Peter Bell, president of that National Reverse Mortgage Lenders Association testified that “a reverse mortgage must occupy the primary lien position on a property. All other home loans must be satisfied with reverse mortgage proceeds. If some of the proceeds available from the reverse mortgage are diverted to a tax and insurance escrow, in some cases, there would not be enough money left to satisfy the liens. In such cases, the homeowner would not be able to obtain the reverse mortgage – and probably be forced to give up the home.  “Instead of simply imposing an escrow, HUD (in partnership with a NRMLA Task Force on tax and insurance issues) is looking at utilizing the financial assessment tool to determine if the lender and counselor should work with the borrower to establish an escrow, amend the draw-down schedule, limit payment options, disallow a lump sum payment or take other steps appropriate to help protect borrowers from tax and insurance defaults. One obstacle here is that the Home Equity Conversion Mortgage statute requires all five payment options available under the program to be offered to all borrowers, restricting HUD and lenders’ ability to take appropriate action.”

FHA mortgage rates have risen from record lows since the MBA’s prior forecast as have Treasury yields, which spiked amid a flood of debt issuance needed to fund federal rescue programs.

In March, the MBA boosted its forecast of mortgage originations by more than $800 billion but reversed most of that expected increase with Monday’s revision.  Average 30-year loan rates have slipped from recent peaks but at 5.38 % last week remain well above the record low 4.78 % set in April, Freddie Mac reported on Thursday.  The higher mortgage rates have quelled home refinancing demand.  The MBA’s index of mortgage refinancing applications in the week ended June 5 sank to 2,605.7 after hovering between about 5,100 and 6,800 from the March 20 week through the end of April.

Estimates of home loans moving through the Home Affordable Refinance Program, using Fannie and Freddie, have also fallen short.  According to Jay Brinkmann, MBA’s chief economist, “While generally accepted estimates were that around 1.5 to 2 million borrowers might avail themselves of this FHA loan program, with many more potentially eligible, to date only about 13,000 loans have been completed according to press reports.”

Though the FHA home loans created under this program should increase, volume is unlikely to come near forecasts, he said.  FHA home purchase loans are also expected to be less than expected in March. Falling prices mean lower loan sizes, and homes bought in foreclosure and by investors are often done for cash, the trade group said.

The MBA expects total existing home sales in 2009 to drop 1.2 % from last year to 4.8 million units. New home sales will slump about 27 % to 352,000 units, the group said.”Median home prices for new and existing homes will likely continue to fall, dropping by about 10 % from 2008 levels, but leveling off in 2010 as the economy improves,” Brinkmann said.

Loan To Values’ up to 105% on the new loan and additional underwriting flexibilities.  See FHA loan Announcements 09-04 and 09-13, the FAQs document, and other mortgage resources provided via the links below for details on Fannie Mae’s refinance effort.

Flexible MI Requirements to Assist Borrowers with Home Price Declines:  Fannie Mae’s regulator, the Federal Housing Finance Agency (FHFA), has authorized us to provide refinancing opportunities for loans we currently hold or have guaranteed with current LTVs up to 105%, with specific flexibility regarding MI coverage for FHA loans with LTVs above 80 %.

The following general guidelines apply: For existing FHA loans with original LTV ratios at or below 80% and no existing MI coverage, the new refinanced loan does not require MI coverage.

For existing FHA home loans with original LTV ratios over 80% that currently have MI coverage in force, the new refinance requires the level of insurance coverage in force on the existing loan or our standard level of insurance coverage. The FHA mortgage lender is encouraged to use its best efforts to obtain MI coverage that provides the lowest cost option available to the borrower.

For existing mortgage loans with original LTV ratios over 80% that do not have MI currently in force due to prior cancellation or termination in accordance with the Selling Guide or the Servicing Guide, the new refinance does not require MI coverage.

See FHFA’s Statement on Fannie Mae and Freddie Mac Refinance Initiatives available at the link below for details on this new authority

Refinance Plus (Manual Underwriting)

Refi Plus simplifies the process of refinancing loans that are already in a lender’s servicing portfolio. This product supports the new 105 % maximum LTV and MI flexibilities for LTVs over 80 %.

DU Refinance Plus

DU Refinance Plus provides increased efficiencies for the origination and underwriting of Fannie Mae to Fannie Mae limited cash-out refinance transactions in DU. Eligible loans identified in DU receive increased underwriting flexibilities, including expanded eligibility criteria and DU minimum documentation requirements.

The DU Version 7.1 April Update release and May Update release will implement these underwriting flexibilities. Release Notes and FAQs for the May Update release (implementing the weekend of May 2, 2009) and updated Release Notes for the April Update release are now available. See the DU Release Notes page on eFannieMae.com for details (available at the link below).

The FHA Home Loan Benefits:

o    FHA mortgage loan limits: The FHA loan limits on FHAs effective until year-end 2009, established on a county basis, were the same as those applicable to Freddie Mac and Fannie Mae. On a single-family house, they ranged from $271,050 to $729,750 in 76 higher-price counties.

o    Down-payment requirements: In 2009, FHA’s 3.5% down payment compared with 5 % to 10 % on most conventional loan programs. Zero-down loans, which were widely available in the conventional sector during the dodgy years of 2000-2006, have largely evaporated. The only generally available zero-down loans are VA mortgages for military home financing.

o    Underwriting requirements: FHA accepts lower credit scores than are allowed with “A-paper” conventional mortgages and in most cases FHA loans are more forgiving of past credit blemishes like collections, charge-offs and delinquencies. FHA underwriting will allow a bankruptcy after only 2 years and a foreclosure after 3 years with strong compensating factors.

o    Mortgage insurance: FHA borrowers pay a monthly mortgage insurance premium of 0.5 % per year

Compare FHA mortgage rates and lender costs: Consumers are now in a great position to shop and compare FHA and conventional mortgages for refinance or home-buying.  We suggest analyzing 3 loan offers from different lenders or brokers.  Compare interest rates, loan amounts, origination fees, discount fees, processing fees, underwriting fees and the appraisal fees. Don’t forget that with FHA refinance loans all cash out transactions above 85% Loan to Value now require 2 appraisals from FHA licensed appraisers.  Don’t forget to factor in the upfront mortgage insurance premium, with FHA mortgage loans.

Falling FHA Mortgage Rates

www.youtube.com/watch?v=UOag1LIcZ4k

The new FHA loan guidelines mean that even borrowers with good credit scores will be charged more for a mortgage loan unless they can make a down-payment of 30% or more.  Even someone with a 739 FICO -- once considered a platinum guarantee of the best rates available -- will get dinged with a quarter-point add-on.  Harney points out, fico scores in the upper 600s were deemed good enough for prime rate home financing just a couple of years ago. Now some borrowers with credit scores of 720 to 740 may not be enough to prevent an add-on fee to their FHA home loan, especially if they are buying a condominium or town home.

Potential home-buyers need to do all they can to increase their credit score and to accumulate enough funds for a more substantial down-payment, both moves which make good financial sense anyway.  But the best home loan solution is the basic FHA mortgage: Apply for an FHA loan, which requires a down-payment of just 3.5% and in most cases has lower credit score requirements.  FHA mortgage rates remain at record levels with national lenders reporting interest rates as low as 5.25% on 30-year fixed rate mortgages.

“In today’s weakened economy where access to credit is being restricted, we need to make home mortgages more available to households throughout the country, and especially in high-cost areas,” said Preston. “These new FHA loan limits will ensure HUD can to continue aid distressed homeowners with safer home refinancing featuring secure fixed rates from affordable government-insured loans that enable many first-time buyers take advantage of today’s buyers market”

FHA mortgage loan limits were increased recently back to 2008 FHA loan limits in high cost housing areas, too -- to a maximum of $729,750 in some areas. Visit the FHA website to check the FHA loan limits for your area.  This website enables consumers to look up the maximum FHA mortgage limits for your area or several areas, and then list them by state, county, or Metropolitan Statistical Area.

Metro Housing of Flint is a non-profit agency. If you’re about to refinance, they suggest waiting until Wednesday before locking in your mortgage rates. “It’s going to be an impact day, and you’re going to see the interest rates hover and loan officers remain excited because of the significant amounts opportunity for home refinancing. It’s going to be a big day,” Crews predicted. If you have bad credit, or if your mortgage balance is greater than what your house is actually worth, qualifying for a refinance loan will be impossible.  Mortgage rates are low, but lending guidelines are tighter than ever.  Mortgage refinancing can be tricky, but not impossible. “Every time there’s a strategy. What happens is we don’t want to do the strategy, and we want to do it now, but we have to take the steps and get there,” Crews advised. 

To ease the confusion, Metro Housing is offering free seminars titled “Know Your Loan, Save Your Home.”  “We need to know what your rates are. We need to be able to look at your credit, and what the recapture period is. Then we can figure out what products can get you back to a safe place,” Crews explained.  If mortgage rates drop again on Wednesday, there’s no way of knowing just how long they will remain that low. Metro Housing’s best advice is to get your act together now, before you miss your opportunity and it’s too late.  “Know your mortgage. If you don’t take action, it will pass you by,” Crews said.

Why the Fed Meeting Matters so Much…

www.youtube.com/watch?v=1Xt9yt-pzVY

The average FHA mortgage rate for a thirty-year home loan dropped below 5% this week.  Mortgage Brokers Network executive, Steve Park said, “This is a rare opportunity to revive the mortgage industry because interest rates have dropped to record levels that have not been available for the last forty years.”  Homeowners across the country realize this rare financing opportunity, so thousands of borrowers are rushing to lock into this monumental era that could spur a much needed home refinancing boom. 

Today, the biggest obstacle for most borrowers is credit.  In many cases, conventional lenders have credit score requirements seeking credit scores over 680.  In this dried up credit markets, even professionals like doctors or lawyers have found it difficult to qualify for a traditional mortgage. If you’re interested in a refinancing mortgage, it is imperative that you have good or excellent credit and the ability to be able to provide documentation for income that lending underwriters deem sufficient. 

FHA still offer a refinancing opportunity for borrowers with good or bad credit can qualify for a FHA home loan that is fixed for thirty years.  The most popular FHA loan allowing refinancing is the FHA mortgage that requires borrowers to be at 97% loan to value for the standard FHA rate and term refinancing and 95% cash out refinancing would require home owners to have at least 5% left in your home equity.  However in some cases the FHA lender will require two appraisals for cash out refinancing above 85% loan to value. 

If you have no equity available because of the declining home value, consider the Hope for Homeowners program insured by FHA.  This unique program enables homeowners who have mortgage balances greater than the appraised amount.  If you are unable to qualify for Hope for Homeowners, consider a loan modification, because credit scores and late payments will not prevent you from renegotiating your mortgage rate.

HUD confirmed recent reports by issuing a formal letter confirming that the government will no longer off  FHASecure refinancing products. The FHA mortgagee letter, 2008-41 confirmed that the refinance program will completely disappear on December 31.  “Maintaining the program past the original termination date would have a negative financial impact on the MMI Fund that would have to be offset by either substantial across-the-board single family program premium increases or the suspension of FHA’s single family insurance programs altogether,” the letter reads in part.  Effective December 31, FHA reiterated that they t will not issue any new case numbers for FHA lenders looking to refinance distressed homeowners with FHA Secure refinance loans.  HUD however, will honor all FHA loans for which a lender has already completed a loan application and requested a case number prior to December 31^st , they said.

The FHA Secure refinance was born in the summer of 2007, administration officials suggested at the time that the refinance program could help 240,000 delinquent subprime mortgage holders avoid foreclosure. But by December of last year, four months after its introduction, the government loan program only had endorsed 266 loans for borrowers that were delinquent at the time of mortgage refinancing, forcing HUD officials to redefine the program with a wider net for any at-risk borrower, delinquent or not.  FHA officials have maintained steadfastly to the press that such a focus was always the intent of FHASecure.

Regardless, the program never seemed to gain much traction with key Democratic lawmakers, who pushed to create the Hope for Homeowners program that went into effect the past October. Part of that was because the Bush administration attempted to leverage FHASecure as a bargaining chip during negotiations over the Emergency Economic Stabilization Act of 2008, suggesting that the program could handle at-risk and underwater borrowers without the need for a $300 billion expansion to the FHA program under the Hope for Homeowner proposal.

On Nov. 12, Paulson announced that the Treasury had ditched the asset-management portion of the TARP proposal, opting instead to focus on capital purchases where most needed to revitalized lending activity and to allow banking institutions the chance to earn their way out of the current financial crisis. “I will never apologize for changing an approach or strategy when the facts change,” Paulson told reporters in a question-and-answer session after the announcement at the time.  “The most important thing we can do to mitigate the housing correction and reduce the number of foreclosures is to increase access to lower cost mortgage lending,” he said. “The actions we have taken to stabilize and strengthen Fannie Mae and Freddie Mac, and through them to increase the flow of mortgage credit, together with our bank capital program, are powerful actions to promote FHA mortgage lending.”

Not long after that pronouncement, the Fed announced on Nov. 25 that it would intervene directly in the MBS and ABS markets, using $20 billion in TARP funds as part of backstop for a plan designed to jump start frozen asset-backed securitization activity.  While signaling a softening of his stance, Paulson also remained steadfast in his defense of existing actions taken thus far, including a foreclosure freeze by both Fannie Mae and Freddie Mac that runs through early next year.  “This Administration has used a variety of authorities to reduce avoidable foreclosures, through HUD programs, through the FDIC’s program with IndyMac, through our support and leadership of the HOPE NOW Alliance, and through the new GSE servicer guidelines announced November 11 that will set a new standard for the entire industry for streamlined loan modification agreements,” he said.

Whether the new Hope for Homeowners loan guidelines will set a standard or fall short of one is clearly a matter of perception; the FDIC’s Bair has roundly criticized the plan, saying it “falls short of what is needed to achieve widescale loan modifications of distressed mortgages.” Instead, Bair has pushed for federal insurance of recidivism risk on modified mortgage loans, a move that FDIC analysts have estimated will require roughly $24 billion of TARP funding. See earlier coverage.