Roland Carrillo, PhD - Mortgage Consultant

Its that time of year again, the Parade of Homes! For three weekends, the 43^rd Annual Parade of Homes will feature 394 new homes throughout Wake County that you can visit for free.

October 4-5, 10-12 & 17-19
12 pm to 5 pm

Tour books with maps can be found at various locations in the Triangle or you can view the homes online to see more information and search by criteria such as price range, city or home features.

The Parade of Homes is brought to you by the Home Builders Association of Raleigh and Wake County. The parade lets you see the latest products, features, decorating and technology at your leisure. Homes are priced from $125,000 to over $3,000,000 and in many different styles and subdivisions. It is a great and fun experience and I enjoy it every year.

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Roland Carrillo, PhD
Branch Manager
VanDyk Mortgage in Cary, NC
Email: rjcarrillo@gmail.com
Website: http://www.mymortgageanalysis.com/

Our branch specializes in affordable lending options including FHA / VA and the Community Heros program. As both a banker and a broker, you have access to a full menu of products including all Fannie Mae and Freddie Mac Conforming loans, Reverse, Jumbo and Commercial financing on a variety of property types. We are located in Cary, North Carolina and are within easy reach of the entire RTP Area including Wake, Durham and Orange Counties.

With the focus on Fannie Mae and Freddie Mac, many have forgotten that big changes are in store for FHA loans as well. With the passing of HR 3221, the "Housing and Economic Recovery Act" this summer several significant changes were made to the FHA program.

The easiest one to understand (and possibly have the widest effect) is that the buyer contribution requirement was raised from 3% to 3.5%. On a $200,000 home, this means that a buyer will need to come up with an extra $1000 for a total contribution of $7000. This is expected to decrease the risk to FHA and help it weather the current market challenges.

Another important change is that there will be a 1 year moratorium on the new "risk-based pricing" for the FHA's mortgage insurance premium. Just recently on July 14^th FHA had switched from a flat 1.5% percent of the loan amount upfront fee and .5% annual fee to a system of tiers. Those with higher credit and down payments would have a lower fee, while those at higher risk would have higher fees. Because of HR 3221, this is put on hold until October 1^st 2009 and we will revert back to the "one size fits all" model. This was implemented to increase affordability for homeowners and home buyers with lower credit, income and assets.

The most controversial (and possibly the most discussed) change will be the elimination of seller-financed down payment assistance programs (DPA). It is important to point out that DPA from family members, employers, charities, local, state or federal governments will still be accepted. This change only applies to programs in which the owner or builder as the seller was providing the DPA.

The reasons why this DPA program was cancelled is complicated and it is still a highly debated issue. Many studies were performed by HUD and other parties and evidence was shown that it was correlated with an increased risk of fraud and foreclosure (we will review this in another post). HUD had actually attempted to prohibit this program last year, but a court order allowed the program to continue.

What this means is that an ever increasingly popular method to obtain 100% financing will no longer be available. In fact, most lenders stopped accepting applications for loans with this program on September 1^st to allow time for them to be processed. However, this may not be the final word on seller-funded DPA as a new bill, HR 6994 the "FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008" has been introduced to bring it back.

Chairman of the House Financial Services Committee, Barney Frank, reported at that the bill is certain to pass in the House of Representatives and has the approval of the Secretary of HUD. Although the program has its flaws and can be used improperly, the National Association of Mortgage Brokers supports the effort to preserve this program as it helps many low- to moderate-income families obtain homeownership. The program should be regulated and reformed, but during this turbulent time the FHA should be continuing its mission to help provide affordable and secure financing.

______________________________________________________

Roland Carrillo, PhD
Branch Manager
VanDyk Mortgage in Cary, NC
Email: rjcarrillo@gmail.com
Website: http://www.mymortgageanalysis.com/

Our branch specializes in affordable lending options including FHA / VA and the Community Heros program. As both a banker and a broker, you have access to a full menu of products including all Fannie Mae and Freddie Mac Conforming loans, Reverse, Jumbo and Commercial financing on a variety of property types. We are located in Cary, North Carolina and are within easy reach of the entire RTP Area including Wake, Durham and Orange Counties.

A week has passed since the government took control of Fannie Mae and Freddie Mac, what has changed?

So far, very little. The CEOs of the two companies were let go (with nice severance packages that are being debated) and replaced with new heads meant to being back some security and clean up the balance sheets. No new regulations, guidelines or loan programs have been announced and no changes have been made to those existing. Plans to implement new guidelines and fees announced in August and taking effect on October 1^st have not been changed.

The question becomes, has this really improved the mortgage, credit and housing markets?

If you look at interest rates alone, the answer by consumers is likely yes. On Monday morning interest rates on 30 year fixed loans dropped approximately .5%. Over the last month when the takeover began to look certain, interest rates have decreased almost .6%. Although by the end of the week rates had increased slightly off their lows, this took the 30 year fixed rate for the highest qualified borrowers below 6% for the first time since early this year.

This decrease in rate means that the monthly principle and interest payment on a $200,000 mortgage will be ~$75 lower than it was a month ago. It could possible result in a small increase in purchases and refinances, helping both buyers that are looking for homes, sellers and those that need to refinance and lower their monthly payment.

The reason for this decrease is renewed confidence in the mortgage backed securities these institutions sell now that the US Treasury is backing them. Under the terms of the bailout the US can loan Fannie Mae and Freddie Mac up to $200 billion and also buy their mortgage backed securities. With increased demand and decreased risks, the interest rates will usually go lower.

As for other measures of the success and the long term effect this will have, that remains to be seen. This may help some, but the credit, mortgage and housing markets still need to return to affordability in many areas and that could take some time. More money, restrictions and changes could still be needed and the outcome on the US economy of this new obligation is still unknown.

______________________________________________________

Roland Carrillo, PhD
Branch Manager
VanDyk Mortgage in Cary, NC
Email: rjcarrillo@gmail.com
Website: http://www.mymortgageanalysis.com/

Our branch specializes in affordable lending options including FHA / VA and the Community Heros program. As both a banker and a broker, you have access to a full menu of products including all Fannie Mae and Freddie Mac Conforming loans, Reverse, Jumbo and Commercial financing on a variety of property types. We are located in Cary, North Carolina and are within easy reach of the entire RTP Area including Wake, Durham and Orange Counties.

Federal officials announced today that Fannie Mae and Freddie Mac have been placed into "conservatorship" and will be overseen by the Federal Housing Finance Agency. This takeover means that the government will temporarily run Fannie and Freddie until they are able to recover. Both agencies will be open for business Monday, but many changes will occur including in their management. "We examined all options available, and determined that this comprehensive and complementary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection," US Treasury Secretary Paulson said.

Fannie and Freddie play a central role in the market for home mortgages by purchasing loans from banks, packaging them into bonds and selling them to investors. Because they attach a guarantee to these securities, they have become the main source of mortgage funds as investors have become more cautious of buying mortgage backed bonds. They have helped stabilize the housing market by continuing to purchase loans, although with increased costs and standards.

Although the media will focus on the government takeover of Fannie Mae and Freddie Mac, several changes were already in the works for conforming loans. Because of large losses in the last year, Fannie Mae had announced it would increase its fees and stop buying certain high risk loans on October 1^st. The new fees include an across-the-board fee on all loans and other fees based on credit scores and down payments. This will of course affect borrowers with lower credit scores and down payments more. The added fees will likely add ~.25% to the interest rates on most conforming loans as banks passed them on to borrowers.

Fannie Mae is also planning to stop purchasing Alt-A loans by the end of the year. Alt-A loans were a category between prime loans and sub-prime loans for borrowers with excellent credit and down payment that could not fully document their income and assets. These loans were intended for self-employed or commissioned employees with hard to document income sources.

The government will of course be cautious and may impose new restrictions on loan programs and fees to ensure that the organizations will survive. The cost of the government intervention to taxpayers is unclear, as it will depend in the way the rescue is structured, how high mortgage default rates get and when the market finally stabilizes. It is likely that it will run into the billions and could take several years to complete. Ending on a positive note, if this move does restore confidence in the mortgage lending it could help to stabilize the market and result in lower interest rates.

______________________________________________________

Roland Carrillo, PhD
Branch Manager
VanDyk Mortgage in Cary, NC
Email: rjcarrillo@gmail.com
Website: http://www.mymortgageanalysis.com/

Our branch specializes in affordable lending options including FHA / VA and the Community Heros program. As both a banker and a broker, you have access to a full menu of products including all Fannie Mae and Freddie Mac Conforming loans, Reverse, Jumbo and Commercial financing on a variety of property types. We are located in Cary, North Carolina and are within easy reach of the entire RTP Area including Wake, Durham and Orange Counties.

This weekend, the Raleigh Department of City Planning is proud to host the 4th Annual Downtown Raleigh Home Tour. This self-guided tour is a great opportunity to experience downtown living and the variety of housing options in downtown Raleigh.

Saturday May 17, 2008 - 11 am to 5 pm

The public can tour nearly 20single-family homes, apartments, luxury condominiums and historic properties. There will also be information on residential projects planned or under construction.

Tickets are $10 each and can be purchased in advance or on the day of the event at the Raleigh Urban Design Center at 133 Fayetteville Street. Children 12 and under are admitted free.

For more information visit www.raleighdowntownliving.com

______________________________________________________

Roland Carrillo, PhD
Branch Manager
VanDyk Mortgage in Cary, NC
Email: rjcarrillo@gmail.com
Website: http://www.mymortgageanalysis.com/

Our branch specializes in affordable lending options including FHA / VA and the Community Heros program. As both a banker and a broker, you have access to a full menu of products including all Fannie Mae and Freddie Mac Conforming loans, Reverse, Jumbo and Commercial financing on a variety of property types. We are located in Cary, North Carolina and are within easy reach of the entire RTP Area including Wake, Durham and Orange Counties.