KEITH BARGER

Well- we are six weeks into using the new GFE and it has become very obvious that most of us in the real estate industry are still trying to figure it out!

Here are two examples of where you are left scratching your head wondering "WHY?"

First, did you know.... that according to HUD's FAQ Guide to understanding the new GFE that a signature line or attestation cannot be added to the GFE? The whole purpose of the new GFE is to hold lenders accountable for their charges and require us to disclose important facts about the loan. So, as a lender, we are required by law to deliver the GFE within 3 business days (via mail or person) to the customer, but we are not allowed to get them to sign the GFE as acknowledgment they received the form? This makes no sense! Most lenders have now created a second form acknowledging that the customer did receive the form and that they intent to "continue" with the loan.

Second, what is the one question that every buyer wants to know? What is my payment? In almost 20 years of originating mortgages, it's the one question that every buyer has asked, but does it state what your payment will be on the new GFE? NO! The customer is only provided a P&I figure that must include PMI, but can not include escrows. How much confusion does this cause the borrower who see that P&I figure, but then has to be explained that is not your total payment because the form does not factor in your taxes. My experience with customers is that they ultimately are looking for the bottom line- what are my cost, what is my down payment, and what is my payment going to be?

What was designed to be a streamlined form to inform the borrower, has proven to be so far, just more confusion to everyone. We went from the old one page form to now, 3 pages; we went from a form that itemized all the charges to now a form that conceals the charges by summarizing; and we went from a form that provided a true snap shot of buying a house to more forms that are needed explain everything.

Please, someone, help me make sense out of this form!

Checking out!

keith

Last May, RD made an announcement (AN 4442) that has for the most part, gone unnoticed by those of us in the real estate community, but has a significant impact for those buyers wanting a house with an in-ground pool. For years loan officers have coached agents about not putting offers with RD financing on a house with an in-ground pool, but that has now changed!

Section 1980.311 of the RD Manual states that in-ground pools are not allowed, but with this announcement, USDA RD showed how they can be flexible to buyer's needs and have put a provision in their guides that allow the financing of homes with in-ground pools, but there is a catch....

RD will provide financing as long as any contributory value of the swimming pool is not financed into the loan amount. What does this mean? If you have a house where the pool is assigned a value of $5000 by the appraiser, then the borrower would need to pay down the loan by this amount in order to qualify for the RD mortgage. BUT, in many cases, in-ground pools do not contribute to the value of the property and can still qualify for 100% financing!

Ultimately, this can only be determined by an appraisal, but we have had success in closing these loans and in speaking with many agents, they were not aware of this change. This opens the door for 100% financing which in today's market can make the difference between selling and sitting.

Want some more details or have a comment? Email me at kbarger@downhomebank.com

Checking out!

keith

FHA's Changes Will Raise The Cost for Your Buyers!! FHA's recent announcement that they would be taking steps to enhance the FHA lending program by addressing risk and strengthening finances means that getting a new home loan is soon going to be a more difficult task! Even at a time when most Americans are needing extra help!

Here is a highlight of the changes that you need to know! I will keep a running total of how the higher cost will affect your clients.

1) First, FHA is reducing the allowable seller concessions from 6% to 3%! FHA states that this is to bring the program in line with industry standards, but the whole idea of the FHA program is to provide assistance not available in the broader market. If standard closing cost are 4.5% in your area, then the buyer will have to pay that additional 1.5%, plus the 3.5% required for the down payment. On a $200,000, your buyer would need atleast $10,000 to buy a house.

2) Second, they are increasing the Mortgage Insurance Premiums (MIP) from 1.75% to 2.25%. This change will increase how much the buyer finances since the majority of borrowers include this premium into their loan. So that same borrower, who now is paying $10,000 to buy a house is also paying an additional $1000 in upfront MIP. The total amount they will borrower with the new premium (2.25%) = $204,500.

3) Third, FHA will require a larger down payment (10%) for borrowers who have under 580 FICO scores. No big deal at this point because just about every lender has implemented a minimum FICO of 620 or higher.

Most of these changes will take affect for any new case numbers issued after April 1, 2010. For those of you working with clients now that plan on purchasing in the coming months, it will be very important to educate them about these changes.

We are here to help at Patriot Bank! Serving all of Shelby, Fayette and Tipton County. Email me with any questions you may have at kbarger@downhomebank.com.

Checking out for now, Keith

Everyone is hoping that 2010 sees a return of building activity and the question this week is how does the new RESPA changes and your new construction project get affected! The million dollar question is if a goodfaith estimate (GFE), which is primarily designed for disclosure of cost on a purchase or refinance transaction work with a construction project that can takes months to complete? How can anyone know what changes could take place between application and closing that may affect your original GFE?

The New RESPA changes address this issue by stating that "if settlement is anticipated to occur more than 60 calendar days" from when a GFE is provided, the lender may provide a disclosure to the borrower that is conspicuous and obvious stating that the lender can provide a revised GFE at any time up to 60 calendar days prior to closing.

For lenders, builders and agents this is a safe guard that allows some flexibility with your new construction project. We all know that construction projects, even the best planned, can suffer delays due to the weather, material supplies or labor; so this provision takes this into consideration.

But there is an exception that should be noted! The new RESPA changes also state if the lender fails to provide a separate disclosure explaining that a revised GFE can be provided up to 60 days prior to closing, then a revised GFE may not be issued and the original GFE stands! WOW- talk about minding your P&Q's- this is going to be mission critical to lenders involved with construction projects.

We are all learning the new RESPA changes together! If you need specific help with a loan scenario or have additional questions not addressed on this blog, send me an email at kbarger@downhomebank.com.

Keith Barger

Why are there no seller paid charges listed on the GFE? On January 1st, 2010 the world according to RESPA starts a new chapter with many changes for everyone in the industry! I hope to answer some questions that we are commonly receiving with a number of post in the coming weeks. As a lender, we are getting questioned daily about the effects that RESPA will have on agents and one of the most common questions is why does the new GFE not list any charges paid by the seller?

According to the NEW RESPA, it's simple- it does not matter who pays the closing cost, all borrower related charges must be shown on the New GFE! The old GFE allowed the lender to mark charges paid by the seller which then deducted those amounts from the bottom line. As a lender, we like the ability to show the "bottom line" because it allowed the borrower to better prepare for the money they will need at closing.

Now, when a customer receives a GFE, they will see all the charges, but there is nowhere it will show the "bottom line" that they will need at closing if the seller is helping pay those cost. SO, how will we work around this issue? For most lenders, it simple, we will continue to provide an itemization of the cost that allows us to factor in the seller paid closing cost.

For example, my customer will receive the new GFE, along with a itemization of their charges similar to the old GFE. This allows them to see how we figured the totals on the new GFE and also provides valuable information on what they will ultimately need to plan for on closing day.

The "bottom line" for us in the industry is to adapt, learn and remain productive during this transition. Thinking outside the box will allow us to best serve our customers!

Checking out for now!