Sam Thompson Mortgage Update: “Get Over it! Please”

I could hear the frustration in the agent’s voice when he left me the following  voice message this week:

 “Sam, it seems like every house that my customer is looking at in his price range needs some kind of work.  One has the electrical ripped out of the attic and the other needs a foundation repair of about $6,000.”

 “I need to talk to you and see how the FHA 203K loan works and what is involved,”  said Hicks Malonson, an associate broker with Harry Norman Realtors in Marietta. 

 I know that there are  those of you out there that have not been involved with a renovation loan before and  may  feel anxious and reluctant about getting involved with this unknown animal.  What the heck’s a K-loan (as we affectionately call them), anyway?

 So I am going to ask those of you who feel that way to confess, slow down for just a minute and let me give you some very important advice :   GET OVER IT! Quickly!  Please! 

Actually I was walking through the Fernbank Science Museum

a couple of Sundays ago and noticed all of the animals that are not with us any more.  A pitty, don’t you think?  Too bad there was no one around to advise them to change their habits before it was too late.  Or perhaps Charles Darwin was right.  Perhaps they evolved and adapted to the changing environment over time. 

In the same manner of thinking, how much longer will you survive in the current challenging real estate market we find ourselves in if you refuse to use some of the tools you need to succeed?

Nia Knowles with Solid Source Realty  is a renovation expert in marketing her community in the West End of Atlanta.  She knows that renovation lending is a little more complex than the average mortgage loan transaction and may take a little more time, but that it is really the only way to get the job done.   Unless your buyer is paying cash. 

Melissa Krudwig of Keller Williams in Marietta is participating in her first 203K loan transaction with a client that is a first-time homebuyer.   “I believe that the FHA 203K program is very important and is very critical in today’s market,” says Krudwig, who markets herself to her customers as the Bear of Real Estate.

“The Atlanta Real Estate inventory is flooded with incomplete and vandalized homes that will simply never pass the appraisal requirements for a traditional FHA Loan,” explains the Bear.  “Most of these properties are great properties at the bones of the homes but they need some additional help such as replacing a stolen HVAC system.  If it was not for this program, my buyers would not have the dream home that they so desired.”

Nationally, Wells Fargo, my lending partner, controls about 40 per cent of the FHA 203K renovation lending market.  The loan process itself takes a little longer, about 45 days.

So if you would like to learn to be a bear instead of a dinasour when it comes to selling properties that need a little work, please give me a call.  For he or she that hesistates may become extinct. If you think your office would like training in renovation lending, please ask your broker give me a call.

Until next week.

Best regards, Sam Thompson

Loan Officer and columnist

 

Phone: 770-301-0527

email:  Sam.Thompson@HSL-GA.com 

web:   www.homeloans.com/sam-thompson

Georgia Dream, NSP

I know I said this before…but really, NOW is a good time to buy. Take a look at what my mortgage specialist sent me:

“DCA Allows up to $14,000 for down payment or repairs on foreclosed properties under Neighborhood Stabilization Program

The Department of Community Affairs, better known as DCA, has come out with a new program to help sell foreclosures and benefit owner- occupant purchasers whether or not they are first time homeowners.

Tagged the Neighborhood Stabilization Program (NSP), DCA will provide $14,000 to be used for down payment assistance or repairs as long as the property is purchased at 85% or less of the market value as determined by an appraisal that is required prior to contract.

Borrowers must qualify for FHA or VA loan guidelines and fall within fairly generous  income limitations (cannot exceed 120% of Area Median Income) based on the number of family members and must attend a required counseling course.  For example, a family of 2 purchasing in a metro Atlanta county, could earn up to $68,350 and a family of 4 can earn up to $85,450.

The $14,000 DAP would be an interest free second mortgage “loan” that would not have to be repaid as long as the customer lives in the house for at least 5 years.  Otherwise, it would have to be repaid on a pro-rata basis of 20% of the DAP amount per year when the house is sold.

DCA will fund the NSP loan as per the Georgia Dream Seller Guide, Chapter 2, Section 212.  For more information, visit their website at: http://www.dca.state.ga.us/housing/homeownership/programs/GeorgiaDream.asp

This and That

FHA cash out refis: I had a question last week about the new changes that are taking place with FHA in regards to refinancing.  FHA previously allowed up to 95% LTV for cash out refinances but is going back to 85% LTV effective April 1st.

Investment Property:  Be prepared to put 25% down for purchases.

New Appraisal Procedures: In an effort to take some of the alleged “loan officer influence” out of the appraisal process, most lenders are going to a system May 1st that will require lenders to rotate conventional appraisal orders and not allow loan officers to discuss cases directly with appraisers.  The rule may not apply to FHA loans, but some lenders may apply it to all appraisals just to be safe.   

Underwriting Turnaround: If I were you, I would be asking your loan officer if they have underwriters and closers on location.  I am hearing stories that brokered loans can take as long as 3 weeks to underwrite.  Refinances are the culprit.

Making Home Affordable: The U.S. Treasury Department went live on March 19th with its Making Home Affordable program, which aims to help homeowners refinance or modify their mortgages. The toll free no. for this service is 888-995-4673.  The website is http://www. Makinghomeaffordable.gov.

Loan  Modifications: Dick Runstadler, who represents US Housing Assist, disagrees with one of the things I mentioned last week about qualifying for loan modifications.  The company I talked to, Integrated Loan Services, told me that they typically require borrowers to have verifiable income to qualify for a loan modification.  Dick says that USHA has closed many loan modifications for unemployed people.  For more information about USHA, contact Dick at 678-455-0072.

Name Change:  Opteum Mortgage, Metro Cities Mortgage, F&T Mortgage and several former Indy Mac retail branches will soon operate under one parent company: Prospect Mortgage.  Opteum is scheduled to change its name to Prospect on April 1st.  Prospect Mortgage will thus operate a network of mortgage offices in all 50 states.  So I wanted to let you know that I will be getting new business cards soon.  You will have to wait and see what they say.

And finally, to the agent that expressed resentment to the “political comments” and inferences I made in last week’s column  in regards to the AIG bonuses, I would like to apologize.  The goal in my newsletter each week is to educate, inform and entertain.  So from hence forth and without hesitation, upon request, I will gladly refund anybody’s subscription fee.

Until next week.”

Best regards,

Sam Thompson
Loan Officer and columnist
email: Sthompson@opteum.com <mailto:Sthompson@opteum.com>
web:  http://www.opteum.com/sthompson <http://www.opteum.com/sthompson>

Opteum Mortgage Update

FHA 3/1 ARM:  With FHA becoming more and more important in our market, considering the loan limits in metro-Atlanta have increased to $346,250, I would like to highlight the FHA 3/1 ARM this week as a viable alternative to the 30 year fixed option.  The 3/1 ARM has a start rate that is almost 1% below the fixed rate product, currently at 5.125%.  On a $200,000 loan, the difference in the monthly P&I would be $1218 vs. $1308 on a 6.0% 30 year fixed.  The 3/1 ARM has a 1% per year cap after the three year fixed period and a lifetime ceiling of 5% and, of course, no prepayment penalty.

There is no minimum credit score required under this program with Opteum.  Some lenders now have minimum required credit scores for FHA products.

FHA Nehemiah lives on, according to Leslie Kane at Nehemiah.  The federal court ruling last week allows us to continue to offer this program that virtually allows for 100% financing.  If you have read my articles over the past several weeks, you know that conventional 100% financing has basically gone away.  Second mortgage lenders do not want to take the risk of doing the 80/20s any more, and PMI companies’ losses have been too high on the single loan program.  Conventional lending now requires 3-5% down with credit scores over 680.

680 Standard:  Speaking of 680 credit scores, as a reminder, there is an interest rate penalty on conventional loans if the borrower has a middle score under 680.  For example, a score below 620, if Desktop Underwriting approves it, would merit a rate of 6.875% vs. 6.0% for the 680 and above borrower.  That same borrower would probably be better off going FHA.  However, we do charge an interest rate penalty to FHA borrowers with credit scores under 580

A Minus Credit:   A Minus credit is a level of credit that is determined by Fannie Mae or Freddie Mac automated underwriting to be sub-standard credit.  A heavy interest rate penalty is applied to these borrowers that raises the rate to the 7.5% level and requires a minimum of 5% down.  This program will become less and less attractive for 95% loans, because most of these borrowers can qualify for FHA loans with the same amount down.  The main reason someone would go to this type of loan would be if they need to put 10-20% down to get approved. 

FHA 203K Renovation Program:  If you want to purchase a home and build in the money in the loan to fix it up after closing, this is the way to go.  A lot of foreclosures are not in good enough condition to qualify as “live-in condition” and thus the 203K program would be the only way to go other than paying cash. 

Declining Markets:  As a final note, I want to warn you again about the possibilities of a house being located in what is considered a “declining market”.   There are three areas where this can pop up and thus cause the LTV to be reduced by 5% (if the loan is at the maximum LTV allowed under the loan program):  1. In the Desktop Underwriting or LP findings, 2. The appraisal or 3. On the List of the PMI company that insures the loan.   So far, FHA is not affected by the declining market issue.  Only conventional loan programs are currently affected.

If you can read between the lines above, I hope you will notice the increasing importance of FHA in our day to day lending activity.  Here at Opteum we are equipped to handle FHA with an in-house delegated underwriter, local processor and closer right in my office.  Please let me know how I can help you.

Best regards,

Sam Thompson

Loan Office

Opteum Mortgage

678-742-6631 (office)1-866-226-2066 (toll free)770-301-0527 (cell)678-585-8345 (e-fax)

222 Chastain Meadows Court, Suite 300Kennesaw, GA 30144

email: Sthompson@opteum.com 

web:  http://www.opteum.com/sthompson

read my blog:  http://samthompson.thewrittenblog.com

* The information above was shared with permission from Sam Thompson, it is believed to be accurate but not warranted.

Sam Thompson: Opteum Mortgage

I was hoping this might happen.  FHA may be coming to the rescue.  There is a big void out there now for customers with sub-standard credit scores that cannot qualify for conventional loans.  There are others that already own a home and  have a loan but need help with the type of mortgage they used to purchase their current home.  They may have one of those infamous conventional 2/28 loan programs where the rate can jump up to 12% after the first two years of the loan.  The “2” represented the time bomb period and the “28” is the number of days they have until they lose their home.

Seriously, I would like to meet the person that invented the 2/28.  I’m sure it was a Wall Street type, probably someone in their late 20s or early 30s that may have even originated loans for a few months before moving over to the investment world.  Can you imagine maxing out your mortgage payment on an adjustable rate mortgage for $200,000 at 7.5% only to see your rate increase to 12.25% after two years.   “But you can refinance the house after a year or so.”  You have to wonder how many times some loan officer or real estate agent said that to the homebuyer.

But let’s move forward.  The Senate passed an FHA modernization bill by a 93-1 vote today that will raise the FHA loan limit to $417,000 in high-cost areas and lowers the minimum down payment requirement to 1.5% from 3.0%.   The House passed its version of the bill in September.  So it could be law in early 2008.  So help is on the way, along with Santa…. 

 Best regards,
Sam Thompson
Loan Officer

Opteum Mortgage

678-742-6631
(office)
1-866-226-2066
(toll free)
770-301-0527
(cell)
678-585-8345
(e-fax)

222 Chastain Meadows Court, Suite 300
Kennesaw, GA 30144

email: Sthompson@opteum.com

web: http://www.opteum.com/sthompson

Email/call Sam to find our more about his competitive mortgages and weekly rates.

Opteum Mortgage: Mortgage News

Ringing in the new year will be a present from Fannie Mae and Freddie Mac to borrowers with credit scores under 680. Here is what these borrowers on conventional loans with Loan-to-values over 70% will receive on either purchases or refinances:

Credit score less than 620: Either a 2 discount point sur-charge or a higher rate of approximately ¾%

620-639: 1.75 discount point charge or higher rate of approximately 5/8%

640-659: 1.25 discount point charge or higher rate of approx. ½%

660-679: .75 discount point charge or higher rate of approx. ¼%

These changes will typically become effective in January. What it means to you is that lenders will not be able to determine the interest rate until they receive the borrower’s credit report if they are anywhere close to 680. If there are joint applicants, the lower of the two applicant’s middle scores will be the one that determines the interest rate….. So, theoretically, a borrower could be quoted a rate of 6.0% prior to loan app and end up with a 6.75% rate because their middle credit score was 619.

Rate swings: This week has been a pendulum for mortgage rates. Monday rates were virtually touching 5.5% on the 30 year fixed, the lowest we have seen in a few years. Things started reversing on Wednesday, turning back up about an 1/8%. We had further movement up today as they are back up to the 5.875-6.0% level. So the window of opportunity has closed for now, but perhaps the market overreacted again and will settle back down. Congratulations to those of you who made the decision to lock your rate in on Monday!

A Minus Loans: These loans are available at Opteum to borrowers with scores as low as 575 on purchases up to 95-100% LTV. Cash assets are needed to offset the low credit scores and can help someone with low scores, few trade lines and without even a rent history purchase a new home. I like to call this type of program “the New Sub-Prime”.

I will be working this weekend if you need me.

Best regards,

Sam Thompson

Loan Officer

Opteum Mortgage

678-742-6631 (office)

1-866-226-2066 (toll free)

770-301-0527 (cell)

678-585-8345 (e-fax)

222 Chastain Meadows Court, Suite 300

Kennesaw, GA 30144

email: Sthompson@opteum.com

web: http://www.opteum.com/sthompson