For many home buyers, FHA-insured mortgage financing is often the only means of home financing available.  With certain exceptions, FHA has granted a temporary waiver to allow FHA home borrowers access to recently foreclosed properties by using FHA mortgage insurance for home purchase and resale within 90 days.  The policy change will permit home buyers to use FHA insured financing to purchase HUD owned properties, bank-owned properties, or properties resold privately.  This change in policy is expected to allow homes to resell as quickly as possible, helping to stabilize real estate prices.

The waiver took effect February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.  To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting home borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the home buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions. 
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

More details regarding this temporary policy are in the text of the waiver, available on HUD’s website.
http://www.hud.gov

http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

How to Calculate PMI.  Private Mortgage Insurance (PMI) Prices.  LPMI comparison for loans in PA.  PMI Expense. PMI, LPMI Removal

Private Mortgage Insurance ( PMI ) is an insurance that protects the lender if a borrower defaults on their loan.  This insurance helps a lender to make loans over 80% LTV.  If a borrower defaults on their mortgage, the average amount recovered by the bank after foreclosure, due to costs, is 80% of the value of the home.  The PMI protects the bank by covering what they could loose in a worst case scenario.   Before PMI, 20% down was needed.  PMI is temporary until the borrower’s equity reached 80%. However, there might be minimum amounts due, perhaps 5 years.

In recent times PMI has become more costly.  These rates are current as of  2/10/09.  The last change was 11/17/08.

There are 2 alternatives to paying BPMI (regular Borrower Paid Mortgage Insurance):

1. LPMI
2. Piggyback 2nd mortgage (harder to get anymore).

Calculate a PA BPMI/PMI Monthly Premium:

The maximum PMI price for a 30 year fixed rate mortgage (using latest updated/increased PMI rates)  :

• 80.01 to 85% LTV:     Loan Amount (LA) x 0.0038 / 12
• 85.01 to 90% LTV:     LA x .0062 / 12
• 90.01 to 95% LTV:     LA x .0094 / 12
• 95 to 97% LTV:          LA x .009 /12
• PMI factor is the number you multiply by the loan amount (.0038, .0062, etc.)
• Adjustments to PMI factor:
  • 5-25 year loan: -.11
  • Cash out refinance +.20
  • Loan amount over $417,000  +.25%
  • Rate and Term refinance +.10%
  • Second Home .14%

Calculate your LTV: loan amount or           loan amount
sales price (purchase)                          appraised value (refinance)

Summary- Benefits of BPMI:
PMI is now tax deductible for those with adjusted gross income of less than $100,000.  If you qualify for this deduction, PMI may be to your advantage, especially 80-85% LTV loans where the PMI is inexpensive.  Please contact us at 610 326-2099 to work up a PMI comparison.  PMI has been the best option for most borrowers with less than 20% down since 2008 because of the tax benefits and the mortgage loan guideline changes with 2nd mortgages.

Compare BPMI/PMI Cost to LPMI Fees:

The draw back of LPMI is its long term cost: We advise never to accept LPMI unless you are going to be moving or otherwise paying off the mortgage in the immediate future.  The reasons: It can never be removed!  PMI is only paid until you build some equity (20%) and then it goes away.  LPMI is a higher rate you pay for the life of the loan.  It may be tax deductible, but it will cost much more than the other 2 options over 30 years.  Mortgage companies like it, because they make more money with the higher interest rate, but we rank it the worst option for those who plan on keeping the loan for more than a few years.

Here are current our LPMI fees.

PiggyBack 2nd mortgage:

These loans have gotten increasingly difficult to obtain.

How to calculate a blended interest rate

PMI Removal:

You may remove PMI by paying the principal down to 80% instead of waiting for it to occur naturally through amortization.  If you want to remove the PMI through appreciation of the home, you typically must wait 2 years and have an appraisal done.  (Consult your lender for their policies.)

*Consult a tax advisor for your specific situation and tax implications.  Assumes average income with itemized deductions.  Those with very high incomes may lose deductibility of mortgage interest. Meant for informational purposes only.

March 19, 2009

Administration Launches New Consumer Website For Responsible Homeowners Seeking Relief

MakingHomeAffordable.gov Features Self Assessment Tools, Calculators 
to Help Borrowers Determine Eligibility, Payment Reductions 
under Administration’s Refinancing and Loan Modification Program

Washington, DC– The U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) today launched a new website for consumers seeking information about the Obama Administration’s Making Home Affordable loan modification and refinancing program. MakingHomeAffordable.gov offers features including interactive self-assessment tools that will empower borrowers to determine if they’re eligible to participate and calculate the monthly mortgage payment reductions they could stand to realize under the Making Home Affordable program.

First announced by President Barack Obama in February, Making Home Affordable will offer assistance to as many as 7 to 9 million homeowners making a good-faith effort to make their mortgage payments, while attempting to prevent the destructive impact of the housing crisis on families and communities. MakingHomeAffordable.gov is a joint effort of the Department of the Treasury and HUD.

“Education and outreach is central to the success of our Making Home Affordable program,” said Treasury Secretary Tim Geithner.  “Putting resources and tools directly in the hands of homeowners will expedite the process of delivering relief to responsible borrowers, and stabilizing the housing market is central to our overall economic recovery.”

“The tools offered on this site will help American families access the help they need even faster,” said HUD Secretary Shaun Donovan. “Communicating how this program works and who is eligible to those who need it is critical to the program’s success, and this website does just that.”

Since releasing the guidelines to enable servicers to begin modifications of eligible mortgages under Making Home Affordable on March 4^th, representatives from Treasury, HUD and other members of a broad interagency task force have conducted detailed briefings and training sessions for mortgage loan servicers and investors, nonprofit housing counselors and nationwide borrower advocacy groups.  Through these early and aggressive efforts to arm those interacting directly with borrowers with information, interagency representatives have briefed more than 2,500 participants on the Administration’s plans in the last two weeks. 

A wide array of large banks to small lenders have already agreed to participate in Making Home Affordable, and servicers have undertaken steps to proactively engage borrowers and respond to their inquiries related to the new program. For example, JP Morgan Chase has put several special tools into place and initiated proactive solicitations to eligible borrowers around the Making Home Affordable program, including an online site to provide program details and allow borrowers to download a new financial information package; increased staffing in a dedicated service center that provides simple entry point for all borrowers, including CHASE, heritage Washington Mutual and EMC; a partnership with Fannie Mae to solicit over 125,000 eligible borrowers; and solicitation to an additional 180,000 non-GSE eligible borrowers.

With those wheels in motion, the Administration is now accelerating efforts to communicate directly with borrowers about the Making Home Affordable program. Features of the MakingHomeAffordable.gov website launched today include:

• Extensive information about the Administration’s Making Home Affordable plan
• Self assessment tools to allow borrowers to determine if they are eligible for the program
• A calculator feature that allows homeowners to estimate the reduction to their monthly mortgage payment that they might stand to realize under the plan
• Resources to find free, HUD-approved counseling services for borrowers who have additional questions
• A handy checklist to ensure homeowners collect all the documents they need before calling their servicers

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LINKS

• MakingHomeAffordable.gov

The Fed announcement came in today indicating that they would drop $750 billion more into the financial sector starting in July 2009.  This will compare with the January 6th rally we had earlier this year.   It appears that the government is serious about lowering rates as a major step in our economic recovery.  Bottom line is when the Fed is spending more money in the mortgage backed securities market, there is more demand for mortgages which results in lower rates.