New FHA rules

FHA loans have become more popular than ever in recent years as purchasers have struggled to come up with the necessary 20 percent down payment that is required for a conventional loan. �

Previously, a common solution to the 20 percent problem was to obtain an 80 percent first mortgage and a 10, 15 or 20 percent second. However, with decreasing home values, lenders have significantly tightened the ability of purchasers to obtain second loans. �

Since an FHA loan allows a purchaser to borrow up to 96.5 percent of the home value, quite often it is the only solution for a purchaser without a 20 percent down payment. �

New FHA rules went into effect on October 4, 2010, which will now reduce the loan amount at the closing, but increase the cost monthly. �

For FHA loans, the upfront Mortgage Insurance Premium has been reduced to 1 percent.� This is the second recent change, since the premium was increased in April, 2010 to 2.25 percent. �

Because the upfront Mortgage Insurance Premium is rolled back into the loan, purchasers will not need to borrow as much at closing.

While this sounds great, it is the second component to the new rule which has altered the landscape significantly.� The monthly mortgage insurance amount was increased from 0.55 percent to 0.85 percent on loans with more than 5 percent down and from 0.55 percent to 0.90 percent on loans with less than 5 percent down. �

Since the minimum down payment on an FHA loan is only 3.5 percent, most FHA purchasers will fall into the latter category.� This means that the monthly payment will increase since the monthly premium has increased.

So, to summarize, for homeowners using an FHA insured mortgage, the upfront cost of the loan will drop by a lot, but the long-term costs of the loan will grow. �

This makes it more difficult for a low income buyer to qualify for a loan, since the purchasers' debt-to-income ratios will be higher with the higher monthly payment.

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6 real estate headlines: 10-15

A daily dose of headlines for real estate agents, mortgage lenders and consumers.

Banks ignored signs of trouble on foreclosures The New York Times: As the furor grows over lenders' efforts to sidestep legal rules, these and other banks insist that they have been overwhelmed by the housing collapse.	Trying to chart the long road back The New York Times: Perhaps it should come as no surprise that after enduring the most brutal recession since the Great Depression, the US economy has emerged with a pronounced limp.
Mortgage bonds steady despite foreclosure flap� Reuters: For now, however, investors are still buying the riskiest mortgage bonds that were issued by Wall Street firms through the height of the housing boom.	The short sale alternative Wall Street Journal: Short sales have become the norm in many hard-hit markets, representing roughly a third of properties for sale in Nevada, California and Florida, according to estimates.
Key Dem accuses banks of 'fraud' in home foreclosures The Hill: Rep. Maxine Waters, a senior member of the House Financial Services Committee, suggested the recent epidemic of foreclosures are a result of collusion in the banking industry.	Mortgage refinancing requests climb 21 percent Forbes: Overall applications rose 14.6 percent from a week earlier, driven by a 21 percent increase in applications to refinance home loans, the Mortgage Bankers Association said.

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6 real estate headlines: 10-14

A daily dose of headlines for real estate agents, mortgage lenders and consumers.

Despite freezes, U.S. foreclosure rate still up Forbes: Not only have the mortgage industry's actions been limited geographically, but banks mean different things when they say they're halting foreclosures.	Has the foreclosure crisis triggered a double dip? CNBC: The combination of still record default rates and rising servicing costs related to foreclosures is making banks hyper cautious about credit.
New tool to test home listings The New York Times: The aim of the tool is to help spur more listings from sellers sitting on the sidelines as well as to spur more sales in general.	Maryland court weighing decision to halt foreclosures Washington Times: Court officials are reviewing a request from Gov. Martin O'Malley and others to halt all foreclosures in the state for at least 60 days.
Businesses join to sell homeowners on value of green Washington Post: By referring business leads among each other, they would be able to offer homeowners a comprehensive approach to lowering their energy and water usage.	What will the foreclosure gate do to home prices? Business Insider: By stopping the flood of foreclosures onto the market, foreclosure-gate will reduce inventory-for-sale, which will likely act as a temporary positive for house prices.

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After foreclosure, a focus on title insurance

When home buyers and people refinancing their mortgages first see the itemized estimate for all the closing costs and fees, the largest number is often for title insurance.

This moment is often profoundly irritating, mysterious and rushed � just like so much of the home-buying process. Lenders require buyers to have title insurance, but buyers are often not sure who picked the insurance company. And the buyers are so exhausted by the gauntlet they've already run that they're not interested in spending any time learning more about the policies and shopping around for a better one.

But all of the sudden, the importance of title insurance is becoming crystal-clear, The New York Times reports.

Full Story...

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Florida attorney general hopes to discuss foreclosure proceedings with large lenders

On October 12, 2010 Florida Attorney General Bill McCollum sent letters to the Chief Executive Officers of several large lenders, proposing for them to meet with him in Tallahassee, Florida to discuss potential ways to redeem the integrity of the foreclosure system and ensure the continued marketability of real property in the State of Florida.

"I am writing you to express my concern for Florida's economic future and the credibility of Florida's judicial foreclosure system as a result of the actions of your company -- actions that have affected the integrity of title to real property for Florida's homeowners as well as the foreclosure process in Florida," Attorney General Bill McCollum stated to the Chief Executive Officers of several large banks such as JP Morgan Chase, GMAC Mortgage, Bank of America, and PNC Financial Services.

McCollum emphasized that the problems of faulty foreclosure affadavits has been compounded by the effect of the recently announced moratoriums on foreclosures by several large mortgage servicers, as well as the private litigation that has already begun.

"In my view, the moratoria and the private litigation are counterproductive to obtaining the swift solution necessary to address this serious problem facing Florida's already fragile economy," McCollum said. http://twlv.net/HGlOju

Develope fees and capital recovery fees

Imagine this scenario: You have to move because of your job.� You have lost all of the equity in your condo that you purchased two years ago, but thankfully, you are not underwater and will break even on the sell.� You arrive at the closing and suddenly you discover that you owe a fee of 1% of the sales price to the developer from whom you bought the condo two years earlier.� Now, because of this "Developer Fee", you have to bring cash to close on the sale of your condo.� Below is a quick Q and A on Developer Fees.

Q.� What is a developer fee?

A.� A developer fee (also known as a capital recovery fee) is a private transfer fee provision requiring you to pay an amount to your developer when you sell your house or condominium in the future.

Q.� What has prompted the emergence of developer fees?

A.� As developers have seen sales prices plummet, attaching a developer fee allows the developer to recoup the loss in sales price by guaranteeing itself future gains from future sales of the property. �

Q.� When does a developer fee expire?

A.� It depends on the terms of the specific agreement, but some private transfer fee provisions continue for as long as 99 years and can apply to all future sales in those 99 years.

Q.� How large is a developer fee?

A.� Typically, a covenant is established that provides for 1% of the sales price to be paid to the developer.� Since this is a covenant that runs with the land, if it is unpaid it creates a lien or cloud on title, preventing the property from being resold or refinanced until it is paid, plus interest.� The fee must be paid even if the property depreciates in value � so a homeowner with declining equity is still responsible for paying the fee.

Q.� Are developer fees legal?

A.� As of this blog, 12 states have adopted legislation banning private transfer fees.� The American Land Title Association is attempting to have the fees banned and declared illegal everywhere else.� The practice has been banned in Maryland, but so far no action has been taken in Virginia or the District of Columbia.
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A quick guide to VA loans

Active-duty service members and veterans may be eligible for a home loan guaranty program offered the Department of Veterans Affairs (VA), for purposes of purchasing or refinancing a home. �

What is a VA guaranteed loan?

It is a loan that is made by a typical mortgage company, savings and loan, or bank, in which the VA guarantees a portion of the loan amount, thereby protecting the lender against loss if the mortgage payments are not made.� The purpose of this program is to encourage lenders to provide veterans with more favorable terms on loans.� For example, allowing the veteran to more easily negotiate interest rates, pay fewer closing costs, avoid having to pay mortgage insurance, and in most cases, not requiring a down payment when purchasing a home.

Who is eligible?

• Veterans.� You will need a Certificate of Eligibility in order to prove you are qualified to receive a VA loan.� You can either apply online (http://vip.vba.va.gov), your lender can obtain the Certificate online on your behalf, or you can apply by mail, by using VA Form 26-1880.

• Active duty personnel.� An original statement of service signed by the adjutant, personnel officer or commander of your unit or higher headquarters, identifying you and your social security number, as well as your date of entry on your current active duty period and accounting of any time lost during that period must be provided. �

• Reservists/National Guard Members.� If you are still active duty in the Reserves or Guard, an original statement of service signed by the adjutant, personnel officer or commander of your unit or higher headquarters, showing the length of time you have been a member of the Reserves or Guard is required.� Said statement must document at least six years of honorable service.
  
  If you were discharged from the Reserves or Guard, you must submit copies of adequate documentation showing at least six years of honorable service.� (Examples of adequate documentation include NGB Form 22 -- Report of Separation and Record of Service, or NGB Form 23 � Retirement Points Accounting, or their equivalents).

• Some surviving spouses.� You must apply for the Certificate of Eligibility by mail using VA Form 26-1817.� In order to qualify, the veteran spouse must have died after service, and the VA determines if the death resulted from a service-connected disability.

What if you had a VA loan before?

If you still own the property, you may still have remaining entitlement to use towards another VA loan. �

If you have sold the property or paid your previous VA loan in full, or if a qualified buyer has assumed your previous VA loan, your full entitlement would be restored, allowing you to use it again towards the purchase or refinance of another property.

How Do You Get a VA Loan?

The process to obtain a VA loan is similar to applying for any other loan.� First, either you or your mortgage lender will need to obtain your Certificate of Eligibility.� Next, if you are purchasing a home, you will need to sign a contract, and apply for a loan with the lender of your choosing.� An appraisal will then be completed with a VA approved appraiser, to determine the value of the property.� Once the appraisal has been completed, the loan process proceeds as normal and you settle on the property and move in.

Costs of Obtaining a VA Loan

A funding fee must be paid by all veterans using the program, unless you are exempt as a result of disability compensation.� The funding fee amount ranges from 0.5% for interest rate reduction refinancing loans to 3.3% for subsequent users of the program.� In addition, you can expect to pay normal closing costs for the VA appraisal, credit report fee, loan origination fee, discount points, title search and title insurance fees, recording fees, state or local transfer/recordation taxes (if applicable), and survey fees.� You can obtain an online quote of title fees, recording fees, transfer/recordation taxes, and survey fees on our website.

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