Deanna Valeo
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Closing Times Move Out a Bit February 1, 2010

During a recent meeting with the head of our closing department we were informed to expect a minimum turn time of 72 hours from when the file gets to the closing department to when the borrower can sit down with the attorney. The reason for this is as follows:

The new GFE is a binding contract with our clients and must disclose the lender charges, attorney charges and secondary provider charges such as surveys and pest inspections. One big issue is that some of the RESPA rules are gray and open to interpretation (especially rules regarding secondary provider charges) - however the rules regarding resolution of undisclosed items are not. The lender must refund any non-disclosed fees to the borrower unless the borrower selects their own service suppliers; therefore lenders are being extremely cautious.

Attorneys have limited experience closing using the new HUD and comparing GFE fees to the one disclosed. There are major concerns regarding this as well. Many are also experiencing software issues that are just now being discovered. Our closing department states it is training many of the paralegals on how to fill out the new HUD (more delays).

Finally, RESPA requires that the customer have 24 hours to review the HUD before settlement.

All of this adds up the 72 hours, 24 hours for our closing department, 24 hours for the attorney to prepare the HUD and 24 hours for the client's to review their settlement statement.

The good news is that Deanna and I have had multiple closings with the new GFE and HUD. The new HUD looks like the old HUD - the major difference are the additional pages and the comparison of quoted GFE fees to the actual fees charged at closing.

Bottom line: the new rules do protect the customer from unscrupulous lenders that changed fees and surprised our client's at the closing table. However, these changes have had an unintended consequence of delaying the closing process. I am being informed that many of the larger institutions are quoting closing in 45-60 days.

The Valeo-Croy Team and Cunningham and Company are committed to help you close your loans faster. Issues that are mandated do slow the process, HVCC, MDIA and now new RESPA laws will limit our very fastest closings times to 3 weeks with excellent borrowers and 4-6 weeks for any transaction with additional requirements (Bond, USDA, House Charlotte). We will continue to focus on keeping our closing times faster than the big banks so we can get your client's into their homes faster. We fully expect that closing times will get faster as we all gain further experience with the new GFE and HUD.

The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428

Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings

@ The Valeo-Croy Team, we are here for you.


The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.

 


Fed Will Not Extend Mortgage Backed Securities Purchases February 1, 2010

On the economic front, the Fed did confirm it will not extend the purchase of Mortgage Backed Securities (MBS) slated to end March 31st. This announcement did cause rates to rise slightly. Investors are mixed on what affect this will have on interest rates.

Currently the Fed buys 75% of all MBS issued on the street. Some investors say that everyone has known that the Fed program will end in March and therefore this is already priced into MBS prices. While others state that rates must go higher when the buyer of 75% of all the MBS issues goes away; they expect rates to rise as much as 1%. I am in this camp as I cannot see prices changing (prices lower, yield higher) until we get closer to the end. Only time will tell.

The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428

Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings

@ The Valeo-Croy Team, we are here for you.


The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.

 


Jumbo VA Loans Up to $1 Million? February 15, 2010

Did you know VA allows eligible veterans to borrow above the $417,000 standard VA loan size? 

A qualified Veteran can borrower above $417K as long as they put down 25% of the difference between the needed loan amount and $417K. 

For example a veteran can qualify for a $834,000 loan amount by putting down $104,250 or a purchase price of $938,250 with a 11.11% down payment and no mortgage insurance. The veteran would need to pay the VA funding fee on the loan amount above the $417K limit in cash; the economics still make sense.

So when your client is shopping for a higher priced home it does not hurt to ask if they have VA benefits.  Most Veteran's do not know about the program - so make sure to let them know.

The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428

Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings

@ The Valeo-Croy Team, we are here for you.


The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.

 


When is it Better to Have a Higher Mortgage Rate? February 16, 2010

Did you know that you have an option to have your lender pay the Mortgage Insurance (MI), and that you can take advantage of a higher mortgage interest deduction with a qualifying tax basis? 
 
Most of us know about mortgage insurance and that, for some of us, it is not tax deductible so it is something to avoid. In years past the desire to avoid MI led to the creation of combo loans, for example an 80-10-10 where the borrower could finance a portion of the down payment as a second mortgage. Because it has become more difficult to get these second mortgages now, borrowers should be aware of a little known alternative: Lender Paid Mortgage Insurance (LPMI).
 
LPM is not new to the mortgage business. If you’re planning to put down less than 20% of the purchase price, it might just be the right solution for you.
 
LPMI is a single payment MI that is funded by the lender, essentially using “rate premium” funds to purchase your policy. “Rate premium” is paid to a lender for charging a higher interest rate. Banks, mortgage bankers and mortgage brokers can use this “spread” to purchase the MI, which you pay for in interest - which is tax deductible in most cases! Therefore with LPMI a higher rate can actually save you money.

We recently had a borrower with an excellent credit score of 767. We were able to give him a 95% loan with no monthly MI at a rate of 5.375%. The market rate for a 30-year fixed loan that day was 5% with standard monthly MI. Despite the slightly higher interest rate, his total monthly payment was $110 less. For this borrower, LPMI has tax benefits as well. All of his interest payments made at 5.375% are tax-deductible. With a household income of over $100K, he would not have been able to deduct monthly MI payments from his Federal taxes. It will take approximately nine years of standard payments to get to 78% (the point at which monthly MI payments automatically drop off). In this time he will have saved $11,888 in MI payments.

So when should you consider LPMI on your purchase? If you’re putting less than 20% down, it’s worth looking into. To qualify, the middle of your three credit scores must be at least 680, and you’ll need to put at least 5% of your own funds toward closing (the rest can be a gift). There are a couple of other factors to consider:

 
  • If you are mobile in your career, or plan to be in your house for less than nine years, LPMI makes good economic sense since it less likely that you would pay the mortgage down to 78% during that time. 
     
  • Do you plan to accelerate your pay-off with large payments and reduce your principal more quickly than the way the loan is amortized? Bear in mind that the higher interest rate will stay with you for the life of the loan, whereas the monthly MI will drop off once the loan balance reaches 78% of the original purchase price, resulting in a lower payment for the remaining life of the loan.
You have options when obtaining a loan for your new home purchase. LPMI is not a “one size fits all” solution, but it has the potential to save you a significant amount of money. Since every situation is unique, it’s important to discuss your needs with your lender in order to design the best solution for you.


The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428

Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings

@ The Valeo-Croy Team, we are here for you.


The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.


Fed Increases Rates What Does It Mean for You? February 22, 2010

No doubt that you have heard that the Fed has increased interest rates last week.

A word of caution here, many of the news outlets do not understand exactly what happened and there may be more frustration and confusion created by some of these reports so we figured we would help to get you some solid information that you can share with your buyers and sellers. 

In essence, what the Fed announced last night was their intent to raise their DISCOUNT rate today.  This is the rate at which the Fed directly lends money to banks for their short term use.  With this short term money being so cheap the banks have been largely using that money for their own investments instead of lending that money or paying higher interest rates to their account holders for things like money market accounts, etc.  This has very little direct impact on mortgage rates on the surface.  The Fed FUNDS rate is the rate that is more tightly correlated to mortgage rates.

However, what this increase signals is a change in the Fed's stance that they are starting to move away from the monetary easing bias.  This move came earlier than had been anticipated and the Fed is taking a stand to signal their intent to end their emergency monetary measures that have been keeping rates artificially low for the past year and one half- this includes a leaning toward increasing the Fed FUNDS rate.

This change in bias by the Fed is what the Mortgage Backed Securities (MBS) market is focusing on and the concerns of the investors in these MBS will dictate how quickly we will see mortgage rates increase and just how high they will go.
In addition to this announcement to increase the Discount rate, we are also seeing the end to the massive MBS purchases by the Fed next month.  These purchases are one of the main reasons we've seen these artificially low rates and there is doubt that there will be any replacement buyers in volume since the Fed has been purchasing about 75% of all new MBS over the past year and one half.
As you can see, there are many forces at work that are pointing to increased mortgage rates, and this could happen fairly soon.
If you have buyers that are deciding if now is the right time to buy, please share this information with them.  Additionally, there is that added incentive of the tax credit as additional reason to consider buying sooner rather than later.

If you have people who are thinking about selling their home and may be waiting for the perfect time - this may be it!  With many buyers looking to find something before the tax credit expires and trying to access these lower mortgage rates, we will surely see the volume of purchases surge over the next few weeks and months (it is already happening!!).  As rates go up the number of buyers in a given price range will decrease as they must purchase a property that fits their monthly payment goals.  We typically do not see buyers increase that monthly payment goal when rates go up.  They simply adjust their searches and consider lower priced homes to accommodate their needs.  For sellers, this means that there will likely be fewer people looking to purchase your home once rates increase.  This should be a serious consideration for anyone looking to delay the listing of their home.

There is no doubt rates are going to increase.  The questions are: How quickly they will increase and how high they will go!
This is a serious time for serious decisions for home buyers, sellers and people thinking about refinancing.  Now, more than ever, people need to work with trusted advisors that can help identify their goals and provide information for those people to make informed decisions about their options.  If anyone you know needs additional assistance with this information, or would like to discuss the potential ramifications of what these changes signal is on the horizon please feel free to call me.

The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428

Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings

@ The Valeo-Croy Team, we are here for you.


The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.


 


How to Calculate Your Self Employed Income for Fannie Mae February 22, 2010

Video on How To Calculate Self Employment Income: From Fannie Mae
 
http://fanniemae.articulate-online.com/p/7778741139/DocumentViewRouter.ashx.scorm?Cust=77787&DocumentID=2e797245-7265-489c-a829-731397b100e4&Popped=True&InitialPage=index_lms.html

This is a great site for self employed borrowers to see how to calcuate your mortgage income.

Of course we can also help with this process.

Our Best Wishes for Buying Your New Home,


The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428

Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings

@ The Valeo-Croy Team, we are here for you.


The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.