appraisers. HVCC also requires that borrowers receive a copy of the appraisal a minimum of three days in advance of closing. Part of the kicker here is that "received" is considered, in effect, three business days after the appraisal has been mailed to the borrower. Since HVCC requires this "firewall" between the originator and the appraiser, the time to receive an appraisal has increased, in some cases by as much as two weeks or more. While this may not always be the case, it is important to take into consideration when considering closing dates. Today, conservative closing dates are mandatory to properly manage expectations of all parties. Make sure you're allowing enough time to avoid panic and stress in the days leading up the the closing date.
Housing and Economic Recovery Act - The Housing and Economic Recovery Act (HERA) amends and influences several aspects of obtaining a mortgage, the disclosures required for borrowers, and the timing of their delivery. This Act affects the minimum time required to close, and should any changes be made to a loan application that could impact the Annual Percentage Rate (APR), this could delay the closing date. Other than paying for a credit report, lenders may not accept any additional fees from a borrower until four business days after disclosures have been provided to or mailed to a borrower. This has the potential to delay several phases of the application process.
Finally, upon making application, a borrower is provided a Truth in Lending (TIL) statement, detailing the total expected costs that could be incurred over the life of the loan. Should anything change in the loan application that could change the APR by more than .125%, a new TIL must be reissued to the borrower a minimum of 3 business days before closing. Items impacting the APR could include a borrower accepting a higher interest rate than initially qualified by floating their rate at application, a change to the loan amount, a change in loan type, a change in closing date, and any changes to fees.
What Now? - While there is more we can discuss on the specifics of these legislative implications, I felt it important enough to let you know now that I would not recommend you write purchase contracts with short closing time frames (less than 30 days). I have prepared additional information to help explain the rationale behind not scheduling closing dates in advance of 30 days at a minimum and ideally not less than 45 days.
Ben Olson is Mortgage Consultant affiliated with Mortgages Unlimited, a Licensed Mortgage Lender - Minnesota Department of Commerce. If you would like to get pre-approved for your home purchase, please contact Ben Olson at 763-416-2620 or visit www.AskBenOlson.com.
Maple Grove, MN - With the November 30th deadline quickly approaching for the $8,000 first-time home buyer tax credit, we've seen a huge increase in activity with our Realtor Partners and in our own office as well. Three months is not a lot of time! Everyone's talking about it [read here] and buyers are getting anxious! But be aware, the time required to process your loan could get longer and longer.
With all of the changes in our industry over the last couple years, the length of the process from loan origination to loan closing has increased. For example, the Home Valuation Code of Conduct (HVCC) no longer allows Loan Officers to communicate directly with Real Estate Appraisers. Though the heart behind this is to protect the consumer, the results of this law have created an environment where buyers and sellers alike are put at a disadvantage. Appraisers are no longer providing a service and managing business relationships, they are simply order-takers. This causes turn-around times to be extended and appraisal quality in some cases is diminished. All in all, getting the appraisal alone could take up to two weeks or more.
In addition, the Mortgage Disclosure Improvement Act (MDIA) has the potential of causing delays. In short, when a Loan Officer discloses a loan to you it needs to be VERY accurate! If the final APR varies by more than 0.125% of what was initially disclosed, you must be allowed three days to review the changes before you can close. The bottom line is this: Work with a Loan Officer who knows what they're doing! Thankfully, most of us who are still in the mortgage industry are here for the long-term. However, there is still a high level of knowledge and expertise that is needed to manage a smooth loan transaction.
Amongst other things, keep in mind that in late October and early November there will be a significant increase in purchase files hitting the desks of processors and underwriters - their turn-times in increase naturally due to the increase in work. Also, processors and underwriters do not work on Thanksgiving! If you think you can submit a purchase file on November 1st and have it close by the end of the month, you may be sadly mistaken.
REMEMBER: If you close on November 30th as a first-time home buyer, you get $8,000. If you close on December 1st, you get NOTHING!
Our recommendation is for you to find your home and have a Fully-Executed Purchase Agreement by early to mid October. There will be many first-time home buyers who miss out on this tax credit opportunity. At all costs that shouldn't happen to our clients!
Ben Olson is Mortgage Consultant affiliated with Mortgages Unlimited, a Licensed Mortgage Lender - Minnesota Department of Real Estate. If you would like to get pre-approved for your home purchase, please contact Ben Olson at 763-416-2620 or visit www.AskBenOlson.com.
Today, the Fed exceeded all expectations when they announced that they would expand their purchasing program of Mortgage-Backed Securities. In addition to the $500 billion MBS purchase program which began in January, the Fed will purchase an ADDITIONAL $750 billion, bringing the total to $1.25 TRILLION!! The Fed will also purchase $300 billion in long-term Treasuries (10-Year Notes) over the next six months.
The primary goal of these actions is to lower mortgage rates in an effort to stimulate the economy. If homeowners can lower the rate on their current mortgage by refinancing, the money saved every month would be available to invest, pay down debt, and most importantly, purchase goods and services. Also, those homeowners would be less likely to go into foreclosure with the lower payment. The lower rates would also make homes more affordable to purchase helping to stabilize housing values.
So what's the catch?? Well, as the Fed buys up Mortgage-Backed Securities, the yields paid on those products come down. In turn, the rates that the lenders offer to the consumer should come down, right? The problem is that in many cases the lenders don't have the staff to keep up with the demand for new loans. So, to slow things down, they keep rates higher and pocket the difference.
Remember when we heard the rumors of 4.5% several months ago? Did that ever happen? Not really, at least not for very long. We had a few days where a few clients got lucky, but as a whole, the rates did not stay there long. The lenders raised their rates to slow down the demand, and in addition, their increased margins helped to make up for all the losses they'd been taking due to foreclosures.
I strongly believe that a "Fannie Mae Streamline" loan, structured similar to the current FHA Streamline, would provide better overall help for homeowners. As long as you've been paying on-time and your new loan amount does not exceed your original loan amount, no appraisal, no income and no assets are required. We would simply give you a new Fannie Mae loan at current rates. The problem is not that rates are too high, the problem is that home values are too low for many homeowners to take advantage of the rates.
I would love your forward-thinking predictions on the GOOD, the BAD and the UGLY of our government's actions.
Ben Olson, Mortgages Unlimited, Maple Grove, MN 763-416-2620
Yesterday, the U.S. Department of the Treasury released details on their new "Making Home Affordable" program, which is expected to aide up to 9 million homeowners. Below is an excerpt from their new website, www.FinancialStability.gov:
"The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country. Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance to lower mortgage rates. Meanwhile, millions of workers have lost their jobs or had their hours cut, and are now struggling to stay current on their mortgage payments...
"The Obama Administration's Making Home Affordable program will offer assistance to as many as 7 to 9 million homeowners making a good-faith effort to make their mortgage payments, while attempting to prevent the destructive impact of the housing crisis on families and communities. It will not provide money to speculators, and it will target support to the working homeowners who have made every possible effort to stay current on their mortgage payments. Just as the American Recovery and Reinvestment Act works to save or create several million new jobs and the Financial Stability Plan works to get credit flowing, the Making Home Affordable program will support a recovery in the housing market and ensure that these workers can continue paying off their mortgages."
The first arm of this program is to help those who are near foreclosure, by lowering their current rate, and in some cases doing a principle reduction. The current mortgage servicer will analyze each homeowner on a case-by-case basis. Not all homeowners will qualify.
The second arm of this program is designed help those homeowners who have paid their mortgages on-time and simply have not been able to refinance due to a loss of equity. Homeowners could potentially refinance into lower rates even if they owe up to 105% of the value of their home. In some cases, an appraisal may not even be required.
Time will tell how this program will actually play out in the real world. Historically, we've seen the government proudly make announcement that, "We are now going to help..." But, at the end of the day, some lender will need to stick their neck out and take the risk. However, there is a ray of hope in the fact that there are some built-in incentives for the lenders who are willing to participate. We will see soon enough.
Ben Olson, Mortgages Unlimited, Maple Grove, MN 763-416-2620
As a result of the American Recovery and Reinvestment Act of 2009 (ARRA), which was signed into law on February 17, 2009, the Federal Housing Administration (FHA) has increased their loan limits for 2009! To read the most recent Mortgagee Letter released on February 24th (along with Mortgagee Letters from previous years), please visit:
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/
Also, for a complete schedule of FHA loan limits in your current area, please click below:
For the 7 county metro area of Minneapolis and St. Paul, including Hennepin County, the FHA loan limit has been increased back up to $365,000 (up from $318,550). This means with a 3.5% down payment (required by FHA in most cases), you could purchase a $378,000 home! This is going to help a lot of Pre-Approved homebuyers.
Please, call me if you have further questions regarding this change.
Ben Olson, Mortgages Unlimited, Maple Grove, MN 763-416-2620
I spend my time and money helping and coaching the real estate agents in my life, by implamenting systems that help them close more transactions every month than they ever thought possible!
Ben Olson is a Mortgage Consultant with Mortgages Unlimited. Ben has been certified by the Minnesota Mortgage Association as a Minnesota Mortgage Specialist (MMS), and has received their national designation, Certified Residential Mortgage Specialist (CRMS). The time, training and commitment that Ben has taken to receive these designations have put him in the top 1% of his colleagues nationwide.
Ben is committed to making sure that his clients fully understand all of their loan options, and are presented with the best loans available to them. This dedication has turned many clients into life-long friends over the years.
As a resident of Maple Grove, staying connected and involved in his community have become top priorities for Ben. Ben has been an active member of his local Chamber of Commerce since 2003. In addition, Ben's connections with Business Network International (BNI) have allowed him to become a valued resource to his clients and his colleagues.
Ben and is wife, Marisa, volunteer their time as the Personal Finance Pastors at their church. Through small groups, coaching, and one-to-one counseling, they help families get out of debt, get control of their spending, and even show them how to get their homes paid off! Their burning desire is to help families and individuals stay on the journey that will lead them to True Financial Freedom.
Mortgages Unlimited is one of the largest and fastest growing mortgage lenders in Minnesota. Since 1991 this private, locally-owned company has set the standard for being the Lender of Choice, the Employer of Choice and the Partner of Choice for its community and its industry. The culture at Mortgages Unlimited mirrors that of smaller companies - strong ethics, family values and teamwork. But, the reality is that Mortgages Unlimited is a company poised for long-term, sustained growth.
As a member of Lenders One, a national alliance of mortgage bankers, Mortgages Unlimited has the leverage of being the 9th largest lender in the nation. This allows Mortgages Unlimited to gain premium pricing for their clients.
Lisa Martin - Owner/Broker, Smart Move Realty
"I've had the pleasure of working with Ben Olson and his team at Mortgages Unlimited for the past several years. My clients' needs have varied over that time from first-time homebuyers, to folks on their third or fourth home. Ben has done an exceptional job of making everyone of my clients feel comfortable and well informed. He always offers competitive rates, and he gets the job done. Ben's helped me personally with the financing for my own home. I never hesitate to recommend his services. Thank you for taking care of my clients and making me look good!"
Jim Bear - Safe Money Advisor, J Alan Financial
"I had life-changing experience dealing with Ben Olson and his team at Mortgages Unlimited on my personal mortgage. I had an adjustable rate mortgage that was killing me. Ben was able to rescue that mortgage and change it to a 15-year fixed, and boy, do I feel good about that. When I look down the road to my financial picture, it's going to feel really good to have my mortgage paid off by the time I'm 55 years of age. So thank you Ben, for helping me achieve a personal goal of mine!
"Since my personal loan, I have also achieved professional satisfaction in partnering with Ben Olson because I have referred several of my clients to him, and he has worked wonders. I remember one client calling me back and saying ‘Ben pulled a rabbit out of the hat.' He did a remarkable job and I want to thank him, because I know things like that will come back to help me down the road. What a resource it is to have at my disposal the knowledge, expertise, and thoughtfulness of Ben Olson and Mortgages Unlimited. Thank you so much!"
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