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Kathleen Davis

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Condo FHA changes now effective Nov 2nd!!

09-18-09
Kathleen Davis

Condos in Trouble

FHA has just issued new condo guidelines that will become effective on October 1, 2009. If you currently either have buyers interested in purchasing condos or clients looking to sell their condo you need to know the facts below:

  • As of right now, after November 2nd FHA is voiding all condo project approvals that were done BEFORE October 1, 2008
  • This means FHA loans will not be able to be done in an ineligible project until it is Re-approved which will be a difficult and lengthy procedure
  • A project approval will cost $1,500 and up and FHA is now going to require an attorney's opinion letter, which can be another $800 or higher.
  • Spot FHA condo approvals will no longer be allowed
    • This means that if you have a condo client who wants to buy or sell FHA, you should get them to do it NOW. After November 2nd, the whole project will have to be approved for just one FHA loan and will be a long and tedious process
      • Project approvals are currently taking 6-8 weeks. If FHA holds to their current November 2nd rules, and some 55,000 condo projects nationwide have to get re-approved, who knows how long an approval may take.
  • Only 30% of the loans in any project will be allowed to be FHA loans
    • For example in a 30 unit project only 9 FHA loans will be allowed. Since FHA is the preferred program currently for most condo buyers, condo sales for the remaining 21 units will be difficult

LET CHERRY CREEK GET YOUR CONDO PROJECT APPROVED. We have one of the best and most experienced project approval experts in the U.S. on our Cherry Creek staff. This gives you a huge advantage over your REALTOR® competitors in the condo arena.

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Mortgage Update

09-14-09
Kathleen Davis

Key things that you need to be telling your clients this week

  1. Rates for home loans remain low - but it won't last forever. The Fed continues on their purchasing plan of Mortgage Backed Securities, and the added demand has kept Bond prices high and home loan rates low. Last week, they purchased another $32.4B, bringing the total to $849B out of the $1.25T they committed to. While these Fed purchases have helped home loan rates stay near present low levels, remember that their buying program is set to be over near the end of the year. There is talk that the program will be extended - but there has also been talk that it will end early - so nothing is a guarantee, except for the fact that when the Fed purchasing program is over, home loan rates will assuredly rise.
  2. President Obama imposed a special tariff on Chinese tires late Friday to help address the job losses among US tire workers. As a result, there is some concern that China could unload some of their US security holdings, largely Mortgage Bonds, which would cause home loan rates to increase.
  3. $8K tax credit ENDS Nov 30th!　 There is rumor it probably will be extended but nothing has been confirmed.　 The focus on the hill is health care and jobs.

    4. The market is volitale and could be getting more with the news of the tariff on China.　 Remember China is buying up a lot of our debt right now in the form of bonds in response they could dump a bunch of those bonds thus sending interest rates up in response.　

Last Week in Review

"BEFORE ANYTHING ELSE...PREPARATION IS THE KEY TO SUCCESS." Alexander Graham Bell

Rates for home loans remain low - but it won't last forever. The Fed continues on their purchasing plan of Mortgage Backed Securities, and the added demand has kept Bond prices high and home loan rates low. Last week, they purchased another $32.4B, bringing the total to $849B out of the $1.25T they committed to. While these Fed purchases have helped home loan rates stay near present low levels, remember that their buying program is set to be over near the end of the year. There is talk that the program will be extended - but there has also been talk that it will end early - so nothing is a guarantee, except for the fact that when the Fed purchasing program is over, home loan rates will assuredly rise.

In addition, given the current expiration date of November 30, 2009 for the $8,000 First Time Homebuyer credit, it's important for homebuyers to get prepared, and take action. In fact, many homebuyers are doing just that already. The Mortgage Bankers Association reported that home loan applications surged in the latest week to their highest level since late May, as more buyers are seeing the great opportunity that exists right now. Let me know if I can answer any questions for you, or perhaps a friend, family member, neighbor or coworker that might be thinking about a home purchase. The combination of reduced home prices, motivated sellers, low home loan rates, and the potential of a juicy tax credit is too great an opportunity to miss.

The Stock market is doing well - and as you can see in the chart below, the S&P 500 Index closed at its highest level of 2009 last Thursday. The S&P 500 is a basket of 500 Stocks that are considered to be widely held, and is considered by most market experts as one of the best benchmarks available to judge overall US Stock market performance.

In other economic news, Consumer Sentiment came in stronger than expected and Initial Jobless Claims were also reported better than expected, but still at a high level. Continuing Claims, which represent the number of people still receiving unemployment benefits, dropped a bit, but this realistically may be due to benefits expiring rather than people finding new jobs.

Forecast for the Week

Be prepared for a jam-packed week of economic reports ahead! Tuesday brings both the Retail Sales Report, which is the most-timely indicator of broad consumer spending patterns, and the Producer Price Index (PPI), which provides information about inflation at the wholesale level. There will also be more inflation news coming on Wednesday with the Consumer Price Index (CPI). CPI is an important measurement of inflation (and deflation) because it measures the average prices paid by consumers for goods and services, and what the change is in those prices over time.

And things won't slow down then...Thursday will bring a read on the housing market with the Housing Starts and Building Permits Report, followed by a read on manufacturing with the Philadelphia Fed Report, which is one of the most widely-watched manufacturing reports. Thursday will also bring another Initial Jobless Claims Report. This weekly report continues to be important to watch as the job market plays a key role in our economic recovery.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds have been able to remain above a key technical support level, and I'll be watching closely to see if Bonds and rates continue to improve.
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Condo Gudielines Change Sept 30th Effective!

09-11-09
Kathleen Davis

Condos in Trouble

FHA has just issued new condo guidelines that will become effective on October 1, 2009. If you currently either have buyers interested in purchasing condos or clients looking to sell their condo you need to know the facts below:

  • As of right now, after October 1st FHA is voiding all condo project approvals that were done BEFORE October 1, 2008
  • This means FHA loans will not be able to be done in an ineligible project until it is Re-approved which will be a difficult and lengthy procedure
    • A project approval will cost $1,500 and up and FHA is now going to require an attorneyâ€TMs opinion letter, which can be another $800 or higher.
  • Spot FHA condo approvals will no longer be allowed
    • This means that if you have a condo client who wants to buy or sell FHA, you should get them to do it NOW. After October 1st, the whole project will have to be approved for just one FHA loan and will be a long and tedious process
      • Project approvals are currently taking 6-8 weeks. If FHA holds to their current October 1st rules, and some 55,000 condo projects nationwide have to get re-approved, who knows how long an approval may take.
  • Only 30% of the loans in any project will be allowed to be FHA loans
    • For example in a 30 unit project only 9 FHA loans will be allowed. Since FHA is the preferred program currently for most condo buyers, condo sales for the remaining 21 units will be difficult

LET CHERRY CREEK GET YOUR CONDO PROJECT APPROVED. We have one of the best and most experienced project approval experts in the U.S. on our Cherry Creek staff. This gives you a huge advantage over your REALTOR® competitors in the condo arena.

CALL ME to strategize and to get a complete list of FHA project eligibility requirements.

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New Rules that went into effect July 30th are you up to date?

09-10-09
Kathleen Davis

Mortgage Disclosure Improvement Act Went Into Effect on July 30, 2009

Overall, there are 4 major reasons behind this law, created to protect consumers who apply for a mortgage. But most importantly, I would like to share how it will be affecting you, your sellers and your buyers.

  1. Uniformity - Every lender must now use the SAME Good Faith Estimate. It's easier to read and includes detailed mortgage loan terms, estimated closing costs and annual percentage rate. The term "business days" has been defined and means Monday through Saturday, EXCEPT Federal holidays.
  2. Disclosure - If anything changes during the processing of the loan - if the loan terms change, the down payment, closing costs, APR (by more than 1/8% higher), another disclosure must be sent to the consumer.
  3. Waiting Periods - The consumer is given "time" to review all disclosures. There is an extra layer of protection where there is a 7-day waiting period before the loan can close.
  4. Comparison Shopping - The new Good Faith Estimate Form now includes a section called "Using The
    Shopping Chart". It encourages consumers to compare loan term, closing costs and interest rates with up to 3 other lenders.

What You Need to Know...

  • When negotiating the date of closing, make sure it's flexible and there are no penalties for not closing on the specified date. The waiting periods are "Federal Law" and preclude the terms in written contact.
  • No last minute down payment changes.
  • No "floating the interest rate" until the last minute. Encourage your buyers to lock-in at least 7 to 10 days before the projected close date.
  • No switching of lenders at the last minute. The disclosure process starts over again with another lender.
  • No waivers - unless it's a hardship case with tens of thousands of dollars at stake because the law is written as such that a "waiver" will be virtually impossible to obtain.
  • Notify your loan officer if anything...and I MEAN ANYTHING CHANGES on the purchase agreement. This could require a re-disclosure and delay the closing.
  • Appraisal disclosure plays a part in this as well. Even if all loan disclosures are met, the consumer has another 3 days to review the appraisal.


The bottom line: The days of negotiating the deal at the last minute ARE GONE-unless your buyers and sellers are prepared to delay the closing date.

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FHA MYTHS! Good borrowers and good loans!

09-09-09
Kathleen Davis

The Truth About FHA Financing

There is a ton of misinformation and wrong perceptions about FHA financing among REALTORS® and REO/Short-sale sellers. Unfortunately, these items are keeping deserving first-time homebuyers, who only have the capability of making small down payments from buying, and REO/Short-sale sellers from reducing their inventories of foreclosed homes as quickly as possible.

We can't speak for other lenders, but at Cherry Creek the following are the truths about FHA financing.

Misperception Number 1 - FHA loans take too long to close:

  • TRUTH - At Cherry Creek we are closing FHA loans in 30 days or less barring unforeseen problems with a borrower's documentation or difficulties with the property value. FHA's are faster than most conventional loans. Why? Partly because we order our FHA appraisals directly, not through an Appraisal Management Company as many other lenders do. Our appraisers give us quick turnaround too

Misperception Number 2 - Termite clearances are always needed on FHA loans:

  • TRUTH - New FHA Guidelines say that a termite inspection/clearance onlyrequired if there is something that affects the safety of the occupants or the soundness (structural integrity) of the property. Very few of our appraisals require a termite clearance.

Misperception Number 3 - Sellers costs are higher on FHA loans:

  • TRUTH - The only mandatory seller's cost on an FHA loan is the tax service fee. Which is only $76.

Misperception Number 4 - FHA appraisals contain unnecessary repair conditions:

  • TRUTH - FHA allows "AS-IS" appraisals except where something may affect the safety of the occupants or the structural integrity of the property.
  • As far as Cherry Creek FHA appraisals are concerned, there are no unnecessary repair conditions. This may not be true from other lenders using AMC's, however.

Misperception Number 5 - Lenders don't know what they are doing on FHA loans:

  • TRUTH - At Cherry Creek we have been doing FHA loans since 1986 and our processors, underwriters, closers and appraisers who each have 10-15 years FHA experience. We do know what we are doing.

Nobody has to be afraid of FHA financing if Cherry Creek is the lender!

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