Julie Messina, CMB

In a Washington news release today, HUD announced it's NEW FHA-MAKING HOME AFFORDABLE LOAN MODIFICATION . Now loans backed by the Federal Housing Administration (FHA) will be eligible for payment reductions similar to the Obama administration's loan modification program currently in use on Conventional loans serviced by FannieMae and FreddieMac.

This program goes into effect on August 15. Distressed homeowners who have an FHA loan may be able to refinance to reduce their payments and avoid foreclosure.

The program was launched for Conventional programs in March 2009 and has helped 200,000 borrowers so far. The FHA program works differently than the conventional program, and allows loan servicers to set aside up to 30 percent of the total principal balance until the house is sold or the property is refinanced. Borrowers will not be charged any interest on that amount.

"We're bringing another important tool to the table to help struggling families who are desperate to keep their homes," Housing and Urban Development Secretary Shaun Donovan said in a statement.

If you have an FHA loan and have experienced a loss of income and are worried about making your mortgage payments, contact your loan servicer in August and ask about this program. Lenders who participate in the FHA program are being incentivized to do these modifications for eligble borrowers.

Interest Rates at market close 7/30/2009

The Fed is consistent with its purchase of Agency MBS, buying another $20.2 billion in agency MBS over the last week. The Fed is still purchasing about 80% of all MBS.

Conforming Conventional 30Yr Fixed 5.375%

Conforming Conventional 15Yr Fixed 4.750%

Conforming Conventional 5/1 IO ARM 4.375%

FHA 30Yr Fixed 5.375%

* Above Conventional rate quotes are as of 7/30/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score. APR includes $1,200 in lender fees and 980 in title charges (title charges may vary). FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required. No origination or discount points.

According to a press release issued by the mortgage bankers association, FHA loans now account for one third of all new purchase money mortgages. In the month of June, 38.6% of all new homebuyers used a FHA loan, compared to 27.8% last year. In the month of June, the FHA endorsed 94,069 mortgages.

Government insured FHA loans are attractive for first time homebuyers due to the low down payment requirement of 3.50%. Also, the FICO standard for a FHA loan is 620 or better, allowing for minor credit blemishes. FHA loans can also be combined with a grant or down payment assistance program to reduce closing costs.

Conventional financing has been more difficult to obtain over the last year. This is due in part to higher FICOs required for mortgage insurance and higher down payments.

Although underwriting standards for both FHA and conventional programs have tightened considerably since 2007, new home sales to first-time home buyers are on the rise, stabilizing prices and rebuilding communities, thanks to the FHA loan program.

Interest Rates for July 10, 2009

Conforming Conventional 30Yr Fixed 5.5%

Conforming Conventional 15Yr Fixed 4.75%

Conforming Conventional 5/1 IO ARM 4.5%

FHA 30Yr Fixed 5.5%

* Above Conventional rate quotes are as of 7/10/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score. APR includes $1,200 in lender fees and 980 in title charges (title charges may vary). FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required. No origination or discount points.

Here's a look at some of the loan programs available in 2005 to finance Arizona residential real estate, and where they are now. Alternative-A (Alt-A) reduced documentation programs (stated income, no ratio, no doc...) made up a majority of new loan originations until mounting defaults resulted in servicing challenges and the loss of demand for securitized mortgage product (towards the end of 2006).

It is estimated that 85% or more of all mortgages originated in 2009 are now closed with full documentation methods. Securitizers and rating agencies have raised the bar for entry into homeownership, requiring applicants to prove ability to repay the mortgage note. The mortgage lending industry has began to regain confidence among fixed income investors by appropriately measuring risk and providing transparency to bond holders and consumers.

Agency full documentation

Owner Occupied 100% LTV with mortgage Insurance required or 80/20 combo. Ficos generally started at 620 but some programs allowed minor credit blemishes and FICOs over 580

• 2009 - 80/20 combos are gone (100% second liens are not available). Max financing is 95% in AZ on a limited basis due to restrictions on Mortgage Insurance.

Second Homes 95% LTV with a 620 FICO and two months reserves / mortgage Insurance required or 90/15 combo

• 2009 - 80/95 combos are gone (no second liens to second home purchasers). Generally 80% available in Arizona due to Mortgage Insurance availability, or a 80/10% seller carry back.

Non-Owner 90% LTV with a 680 FICO and six months reserves / mortgage insurance required

• 2009 - Mortgage insurance no longer available on non-owner properties. Max financing now 80% LTV.

FHA full documentation

Owner Occupied 100% financing with a 97% LTV FHA Loan, plus (seller) funded down payment assistance (DPA)

• 2009 - 96.5% LTV with up front Mortgage Insurance plus monthly mortgage insurance. Seller funded DPA are no longer allowed. DPAs are now available for qualifying first time homebuyers using government programs targeting neighborhoods devastated by economic recession.

Alt-A reduced documentation

Stated Income - 100% LTV - reduced documentation programs were designed by "profiling" borrower types. The typical profile of a stated income applicant was a borrower with irregular income because he/she earned seasonal or commission income, and was typically self-employed. Applicants were qualified using their "stated " annual income for the previous two years. Loans were underwritten and closed under this honor system, as lenders typically did not verify a borrower's stated earnings with the IRS. Stated income was also extended to wage earners at 100% LTV with FICO minimums set as low as 580. Primary, second, and non-owner residences. Financing over 80% was typically done using a combo loan to avoid mortgage insurance premiums

• 2009 - Stated Income now available thru hard money sources. Max financing generally 50% - 60% LTV

SISA - Was available at 100% LTV - Stated Income / Stated Assets (AKA Stated/Stated, Go Fast, Fast & Easy, Expressway, Quick & Simple, etc...). These programs allowed an applicant to state both income and asset reserves. The source of income was verified but not documented. Available to 100% usually with a combo loan.

• 2009 - Stated Income now available thru hard money sources. Max financing generally 50% - 60% LTV

No Ratio - Was available to 100% LTV - No income documentation required to validate the borrower's ability to repay the mortgage or other debts listed on the credit report. No qualifying ratios were calculated. Income source was verified, but not the amount. No Ratio loans were available to 100% with an 80/20 combo loan.

• 2009 - No longer available

NINA No Income No Assets - Was available to 100% usually with a comb loan. Source of income verified, not documented.

• 2009 - No longer available

NIVA No Income Verified Assets - Was available to 100% usually with a comb loan. Source of income verified, not documented. Assets verified.

• 2009 - No longer available

No Doc - No Income, No employment no qualifying ratios - Was available to 100% for primary residences using a combo loan. Because the least amount of documentation was required from the applicant, lenders typically required a higher FICO score for this loan - generally 680 or better.

• 2009 - No longer available

Interest Rates for week ending July 3rd, 2009:

Markets are re-assessing the economic outlook. Rates improved slighty Thursday and Bond market was closed Friday in observance of the Holiday.

Conforming Conventional 30Yr Fixed 5.625%

Conforming Conventional 15Yr Fixed 5.125%

Conforming Conventional 5/1 ARM 4.750%

Conforming Conventional 5/1 IO ARM 4.875%

Jumbo 5/1 Arm 5.625%

Jumbo 30Yr Fixed 6.625%

FHA 30Yr Fixed 5.625%

FHA 5/1 ARM 4.750%

* Above Conventional rate quotes are as of 7/3/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score. APR includes $1,200 in lender fees and 980 in title charges (title charges may vary). FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Jumbo quote assumes a 75% LTV and 680 FICO score. Documentation of income and assets required. No origination or discount points.

Homebuyers that take an eight hour HUD approved Homebuyer Education class have a better chance of successful homeownership and lower default rates. These classes are not mandated by FHA, but are filling up fast as buyers seek to use the many down payment assistance (DPA) programs available to communities for the purchase of distressed properties. Those of us in the housing industry take for granted the knowledge we impart to our clients as they are making their first purchase. How different the last three years would have been had all first timers attended an 8-hour homebuyer education class on responsible homeownership.

You don't have to be getting a DPA, grant, or bond program to participate in homebuyer education. Hud-approved counselors can prepare anyone for the home buying process. The homebuyer education class covers:

•· Explanation of housing "terminology" which improves buyer confidence

•· Evaluation of potential buyer's income, credit, debt, and available cash

•· Understand what you can afford to buy

•· Budgeting for home purchase

•· Educates the potential homebuyer on each step in the buying process

•· Maintaining good credit and resolving any existing credit issues

•· How to avoid predatory lenders

•· Title, escrow and the closing process

•· Homeowner's insurance

•· Home inspections

•· Home maintenance tips

•· Locating a suitable property and negotiating a real estate contract

• • Selecting a Realtor
  • Selecting a Lender

Homebuyers who complete pre-purchase counseling better understand the responsibilities of owning a home, and the consequences of delinquent payments. If problems arise, they are more likely to contact the lender to establish a workable payment plan, and less likely to default on the mortgage.

Homebuyer education can be done prior to shopping for a home as clients who don't meet qualifications learn what they need to do, avoiding the financial and emotional disappointment of being declined.

Homebuyer Education classes are easy to find and provided by Hud-approved Homebuyer Education Agencies in your town, usually free of charge or a nominal fee.

Interest Rates Monday June 29th

Best Conforming Conventional 30Yr Fixed 5.625%

Best Conforming Conventional 15Yr Fixed 5.125%

Best Conforming Conventional 5/1 ARM 4.750%

Best Conforming Conventional 5/1 IO ARM 4.875%

Best Jumbo 5/1 Arm 5.625%

Best Jumbo 30Yr Fixed 6.625%

FHA 30Yr Fixed 5.500%

Best FHA 5/1 ARM 4.750%

* Above Conventional rate quotes are as of 6/29/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score. APR includes $1,200 in lender fees and 980 in title charges (title charges may vary). FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Jumbo quote assumes a 75% LTV and 680 FICO score. Documentation of income and assets required. No origination or discount points.

These changes affect the disclosure process for purchase money and refinance mortgages, and provide additional consumer protection and transparency over the existing Truth in Lending rules:

•· Initial disclosures provided to applicant within three days of loan application, no fees can be collected during this three day waiting period (except for a reasonable credit report fee).

•· Intial disclosures must also be provided again at least seven business days before a borrower signs closing docs.

•· The appraisal report cannot be ordered until after the three day waiting period (after initial disclosures).

•· Borrower must be provided with a copy of his or her appraisal a minimum of 3 business days prior to closing. The appraisal is considered "received" 3 business days after mailing.

•· Any increases of fees that result in an APR change by 0.125% of the loan amount during processing require re-disclosure. The borrower must receive this revised TIL disclosure at least 3 business days before closing, providing the borrower with the time required to determine if the borrower is comfortable with his or her loan choice.

Today's Interest Rates : Same as yesterday. Condos lead the existing home sales numbers this morning, which were up over last month. Sales took place with mortgages under 5%. Expecting strong interest in 2-yr Treasurys auctioned this afternoon. MBS market should be quiet today.