Jamie Woods

Let's face it; 100% financing (or more commonly referred to as no money down mortgage lending) has taken a bad rap, as have the loan officers, brokers and others who originated them in the past. And there is understandable justification for that. During the boom, when pretty much all underwriting rules were thrown out the window and loans were given to anyone who could tie a shoelace, 100% financing loans were very commonly issued in lieu of common sense and empathy for the applicant or the possible detriment that certain types of 100% financing could pose to them in the years to come.

I saw some people chatting about this very topic in a related chat group earlier today and it prompted me to voice my opinion and thoughts not only in that group, but also here on active rain. There is no denying that a piggyback (or 80/20) of risky ARMS with hidden or misunderstood (or even unrevealed) adjustment clauses when used to originate 100% financing on falsely inflated or overvalued properties was predatory and a certain factor in the meltdown which we are now experiencing. Originators of any type anywhere who made loans like this as well as the policy makers who allowed this practice and investors who shelled out the dough to buy packages of loans like this should be held accountable to the fullest extent. However, I firmly believe in the importance of the preservation of certain types of 100% financing in certain situations.

Take for example a first time buyer with acceptable credit, employment tenure and a proven track record of timely rent payments to their landlord. Say this buyer's "payment shock" (the difference in their existing rent payment and their proposed new property payment as a homeowner) won't exceed 25%. Say for instance this buyer does have and can prove they have cash stored for life needs but they lack the ability or willingness to part with it for a down payment on a home purchase. Maybe they need the money to meet the challenges of rising food, gas and heating costs. Why should a responsible, structured, goal-driven, ambitious person like this keep fattening their landlord's wallet or keep paying his or her mortgage and property taxes?

Another example: Take a recent or prospective divorcee who is leaving their current estate with their soon to be ex spouse. Say the gainfully employed divorcee has paid their mortgage and all other bills on time and they have the credit record and score to prove it. Say the home they are splitting or selling has no equity as a subject of the declining market that they (all of us) are in. The divorcee has credit, employment and maybe some savings or investments (or even maybe not) and wants a fixed ratemortgage loan! Why should someone like this have to rent if they want to own? Owning can continue to provide numerous benefits such as tax advantages and the development of equity as well as the continued growth of ones credit scores and therefore, ones purchasing (ok, charging) power. For these reasons, no money down mortgage loans are still made to properly qualified individuals and will likely always be via endorsements and insurance from the federal and state governments.

In summary, there is no doubt that 100% financing and a lot of types of financing, such as sub prime (loans made to people with poor credit), jumbo (loan amounts that exceeded Fannie/Freddie guidelines which today is $417k), ALT-A loans (loans made to applicants with light or absent income, employment, and/or asset documents in the application folder) or a blend of the above types of loans were misused and became widespread during the boom. Hopefully lessons were learned. Accountability and regulation now occur, and hopefully will from now on. But before people go blaming the whole mess on 100% financing and seek to axe it as a practice altogether, just remember, maybe some day it may make sense for you or a loved one to use. Especially with the bottom in sight now (we hope!) and property values sure to start to at least make a bowl shaped recovery and begin to climb again.

As always, I'm here to help!

For more on the availability or guidelines of the USDA Rural Development 100% financing program please visit my entry at:

http://activerain.com/blogsview/801081/100-financing-very-much-alive

To fill out a secure online mortgage application please visit:

http://www.saramortgage.com/apply.asp/Hollis/New%20Hampshire

Jamie Woods ~ Senior Loan Officer ~ FHA/VA/USDA Specialist ~ SARA Mortgage & Financial, LLC ~

Cell: (603)-965-8241 Office: (603)-816-0255 email: jamie@saramortgage.com

web: http://www.mortgagemagician.blogspot.com

Licensed by the NH Banking Dept

WHO WILL BE HELPED AND HOW?

These are of course very common questions being asked by many, not just home owners. This week the federal government took huge steps to ease the national credit and banking crisis which has become a worldwide crisis in recent months. But I will not digress into a blog entry about global or even domestic economics here. People want to know what steps were taken and how these steps have influenced not only the mortgage and housing markets but also whether relief may be in sight for themselves and whatever personal housing or mortgage crisis or dilemma they may be facing. While it is still premature to be able to answer alll these questions in detail, as the "bailout plan" in its entirety will not be revealed until next week, I will do my best here to shed some light on how the chages to date will likely impact homeowners and others.

First, this past Monday, the government after meeting with officials from all levels, decided to funnel $140 billion US Dollars into the global economy and indirectly, back into our own banking system via an indirect route called credit line swaps. Basically, the government auctioned off much needed US Dollars to numerous European countries in exchange for chunks of their respective currencies. This move was meant to attract investors back into the global and American banking system and ease worries abroad about the stability of US banks and lenders. This move was well-received and immediately regarded as good news by global investors, as the Asian markets boomed that very evening (while our markets were closed). Upon opening Tuesday morning, our markets followed the Asian markets with a recovery of Monday's loss which was attributable to the worries over AIG's downgrade.

Most recently, last night actually, the officials met again behind closed doors with top ranking banking officials and congress people to discuss more action to be taken. They determined that the SEC needs to temporarily ban investor trade "shorting"; shorting is basically betting on a financial or banking stock's future poor market performance and the loss of value of their shares. This practice will be banned until at least October 2nd. This was also highly well-received and regarded as positive action by the domestic and global markets. The DJIA has more than recovered its earlier losses. These positive actions have however deflated the yield on treasuries and equities, which typically have a major influence on mortgage rate averages.

Now, back to what this means to the housing and mortgage markets, as promised. The FED also recently intervened in taking over Fannie Mae and Freddie Mac, two previously "overseen" but not "regulated" GSEs, or government sponsored enterprises. This action ousted the agencies top officials and ensured much stronger regulation and monitoring of practice, accounting and record keeping. Additionally, this fed measure promises to back the agencies with billions in cash from the discount window if needed, and it probably will be. That instantly drove agency fixed mortgage rates significantly downward by attracting more investors back to Fannie Mae and Freddie Mac. Between the takeover of Fannie/Freddie last week and the fed's action this week, you may expect to see stability in low and attractive mortgage rates, other geopolitical and economic factors and influences not withstanding (one never has a crystal ball and news does happen!). Anyway, we also expect to see a slight to moderate easing in mortgage lending guidelines in the weeks and months ahead, meaning more specifically, loosening of the rules such as minimum credit scores, down payments and mortgage insurance premiums. While house inventory is still a huge challenge to the continued recovery of the housing market at large, expect these recent governmental actions to continue the slight to moderate and progressive easing of mortgage lending and also continued lower rates to attract more buyers back to the market in anticipation of the bottom in sight. However, don't expect a huge boom again like that which we experienced from '01 to late '06 but do expect a bowl shaped bottom and moderate recovery to growth period starting right about now and in the months ahead. Many expect the market to have passed its bowl shaped bottom and pick up steam by mid to late '09.

Bottom line: There are tons of deals to be had on the market right now with lots of excess inventory and motivated to distressed sellers including banks and lenders holding foreclosed properties. Additionally, developers and builders are stricken with high standing inventory and they also are offering great incentives and deals to buy. Home prices in many to most areas are stabilizing and nice and low. Mortgage interest rates are low and no matter what you are told by anyone, always remember, 100% financing IS STILL AVAILABLE in many to most areas (via USDA Rural Development Guaranteed Financing for approved buyers), provided you are not in a large city or metropolitan area. 97.75% government insured financing for approved buyers has existed via the office of HUD/FHA since 1936, has sustained dozens of market ups and downs and always will.

If you have any questions or comments, please feel free to comment here or to email or call me at any time! As always, I'm here to help!

Jamie Woods ~ Senior Loan Officer ~ FHA/VA/USDA Specialist ~ SARA Mortgage & Financial, LLC ~

(603)-965-8241 http://www.mortgagemagician.blogspot.com

Licensed by the NH Banking Dept

For more on government insured, fixed rate mortgage financing including 100% LTV, zero down, zero PMI programs and the 97% of AFTER IMPROVED VALUE, government insured, fixed rate home improvement/fixer upper loan, which provides mortgage funds to cover the acquisition cost of a property (or the payoff of an existing mortgage for those that wish to refinance) PLUS CASH TO PAY CONTRACTORS TO IMPROVE THE HOME IN ALMOST LIMITLESS WAYS, visit

http://mortgagemagician.blogspot.com/2008/05/need-home-improvements-why-not-apply.html

NEED HOME IMPROVEMENTS? WHY NOT APPLY FOR A HUD/FHA INSURED 203k LOAN?

As you may or may not know, The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. These programs operate through FHA-approved lending institutions which submit applications to have the property appraised and have the buyer's credit approved. These lenders fund the mortgage loans which the Department insures. HUD does not make direct loans to help people buy homes.

The Section 203(k) program is the Department's primary program for the rehabilitation and repair of owner occupied residential properties. As such, it is an important tool for community and neighborhood revitalization and for expanding homeownership opportunities. Since these are the primary goals of HUD, the Department believes that Section 203(k) is an important program and HUD intends to continue to strongly support the program and the lenders that participate in it.

What is a 203k loan? It is a HUD-insured mortgage loan program that provides financing for the purchase price of the home (or in the case of refinancing, payoff of the existing mortgage), origination and recording costs, the cost of improvements, inspections, disbursements and draws as well as title updates. A borrower may use this program for a 1-4 unit home, condo (interior only), town house, row home or HUD repo. The borrower may use the finances to pay for additions, roofing, siding, interior and or exterior paint, walls, flooring, carpeting and tile, kitchens, baths, energy efficient improvements, modernization of heating, ventilation, cooling systems, basically any and almost all types of minor to major work, too much to even list right here. The borrower collects their own bids from licensed contractors and provides them to the appraiser in determining the after improved value of the property and a loan amount. By the way, in addition to repairs that may be deemed necessary, the home buyer may finance custom work and improvements that change the obsolescence of a property! This even includes appliances like washers, dryers, dishwashers, refrigerators and microwaves! A 203k loan can even finance the construction of a home on an already existing foundation and it can also finance the relocation of a home from one site to another on an already existing foundation! By the way, bank-owned properties (REOs), pre foreclosure properties or otherwise distressed or motivated sellers are allowed and yes, even highly funded!

Well, that's about it, in a nutshell. Rather than cut and paste features from HUD's site or unnecessarily elongate this entry, I'll just refer you to the HUD site which explains it all in about 5 minutes of easy to read material! Be sure to read up on the "Streamline K", which as the term implies, streamlines the process. It limits the applicant to $35k in repairs and costs, on top of the acquisition price or mortgage payoff. The streamline requires no inspectors or consultants but disallows major site work like additions. It pays the contractors two draws, one upon commencement and one upon completion. Like the standard 203k the borrower collects their own bids (contractor licensing and all permits are required). If the borrower happens to be a demomstratively qualified contractor, they may do the work themselves! The required minimum down payment or equity position is 2.25%.

Here is the link for more:

http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm

And of course, for more, you can always call or email me! Be absolutely sure to contact me prior to engaging in any bids, estimates, offers or contract language. There is certain contract language and protocol that should be followed to ensure a smooth, easy project and closing. For instance, the contract should be contingent upon loan approval and the selling party must agree to a visit from contractors (for estimates) and also a HUD consultant.

In summary, these are changing times that require zeal, resourcefulness, know-how and positivity! Everyone knows there are a ton of properties on the market, many of which are listed by highly motivated sellers and many of which need improvements, upgrades, repairs and/or customization! See a property you like and want to live there? Does it need improvement or customization? Go get it! Are you a homeowner that has recently had your home listed but you have given up on your listing and withdrawn it in lieu of just staying and maybe doing some improvements before re-listing it in the future? Maximize your home's value and appeal! Look very closely at this option!

As always, I'm here to help!

Jamie Woods ~ Senior Loan Officer ~ FHA/VA/USDA Specialist ~ SARA Mortgage & Financial, LLC ~

(603)-965-8241 http://www.mortgagemagician.blogspot.com

Hi, friends and colleagues! Hello! Happy Spring!

This post is to demonstrate in easy to understand terms how a sub prime adjustable rate mortgage works and also to notify people that there is a HUGE piece of misinformation feeding the rumor mill right now regarding sub prime mortgages and the indices that they are tied to. Not a day passes that I don't blip through the news channels and see some suit and tie talking about the recent Fed rate cuts which should bring relief to those facing adjustments in their ARMs (adjustable rate mortgages). This statement holds partial truth, at best. The Fed rate cuts will help those with CONVENTIONAL, CONFORMING ARMS ONLY! Why? Because the conventional, conforming ARMS (the strong borrower credit 3, 5 and 7 year ones) are almost all tied to a domestic, federally influenced and controlled index, such as the One Year Treasury. Those with SUB PRIME ARMs are tied to the LIBOR, which stands for the London Inter Bank Offered Rate, which as the name implies, being from London and all, is NOT influenced or controlled by the Fed, although the LIBOR index is declining as well and many sub prime ARM holders may likely see relief as a result, but that index is still extremely risky and sub prime ARM holders should refinance anyway, if they can, because they all have extremely swollen margins any way, more on that in just a bit.

Some sub prime adjustable rate mortgage holders know how their adjustment works, but many do not! There is a certain addendum to their mortgage called an adjustable rate rider, usually filed and recorded near the back of the packet of mortgage papers, where the language spells out exactly how their reset will be orchestrated. There will be an index, which you may rest assured IS the 6 month LIBOR, and also a margin. The index is not set or controlled by the lender issuing the mortgage. However, the margin is. In calculating one's new interest rate upon adjustment, the rider mandates adding the index TO the margin, which is almost always after two years of origination. Some sub prime ARMS are 3 years. Anyway, the riskier the borrower profile upon origination (based on factors such as amount borrowed vs the property value, borrower credit scores, employment and income type, etc.) the higher the margin will be in that paperwork! The sum of the index and the margin will equal the borrower's new interest rate. So, if the index upon reset is say, 5.2, and the margin is 6.1, the new rate will be 11.3. That's pretty high for a mortgage rate! But, there is also language in the rider that protects the borrower from such swollen rates. This protective language is called "caps". There are periodic caps and lifetime caps (or a ceiling). The periodic caps protect the borrower from huge adjustments per period (6 months). The lifetime caps protect the borrower with a maximum rate no matter what the economic conditions or indices of the time. At the first adjustment, the rate will likely not swell more than 1 to 1.5%, (that's the periodic cap) no matter what the index is. But, be assured, in markets with rising indices the rate will adjust every 6 months thereafter, and that's one of the most cumbersome issues with these mortgages.

Now for the potentially somewhat good news. The LIBOR is tumbling downward. A year ago the LIBOR was 5.321. In January it was 4.596. A month ago it was 3.041. Two weeks ago it was 2.943. As of today (April 9, 2008) the LIBOR is 2.68! Based on this trend, we are seeing sub prime ARM holders new, adjusted rates not rise at all! By the way, the sub prime ARMS have clauses in them that assure the payment will not ever be lower than the start rate, unlike conventional, conforming ARMS where the adjusted rate may adjust downward, one of the potential rewards of having strong credit and a strong loan application and using this type of loan as a gamble or as an investment strategy. Anyway, back to the sub prime ARMS. Just because the index is tumbling, offering potential easing to the home owner, one should still have their upcoming adjustment looked at by a professional, because there are still too many negative influences at play to risk keeping one of these home loans. As we all know, home values (for the most part) are declining, credit conditions and lending standards are tightening, BIG time. If you have a sub prime ARM, try to refinance! Don't be a victim of the rumor mill or a sucker for water cooler mortgage talk. Call someone who knows how it works and can direct you to potential avenues of recourse and recovery! If this sounds overly obvious, I am sorry. But the research-proven facts remain that many homeowners are taking no action at all or awaiting legislation or congressional initiatives to help them.

In summary, now is the time to dispel the rumors feeding the mill, hand-hold our clients and prospects and re-educate them with facts and help put them at ease a bit.

For a closer look at the history of the LIBOR index and other mortgage related indices, visit

http://www.mortgage-x.com/general/mortgage_indexes.asp

If you have a client or prospect that needs more information on how to dump their sub prime ARM, potentially avoid foreclosure, and what resources, both governmentally or otherwise may be available, and there ARE sources avaialble, visit http://armhelp.blogspot.com/2008/01/get-rid-of-your-adjustable-rate.html

Jamie Woods ~ Senior Loan Officer ~ FHA/VA/USDA Specialist ~ SARA Mortgage & Financial, LLC ~

(603)-965-8241 http://www.mortgagemagician.blogspot.com

Licensed by the NH Banking Dept

UNDERSTANDING THE DIFFERENCE BETWEEN A PRE QUALIFICATION AND A PRE APPROVAL: IT'S IMPORTANT!

Knowing the difference is key when it comes time for property shopping. Pre-qualification is the first step in property "browsing". A potential borrower speaks with a bank, broker or lender and answers a few questions to provide the loan consultant with a quick snapshot of their income, credit score (if known), existing debt, accumulated savings and whether or not there is a co-borrower. The loan consultant advises the applicant as to their price range or affordability index and the likelihood of approval or not, moving forward. It is a vague synopsis of approvability, and while helpful for home "browsers" to look at advertised listings, a pre qualification is virtually useless for true property shopping and engaging in tangible purchase offers!

Pre-approval, however, is a written documentation that demonstrates the borrower has the full support of a lender. The candidate allows the loan consultant to run a credit report. It means the form 1003 Uniform Residential Loan Application has been completed by the applicant and submitted and reviewed by the loan professional and his or her underwriter. The applicant/borrower has actually sent copies of their pay stubs, W2s and/or most recent tax forms. The applicant/borrower has also sent copies of a bank or asset statement showing his or her prepared down payment (if they are making one), thereby proving its readiness. Based on the borrower's income, credit score, debt ratio and savings, the loan professional will provide a dollar amount this borrower is eligible for and equip the borrower and his or her Realtor® with a letter of pre-approval. Now the borrower has the convenience of shopping for a home in the price range agreed upon by the lender!

Furthermore, a pre-approval letter allows potential homeowners to shop as cash buyers, and that means negotiating power. The seller will take an offer from a pre-approved shopper much more seriously and may even accept a lower bid and/or offer concessions because they know the financing is in place and the deal is secure. Furthermore, Realtors® will also be more apt to help a certifiably pre-approved buyer! So, bottomline is: If you have a property in mind and are ready to approach the seller with an offer, you need to be fully pre-approved!

One more side-note regarding the matter and that is that many "poster banks" or participants of "E-lenders" are staffed by "Johnny Cubicle", as I like to call him or her. Johnny likes to fire off instant letters of either type (because he or she doesn't know the difference) to anyone who can tie a shoelace, completely oblivious to the importance of the practice and the difference between the two. Johnny Cubicle does this with the hopes and intentions of appeasing the applicant with a "Congratulations! You're approved" letter and thereby coercing the applicant to choose them as their lending source.

Well, in conclusion, call me a stickler or an industry geek, if you wish, but knowing the difference between a pre-qualification and pre-approval and realizing and understanding the source sending such letters is truly so important! Besides, I've been called worse!

Remember, there are literally dozens of loan programs available and lending and market conditions are changing at all times. It is important for the loan professional to know the long-term financial objectives of the prospective homeowner and to make sure that the prospective buyer's mortgage financing plan matches their other life strategies and plans for years to come.

To fill out a secure on line mortgage application, please click on this link, fill out the application, and click "submit". It is automatically electronically uploaded to my secure, password-protected email address for immediate processing and review. All applications are answered in 24 hours. Here's the link:

http://www.saramortgage.com/apply.asp/Hollis/New%20Hampshire

As always, I'm here to help!

Jamie Woods ~ Senior Loan Officer ~ FHA/VA/USDA Specialist ~ SARA Mortgage & Financial, LLC ~

(603)-965-8241

Licensed by the NH Banking Dept

http://www.mortgagemagician.blogspot.com