Deanna Valeo

New GFE What Does It Mean to You and Your Customer? January 4, 2010

Good Morning: By now you have heard about the new GFE and the "magical issues" that will come with this new disclosure document. Please understand that while the new GFE will protect your client from last minute changes at the closing table (the reason for the new law), all should basically be the same for your clients.  With a few exceptions (see sample of new GFE and HUD below).
  1. The GFE now becomes a legally binding contract between the lender and the customers
  2. The rate on the GFE is time sensitive (most will guarantee 1 hour for the rate quoted)
  3. The estimate will have a time limit for all settlement charges as well.
  4. Once your customer agrees to lock the origination and discount fees (points) cannot change unless the loan does not close before the lock expires (we must get inspections and appraisals done quickly) there is 0% tolerance on these fees.
  5. Appraisal Charges, Tax Service, Flood Certification, Up Front Mortgage Insurance, Mortgage Insurance rates, title insurance, owner’s title insurance, attorney fees. Cannot increase more than +10% from the promised fees shown on the GFE. (The exception to this rule will be if the client decides not to use our standard provider – we will have a single attorney that will guarantee our fee structure.) I will get a copy of this out to your all so you can share with your attorney of choice. My guess is that your attorney will be less expensive. If our client decides to use your attorney then we are exempt from this requirement.)
  6. The following Fees can change: Survey, Pest Inspection, Title Insurance if you do not use our default supplier (Cardinal Title Insurance), initial deposit for escrows, Daily Interest Charges and Homeowners Insurance.

What does all this mean to you?
  1. We need to get inspections done ASAP
  2. Appraisals must be ordered quickly – we have our selected suppliers and can guarantee the rate.
  3. Our attorney will be the default – unless we get your customer to agree otherwise (all lenders will have this in place).
  4. Our Title Insurance provider will be the default unless your attorney can get a better rate (borrower must agree to other supplier).
  5. The appraisal will be important for all mortgage insurance requirements.
  6. The GFE will only show the amount of borrowing costs, it does not show the payment or the amount needed to close. Both of these are shown on the loan application. As a team we will be providing an initial pricing model that will give this information to the borrower in place of a GFE.
  7. Finally, we will need to educate our buyers/ customers about a good faith estimate. The GFE was in the past an estimate (therefore it was abused by unethical lenders) and now is a legally binding contract with the lender.   A tool that provides the amount needed to close; the PITI payment (with HOA when required) and the amount needed to close on a single sheet will give the easiest way to demonstrate our estimated payment structure to our customers. We have developed such a form that will keep it easy for your buyers to know what to bring to closing, what their payment will be and finally what the closing costs should be.
With change come conservative approaches from the closing departments for all lenders. We will endeavor to get our packages out early so we will not have discrepancies between the GFE and the final Settlement Statement. 
Please note this conservative approach will be due to the lender having a financial obligation to meet the terms of the new settlement act law. If we are off on these charges we have to pay for them out of our pocket on the buyers behalf.

Link to new GFE sample: index.cfm/p/files/fid/fdab6fd4-d0d3-4501-bd29-a7b712e2a300.pdf

Link to new HUD sample: index.cfm/p/files/fid/225b1ecb-16fa-458f-8be8-d9041481d1a0.pdf 
Market Information:
It's been a rough ride over the last couple of weeks as the mortgage market is waking up with quite a holiday hangover.  Since December 17th, the FN 30yr current coupon has increased by roughly 35bps. At the same time we have seen the 10yr yield that spike by ~ 60 bps in December. What this indicates is a trend towards higher interest rates. According to Fannie Mae 30-YR fixed rates are reporting at 5.250%. This is up .5% from the low of 4.75%.

Remember the Fed is still buying FN 30YR coupon mortgage backed securities (MBS) until the end of March. Once we get there I would expect the MBS spreads to follow the 10yr yield more closely. 

MCC - Mortgage Credit Certificate Can Help Self Employed January 19, 2010

"To do anything in this world worth doing, we must not stand back shivering and thinking of the cold and danger, but jump in, and scramble through as well as we can." -Sydney Smith

While mortgage rates climbed in December, they have decreased during the first two weeks of January. A combination of factors was favorable for mortgage markets this week. Low inflation, weaker than expected economic growth data, and strong demand for the Treasury auctions all helped mortgage rates move a little lower.

Tips - For first time home buyers with house incomes of $65,000 or less ($75,000 with 3+ persons) that need a little boost in purchasing power (Think Self Employed) - the MCC Mortgage Credit Certificate may be the right move. This NC Bond Program gives a tax credit for 20% of the interest paid in a year up to $2,000 this can be counted as income and make the difference in qualifying your borrower. Remember this is a NC Bond program and it is best to allow 45 days or more for closing. But when income is tight this may be the best answer and Cunningham and Company can help get this loan closed.

Link to NC Housing: see MCC at the bottom

Tax Credit Forms and Rules links - last week for FHA Spot Approval January 25, 2010

This week is the last chance to do a FHA spot approval for condo purchases and it is the last week for us to order FHA appraisals without going through our HVCC system. We must have case numbers assigned by Friday to use these great tools. 

Make sure to ask us about getting approvals for condo developments for FHA – the HOA members (not Management Company) will need to participate for success. Know your approvals before taking a condo listing: FHA, Fannie and VA no longer reciprocate.
The official IRS guidance is out for homes purchased after November 30, 2009:
  • Clients can get a 10% ax credit f up to $6500 for replacing their existing home if they wrote their contract between November 7, 2009 and April 30, 2010. Think about your customers that owned homes they may qualify. Must close by June 30, 2010
  • The max purchase price for the house is $800,000
  • If youour client buys a new home but still owns their old home they must prove that the new home is going to be their primary residence – think mail received that comes to you house as proof.
  • Income limits are $125,000 for single and $225,000 for married couples. 
Things you will need to claim the $6500 and $8000 tax credit: 

Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

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