Need To Refi, But Your House Is Underwater?

Click on the title to link. This is an article about two government options if your house is underwater. The thing about these two options is they are not as easy to get as they may make them sound. There has been numerous articles about how these two programs have not really accomplised what they were intended to. But they are, none the less, options.

If you are currently on an FHA or VA loan then you can also refi onto another VA or FHA loan at a lower rate without having to get an appraisal. This would eliminate any "underwater" issues.

Refinancing Options If Your Under Water

Click on the title to link. We do not do either of these loans; you would have to go through your current mortgage holder. But they are resources for you if it is a last option, and you want to view these as last resorts.

Mortgage Terms Now In Plain English? Funny.

Click on the title to link to this ridiculous article.
Oh my, where do we start? This could be one of the most uneducated articles we have read in some time. This is just the latest example of part of the problem..people like James R. Hagerty with the Wall Street Journal who write articles as if they actually know what they are talking about. I guess "investigative reporting" is a lost art form these days.

I have a question, has anything the government ever come up with "simplified" the issue? Please, I beg you, let me know if you can think of one. This is yet another example of people coming up with a "solution" who now absolutely nothing (and that is not overstated) about what they are trying to fix. The issue is not fees changing at closing. The issue is that our industry is full of idiots who have no ethics and, therefore, get away with it. How do they get away with it? Because nobody governs the established "laws". So what's the answer, according to the government, well let's create a "simplified" form that the lenders and brokers have to "commit" to. But let's not make them actually show how they get the numbers. Let's instead hide the details and only show the consumer the number the lender and brokers have to "commit" to. Make sense? Hardly.

This new GFE (Good Faith Estimate) is undoubtedly the dumbest, most confusing form we now have to deal with. It is so confusing that we are going to be using the old GFE to explain the new one. We continue to stand utterly amazed at how these dopes in Washington come up with this stuff without so much as consulting people who actually know what they are doing. Is it really that difficult? Instead they have come up with a form that goes from one to three pages, shows no detail, does not give the PITI (Principal, Interest, Taxes and Insurance) payment anywhere, encourages to shop instead of working with people you actually have been referred to and trust, and clarifies one thing...nothing.

So just know that we are here to help walk you through the, now, more confusing and less understandable mortgage process. And remember this, we are 100% referral because we treat people the way they should and want to be treated. If lenders and brokers did that then the need for stupid forms like this would not exist. Don't kid yourself into thinking this form "protects" you. Forms and rules will not protect you (trust us, we see it all the time from people who come to us from other places). All that will protect your interests is working with a company, like Premier Choice Mortgage, that will actually do what is in your best interest and not their own.

Mortgage Disclosure Improvement Act - Friend or Foe

Oh, the MDIA. Now that this is in full force, no consumer could possibly get bamboozled. The powers that be have come to the rescue. Among other details (obviously), this Act mandates a 7 day minimum waiting period between disclosing the details of a transaction via the Truth In Lending and closing on the mortgage.

This sounds reasonable I suppose; but, why? Are they really expecting that because one HAS to wait 7 days to close they are less likely to be taken advantage of. Even it that is the case, this is another example of the 99% being potentially inconvenienced for the 1%. Now, one of the primary purposes is that if the APR increases by more than .125% of what was originally disclosed, the details have to be redisclosed and the 7 days starts over. So sure, it could protect someone from closing on a loan that has surprises at the end. But, it has ALWAYS been the case that if someone is surprised at the end of the loan, they do NOT HAVE to close on the loan. They could have walked away. It is understood that MDIA will take some of the pressure off the borrower in these situations, but they may still ultimately have to make a difficult decision - go figure.

If you are picking up on the frustration and sarcasm, you're right on. The thing is, due to the way we've always done business, these types of legislative mandates (of which there are more coming in the near future) do nothing but create inconveniences. EG:

- we have a wonderful client who came in to do a streamline refinance. These can be done very quickly for various reasons; and this client wanted and needed to get it done quickly. Well, we had the client in and disclosures signed on the 19th of October. The disclosures the investor has to send out were sent on the 20th, and this loan was fully approved and ready to close on the 26th, which would have meant it could fund on October 30th - Perfect! But wait, because of MDIA, it could not be closed until October 28th, 7 full days from the 20th. This meant the loan would not fund until Nov 2nd - a problem because it's an FHA loan and the borrower would end up paying interest for November to both the lender being paid off (a rule specified by HUD) AND the new lender. So, we have postponed the closing until the end of November. The legislation designed to "protect" the consumer has again simply inconvenienced them.

All that said - thank you for allowing the vent session - we will continue to adhere to the rules we are governed by and be diligent in providing the best experience imaginable for our clients.

HUD Sued By The National Association of Mortgage Brokers (NAMB)

In the last several months HUD passed some new laws regarding, specifically, a new Good Faith Estimate (GFE) that will go into effect in 2009. The intended purpose of this new GFE is to have more disclosure to the consumer so they know what they are getting and paying for. The problem...that is not the problem. The problem is that the consumer is not educated enough to know what they are looking at, and what it means.

It is sad that we have to come up with all these new rulings to "protect" the consumer. If this industry actually had some worthwhile regulations that would keep the yahoos out then that would help a ton. And it is sad that people intentionally mislead folks, or maybe at least unintentionally because they have no interest in educating the consumer.

Regardless, for those of you who know us, you know that we have no problem giving you our opinion (or the facts, as we think about them). So here you go:

Fact #1: As my dad would say, "HUD does not know it's butt from a hole in the ground." If they honestly think this will solve the major issues then they are kidding themselves (see opening paragraph). It is utterly fascinating to me that HUD would completely disregard the people who are in this industry and try to come up with their own thing.

Fact #2: Consumers do not want more forms, longer forms (the GFE is going from 1 page to 5!), disclosing more info they already think is greek and do not understand. Consumers want people who are trust worthy, will educate them on the realities they are facing in a mortgage and will walk them through the process from start to finish. They want people who will do what they actually say they will do (novel idea).

For those of you who are interested, here is the article about the suit that NAMB filed against HUD.

The National Association of Mortgage Brokers (NAMB) filed a lawsuit against the U.S. Department of Housing and Urban Development (HUD) after it issued the Real Estate Settlement Procedures Act (RESPA) Final Rule issued November 17, 2008.

NAMB, with the support of Baker & Hostetler LLP and the Federal Policy Group, argues that the Final Rule is in violation of law, finalized on a flawed consumer testing methodology and will have a detrimental impact on small businesses consequently having a negative affect on consumers.

"HUD has failed to examine properly the Final Rule's impact on small businesses," said Marc Savitt, NAMB President. "It will put small business mortgage professionals at a significant competitive disadvantage, impeding competition in the mortgage industry and ultimately hurting consumers. What we are looking for is a level playing field for consumers."

HUD was quick to react to the announcement that NAMB had filed the suit.

“In this housing market, the nation is crying out for reasonable regulation to help families shop for and save money on the largest purchase of their lives,” HUD commented. “This rule is that reasonable regulation and it helps consumers to avoid getting into trouble in the first place. It’s mystifying why anyone would stand in the way of the kind of transparency this rule brings to the marketplace.”

The lawsuit against HUD states that the Final Rule is "arbitrary and capricious," contrary to the intent of Congress, and fails to offer any rational reasons for its rejection of alternative approaches. The case alleges the Final Rule discriminates against mortgage brokers with the required broker-only disclosure of yield spread premium (YSP), placing them at a permanent disadvantage in the marketplace.

According to Savitt, the complaint includes a laundry list of the different government agencies that have had a problem with the proposed rule.

Savitt told RESPA News that HUD has disregarded numerous federal and private sector studies providing evidence that different origination channels disclosing differently confuses consumers, and will often times cause them to choose a more expensive mortgage product.

NAMB argues that consumer studies conducted by HUD failed to test both the consumer understanding of loan terms and comparative shopping when originator compensation was not disclosed, and disclosures in transactions involving competing originators.

"Flawed testing methodology prevented HUD from adequately assessing consumer understanding of provisions in the originally Proposed Rule,"
Savitt said. This led to the Final Rule being issued on flawed and inaccurate conclusions, he added.

"Reform of RESPA is necessary to accomplish a simplified mortgage process," Savitt stated, "But implementing provisions harmful to small businesses and consumers in doing so, is not the answer."

“The final rule is contrary to the intent of Congress,” Savitt told RESPA News. “HUD can’t reasonably justify this thing. Most importantly, it is not in the best interest of the public. They failed to offer any reasons for rejecting the alternatives we presented. Case in point: NAMB gave them a prototype of a one page GFE that was a mirror image of the
HUD-1 settlement statement, which makes sense.”

Savitt contends HUD had every opportunity to “get this thing right” but in the end is failing the consumer.

New HUD Ruling

On Wednesday, November 12, 2008, the Department of Housing and Urban Development (HUD) issued a press release announcing the finalization of its changes to the Real Estate Settlement Procedures Act (RESPA). We shall see if this new ruling actually helps or hurts the consumer market. It seems that too much of what our government imposes on us as helpful ends up doing more damage than good (see last two posts as some proof for that).
I guess what is frustrating with this is people should not be working with lenders that do not disclose info. Why do people work with these lenders? And the reason is because they trust somebody too much and by the time they realize they are about to get screwed it is too late (at least in their mind). But it is never too late to walk, folks. You are never forced to work with a particular lender. And just because you may have already started the process and would have to start again, it is worth it; if you do not walk away where is the "lesson learned" by these people.
But it is more than just blindly working with someone referred to you. Every loan we do is referred to us. But when people call us they can immediately here the difference just in what we are saying. Good lenders should stand out. Great ones immediately display a difference. We have said this a thousand times, the inward reality MUST match the outward perception. Just because someone has referred you to a lender does not make them good (the outward). What are the specific things they do that show they are the best (the inward). It is up to you to ask because most lenders would never volunterr this info to you because they cannot show anything. They are all talk.
We would love to further discuss this with you. Call us if you would like to.
In the mean time, here is the link to the new HUD ruling. Let us know if you have any questions.

Hope For Homeowners

Here is some relatively new information released by HUD about the Hope For Homeowners program, which is part of the Economic and Housing Recovery Act passed in July. Details of the program are just now becoming public. The ability to do FHA loans is critical in this market. Make sure you are working with someone who is FHA approved. Please let us know if you have any questions.

The Bush Administration today unveiled additional mortgage assistance for homeowners at risk of foreclosure. The HOPE for Homeowners program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new loan insured by HUD's Federal Housing Administration (FHA).

"For families struggling to keep up with their mortgage payments, this program will be another resource to refinance into a loan they can afford," said HUD Secretary Steve Preston. "FHA remains a safe and affordable alternative to the high-priced mortgage loans that threaten homeowners' ability to retain their homes. We strongly encourage borrowers to work with their lenders to determine if HOPE for Homeowners is the right program for them."

The HOPE for Homeowners program was authorized by the Economic and Housing Recovery Act of 2008. Since the President signed this vital legislation into law on July 30, 2008, the HOPE for Homeowners Board of Directors has worked diligently to develop and implement the program as directed by Congress. The Board was charged with establishing underwriting standards to ensure borrowers, after any write-down in principal, have a reasonable ability to repay their new FHA-insured mortgage.

The HOPE for Homeowners program begins today and ends September 30, 2011. The program is available only to owner occupants and will offer 30-year fixed rate mortgages - so the borrower's last payment will be the same as the first payment. In many cases, to avoid what would be an even costlier foreclosure, banks will have to write down the existing mortgage to 90 percent of the new appraised value of the home.

Borrower Eligibility

Borrowers are encouraged to contact their lender to determine eligibility, but may be eligible if, among other factors:

The home is their primary residence, and they have no ownership interest in any other residential property, such as second homes.


Their existing mortgage was originated on or before January 1, 2008, and they have made at least six payments.


They are not able to pay their existing mortgage without help.


As of March 2008, their total monthly mortgage payments due were more than 31 percent of their gross monthly income.


They certify they have not been convicted of fraud in the past 10 years, intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s).
How the HOPE for Homeowners program works

"HOPE for Homeowners will add to HUD's existing efforts to make FHA refinancing available to homeowners who need it most," said FHA Commissioner Brian D. Montgomery. "One year ago, FHA expanded refinancing into its FHASecure program. Since that time, we have helped more than 360,000 families keep their homes by refinancing with FHA, and we will assist a total of 500,000 families by the end of this year."

The Board expects that the primary way homeowners will participate in the program is by working with their current lender. HOPE for Homeowners will serve as another loss mitigation tool available to distressed borrowers.

HOPE for Homeowners also includes the following provisions:

The loan amount may not exceed a maximum of $550,440.


The new mortgage will be no more than 90 percent of the new appraised value including any financed Upfront Mortgage Insurance Premium.


The Upfront Mortgage Insurance Premium is 3 percent and the Annual Mortgage Insurance Premium is 1.5 percent.


The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.


The existing first mortgage must accept the proceeds of the HOPE for Homeowners loan as full settlement of all outstanding indebtedness.


Existing subordinate lenders must release their outstanding mortgage liens.


Standard FHA policy regarding closing costs applies, and they may be:
Financed into the new loan provided the value of the mortgage (including the Upfront Mortgage Insurance Premium) does not exceed 90 percent of the new appraised value of the home.
Paid from the borrowers' own assets.
Paid by the servicing lender or third party (e.g., federal, state, or local program).
Paid by the originating lender through premium pricing.


The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.


The borrower cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.
The lender will disclose to the homeowner the benefits of the program including home retention, a new affordable mortgage based on the current appraised value, and 10 percent equity. The lender will also explain the prohibition against new junior liens against the property unless directly related to property maintenance, and a minimum of 50 percent equity and appreciation sharing with the Federal government.

The costs to the homeowner include the upfront and annual insurance premiums, as well as a share of the equity created by the write-down associated with the HOPE for Homeowners mortgage and any future appreciation in the value of the home. At settlement, subordinate lien holders will receive a certificate that evidences their interest as an obligation backed by HUD, with payment conditional on the value of HUD's appreciation share.

If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100 percent FHA share after the first year to a minimum of 50 percent after five years. The lien holder that previously held the highest priority will receive payment up to a proportion of its original interest, not to exceed the amount of available appreciation. This type of delayed payoff will take place until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.

The HOPE for Homeowners Board of Directors includes HUD Secretary Steve Preston, Treasury Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke, and FDIC Chairman Sheila Bair. They have named the following people to serve on the board as their designees: FHA Commissioner and Chairman of the Board Brian Montgomery, Federal Reserve Board Governor Elizabeth Duke, Treasury Assistant Secretary for Economic Policy Phillip Swagel, and Federal Deposit Insurance Corporation Director Tom Curry.

Read more about HOPE for Homeowners at www.hud.gov/hopeforhomeowners.