FOR IMMEDIATE RELEASE
PRLog (Press Release) – Aug 07, 2010 – Details that Bank Of America has begun a new short sale program in an effort to stave off an increasing foreclosure inventory have leaked. The new program is called the HPO short sale program in which a Bank of America representative known as a “Personal Advocate” will be assigned to the short sale and will be very responsive in seeing the short sale process to completion with approvals in just two weeks.  

The reported details and benefits of the Bank of America HPO short sale program are listed below.

Key Benefits of the Bank of America HPO short sale program:
1) No deficiency judgments.
2) No pre-qualifying (the value of the home being less than the loan amount qualifies.)
3) Seller is not asked to contribute funds to the short sale.
4) Seller will receive $3,000 at the successful close of escrow (primary residence.)
5) No records documentation.

Required Documentation:
1) The listing agreement.
2) The ratified purchase contract.
3) An appraisal.
4) Signed HPO Form.

Documentation NOT Required in the Bank of America HPO Short Sale.
1) No hardship letter.
2) No IRS Form 4506.
3) No tax returns.
4) No bank/asset statements.
5) No financial worksheets.

This is incredible news because if a borrower has a Bank of America loan and has been turned down during a loan modification request or their loan modification has not worked out the way they had hoped or their short sale had been rejected and they had given up hope and resigned themselves to losing their home or investment property to foreclosure, they might now be able to sell their property in a simple and quick process while further minimizing damage to their credit (other than having a short sale on your credit report which the credit rating agencies reportedly will begin to significantly minimize after just two years as opposed to a foreclosure or deed-in-lieu which won’t begin to minimize until seven years have passed).

Bank of America is apparently taking this approach because they realize furnished homes in good condition will net them a higher price and nine to eighteen months of neglect and unpaid property taxes and mortgages can be greatly reduced which will help the corporate bottom line.

A short sale occurs when the cumulative debt on the property is greater than the net sales proceeds. This results in a shortfall ofmoney relative to the debt and requires either a cash contribution from the seller, an increased cash contribution from the buyer, a forgiveness of debt from the lender or a combination of these three. Hence, the name short sale.

National Mortgage News reports:  Beginning June 1, lenders originating mortgages being sold to Fannie Mae will have to pull a second credit report just before the loan closes.

Mortgages and special programs: Check with your lender for more information on these great programs:

• Palmetto Heroes – a state housing program for first time homebuyers who are firefighters, law enforcement, teachers … down payment assistance up to $7,000.
• State Housing – Low rates and $5,000 allowed for down payment assistance, may be forgiven based on qualification
• Rural Housing – 100% financing for properties that qualify, temporarily suspended but should be available in the future
• FHA 203 k – up to $35,000 of repairs can be incorporated into the mortgage

This week brings us the usual cascade of first-of-the-month data, with very important insight into manufacturing and employment.  While GDP was adjusted upward last week, most of the increase was due to inventory-related adjustments.  If the ISM Manufacturing Survey comes in below 55.0 we could see mortgage rates begin the week on a decidedly downward bend as traders begin worry about a manufacturing slowdown. However, if the Ism shows any improvement, rates will flatten, or perhaps even move slightly upward.  Friday’s employment report will be hugely influential as usual.  If we get an unexpected month of job creation, we could see rates moving back upward next week.

From:
Katie Mahoney and Jill Settle
Carolina One Mortgage

• Provide initial TIL disclosures at least seven days before loan closing.
• Send revised TIL disclosures if loan changes affect the APR by more than 1/8%, which triggers an additional waiting period before a loan can close. Typical items that affect the APR include: product change, rate increase/decrease, revised loan amount, third party fees, change to closing date.
• Understand new waiting periods, when they apply, and how they impact the borrower’s closing date. The initial TIL disclosure triggers a seven-day waiting period before a loan can close. Any further changes to the APR greater than 1/8% trigger revised disclosures and a related three-day waiting period to kick in before a loan can close. Each time the APR changes, a revised disclosure must be sent and the three day waiting periods kicks in. If APR adjusts by less than 1/8%, up or down, TIL must still be re-disclosed but there is no waiting period before closing.
• Send initial TIL disclosures to refinance and home equity loan customers, in addition to good faith estimates. New regulations do not apply to Home equity lines of credit or mortgages for rental property.
• Wait to charge fees to borrowers until the initial TIL disclosure is received. The only exception is a reasonable credit bureau fee.

Here are a few things buyers can do to help ensure an on-time closing:

• Apply for a mortgage in-person. It eliminates the delay of mailing documents and returning them days later.
• Know what you want regarding loan terms so you can avoid changing products later. If terms change, it impacts the APR, which may require revised disclosures and additional waiting periods.
• Lock in your interest rate earlier in the transaction, instead of waiting until the last minute. Any interest rate change of 1/8% will be enough to require a new disclosure and new waiting period, which will delay the loan close.

Mortgage rates started last week where we left off the week before – on the rise.  However, Thursday market sentiment seemed to change, and we saw a reversal, with mortgage rates ending the week slightly better than where we started.  What has caused rates to go up recently?  Supply.  The government has to raise cash to pay for all of the stimulus programs that it has enacted over the past year to help us the country get out of the recession that we are in.  That cash comes from the sale of treasury bonds.  The problem is that there is so much cash being spent, that the markets are unsure if there will be enough interest (pardon the pun!) in the bonds.  So, in order to attract investors, the rate on the bonds has to go up.  In addition to all of the treasury bonds hitting the markets, billions of dollars of mortgage bonds are hitting the markets from all of the people that have been refinancing.  So, we’ve seen interest rates going up to get through the glut of all of the treasury bonds and mortgage backed securities hitting the market.  In the middle of last week, the Treasury finished a round of bond selling, which went fairly well, and some big investment firms announced that they are purchasing mortgage backed securities.  This helped to settle the markets down, and we saw rates change course.  The week ahead could be a tough one for the stock and bond markets, as there is a slew of information coming out, including important reads on inflation, housing and unemployment claims.  The economic news that was released last week was pretty rate friendly:

On Wednesday, we  learned that our trade imbalance with the rest of the world increased.   What does this mean?  We imported more than we exported.  Since part of what we import is oil, and the cost of oil has increased recently, the trade deficit typically rises in step with the price of oil.   Thursday’s report on Retail Sales in May showed an increase of 0.5%, higher than the 0.2% that was expected and the -0.2% that was reported in April.  The Retail Sales report has a big impact on mortgage rates, since so much of our economy is based on the consumer.  However, a big reason for the increase in retail sales in May was due to the increase of the cost of gas at the pump.  This makes sense.  I know it has been costing me quite a bit more to fill up the tank.  I’m spending a lot more, but driving off with the same amount of gas.  First time Unemployment Claims decreased to 601,000 from 625,000 the week before, and were well below expectations of 615,000.  However, continuing claims for unemployment (those people that are unable to find work) increased to another record number, with no signs of improvement in sight.  Finally, on Friday the University of Michigan Consumer Sentiment came in slightly lower than expected, but higher than the previously reported number.  This might not bode well for future retail sales figures.

As I am writing this on Monday morning, the mortgage bond market is continuing its rally for the better that began last week.  Let’s hope that continues!  I will be watching the markets and will keep you posted throughout the week ahead on any major movements, one way or the other, in mortgage rates.

By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — Rates on fixed-rate mortgages rose this week as the financial markets tried to discern the state of the economy, Freddie Mac’s chief economist said on Thursday.

The 30-year fixed-rate mortgage averaged 4.91% for the week ending May 28, up from last week’s 4.82% average; the mortgage averaged 6.08% a year ago. The 15-year fixed-rate mortgage averaged 4.53%, up from 4.50% last week and 5.66% a year ago. 

Rates on 5-year Treasury-indexed hybrid adjustable-rate mortgages also rose, averaging 4.82% this week, up from 4.79% last week; the ARM averaged 5.62% a year ago.

But 1-year ARMs averaged 4.69%, down from 4.82% last week and 5.22% a year ago. The ARM hasn’t been lower since the week ending Sept. 29, 2005, when it averaged 4.68%.

To obtain the rates, the fixed-rate mortgages required payment of an average 0.7 point. The ARMs required payment of an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

“Fixed-rate mortgage rates followed long-term bond yields higher this week as financial markets try to discern the state of the economy,” said Frank Nothaft, Freddie Mac chief economist, in a news release. “Consumer confidence rose again in May and represented the largest two-month rally since records began in 1967. According to the National Association for Business Economics, the consensus of a recent survey of 45 professional forecasters called for the recession to end in the second half of this year, but the recovery is to be more moderate than the previous survey.”

Still, housing continues to be a drag on the economy, he said. Read about the record level of foreclosures and delinquencies.

“Although single-family existing home sales rose 2.5% in April, inventories of homes for sale also rose to 9.6 months from 9.0 in March, according to the National Association of Realtors,” Nothaft said. “Moreover, the NAR noted that sales of distressed homes made up 45% of the purchases in April. Such types of sales mixed with a large supply of unsold homes keep depressing house prices.” Read more on the latest data on sales of existing homes.

Mortgage applications filed last week fell a seasonally-adjusted 14.2%, compared with the week before, according to a report released by the Mortgage Bankers Association on Wednesday. See full story.

Everything You Need To Know About The $8,000 First Time Homebuyer Tax Credit:

• It is said that the $8,000 tax credit will bring an additional 300,000 new homebuyers into the market.  This is great as it creates the domino effect as first time homebuyers will most likely lead to two or more trade-up transactions in the years to come.
• The tax credit also provides a nice nest egg for first time homebuyers in the early difficult years, when repairs and other unexpected expenses pop up.  It’s a great way to stimulate the economy as first time homebuyers may need to purchase new items such as lawn mowers, washers/dryers, furniture, etc.

With such an important initiative, there is a lot of information available – we’ve summed it up to the main points for your review…

How much can I claim for the tax credit?
Borrowers can claim up to $8,000 or 10% of the home’s value, whichever is less.

Who is eligible for this tax credit?
First time homebuyers or those who have not owned a primary residence in three years previous to the new purchase.

Does this tax credit need to be repaid?
No repayment is necessary as long as the new purchased home is not sold within three years.  If the home is sold within the first three years, the entire amount of the tax credit is recaptured on the sale.

How long is this tax credit valid?
The tax credit is valid on all homes purchased on or after January 1, 2009 and before December 1, 2009.

What properties are eligible for the tax credit?
Any single family residence (including condos, co-ops and townhouses) that will be used as the primary residence.

Are there income limit restrictions?
Yes.  To qualify, individuals must make less than $75,000 and $150,000 for couples.  Higher income buyers may receive a partial credit.  Individuals making over $95,000 and $170,000 for couples are ineligible.

How does this work with my tax refund?
This could work a number of ways.  The following three scenarios will help explain.
Scenario 1: Your final tax liability is normally $6,000. You’ve had taxes withheld from every paycheck and at the end of the year you’ve paid Uncle Sam $6,000. Since you’ve already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you’ve overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you’ve underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.  CNNMoney.com

How do I apply for the tax credit?
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required. Home buyers that have filed their 2008 taxes may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.

Is this a good time for a first time homebuyer to purchase a home?
Absolutely!  Interest rates are at historic lows and home prices are in general lower.  Also, there is a surplus of homes for sale, meaning you will have many options to choose from.  One thing to note is you will need a down payment, but not to worry, there are low down payment programs available for first time homebuyers.

“As a result of these changes, effective 3/9/09, no MI company will offer the following as an eligible feature, and therefore will be restricted to 80% LTV in all Fannie Mae and Freddie Mac Loans:”

• Second Homes
• FICO below 680 (credit score)
• Debt ratios above 41%
• Cash-out refinance
• Manufactured homes

These guideline changes will not effect FHA loans (FHA insures their own loans)…

Mortgage rates have seen a couple of big dips recently, to rates not seen in over five decades. The dips were short lived, however, as demand and inflation fears caused rates to retrace to higher levels. Chances are pretty good that we will see more of these dips, but even if we do, not everybody will be able to take advantage of them. This is because of recent changes announced by Fannie Mae and Freddie Mac. They will be imposing additional “risk-based pricing adjustments” to borrowers with credit scores and loan to values which in the past would have been considered very low risk. Also, based on rates being offered by these mortgage giants and other large buyers of mortgages, there has been a decrease in “premium pricing”, which has been used in the past to fund origination fees and closing costs in return for a slightly higher interest rates. This means that many buyers will no longer qualify for a “no point(s) mortgage”.

The recently announced changes come in the form of Loan Level Price Adjustments (LLPA), Condo Loan Pricing Adjustments, Cash Out Refinance Pricing Adjustments and Investment Property Adjustments.

Here is a grid that shows how these LLPA changes might affect certain borrower’s interest rates:
Assumption: 30 year base fixed rate of 5.375% (JUST AN EXAMPLE!)
20% Down                           10%Down               5% Down
FICO >740                    5.375– 0 points                   5.375 – 0                5.375 – 0
FICO 720-739               5.375 – ¼ point                  5.375– 0                 5.375 – 0
FICO 700-719               5.375 – ¾ point                  5.375 – ½              5.375 – ½
FICO 680-699              5.375 – 1-1/2 points or      5.375 – ¾               5.375 – ¾
6.25 – 0 points                  6.125- 0

FICO 660-679                5.375 – 2-1/2 points        5.375 – 1-3/4           5.375 – 1-3/4
FICO 640-659                5.375 – 3 points                5.375 – 2-1/4           5.375 – 2-1/4
FICO 620-639                5.375 – 3 points                5.375 – 2-3/4           5.375 – 2-3/4

In the past, a lender might have been able to increase the rate to cover the cost of the loan level price adjustments. The idea being that at a higher than market interest rate, the loan was more valuable to the end investor, so they were willing to pay the originating lender more, which covered the cost of the LLPA. However, for various reasons, the end investors are not as willing to do this. One reason might be that the end investors are experiencing so much volume now that reducing this premium pricing is helping them to manage this increased volume with their reduced staffs. Another reason for the reduced premium pricing may be a fear on the part of the end investors that lower mortgage rates are ahead of us, and they don’t want to pay large premiums on loans that might payoff quickly as borrowers refinance into those lower rates. When an end investor pays a YSP (yield spread premium), SRP (service release premium) or other premium pricing to originating lenders, it is with the belief that the mortgage is going to be around long enough for them to make up these costs. If a loan pays off quicker than expected, the end lender (and sometimes the originating lender) loses out.

You may notice that the additional points in the above chart actually decrease with less than 20% down. This isn’t a mistake! Because of the private mortgage insurance that is required on loans with less than 20% down, there is less risk to the investor. Therefore, there is less of a risk-based pricing adjustment.

Condominium Loan Pricing Adjustments:

Fannie Mae, Freddie Mac and other mortgage lenders have experienced a lot of losses on loans secured by condominiums. As a result, they have instituted a price adjustment, or fee of 3/4 of a point on any loans secured by a condominium where the borrower has less than 25% equity. So, using the above chart, if a borrower with a 680 credit score and 20% down was purchasing a condominium, their rate would be 5.375% with 2-1/4 points (the 1-1/2 LLPA plus the 3/4 condo fee).

Cash-Out Refinancing Adjustments:

Borrowers trying to take advantage of lower interest rates by refinancing and pulling equity out of their current home (cash out refinance) will find pricing adjustments ranging from 1/4 to 2-1/2 points, in addition to the additional adjustments listed above, depending on LTV and credit score. Borrowers looking to refinance just their current balances will not pay the additional cash out refinance adjustments.

Investment Property Adjustments:

Finally, borrowers that are purchasing (or refinancing) investment properties will also see additional adjustments, based on the following:
Loan to Value up to 75% – add 1-3/4 points (a small increase from previous levels)
Loan to Value between 75.01 to 80% LTV – add 3 points (a large increase over previous levels)

The news isn’t all bad!!! FHA loans are still readily available for borrowers with as little as 3-1/2% down! The pricing adjustments don’t start until the borrowers credit score drops below 620, making FHA financing a fabulous alternative for many borrowers, especially those with smaller down payments and/or lower credit scores.

APPRAISAL CHANGES COMING, EFFECTIVE MAY 1, 2009:

The Federal Housing Finance Agency (FHFA), which controls Fannie Mae and Freddie Mac announced that Fannie and Freddie will implement a revised Home Valuation Code of Conduct (the Code), that will govern the relationship that any lender that sells mortgages to Fannie and Freddie have with their appraisers. The full Code is too lengthy to be included in this update, but it can be viewed at:

http://www.freddiemac.com/singlefamily/pdf/122308_valuationcodeofconduct.pdf

Highlights include:
1) Lenders must ensure that borrowers receive a copy of the appraisal at least 3 days prior to closing.
2) Lender’s production staff is forbidden from selecting, retaining or recommending the selection of particular appraisers.
3) Lenders cannot accept appraisal reports from appraisers selected by mortgage brokers, real estate agents, or other third parties.

These changes may have the biggest impact on the way that mortgage BROKERS.In
the past, a mortgage broker has put a loan package together, maybe with a funding lender in mind, but not committed to that end lender. With these changes, the end lender will need to be chosen at the beginning of the process, so that lender can order the appraisal, or there could be some delays in obtaining appraisals if the broker delays choosing the end lender, for whatever reason.

Although all of the changes that I have listed may seem extreme, we have had changes in the past, and the real estate market has always found a way to accommodate the changes. We may go through a period where mortgage underwriting standards move back to where they were 10 to 20 years ago, as the mortgage credit pendulum continues its swing from one extreme to the other. It will eventually settle somewhere in the middle! I’m confident of that. In the mean time, households are continuing to grow. The Echo boomers – children of the baby boomers – are getting ready to buy homes, ready to make up a big demographic of buyers, which will need to a larger number of households that will need a place to live! With mortgage rates at their current low levels, and home prices as low as they are, many experts say that home affordability is at its best level since the 1970’s. Now, if that fact could only make the headlines!