A couple of weeks ago Fannie Mae (FNMA) announced yet another game changer to the mortgage and real estate industries.  The FNMA LQI (loan quality initiative) was introduced to the mortgage world.  Effective for loan applications originated on or after June 1, 2010 (my birthday) Fannie Mae will require a credit "refresh" within 72 hours of funding.  The purpose of this credit refresh is to determine any change in a borrower's debt load from time of application.  Credit reporting agencies have made a credit comparison report available.  The comparison report will be pulled within 72 hours of funding.  If an increase in a borrowers debt capacity and/or undisclosed debts from time of initial application have been identified then a refreshed report will be issued and the file will be sent back through underwriting.

An increase in a borrower's debt capacity may be a result of:

• A new debt
• Increase of minimum payment for revolving debt (credit cards, store cards, lines of credit)
• Student loans coming out of deferment

As you can imagine, this will inevitably cause delay in funding a loan when a borrower's debt capacity has been impacted.  If a borrower incurs new debt and does not disclose the outcome of loan approval may be changed.  Fannie Mae's primary goal is to insure a borrower's ability to sustain homeownership.  It's important to look at a borrowers total debt capacity at time of final loan application.

Responsibility: The Lender – Lenders are responsible for accurately qualifying borrowers and assessing their ability to repay their loan.  Sound underwriting are implemented to exercise due diligence throughout the entire origination process.  The responsibility of the loan file begins at time of application and carries through to closing.

Responsibility: The Borrower – Borrower's have the responsibility of providing the lender with accurate and complete information for the loan application.  It's always been important, but now is even more important for a borrower to notify the lender of any changes to their employment, income, debt obligations or other financial circumstances during the application process.

The bottom line: As you embark on your next financing transaction (purchase or refinance) make sure you fully disclose all debt at time of initial application.  Any new debts that may not be reporting at time of application will surely reveal themselves and may cause you an issue in obtaining loan approval.  Spending/borrowing on revolving accounts must be managed very carefully and/or completely avoided. Please remember that even a small change in one of these payments could potentially cause your debt capacity to increase and will result in a re-underwrite of your loan which will result in a delay of closing.

I am always here as a resource, in process or before you decide to make a move.  Please give me a call (503.585.1105) or shoot me an email to inquire about your specific refinance or purchase questions.

USDA has announced that the funds allocated for rural housing home loan program for the fiscal year of 2010 will likely be depleted prior to the end of April. The rural housing program budget is set in October each year. The increasing propularity of this program caused a double of funds from 2009 to 2010, but the picture is now clear that the increase was still insufficient.

Along with the announcement from USDA we received an email from nearly every lender stating they highly advise files be placed in line for underwriting to reserve the funds ASAP. In past years, the USDA program funds have neared depletion towards the end of the budget year allowing for USDA to give a "conditional funds approval". This year we will not have this flexibility since we are still so far from the budget allocation. Therefore, I strongly urge anybody looking to purchase with the USDA rural housing home loan to make an offer sooner than later.

If you are looking to purchase or you have clients looking for homes and planning to use the USDA program, please call me and confirm the update on funds availability prior to making an offer.

As a borrower it may be a bit more difficult to obtain FHA financing in 2010.  Today the FHA announced a series of changes to the FHA insured mortgage program aimed at increasing home ownership in underserved neighborhoods.  The program has become the most widely used program for first-time buyers or move up buyers with down payments less than 10%.

In the FHA official announcement today it spelled out a series of changes that will increase the capital fund of FHA as an effort hedge against the increase of defaulting mortgages.  Fortunately FHA retained the minimum down payment of 3.5%.  The changes will consist of the following:

• Increased mortgage insurance premium by .5% (from 1.75% to 2.25%).
• Seller concessions (credit towards closing costs) reduced from 6% to 3%.
• Increased enforcement on FHA lenders/banks.
• 580 FICO score now required to qualify for 3.5% down payment program (Scores below will require 10% down payment.  However, nearly all FHA lenders nationwide have a minimum 620 FICO score overlay).

The changes come as a necessary precaution for FHA to avoid asking the federal government for assistance to sustain it's mortgage insurance for homeowners.  FHA does not actually service the mortgages issued by FHA, but insures the loans serviced by the banks.

As a borrower, the increased mortgage insurance premium will have a small impact on your monthly payment and the limit of 3% seller concessions may require you to come to closing with a bit more cash to cover the exceeding amount of closing costs and prepaid items.

The increased enforcement on FHA lenders/banks will be determined by each banks servicing and performance of current FHA loans.  As a precaution to retain the ability to fund FHA loans we will see increased lender guideline overlays in the near future.  A guideline overlay is an individual lender/bank guideline that is usually more stringent than the standard loan guidelines.  As a result guidelines may vary significantly between banks.

We will likely see an increase in FHA loan denials in 2010.  A borrower's FHA loan may be denied simply because it was sent to the wrong FHA lender.  If you have questions about an FHA loan or want to know if you qualify feel free to give me a call or email me.  As a broker, Landmark Mortgage has several options for FHA lenders.  It will be important for borrowers to work with a knowledgeable broker who has experience and options for each FHA loan applicant.  As a loan officer I will find the right fit for your specific loan profile.

FHA will issue a Mortgagee Letter tomorrow announcing the exact dates of implementation.

We must have a passion for what we do in life.  This man encapsulates the meaning of a niche.  And he loves it.  Simply beautiful.

November 30th (the expiration of the first time homebuyer tax credit) is just around the corner.  Make sure your buyers are making an offer leaving sufficient time to close.  Oh yeah, and these fabulous rates…they won't be around forever!

Dealing with life after Taylor, Bean and Whitaker… Be prepared to time your closings accordingly.  The closure of the nation's largest FHA lender has had an effect on the entire wholesale mortgage market.  Check out the video below:

FHA lenders are beginning to implement some new guideline overlays.  Watch the video and be prepared to coach your clients accordingly:

Ok, so Taylor, Bean and Whitaker has officially announced the ceasing of all origination operations.  If you are a Realtor, please make sure you're clients are placed somewhere else quickly.  Again, none of my loans in process are being underwritten by Taylor Bean.

If you have any questions or need help finding a suitable source for your loan or a clients loan, please don't hesitate to contact me.

TBW Press Release:

PRESS RELEASE

TAYLOR BEAN MUST CEASE ALL ORIGINATION OPERATIONS EFFECTIVE IMMEDIATETLY

Ocala, Florida – Taylor, Bean & Whitaker Mortgage Corp. (“TBW”) received notification on August 4, 2009 from the U.S  Department of Housing and Urban Development,  Freddie Mac and Ginnie Mae (the “Agencies”) that it was being terminated and/or suspended as an approved seller and/or servicer for each of those respective federal agencies.  TBW has unsuccessfully sought to have the termination/suspension decisions of each of those agencies reversed.    As a result of these actions, TBW must cease all origination operations effective immediately.  Regrettably, TBW will not be able to close or fund any mortgage loans currently pending in its pipeline. TBW is cooperating with each of the Agencies with respect to its servicing operations and expects to continue to service mortgage loans as it restructures its business in the wake of these events.  We understand that this could have a significant impact on our valued employees, customers and counterparties, and are very disappointed that a less drastic option is unavailable.

Yesterday FHA announced it's suspension of Taylor, Bean and Whitaker's FHA origination.  The action came after Taylor Bean failed to file required annual financial reports.  Although FHA will allow Taylor Bean to appeal it's action within 30 days, the Government National Mortgage Association (GNMA) has immediately terminated Taylor Bean's registration with it's MBS pools. Taylor Bean has been a primary outlet for manufactured homes and HUD's FHA 203k rehabilitation loan.

If you're a Realtor or a borrower with a loan currently in process and you're aware of it being underwritten by Taylor Bean please contact your loan officer immediately to seek a backup plan or to seek an alternative lender immediately.  Please note, that none of my files in process are in Taylor Bean's pipeline.

Below is HUD's News Release:

HUD No. 09-145 Brian Sullivan (202) 708-0685 www.hud.gov/news/

For Release Tuesday August 4, 2009

FHA SUSPENDS TAYLOR, BEAN & WHITAKER MORTGAGE CORP. AND PROPOSES TO SANCTION TWO TOP OFFICIALS
Ginnie Mae Issues Default Notice and Transfers Portfolio

WASHINGTON – The Federal Housing Administration (FHA) today suspended Taylor, Bean and Whitaker Mortgage Corporation (TBW) of Ocala, Florida, thereby preventing the Company from originating and underwriting new FHA-insured mortgages. The Government National Mortgage Association (Ginnie Mae) is also defaulting and terminating TBW as an issuer in its Mortgage-Backed Securities (MBS) program and is ending TBW's ability to continue to service Ginnie Mae securities. This means that, effective immediately, TBW will not be able to issue Ginnie Mae securities, and Ginnie Mae will take control of TBW's nearly $25 billion Ginnie Mae portfolio.

FHA and Ginnie Mae are imposing these actions because TBW failed to submit a required annual financial report and misrepresented that there were no unresolved issues with its independent auditor even though the auditor ceased its financial examination after discovering certain irregular transactions that raised concerns of fraud. FHA's suspension is also based on TBW's failure to disclose, and its false certifications concealing, that it was the subject of two examinations into its business practices in the past year.

"Today, we suspend one company but there is a very clear message that should be heard throughout the FHA lending world – operate within our standards or we won't do business with you," said HUD Secretary Shaun Donovan.

FHA Commissioner David Stevens said, "TBW failed to provide FHA with financial records that help us to protect the integrity of our insurance fund and our ability to continue a 75-year track record of promoting, preserving and protecting the American Dream. We were also troubled that the Company not only failed to disclose it was a target of a multi-state examination and a separate action by the Commonwealth of Kentucky, but then falsely certified that it had not been sanctioned by any state. FHA won't tolerate irresponsible lending practices."

Ginnie Mae President Joseph Murin said, "I would like to reassure TBW's customers whose loans serve as collateral for Ginnie Mae securities that, although this action will result in a new servicer, the transition will be seamless for them."

TBW's immediate suspension is for a temporary period pending the completion of an investigation by HUD's Office of Inspector General, an ongoing review by the Department's Office of Housing, and any legal proceedings that may ensue. TBW is the third largest direct endorsement lender of FHA-insured loans and the eighth largest issuer of Ginnie Mae mortgage-backed securities. FHA decided that TBW's immediate suspension is in the best interest of the public and is necessary to protect the financial interests of the Department.

TBW may appeal its immediate suspension by submitting a written request for a hearing before an Administrative Law Judge within 30 days. Such a request will not delay the action FHA is announcing today.

In conjunction with TBW's suspension, HUD sent notices of proposed debarment to TBW's Chief Executive Officer, Paul R. Allen, and TBW's President, Ray Bowman. Mr. Allen's proposed debarment alleges that he submitted false and/or misleading information to Ginnie Mae regarding TBW's delay in submitting its audited financial reports for fiscal year ending on March 31, 2009. Mr. Bowman's proposed debarment alleges that he submitted two false certifications to HUD on TBW's Yearly Verification Report. Mr. Allen and Mr. Bowman have thirty days to contest the proposed debarments.

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HUD is the nation's housing agency committed to sustaining homeownership; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation's fair housing laws.

Ginnie Mae is a wholly-owned government corporation within the U.S. Department of Housing and Urban Development. Ginnie Mae pioneered the mortgage-backed security (MBS), guaranteeing the very first security in 1971. An MBS enables a mortgage lender to aggregate and sell mortgage loans as a security to investors. Ginnie Mae securities carry the full faith and credit of the United States Government, which means that, even in difficult times, an investment in Ginnie Mae is one of the safest an investor can make.

More information about HUD and Ginnie Mae is available on the Internet at www.hud.gov, espanol.hud.gov and www.ginniemae.gov