Club Chaos Agents - All Things Hollish, Wacked, and Jacked

 

IMPORTANT CALL TO ACTION - Hot topic - Reduction of seller concessions on FHA loans to 3% max

 

 

I wrote this article the other day, HUD seeks public comment on three main issues for FHA loans. - The main issue and focal point is that FHA wants to reduce the seller concession from 6% to 3%. I can understand why. Two reasons I can think of :

1. The real estate market has crashed and home values have dropped significanly in some areas, that homes are upside down. Some feel that with a FHA mortgage, that you basically start underwater if you need to sell quickly.

2. HUD/FHA feels that home values are inflated some, pushed a tad higher to cover the seller concessions so that it actually doesn't come out of the seller's pocker per se. This is an never ending argument by several.

 

 

So we have a slight debate from some thinking that anyone receiving 3% to 6% seller help is to much. And then we have another side that feel that making 3% as a maximum percentage, that it could cripple an already devistated real estate market.

The basic argument - 6% is just to much.  Okay, I agree, on a $300,000 house, because that would be $18,000 in seller help. Not many sellers actually would be willing to give up $18,000. Many don't even have the room to do this.

Reality depending on certain real estate markets - What about those homes that are selling for $50,000 to $100,000. AT 6% that would be a seller concession from $3,000 to $6,000. Make it a maximum of 3% and it drops from $1,500 to $3,000.

 

 

The defense to such an argument -   Example - $80,000 home. If the seller could on give 3%, that is only $2,400 in help.  The down payment alone would be $2,800. Depending on taxes, how many months that must be escrowed, etc, etc, you could be looking at $3,400 to $4,000 in closing costs.  In the state of PA, 12-13 months of escrows must be collected and there is either a 1% to 2% stamp tax that must be paid by the buyer. So you add that into this equation, that is another $800 to $1,600 just on the stamp taxes. And this example is not even including points or lender fees. I would rather have the borrower keep at least $2,000 or more in their account as cash reserves.  You take that away from them for the costs, then you have nothing.  What if something happens, then what? Just food for thought.

Important Reminder : Keep in mind, real estate is local and each state is different on their different fees that must be collected. Some states have state stamp taxes, transfer taxes, or require taxes to be escrowed for 6 or 13 months. This greatly adds to the buyers costs.

 

 

 

Jeff Belonger's solutions :

Why don't we come to terms, meet half way. How about impossing checks and balances if a borrower gets 3.01% to 6% in seller help. Or have a graduated scale. Maybe add some specific clauses.

 

1. Appraisal Values - FHA is concerned about values being pushed higher to cover these concessions. Why not get 2 full appraisals. An appraisal is an opinion of value determined by several factors, to include average market values and true comparisons. Real Estate Appraisal by wikipedia.

2. Credit Scores - This one could be tricky and hurt the less fortunate. But if are to receive more than 3%, that you have to have higher credit scores, possibly making a graduated scale.

3. Cash reserves - That the borrower must have at least 2 months in reserves in order to receive from 3.01% to 4%. Maybe 4 months to go from 4.01% to 5% and so on.

 

 

SUMMARY : SOme of my solutions might seem harsh or hurt those that don't fit.  But isn't this much better than just reducing the seller concessions to 3 percent no matter what? Let's think this through, come up with a comprimise. I feel that if we don't do this, that it will cripple our economy even further.... We need not be rash in our decision making and not just for political agendas. What se thee?

 

 

 

List of solutions from other comments :

 

     1. From Julie Odum - comment #2 - In my comment to HUD, I recommended a sliding scale for seller help. 6% for sales under $125,000, 5% for 125-150k, 4% for150-175 and 3% for 175+k.

     2. From Tim Bradford - comment #9 - Similar to rules on Reverse Mortgages - A 3% limit with a mininum of $3,000 being allowed and a Maximum of $6,000. 

     3. From Drew Sygit - comment #21 - Tie the seller concessions above 3% to other lower risk identifiers.  Examples: to get the 6% require either higher credit scores, more reserves, maybe 5% down instead of 3.5%, allow lower DTI ratios, etc.

 

 

 

 

 

Here is the actual page to go and make your comments - Comments for reduction of seller concessions and new loan to value with credit scores - Click submit a comment which is on the right side of this page, in blue.

 

 

 

 

CALL to ACTION : Send this to other agents and loan officers.  Don't hesitate to reblog this, to get the message out. And you can even copy the link to this post in your comment when commenting to FHA/HUD, so it repeats the message to FHA, the government, and to others that fight this issue.  Link :

http://activerain.com/blogsview/1749213/issues-regarding-the-3-seller-help-proposal-by-fha-can-we-fight-fha-loans-with-solutions-yes-

 

 

 

Please don't hesitate to leave your own solutions in the comments below, so others can read them.  I will then come back and list those solutions in this post.  Thanks & thanks for your support.

 

I will be forwarding this post to FHA, to HUD, and to some members of congress before the 30 days is up.  This way they can have all of our solutions rolled up into one.  Just like the Declaration of Independence. Why not make it our Declaration of FHA Financing !!!

 

 

 

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- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

You can make a difference - you have 30 days to comment against FHA's proposals

 

With a difficult economy and possibly some new FHA mortgage changes coming in the new future, this could be time to make your voice heard. HUD made this announce back in January 20th, 2010 - FHA announces policy changes to address risk and strengthen finances - I parlayed this announcement into layman's terms. - FHA loans and some possible mortgage changes.

 

So now, FHA just announced that there will be a 30 day period for comments on these issues described above.  These proposals are designed to limit the risk in regards to the Mutual Mortgage Insurance Fund and at the same time, trying to promote sustainable homeownership for FHA borrowers.

 

 

 

The 3 possible changes to FHA Loans :

 

1. Changing the combination of credit scores and downpayments. You will need a credit score of 580 or above to still be eligible for the regular 3.5% downpayment. If below 580, you will be required to put 10% down. And FHA loans will not allow any loans with credit scores below 500.

My opinion :  I am not concerned with this proposal. Most lenders require credit scores of 620 or higher on FHA loans. I wrote about it here. - FHA home loans have no minimum credit scores - So FHA, you can have this one.

 

2. The reduction of seller concessions from 6% to 3%. Many of us know that this could have a huge impact on many different housing markets.

My opinion : I truly think this could affect those buying homes from $150,000 and below. Especially those homes prices at $100,000 and below. That would mean on a $100,000 home, the buyer could only get $3,000 of help towards closing costs. - FHA, since I gave you #1, I want #2, and keep it at 6%. Update... keep this in mind - If a borrower has to come up with more money now, what does that do to their cash reserves in many cases.  In troubled times, does this mean that they will default quicker now?

 

3. To tighten FHA underwriting standards for manually underwritten loans. FHA's purpose would be when using compensating factors while underwriting, lenders will be required to consider those factors which would be best predictive indicators of the performance of the loan.

My opinion : I guess I would have to wait for a better explanation letter in the mortgagee letter, if this is approved.  You already are required top have compensating factors when manually underwriting a FHA loan, making sure that the loan will perform. I just think this is FHA's way of saying that they want underwriters to be more critical when approving a loan and to have more solid compensating factors. Ex. Instead of making sure that your borrower had 2 months in reserves (money left over after closing to cover 2 mortgage payments), that they would like to see 6 months. Who really knows on this one. Could be more political chit chat.

 

 

 

Conclusion : As I mentioned above, I am not worried about numbers 1 and 3. But number 2 could have an impact on the housing market in many areas. On the positive side of things, HUD could have increased the down payment to 5%. This was talked about in congress several times, but shot down. Talk of FHA loans raising the down payment to 5%. -  Here is the argument about why some want more money down. The FHA argument - I want more skin in the game.

 

 

Where and how to comment :

Regulations.gov - (main site) please to search for government proposals.I give the specific page below, where to comment.

 

Here is the link to the different proposals and FHA's reasoning's for such proposals. Federal Register for HUD changes and the reasons why. If you go to the middle of the first page, you will see how they explain the different ways to comment. They highly suggest doing it electronically, which I mention below.

 

 

CALL to ACTION : Send this to other agents and loan officers.  Don't hesitate to reblog this, to get the message out.

 

Here is the actual page to go and make your comments - Comments for reduction of seller concessions and new loan to value with credit scores - Click submit a comment which is on the right side of this page, in blue.

 

 

 

Important Update as of 7/17/10 @ 1:05 pm - Please read and make your voice heard - If you are going to comment to FHA, please copy and paste this link into your comment :  http://activerain.com/blogsview/1749213/issues-regarding-the-3-seller-help-proposal-by-fha-can-we-fight-fha-loans-with-solutions-yes-   (this article is below)

Issues regarding the 3% seller help proposal by FHA - Can we fight FHA Loans with solutions?? - YES !!!

 

 

 

_____________________________________________________________________________________________________

 

                  

                                                                                                           FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

Does our government just have nuts and bolts for brains? Can one be so blind to the issues at hand in regards to our economic status, to how much further we are falling into debt, yet they keep announcing rays of hope?

Let me pose a question to everyone. What has happened to common sense and logic? Is common sense not so common anymore? 

 

Before I get into the gist of my gripe, frustration, and fear... yes, FEAR... Whenever I always debate a situation, a fact, or an issue, I always try my hardest to look at it from both sides and not just from my emotional state of mind.

 

 

 

As we venture into 2010, I see more chaos on several horizons. Let's attack 3 important issues that I see will bring much chaos, frustration, and fear.

1. The New Good Faith Estimate. Not only is this form much longer, could delay settlements because of the new MDIA law (Mortgage Disclosure Improvement Act), but it could impose misleading mortgage shopping to consumers.  Gerry Suarez gives you his opinion and a good example to why this could cost the consumer more when shopping for a mortgage. Please read : The Road to Hell and the new mortgage disclosures.

 

2.  Foreclosures : There have been estimations that we could see another 1-2 million foreclosures by the end of 2010. One thing that seems to be talked about is the fact that many of the foreclsoures are due to the loss of equity. I know there are reasons for this, but I see the major problem being the huge unemployment numbers and loss of jobs. Why is this not talked about as much?  The government spoke so highly about the 2009 stimulus package that was partially structured to help with new jobs.  Hhhmmm, inquiring minds want to know what they were smoking.

 

3.  Immature government spending.  I will go on the record to state that I have seen so many smoke screens in regards to free government spending, making it sound like the main solution is to keep printing money, and this will help our current economy rebound quicker. But who will pay for this printed money?  Let's take a closer look. What about the Tax Credits for first time homebuyers?  I know many of you think that this has helped sell real estate, but seriously, who are we fooling. Again, if you take a much closer look at these tax credits, which were first established in 2007, it has not done as much as it was intended. My guesstimating would be less than 5% of all homes bought since 2007, were the direct reason for new homebuyers. Many people were going to buy anyhow. Secondly, because of the lack of government prevention, this tax credit has led to billions of dollars in fraud now. Please read these :

• The high levels of fraud pertaining to the first time homebuyers tax credit - Eye Opening Info
  

• The Welfare Mentality of the First Time Homebuyer's Tax Credit

• So you think you outsmarted the crowd because you skipped the $8,000 first time homebuyer tax credit

My summary on the tax credit & free gov't spending : In 2007, there was a stipulation for the homebuyer to pay it back in 15 years. You didn't make a payment until year 3 and in the 13 years, it was only going to cost you about $43 a month to repay the tax free loan. I am soooo confused to why we couldn't go back to this.  Again, what is the government thinking?

What about the billions of dollars that were spent on the MBS's to keep interest rates down?  People bought with 6% and 7% rates.  This has been wasted money only for the good of keeping consumer confidence riding high, when in reality, it will hurt us in the short and long term. Yes, Billions of dollars, to keep rates in the low 5's.

 

 

 

Okay, the economy has been crumbling in the last 2 years and new predictions are now saying possibly 2011 before a true recovery starts to happen. Don't get me wrong, I do believe that we need to tighten some lending requirements, but do we seriously think another 2% for a downpayment would work? Do we seriously think 620 and 640 credit scores will truly make people pay back their mortgages? I know there have been studies done on the different levels of credit scores, but have certain factors been taken in consideration such as :

1. Loss of job

2. Death in family

3. Higher property taxes

4. General cost of living

 

I wrote a blog at the end of 2007, talking about the fact that we are in a slight recession.  My 2007 review and 2008 predictions. I think several of us saw this coming, but it wasn't until 2008 that we were actually told that we are in a recession. You have to understand the true definition and that this definition varies amongst different experts.

Overall, we need to re-look at certain things and to why borrowers miss mortgage payments. What ever happened to the ability to repay vs the credit score?  Keeping in mind that things happen that aren't in ones control.  Here are a few posts that I wrote about these current issues.

• I want your skin in this game. Give me more skin, a larger down payment.

• FHA loans to 5% down?  Where is the common sense in all of this?

 

 

 

(for those that can't read the name on the desk, it says Chief Bean Counter)

 

Let me cut to the root of our current problems and why I don't see any relief in sight. This is based on my opinion of watching our government closely for the last 12 months.

It's called greed and selfishness. I am sorry, but many in our government only care about themselves and obtaining new votes for the new elections. Some have even admitted to this which I have written about. They tell us what we want to hear and make this immature spending sound like it will work. Yes, these individuals have common sense, but they don't use it, because selfishness super-cedes this thought process. We can change this by voting for others, or rise up and to protest harder and louder. It can be done, but we need these changes to start in the trenches. I gave some of my thoughts and opinions in this blog from the summer. Call to Action : We must fix the real estate market ourselves!!

 

 

 

 

Conclusion: I am just fed up with the misleading information that circles from the government, to the media, and then to the consumer. I don't want to make this political, but there are some major political issues and this free spending will put us deeper in the hole. What we need is less government interaction and more small business interaction and private investment.  What do you say?  Think?

 

UPDATE : 12/28/09 - 1 pm - I just came across this post by JP Lowry and I think it hits some points that I didn't dwell on, trying to keep my blog short.

Why Banks can't loosen lending.... it's just not up to them.

 

 

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

ADVERTISING – Those ads that seem too good to be true.

 

 

I have been in the mortgage business for 17 + years.  I have seen so much advertising when it came to mortgage companies and how many of the ads were misleading or just flat out lies.  Those companies advertising low rates that didn't happen.  This easily went on from 1992 to 2002. I always wondered why this wasn't regulated as strongly as it should have been.  I found out that some of these companies had 100's of complaints, yet they still operated for those 10 years. I think this is misleading and I call it Shark Advertising.  It's dangerously misleading, yet it worked for many companies, at the expense of the borrower.

 

 

 

If anyone has noticed, we haven't see as much advertising from mortgage companies or large banks in the last 18 months or so. I am now seeing a few mortgage companies advertise on the radio and as of lately, a few advertise on TV, especially ESPN. The ads are misleading because they appear to make you believe that it's being backed by the government.  (Miriam Bernstein made this comment below that explains this part..  - Comment # 30 -)Has anyone seen a few ads on tv that look like a news update, a spokesperson telling you about government funded programs or that the government is helping in sponsoring these programs. Yet if you read the fine print, it's a mortgage company, disguising this ad very carefully, spinning it as thought the government is putting this out to the public??

I am even seeing this more and more in such places as Facebook. Below are a few that I am seeing on Facebook now.

 

 

 

 

 

Here are some ads found on facebook and comcast.net. As you can see, these mortgage companies and or companies that are lead generators, make you think that the government is behind this.  Obama hasn't asked homeowners to refinance. The first one on the left, upper left, is from a company called Lower My Bills.  They sell leads to other mortgage companies, after they have gathered your information online. Then you have like 4 to 10 lenders call you, sometimes daily.

 

 

 

 

 

 

 

 

People on Facebook that give basic information – eye catchers to pull you in.

 

Here is a loan officer on Facebook that placed this on his Wall, to capture the attention of others. You just need to be aware of what you read. Sure, this can happen, but there are some unknowns not mentioned. And sometimes the loan officer will raise that unknown, so you can't obtain that great rate and get the next best thing.  Keeping in mind, it's not always about the Best Rate.  How service?  Integrity?  Educating the borrower? And so much more....  Please read : I want the same deal that my friend receivd...  &  Mortgage payment vs Interest Rate

 

 

 

 

Web Sites that are deceiving !!!!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As I explained in this blog post, deceptive web sites, here is a great example above. Doesn't this look like it could come from the USDA themselves?  But it isn't. It acts as a lead catcher, catching your info to call you and or sell you about USDA loans or any other type of mortgage loan. No Cost Obligation is mentioned on the site. - We always love to hear about free things, but are they free overall?

 

 

 

 

 

Here is a FAVORITE of mine !!!

 

 

 

 

 

 

 

 

 

 

 

I am sure many of you have seen this one on tv, FreeCreditReport.com. The commercial announces a free credit report. But at the very end, it says that you need to enroll in their Triple Advantage program.

A free credit report?  They have tons of commercials &  commercials cost money to display on TV. They also have like 3 to 4 different kinds of commercials and.  producing commercials cost money.

 

Well, I feel like an investigative reporter for the news. I filled out my info online, trying to see what I get. It says that it takes 3 to 5 days for me to obtain these credit reports from the 3 credit agencies. (giving my credit card #) And then there is a button that says, to obtain your 3 reports now, click here. Imagine that, it's asking for $24.95 now. See the 2nd paragraph on the left, highlighted in yellow?  It talks about the new Federal Law and I am wondering if that is what they are sending me now, because that is free. But from what I know, you have to go to annual credit report to get the free reports.

All 6 commericals - Free Credit Report.com

 

 

 

Conclusion :   Just be very careful of what you read and what says free, when it might not be free.  I always have said, someone has to pay for it from some where. Is it you?  Is it me who pays for it?

Overall....No matter what, consumers will fall for some of these ads.  It's called false hope.  Especially when desperate, you just want to believe that someone can help you.. or, that it's cheaper with them than the others.  thanks

 

 

• Shopping for mortgages - The Public Image of Advertising that is misleading !!!! - Part 1 of 2

• Shopping for mortgages - The Lending Trees of the World (lead generators) - Part 2 of 2

 

 

Advertisements - Is the grass greener on the other side?

 

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

  

 

 

 

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