George Souto

Most of the country is aware by now of a truly historic event that took place yesterday. Treasury Secretary Paulson and Federal Housing Finance Agency (FHFA) Director Lockhart announced that "FHFA has placed Fannie Mae and Freddie Mac into conservatorship." The government (FHFA) will now be managing Fannie Mae and Freddie Mac for the foreseeable future.

What does this mean:

In order to stabilize and to stimulate the housing and financial markets, the Federal Government is taking the following key steps.

• The GSE's will be allowed to increase their mortgage-backed securities (MBS) portfolios through the end of 2009.

• The Treasury will be initiating a program to purchase GSE mortgage-backed securities (through December 31, 2009).

• Treasury has established a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

What the long term affect of this action will have on the Banking/Mortgage Industry, only time will truly tell, but in the short term we have already seen a decrease in the interest rates today. Hopefully as more of this develops I will be able to post about it, and keep those who follow my blog informed.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Many of you by now have heard of the recent Housing Bill (H.R. 3221) that was signed by President Bush on July 30th, and goes into effect on October 1st, which made a $7,500 Tax Credit available to "First Time Home Buyer" who purchase a home between April 8, 2008 to July 1, 2009. A first-time homebuyer is defined as an individual who has not had an ownership interest in a principal residence in the previous three years. There is an income limit for individuals with adjusted gross income of no more than $75,000, and $150,000 on a joint return. Individuals with incomes greater than the $75,000 or $150,000, can still receive a partial Tax Credit if their individual income is below $95,000 and below $170,000 a joint return. This Tax Credit is also only available for a principle residence and is not available for investment properties, and the property must be located within the United States. Properties outside the United States are not eligible.

The Tax Credit works like this, if the "First Time Home Buyer" was going to receive a $1,000 refund when they file their Federal Tax Return in 2009, they will now be eligible for an additional $7,500 if they choose to receive it (it is not mandatory to receive the new tax credit, the First Time Home Buyer can decline to receive it). This means that their tax return will be $8,500 instead of $1,000. Likewise if they were going to have to pay $1,000, they would now receive $6,500.

This new Tax Credit is not a $7,500 gift, because it must be paid back within 15 years, however, it is interest free. The statute specifies that the repayment amount will be 6.67% of the credit amount each year. Thus, a buyer who qualifies for the full $7500 credit will repay a minimum of $502.50 each year starting with their 2010 tax return (which will be filed in 2011). If the purchaser sells the house before he/she has totally paid back the Tax Credit, the remainder will be due at the Closing and reduced from the proceeds of the sale. For example, if an individual still owes $3,000, and makes $30,000 on the sale of the house, the $30,000 profit will be reduced to $27,000 and $3,000 will be sent to the IRS.

There is an exception. "First Time Home Buyers" who meet the income requirements for this new Tax Credit, but who have a mortgage that is funded by "Tax Free Bonds", like the Connecticut Housing Finance Authority (CHFA), here in Connecticut, DO NOT qualify for the new Tax Credit. So a "First Time Home Buyer" needs to take this into consideration. What is more of a benefit to them, the low interest rate that CHFA offers, or the opportunity to receive a Tax Credit of $7,500.

Some of the initial advantages that I see that a "First Time Home Buyer" can gain from this new Tax Credit are:

• Mom and Dad might want to help with the purchase of the house, but don't want to outright give them the money. They now could quickly give Mom and Dad back up to $7,500 when they receive their tax return.

• Downpayment tends to be a big problem for "First Time Home Buyers", and most do not like taking money from their 401K's to come up with the money. Well now they could borrow the money from their 401K, knowing that they could quickly pay up to $7,500 within a few months.

• Houses sometimes need things done that a "First Time Home Buyer" might not have the money to do. Once again within a few months they will have up to $7,500 available to do some of those things.

I see this new Tax Credit as one of the few positives that have come out of the new Housing Bill, and one that I will be talking about with the Buyers, and Realtors that I work with here in Middlesex County. The other major positive that I feel the new Housing Bill has done, is the elimination of the DPA's such as Nehemiah and AmeriDream. But that is a topic for another day. By the way this does not eliminate the DPA programs such as the one provided by CHFA here in Connecticut.

I hope that this helps to shed some light on this new provision to those who have taken the time to read this blog. Please feel free to contact me if you have any questions on this program that I have not addressed, or if you should need clarification on anything I stated.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Earlier this week I Refinance a house for an Elderly Couple. They were looking to pay off their credit card debt and do some much needed improvements to the house, which they plan on leaving to a daughter that still lives with them. They bought the house in 1980, and have never Refinanced.

Does anybody remember what the Interest Rates were in 1980? I was able to Refinance them with enough money to pay off all their credit cards, which were mounting up. Get them enough money to do all the repairs and improvements that they wanted to do, the house was really starting to fall apart, and still lower their monthly payment.

It is amazing to me that there are still people with these high interest loans out there. I don't remember what they were in 1980, but based on the mortgage amount and payment, it had to be about 14%. They still have a ton of equity in the house, and with the much needed repairs it will increase in value even more.

I know that Interest Rates were at 15% when I bought in 1981, and I believed that they got close to 19% before they started to come down. I wonder how many more people out there still have these loans, and did not get out of them when the interest dropped below double figures?

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Tis it nobler to put your Borrower into a “Subprime Loan” or have them wait to clean up their credit? I have done a few Subprime Loans, but not many. They definitely a place in the Lending Industry, and it is an option that I feel should only be looked at after everything else has failed.

Some people think that Subprime is an automatic. Can’t do a conventional loan, do Subprime. Peace of cake, I don’t think so. The people that I have been able to put into a Subprime Loan are generally those that are selling a house, but their credit has gone down the shut. People that don’t have a house to sell, those Subprime Loans have been much tougher, and I will explain why.

Subprime candidates have bad credit, now there is a revelation. The reason why they have bad credit is because they don’t pay their bills. The reason why they don’t pay their bills is either because they don’t want to, or more likely don’t have the money to pay them. And there lies the Subprime dilemma, no money. Maybe other Loan Offers on here like Jeff or Brain, can inform me of Subprime Venders that don’t have the same limitation as the ones I have, I welcome that input. So my comments are based on the Subprime Venders I deal with.

Subprime with no money = no loan most of the time in my world. If I have to have at least a 560 score before I can usually offer them a loan with a 10% downpayment. If they are selling a home, that is normally no problem, but if they are not selling a house, rarely is there money to do 5% much less 10%. As we go up the score ladder the need for downpayments start to go down, but so does their chances of me getting them into a conventional or government loan improve.

When I get to that point I give them the choice, Subprime or wait for their credit to improve enough for us to do a conventional or government loan. Once I show them what they still need to do to get their credit score up, the choice is usually to wait, instead of paying the higher rate, points, and being stuck with a prepayment penalty for two years. Some can’t wait because they have to get into a house, or love a house they have found and don’t want to lose it. In those cases I work as hard as I can to get the deal done, but there are rules and regulations that have to be met. If they chose to wait I work with them to get their credit cleaned up, and the company that runs my credit reports has a great credit dispute department that has been a great help.

I know that some people specialize in the Subprime Loan market, and probably have ways of getting around the down payment requirement on the really low scores. 80/20’s are not an option for me with the real low scores, it does become an option as I start to approach the conventional end of things. But again, waiting is a lot of times the better choice when they get that close.

I would be interested in hearing ways that any of you have found to get around this dilemma. For those of you who are not Loan Officers, your comments are welcome as well, especially what do you do as a Realtor in these cases. Do you continue to work with them even though they might not be ready to buy right now, or do you feel that it is a waist of your time?

Long blog and no solutions on my end, but maybe there will be one from your end.

THE END, BUT HOPEFULLY YOUR BEGINNING.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

I am sure that most, if not all of us have told a "Redneck Joke" at least one time in our lives, but nobody does it better than Jeff Foxworthy. Jeff has been picking on the "Rednecks" for a long time. Well now he has decided to expand his horizons to us New Englanders. So for those of you who have not heard them yet, I thought that you might get a kick out of them. What is sad is that just like the blogs that I posted on When I Was Growing Up and My MotherTaught me I can identify with most of his New Enlander jokes.

If your local Dairy Queen is closed from September
through May, you live in New England

If someone in a Home Depot store offers you assistance
and they don't work there, you live in New England.

If you've worn shorts and a parka at the same time,
you live in New England.

If you've had a lengthy telephone conversation with
someone who dialed a wrong number, you live in New
England

You know you're a New Englander when: "Vacation" means
going anywhere south of New York City for the weekend.

You measure distance in hours. . well, of course!

You know several people who have hit a deer more than
once.

You have switched from "heat" to "A/C" in the same day
and back again.

You can drive 75 mph through 2 feet of snow during a
raging blizzard without flinching.

You install security lights on your house and garage,
but leave both unlocked.

You carry jumpers in your car and your wife knows how
to use them.

You design your kid's Halloween costume to fit over a
snowsuit.

The speed limit on the highway is 55 mph -- you're
going 80 and everybody is passing you!

Driving is better in the winter because the potholes
are filled with snow.

You know all 4 seasons: almost winter , winter, still
winter and road construction.

You have more miles on your snow blower than your car.

You find 10 degrees "a little chilly."

You actually understand these jokes, and forward them
to all your New England friends &others!

If we can't laugh at ourselves who can we laugh at? I couln't help myself, I had to throw in a "Redneck Picture".

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com