Pawtucket, RI

A bend in the road is not the end of the road, unless you fail to make the turn.: Author unknown

Yes! The real estate market has a lot of bends for us to go through, but the road continues with those of us who do not quit!

Let's keep turning down the road and help every seller and buyer we can!

This new mortgage will affect every American looking to mortgage a home. And the impact will be felt by all of us.

Regulators are deciding the future of down payments. For those who have minimal down payments, FHA will become the norm.

The new mortgage: QRM: Qualified Residential Mortgage has yet to be defined in detail, but, basically, it will be the new mortgage which will require a defined minimum down payment. Some proponents are advocating as high as 30%. If a borrower does not have this minimal down, there will be limited non-QRMs available at higher rates.

Thus, there will be an increase of mortgages at FHA, which currently offers mortgages at 3.5% down and reasonable rates. The downfall of FHA is the 1% upfront mortgage insurance, which is financed into the loan and the monthly mortgage insurance which is paid every month for 5 years and until the LTV reaches 78% (for loans greater than 15 years) and paid monthly on loans 15 years or less when the LTV reaches 78% regardless of how long the payments have been made.

FHA may be gearing up for this by increasing their mortgage insurance rates by .25% effective with all new loans on April 18, 2011. Even the 15 year FHA loans, which were exempt from monthly mortgage insurance with LTV's less than 90%, will have monthly insurance.

So, let's compare FHA payments based on a $200,000 loan at 4.75 for 30 years:

Prior to October 2010: P&I and mortgage insurance: $1146.31

After October 2010: P&I and mortgage insurance: $1205.23: Increase of $58.92/month

After April 2011: P&I and mortgage insurance: $1247.31: Increase of $42.08/month

In less than a year, the increase due to mortgage insurance is: $101.00/month!

Proponents of QRM wish to see the originating company to maintain 5% of every loan on their books for the duration of the loan. To have so-called "skin in the game", proponents believe the originating company will "care more" about underwriting the loan and will think twice before closing on a loan. The opponents see this as a large negative for the consumer. A non-QRM will have higher rates, thus greasing the lining of lenders and hurting the consumer and the housing market. If an originating firm must keep 5% of the loan and it is a non-QRM, the lender will wish to have a higher return for the higher risk.

The 5% retention requirement will also negatively impact the smaller lenders who will not be able to stay in business with limited capital. How many loans can a small lender hold for the duration of the loan? Thus, an already high unemployment rate will grow worse with the closure of all the small lenders.

In 2009, 47% of homebuyers placed less than 10% down on homes. Imagine what this new QRM will do to the housing market!

Mortgage insurance companies are against the QRM, since they are in business to insure homes with down payments of less than 20%. If the regulators enact a 20% or more down payment requirement for a QRM, non-FHA mortgage insurance companies will no longer be required.

April 21 is the deadline to define a QRM, but that date will probably be moved to a later date since this is a big decision for the mortgage industry.

The mortgage crisis is causing many changes. Some are for the better, but this one needs to be reviewed and analyzed CLOSELY by regulators BEFORE they implement, since it may further negatively affect the real estate industry.

Stay tuned!

Title issues are rampant! Foreclosures not executed correctly, sloppy mortgage recordings, trying to determine who owns the mortgage all contribute to delays in title clearance.

The solution? It would be in everyone's BEST interest that as soon as a home is marketed, the title be searched and resolved. This will lead to FASTER closings. As far as the cost of doing this, the lender holding the mortgage(s) would be best served since a delay in the closing just adds to their lost interest per day by not being able to collect their payoffs. Time is money! The money the lender(s) lose by delays in title clearance far outweighs the cost of searching and clearing the title. While this is being done, the property is being marketed.

So, listing agents, present the idea to the asset manager in control of the property. Being pro-active is good for all parties!

The deficit panel is reviewing the “mortgage interest deduction”. This deduction saves homeowners $134 BILLION in taxes. By modifying the deduction over time, the government’s plan is to reduce the deficit, accordingly. But what about the homeowner impact??!!

Wall Street Journal News 11/11/10 on this subject:

What implication does this have on the homeowner?

1) The real estate market will further suffer! The financial benefit of owning vs. renting is the interest tax deduction. By eliminating it, or significantly modify it, will cause consumers to continue to rent.

2) Less available consumer dollars for spending. The tax deduction saves $$, thus allowing consumers to spend and GROW the economy: thus creating and maintaining jobs for all of us.

The proponents of the plan say:

1) This deduction favors the upper class.

2) Most people use the standard deduction: why should homeowners be able to itemize, thus allowing for greater deductions than the standard.

3) We will be able to significantly reduce the national deficit.

It is not just the upper class who owns homes. Especially with the pummeled prices in the real estate market, the doors have been opened for all classes to purchase lower priced homes. Homeowners should be “rewarded” from their government for helping the real estate market by purchasing a home. Home purchase increases consumer spending in many areas.

This plan has been discussed since President Bush was in office. It has now resurfaced with this administration.

This is NOT a good way to reduce the deficit. Especially now! The real estate market is suffering enough. This idea will certainly deliver a death blow to the real estate market.

100,000 points. Sign of passion over this business? Perhaps I just love blogging? Enjoy receiving comments? Look forward to the next client who finds me because of Active Rain? Or my intense desire to see us recover from this economic recession and see homeowner's STAY in their homes vs. suffer foreclosures or short sales?

I have blogged a lot about keeping the homeowner in their home and I am still passionate about developing a plan to do just that.

In summary, I propose

•1) implementing new common sense underwriting guidelines for the loans which are eligible for refinance, but the subordinating lender refuses to subordinate or any refinance which "makes common sense" for other logical reasons. In cases where "common sense" underwriting does not prevail, mortgage insurance is placed on the subordinate lien to make the 2^nd lien holder feel comfortable to agree to the subordination.

•2) forbearance of debt (not elimination) for the amount of the mortgage in excess of 95% of current market value for those borrowers which can demonstrate a hardship. Why should a stranger be allowed to buy a home at a price the current owner can afford? Forbearance of debt is better than selling the home, leading to large lender losses, deteriorating/unkept properties, and attorney fees.

•3) allowing a streamline rate & term refinance for anyone. The FHA streamline rate & term program would be used. This program includes placing mortgage insurance on the new loan. For those who do not qualify due to poor credit as a result of applying for a loan modification or for any hardship reason, they too should be allowed to rate & term streamline refinance through the FHA program with mortgage insurance.

•4) allowing a re-entry into home ownership for those borrowers who fell victim to the mortgage crisis and were not allowed any of these remedies. FHA guidelines, which would include home buying education, can be developed which would allow for re-entry of the former homeowner. Currently, there are 10-15% less home buyers in the market due to foreclosures or short sales. They must wait 4 years until they may qualify again. Some of these buyers should wait 4 years, but the former homeowners who suffered due to job loss and were not allowed a loan modification should be allowed re-entry sooner than 4 years.

In order for this economy to recover, the homeowner MUST STAY IN THEIR HOME. Please pass on this blog to anyone who may have a connection to leaders in the government or lending industry to implement any of these proposals.

Homeowners everywhere will THANK YOU!