Doing FHA Getting Real Tough, Real Soon - 06.17.10 | Zenet Negron : First Priority Financial : Stockton, CA

salena214: (June 20, 2010 10:09am)

While in some markets, a change like that would not make too much of a difference, in a market like mine, raising the payment on a 200,000 home by 166 a month is going to mean the difference between a qualified and non qualified Buyer. I ahve a client it could affect right now if we dont get them a house. Thats just too much for my tastes. You would think that if this is needed, a smaller raise would be sufficient, with the amount of FHAs that are done in this market.

thedefchef: (June 18, 2010 9:03am)

Love the new do! You need to grow some sideburns!

drew spitz: (June 18, 2010 7:13am)

The government has to make up for the first time buyer tax credit some how and this sounds like what they are doing to me!

Mortgagerock: (June 18, 2010 5:03am)

What people don't realize is that Congress uses the MIP from FHA to fund other programs. THIS has to be the reason for the potential increase in premiums. THIS also means that FHA will NEVER go away.

tbwbrian: (June 17, 2010 4:45pm)

hi frank!!

tbwbrian: (June 17, 2010 4:44pm)

hey cj. not complaining just callin it for what it is. check out the legislation. our numbers are correct and counter to recovery thinkin. further, we cannot talk >2000 as our industry is just different. no old models to new problems... just doesnt work. BUT I GET.... sometimes complaining is, in itself counter productive. for that cheers. i agree. ~ b

tbwbrian: (June 17, 2010 4:44pm)

hey cj. not complaining just callin it for what it is. check out the legislation. our numbers are correct and counter to recovery thinkin. further, we cannot talk >2000 as our industry is just different. no old models to new problems... just doesnt work. BUT I GET.... sometimes complaining is, in itself counter productive. for that cheers. i agree. ~ b

frankgaray: (June 17, 2010 2:15pm)

CJ - Not crying about the upfront.. it's the annual that hurts. thanks for "tuning in".

joe: (June 17, 2010 2:15pm)

@msmammypie: May I suggest that you follow your own advice? If you are interested in getting a factual overview of that provision, go to http://www.factcheck.org/2010/04/a-38-percent-sales-tax-on-your-home/. In addition to the explanation and analysis of this provision, there are links to the relevant sections of the bill itself.

cjseven69: (June 17, 2010 2:06pm)

hey frank and brian, stop cryin about the ufmip. up until 2000, the ufmip was 2.25%. they only lowered it because they has a $16 billion surplus in the insurance fund. remeber that fha is just an insurace company after all. while i do agree that this is a bad time to be increasing the cost of obtaining a mortgage, its not the end of the world, as most people finance this premium and it results in a small increase in their monthly payment. the real kicker is lowering the seller contribution from 6% to 3%. that is the thing that is really gonna stall the market, imho.

msmammypie: (June 17, 2010 1:52pm)

Lockin, you need to do a little more homework yourself. The 3.8% "payroll tax" that goes into effect in 2013 to subsidize Obamacare will be applied to ALL unearned income (think rental income, interest, dividends, etc.) So while it may not kick in until you hit a certain income threshold, the folks who are generating the revenue are the ones who largely provide the jobs. Think about it....

5pence: (June 17, 2010 1:48pm)

It's an "A" paper world with junk AMC valuations. Of course they have to protect their asses when they deal in risks, like those, for profits. Some will say they can't blame them - well, I can.

The Dude: (June 17, 2010 1:03pm)

Let's Face it . . . when subprime left the market, FHA became the new subprime. Of course they're going to raise capital, credit scores, requirements, etc. It's an A-paper world.

5pence: (June 17, 2010 12:23pm)

5 minutes ago a senator from LA. just tried to get an extension of the flood insurance program and a michigan senator shot it down saying it's in another bill. Sorry guys, it's totally wrong but you know politics always come before people (sarcasm)

woodmoor: (June 17, 2010 12:03pm)

You are right on with message, I think you overstated the affect as consumers are already paying the .5% so the new 1.5% will actually raise payments by 1% increase. Yes this difference will affect buyer's ability to qualify and tend to drive prices down to meet the new affordability level\\.

billyjelly: (June 17, 2010 11:17am)

Owl Tree-The strong will survive from one degree or another. And Kudo's to you for your success. There will be more fallout, there is no avoiding it. Big banks relying on secondary to survive will also be forced to change their model, inturn forcing overall change to the failing model. Consumers will force the demand, not industry or government. The publci just needs to understand a better way of financing their lives. Public demand will change the playing field. This is the problem; decisions are being made from the top down to protect the top, not the bottom, which is the consumer who supports the whole thing. The whole system is an inverted pyramid. The pyramid tipped over in 2008. The consumer is at the bottom and are the weakest link in the whole chain. Ever heard "familes are a pycheck away from bankruptcy"? Its not the fault of the consumer, it is caused by the way we bank and borrow. Whether any of you believe it or not, but this is the problem.

frankgaray: (June 17, 2010 10:56am)

Tjandt - Exactly! So why do they keep telling us that everything is getting better? Things aren't as good as they present them and THAT'S why they are pushing this thing through... They should shoot straight with us, and hey, If they are going to continue to fuel fannie and freddie, why not FHA?

Owl Tree: (June 17, 2010 10:45am)

Billyjelly....I'm working 16 hour days to handle the business that is flooding into my office. If the wholesale channel disappears, I have 3 standing offers of employment from the 2Big2Fail crew. Sure, regs blow, conditions blow....and yet my old buddies from the giant banks come to me when they need a new loan. The only thing I'm worried about are the fools in Government....and if the TPO channel is destroyed, a new avenure will be open for professionals to flourish.

tjandt: (June 17, 2010 10:37am)

Guys...come on, you're smarter than this! FHA isn't in "better" shape...they're in WORSE shape and as housing continues to slip and decline, it'll be worse. THEY KNOW THIS...so they know they're going to need to stockpile cash for the real estate Armageddon that's on it's way due to Obamanomics (higher taxes, more regulation and more government spending) Get used to it...we're just going to have to suffer through the next few years until we get an "independent" in office to clean up the mess of the politicians. Dang it...there I go again, being realistic again! Sorry for not drinking to Kool Aid...

iam 2520: (June 17, 2010 10:22am)

I have heard conflicting #s. FHA proposal is to REDUCE the UFMIP (financed for the most part) from ___ to ___ ? and then to INCREASE the monthly MI, used to qualify from ___to ___ (Frank figured out the % increase in payment and rate) I also understand that this will not be for the life of the loan, when the LTV, based on pruchase amount hits 78% it will go away?

billyjelly: (June 17, 2010 10:14am)

joe, it's only my opinion on the future of the wholesale broker. I just see the writing on the wall. Congrats on a great month. You are right, if wholesale channels don't disappear the cream will rise to the top. Sounds like you are one of those brokers. This whole mess will identify and eliminate the 'check chaser' of the industry and those with honor and integrity should survive. Bottom line for me; the conventional banking and borrowing model is broken. We are all dealing with this mess because the model itself has exposed itself as fatally flawed. Low rate and low payment does not make for a financially fit consumer, it makes the lender/note holder stronger. We need to rebuild from the bottom up, not from the top down. Make the consumer stronger thru education and better strategies to use the tools already available. The fix is rather simple if you know where to look and what to look for.

joe: (June 17, 2010 9:55am)

@billyjelly: I don't know where you get the idea that brokers are going to be out of business. Those who are starving are in that state because they haven't adapted to new regulations and market conditions. GFE 2010 has to all intents and purposes made the discussion about YSP moot, since it doesn't belong to the broker anyway. If the wholesale channel disappears as you seem to believe it will, LOs have to find a different channel. In my case, I am positioned to be broker *or* banker, with no loss of profitability. I think this is the very best time in history to be a loan originator--IF the skills are there to get loans packaged and funded. May was the best month we have had in the 6.5 years since we opened our office, both in terms of revenue generated and number of loans funded. This is a time for all of us who plan to stay in this business to bring our "A" games. There is far less margin for error or sloppiness than ever before.

billyjelly: (June 17, 2010 9:50am)

TNDebbie, I don't have ALL the answers, not that arrogant, but I do have many of the most important answered and that is why I am still growing in the worst of time. I have circumvented the need to rely on a misguided and illequipped government. Email me your contact info at bwestrom@ifsdg.net.

TNDebbie: (June 17, 2010 9:49am)

mthibo: aren't we all!! AFR is a slow process but you can get it done - my rep's email is jaydempsey@afrwholesale.com - he is in Memphis but I am sure can get you info for the local rep in your area

TNDebbie: (June 17, 2010 9:45am)

billyjelly - so you have all the answers?? how about sharing with us poor brokers! We have been saying for several years "roll with it" - do whatever you have to do in order to meet the requirements - we do this and then another block is put in the way - whatever happened to free enterprise!

billyjelly: (June 17, 2010 9:38am)

I hope all you mortgage brokers are looking for a new line of work or finding a way to bypass "Big Brother". The wholesale channel is going bye-bye. I gave the answer to the principles at TBWS, but you haven't heard about it yet. I wonder why I keep hiring while TBWS followers are starving or going out of business? MMMM? Brokers; it was a good run while it lasted, but you are putting your future in the hands of those who don't want you any more. Good luck.

5pence: (June 17, 2010 9:36am)

LMFAO bern2surf - good one. The reason I say it's a direct result of the illegal HVCC, read it. It's implementation without consumer protection means that there is no protection for anyone in the mortgage biz. The banks can rule with an iron hand and with the other hand pick your pockets. No protection against the banksters and their will for profits at all our expenses. Fannie and Freddie and now FHA are bailout central for the banksters. See why I say the illegal HVCC sets a dangerous precedent?

SacRELender: (June 17, 2010 9:30am)

Unfortunately, as a Californian, we have DiFi and Babs representing us. Any suggestions on senators from other states that might be interested in reality?

bern2surf: (June 17, 2010 9:22am)

Great piece guys. Hey Mr.Freeze, how can you survive without your suit?

mthibo: (June 17, 2010 9:07am)

TNDebbie: Thanks for the info, I will call them

mthibo: (June 17, 2010 9:07am)

Godlike: I am just trying to do my job and help out a client.

5pence: (June 17, 2010 8:24am)

I think I see what's going on. Banks don't want to do risk assessment/quality U/W (just like in the boom/bust) so they're avoiding risk by requiring larger downpayments & higher MI from the borrow. Since they're now going with unreliable crappy appraisals and AVM's, one of the parties in the transaction has to have more skin in the game and it won't be the banksters. This is another adverse direct result of the HVCC in harming consumers and small businesses IMHO. The banks don't want any risk whatsoever - they just want to take the money and run. There is no foresight in the directives. Quality has to be somewhere in the loan process and it isn't going to be the banks or the appraisers or AVM's/BPO's they use, so by raising requirements for the borrowers they can avoid any risk assessment. If their appraisers and AVM's are wrong, they're still covered by these higher requirements. No quality underwriting dept. necessary. Easy money - screw the consumer & you don't have to do your job.

Owl Tree: (June 17, 2010 8:12am)

CONTINUED... I've been involved in the mortgage industry for over 20 years. I've been a small business owner since 2005. I've always conducted myself according to the highest ethical standards. That includes giving customers complete authority in how they wish to structure their loans. If Congress takes that authority away from the consumer, it will crush my business. The Congress holds the fate of my small family business in its hands.

Owl Tree: (June 17, 2010 8:10am)

Here is an email I just sent to my congressman, and my two senators, with respect to Barney Frank's comments regarding "eliminating YSP". Feel free to ignore or borrow from it. Regarding: Title VII…..Section 9003 (HR 4173) / Section 1073 (SR 3217) The current House and Senate Bills give the consumer the ability to pay points and fees directly, or allow the originator the option to charge no fees to the consumer and instead obtain compensation based upon the rate. However, this morning, on CSPAN, Barney Franks was overheard stating that this option would be eliminated. If the borrower is not permitted to finance closing costs through the rate, it will raise rates and costs for the consumer, and destroy small business. Hundreds of small Illinois companies will be destroyed; thousands of Illinois employees will lose their jobs. Thousands of Illinois homebuyers will be forced to pay higher closing costs and higher rates. Consumer choice, consumer protection, and fair, open, honest competition will NOT be served with a departure from what the House and the Senate have passed in their respective chambers. I've been involved in the mortgage ind

jcollins: (June 17, 2010 8:04am)

TOTAly different subject. Does anyone have an answer to how to calculate for REG Z (5-6% rule) with the new GFE that is the same for BANKS anb Brokers. I have run into different Banks calculating it differently. It would seem to me that to be equally and by that means correct. You would use the adjusted origination not the gross oigination. This really only effects the lower loan amounts. But, it does hurt the consumer by limiting their choices. Becuase, I work for a bank and brokerage, I have the ability to change the way I disclose on the GFE. This has to be wrong. HAs anyone else had this problem. Maybe it is just CA.

joe: (June 17, 2010 7:58am)

@Lockin: Good call (on B.S.)! You beat me to the punch!

joe: (June 17, 2010 7:54am)

@Evil Genius: re the "sales tax on real estate:" Mr. Guppy doesn't tell the whole story. In his op-ed, he said, "Tax on Home Sales. Imposes a 3.8% tax on home sales and other real estate transactions. Middle-income people must pay the full tax even if they are “rich” for only one day – the day they sell their house and buy a new one, if the profits push their adjusted gross income above the yearly limits." The legislation calls for a 3.8% capital gains tax on any gain over the threshold. That would be $500,000 for a married couple filing jointly. That is not likely to affect a large number of people, contary to Guppy's li...er, misleading statement.

TNDebbie: (June 17, 2010 7:48am)

mthibo - American Financial Resources (AFR Wholesale) - still doing mfg FHA 96.5% with 640 credit score

sidlerwicz: (June 17, 2010 7:48am)

not to get off subject...but...lakers or celtics??

Evil Genius: (June 17, 2010 7:39am)

Some Obama humor http://www.angelfire.com/ak2/intelligencerreport/obama_at_bat.html Enjoy

bobbrennerloans: (June 17, 2010 7:37am)

My God, our current cast of rulers are clearly dopes. They no doubt failed every econimics course they ever attempted in college (I am certain Maxine Waters never attended any school let alone college). Between this current money grab that will only serve to further depress real estate and the brain dead suspend Gulf oil production that will drive energy costs up to really stifle any recovery demonstrates they know nothing about econimics. Everything these thugs want to pass will cost us all dearly.

Joe_DAgostino: (June 17, 2010 7:32am)

The regulations that has affected our business has caused the mortgage broker to be look at with as much integrity as the proverbial used car sales man. The truth of the matter is that the small broker has created little impact on the fiscal state of affairs within our industry. The major banks are the real cul-prits in this fiasco. They are the ones that have placed the majority of bad deals and yet for the most part are exempted from all these rules. The MBA is a joke, our lobbyists must gain the respect of the very people who allow the “Big Banks” to do business as usual. What we need is to join forces with the NAR, who in my state (New Jersey) just got the government to allow for a state tax credit of up to $15,000.(awaiting Governor's signature) In order to jump start the new housing industry. After 40 years as a Licensed Mortgage Banker, I feel I have no idea what the hell is going on. Let’s get together NOW!

Owl Tree: (June 17, 2010 7:27am)

THIS IS A COPY AND PASTE FROM NAIHP....CALL YOUR REPRESENTATIVES, NOW.... http://www.naihp.org/index.php?option=com_content&view=article&id=56:hvccarticle&catid=35:calltoactionarticlescategory&Itemid=61 Barney Frank intends to BAN yield spread premiums (YSP), in the Financial Reform Bill. This reckless action will harm both consumers and housing professionals. Zero Point mortgages will be eliminated! Cost of Home Ownership will increase. Consumers will need more up front funds, resulting in substantially fewer buyers. Low and Moderate income buyers, especially those in minority communities, will be excluded from Home Ownership! Tens of thousands of small business mortgage companies will go out of business, as they won’t be able to compete with large banks. Consumers will pay higher interest rates and settlement costs, as a result of less competition.

GODLIKE: (June 17, 2010 7:26am)

mthibo in this market why would you think anyone would do a trailer loan at 3.5% down? They are the first portion of the market to deteriorate, the last to recover and trailers still depreciate in value. There are several trailer lenders who still do loans, but the interest rate and downpayment are astronomical.

drez: (June 17, 2010 7:20am)

Hey TBWfrank and brian.....what you heard on Cspan, is true...in fact IMMAAG is passing this around in earnest...it is absolutely insane what this bill proposes to do to OUR compensation...check it out..there are talking points to CALL your senators as well as your HOUSE reps....although my honest opinion thinks it too little too late...another travesty

Lockin: (June 17, 2010 7:20am)

To: Evil Genius Q: Does the new health care law impose a 3.8 percent tax on profits from selling your home? A: No, with very few exceptions. The first $250,000 in profit from the sale of a personal residence won’t be taxed, or the first $500,000 in the case of a married couple. The tax falls on relatively few — those with high incomes from other sources. il Genius. Sound bites are good, but are really evil when they don't tell the whole story. FAQ taken from Fact Check.org

vbisc: (June 17, 2010 7:15am)

It's actually comical what these people in DC come up with. Think about the scenario of lowering the upfront to 1% and increasing the annual renewal to .85%. You decreased an intake of cash that is needed right now of 125 basis points but increased an annual premium by 30 basis points. The breakeven is after 4 years. The majority of FHA loans are used by first time buyers. According to NAR the average home owner keeps a home 6 years. Making an educated guess, I would think a 1st timer is actually below this average as they move due to family size increases, job transfers, etc... So how, if your average FHA borrower sells a home in less than 5 years, does FHA expect to sure up it's balance sheet by decreasing revenue in? Add this to consumers qualifying for less of a sales price, only in DC can you come up with this stuff and keep your job!

DanSchweihs: (June 17, 2010 7:08am)

You are wrong on this today. FHA’s average credit score has gone from 620 to over 700. FHA has stopped working toward its original mission of “Serving the Underserved” and has instead crowed out private mortgage insurance by becoming a Triple-A loan insurer. They have reduced the pool of available buyers. They have been a major contributor to the glut of unsold homes by eliminating large groups of “Underserved” potential buyers. No question that the cost of insuring a loan has increased due to the increased foreclosure rate along with other reasons. Back in the 1970s, the cost of gasoline increased, which increased the Post Office’s cost to deliver a letter. The Post Office did not stop delivering mail to people that were expensive to serve. They raised the price of stamps.

DanSchweihs: (June 17, 2010 7:08am)

Continued: If FHA increased the price of up-front mortgage insurance to 5% and get back to “Serving the Underserved” again, they would dramatically increase the pool of available buyer and the housing industry would recover. Increasing the up-front MIP would increase borrower's monthly payment by only about 3%. The arithmetic driving this is on my website at: http://www.hard-loans.com/Solution.htm Please review the arithmetic on my website and put this solution on your broadcast.

mthibo: (June 17, 2010 7:06am)

Help everyone!!!!! I am still looking for a lender who does FHA Manufacuted housing on a basement at an LTV of 96.5%. Does anyone know of a lender?????

sidlerwicz: (June 17, 2010 7:05am)

declining market hits of 5% have to be waived by fanny & freddie in order to boost conventional ltv's asap; if they can offer 97% homepath financing w/ no m.i on reo's why isn't that program available to vanilla borrowers across the board ;recently a surfboard business i'm a partner in has taken a major hit due to cheap chinese imports flooding the market; too bad there are no cheap chinese mortgages out there or resurected old school programs so we can stop the higher down strokes and the short sale stall;and leverage w/ conventional $$$ @ higher ltv's;i am also a real estate broker so i can't originate fha,... fha will inevitably regulate itself out of business...it's the govt.death wish...

TNDebbie: (June 17, 2010 7:05am)

Does anyone really believe that ysp is the cause of this mess - making a 1% premium for upselling the rate by .125% to .25% has caused this foreclosure nightmare??? I don't think so -- look closely at the AUS system and credit reporting systems - I can get a loan approved for a borrower with a 680 credit score that had a Chaper 7 bankruptcy 2 years ago (how do they score a 680?) but can't get a loan for someone who has never missed a payment but because of high credit balances scores a 619 - don't take into consideration that they have always paid their mortgage on time and they are refinancing to lower rate from 6.5% to 4.5% (a benefit wouldn't you say? - why can't we find a way to use a little common sense -- doing away with YSP is not the answer!!

Evil Genius: (June 17, 2010 7:01am)

Following from Paul Guppy of www.washingtonpolicy.org Under the new health care bill - did you know that all real estate transactions are now subject to a 3.8% Sales Tax? The bulk of these new taxes don’t kick in until 2013 (presumably after Obama’s re-election). You can thank Nancy, Harry and Barack and your local Democrat Congressman for this one. If you sell your $400,000 home, there will be a $15,200 tax. This bill is set to screw the retiring generation who often downsize their homes. Is this “Hope & Change” great or what? We can vote the bums out in November and demand that they eliminate the bill or at the very least defund it. Then in 2012 repeal it.

TD Hawk: (June 17, 2010 6:51am)

M.I. increases and lower seller concessions are the least of the worries, just wait until FHA copies Fannie and decides to pull credit again a few days before closing. How many knuckle headed borrowers will hose themselves, care to venture an over-under percentage for a poll question?

JUSTFRANK101: (June 17, 2010 6:46am)

Name a profession where the ONLY way to get a JOB is to go through a THIRD party that takes 40% or more of your EARNED FEE?

barbara: (June 17, 2010 6:03am)

I think it offends Barney and Co. that profitability is determined by the interest rate of the loan. What do they think will happen to those profits if they can't be shared with the LO's by the lenders? Of course, the banks will retain them. Does anybody remember when FHA and VA "set" their interest rate at .5% below market? I remember sellers paying 10 pts. to close loans when Carter wouldn't raise the rate above 10%.

barbara: (June 17, 2010 5:55am)

Don't forget that the seller contribution to cc and pp will soon decrease to 3%. They will choke off whatever recovery is slowly coming. But then whoever thought they ever understood anything about economics and doing business?

tbwbrian: (June 17, 2010 5:45am)

Barney Frank caught on CSPAN saying 4173 does away with YSP. This is a big problem guys. More to come.

flippingRealtor: (June 17, 2010 5:41am)

I was thinking...Why don't these people just ask around before passing legislation. It occures to me they have not changed jumbo loans. Conclusing...they don't know anyone to ask in the lower price ranges!!! They have no clue how the average person lives. Sad, very sad!

Hammer: (June 17, 2010 4:54am)

While we spread the word and tell our elected officials how we feel (an act that is necessary even though it feels futile), let's also remember to use this as a selling opportunity and help our clients get those picket marks off of their asses from all that fencesitting..........

GaryP: (June 17, 2010 4:37am)

The recent increase to 2.25% on the UFMIP was just a stopgap measure that was allowed under the current FHA authorization. FHA was capped on how much they could increase the monthly MI. HR 5072 is intended to give FHA more flexibility to increase their revenues and rebuild their reserves. They make more money on the monthly than they do on the UFMIP. One note here. My understanding is that part of the reason that their reserves are lower is because those funds are also used to finance non-mortgage HUD programs, like section 8 and other low cost rental programs. So, it's not like the non-performing FHA mortgages are the only cause of this issue.

GaryP: (June 17, 2010 4:25am)

Just an FYI on the FHA MI issue. I watched a congressional hearing with Stevens on this issue, and he said the goal was to drop the UFMIP to 1% and increase the monthly to .85%. Somehow, he came up with the idea that was more consumer friendly, while still increasing the cash flow to FHA. I got the impression that he thought that most buyers pay the UFMIP in cash. Any LO could tell you that 99.9% of the time, the UFMIP is rolled into the loan and increasing the monthly payment is going to have a far greater impact on the borrower. Thre is no way that lowering the UFMIP will offset the increased monthly MI. This just mean that DTI will go up, thus reducing what we can pre-qualify our borrowers for.