Originator Digest: Sherri Sherpy, NMLS #287770 (iLoan)

Borrowers are going to pay more for an FHA loan in 2012.  FHA mortgage insurance premiums are going up AGAIN.  This change could possibly take an approved loan file straight to the DENIED bin.

The recent, signed legislation to extend the payroll tax deduction means an increase in FHA’s mortgage insurance premium.  The FHA (Federal Housing Administration) has 2 charges to the borrower:

·        Up Front Mortgage Insurance, which is currently 1% of the loan amount

·         Annual Mortgage Insurance, currently at 1.15% and slated to increase to 1.25%

How could this affect you?

It could end in loan denial.  Namely, if as a borrower, you are near the limits of allowable debt-to-income ratios.  For example, on a $250,000 loan, this increase will add another $26.04 per month in additional mortgage insurance which also gets added into the debt-to-income ratios.  This increase couple topple the peak of allowable ratios and result in a denied status on your loan.

What do you do?

We Are All About Solutions!

Two things:

1. If you are an FHA buyer, get off the fence, find your home and CLOSE on your loan…now rather than later.   Push that spring market today!  Heck, even if you do still qualify after the increase, who wants to pay extra mortgage insurance?  Pew.
2. Convert your financing goals to conventional financing.  With as little as 5% down (good credit needed), you can get a loan with NO monthly MI.  HUGE advantages:

               a.       No monthly MI means your purchase power just increased dramatically (see illustration below).

b.      Sellers and banks LOVE conventional offers!

c.       Many lenders will tell you that there is a rate increase for doing this “flavor” of conventional financing (called single premium financed MI).  DON’T LISTEN.  You can get the SAME rates as those borrowers paying monthly mortgage insurance.  You just need to work with a lender who has that capability.

Happy House Hunting!

Recently, my daughter had to write a short essay from a list of topics for her English class.  I wanted to share.  There is a whole lot of wisdom in this teenager's thoughts...........

One of the things that confuse me most in life is why people accept average or less than average.  People live in a world of mediocrity, settling for something less than what life could offer them.  People don't excel.  Many people don't even try.  We live in a society of people who believe "I can't".  This country exposes us to a world of opportunity.  The sky is the limit.  Only our imaginations and drive can stop us.  When people are young children, they have big dreams, larger than life goals.  They want to be actors, astronauts, lawyers, and doctors. Then as we age, those dreams fade.  People begin to accept less, they allow themselves to be less.  They lose any kind of drive to do better.  People just settle, and I just don't understand that. 

It confuses me how people who live like this know that they can do so much better.  But they do nothing or choose wrongly.  People choose drugs and alcohol, drop out of school, get small jobs or don't work at all.  So many have accepted a life where dreams, goals and ambitions are non-existent.  It seems that they forget what they dreamed of when they were still young.  Every day people wake up in the morning and do the same thing, day in and day out, with no better results than the day or year before.  They continue to choose a lifestyle that does not promote "the best that I can be". 

Fortunately for me, I still have that child in me.  I still dream and hope to do great things in my life. And I refuse to be part of the "I can't" group of people.   How I act now and how hard I try now reflects over to how I am going to act and try in my future.  They are great habits and life rules to live by.  In other words, trying my best now will only benefit me in the long run.   I will bring that child in me forward in life.  I will live and strive for the fullest life can bring.  My sky is my limit and there is no end to my imagination.  I can and I will.

We should all live by these words.  Can you find that child in you?

The mortgage industry has seen much blood shed in the last 2 years, particularly in the last year.  After reading a very interesting magazine article, I began to think about the future...the eminent future and a big question arose, "Who the heck is going to write these loans"?  What is the MN Mortgage Mom rambling about now?  Well, let me take a step back a few years first.

In the early to mid-2000's, loan officers were a dime a dozen.  We were in offices, working out of our garages and in the comforts of our living rooms.  We were dressed in suits, dressed in jammies, dressed in nothing (remember, we were working out of our living rooms, for pete sake).  The point is, it didn't matter....we were all writing loans and becoming fat cats.  Loans were written at light speed. Home values were sky rocketing.  In fact, if you had a pulse and could sign your name on a line, you could get a mortgage.  Good, bad or evil, that was the environment and our industry was crammed with LO's.  Life was EASY.

Fast forward to 2008.  WHOA!  The big bubble burst.  HVCC (Home Valuation Code of Conduct) was introduced.  Appraisals became harder.  Lenders started to freak out just a tad.  Guidelines became just a bit stricter.  In MN, for example, stated income loans became a thing of the past.  What?  No stated income?  We really have to collect a paystub or W-2 or tax return?  The audacity!  Moreover, home values plunged and no one had any equity left.  Refinances dried up and it was the year loan officers had to re-align or get out.  Many exercised the latter.

Now, I'm not saying that was such a bad thing in hind sight.  The mortgage industry could use a fresh cleaning...get rid of the riff-raff, so to speak.  The tough got tougher and the weak perished.  All-in-all, 2008 proved to be a hard year for all of us.

Present day....WOW.  The introduction of the NMLS in 2009.  That freaked a whole lot of people out.  For those of you who do not know, the NMLS is the National Mortgage Licensing System.  It is Big Daddy watching over us.  It is one of the ways, as a consumer or realtor to check out your LO.  It is our report card of compliance and good work.  And we had a deadline...December 31, 2010 or we were barred from writing mortgage loans.  Now, being the pig-headed person I am, I was not going to let the NMLS conquer.  Commitment or stupidity?  Some days, I wonder.  Nevertheless, I completed my education requirements, took the national test, took the state test, got finger printed, mug shots and a credit report pulled to boot.  Feeling like a convict, needless to say, I passed with flying colors.  No, the Twin Cities mortgage market was not going to get rid of me that easy.  I'm here to stay.

THAT HAS NOT BEEN THE CASE FOR THOUSANDS.

Let me give you an example.  In Arizona, prior to the NMLS, that state had 18,000 loan officers.  In the past year, that number has dwindled to 3,200.  And it is going to get worse.  These numbers are BEFORE the final tally of those who passed their NMLS requirements and are licensed to write mortgages as of January 1, 2011.  Every other state is seeing attrition much like this.  Our numbers are dwindling really fast.

Moreover, the lending guidelines, restrictions and regulations today are TOUGH.  Remember the old saying, it doesn't take a rocket scientist?  That does not work for the mortgage industry.  In today's environment, you better bet that every thriving loan officer is just that...a rocket scientist.  We have to be.  Lending guidelines fluctuate at a moment's notice.  Regulatory changes are occurring by the minute.  Appraisals, title, income, credit and a whole myriad of other factors are scrutinized to the nth degree.  It is a literal feat of accomplishment to successfully drive closed mortgage loans and prosper in this environment.

Finally, as of April 1, 2011 the mortgage industry will discover how the government will be dictating our compensation.  As part of the Dodd-Frank H.R. 4173 Act, (page 762) loan officer compensation will be governed with oversight from the Feds.  Fun stuff.  Can you see people clammering to their local mortgage companies aspiring to become a loan officer?  Umm...not so much.

Now, let's jump to the future.  Six months, a year.  The mortgage industry has gone through severe attrition.  The bloodbath is over and there are crickets in the halls of former mortgage offices.  An excited buyer dials the mortgage call center to get the mortgage process started.  A heavily accented person, 2000 miles away replies, "Yes sir, that will be 26 weeks before you can close."  Can you imagine?

So, who IS going to write these loans?  This brings us full circle and to my final point...Although my illustration above is a bit tongue-in-cheek, there will always be loan officers in every state.  BUT, there is going to be a big shortage.  Whether you are a consumer or real estate agent, it is in your best interest to align yourself with the best.  CHECK OUT YOUR LOAN OFFICER (I will show you how in the next blog).  Make sure you are working with a LO who is "in it to win it"...the lifer.  Make sure your loan officer is a rocket scientist or has aligned himself/herself with a team who is.  Why?  Because after the dust has settled, dialing up that call center because you don't know where else to turn is really going to stink.

Happy Buying and Selling!

The MN Mortgage Mom

You've just completed the renovations.  New paint, carpet, kitchen, bathrooms, you name it.  You took a nasty dwelling and completely transformed it into "home-sweet-home" for that buyer lucky enough to reap the benefits of your hard work and skill.  AND YOU DID IT IN RECORD TIME.  Two months after your acquisition, you are ready to throw up the FOR SALE sign.  Woot!  Life is good.

 Okay, maybe not that good...

 Have you considered the buyer pool in your market?  Have you thought about who your buyers are?  How knowledgeable are you and your listing agent on current financing guidelines?  The fact that you are ready to flip that home in record time is nothing less than admirable.  But if you don't have the ABILITY to sell to a whole group of buyers or are unaware of potential hurdles, your timeline and patience are going to be tested.

So, what the heck is The MN Mortgage Mom rambling about now???  FHA.  FHA buyers.  And there is a whole lot of them out there.  Statistically, FHA accounts for more than 30% of all loan originations nationwide.  In many areas of the country, that number is closer to 50%.  When I look at my own pipeline for the last year from the Minneapolis/St. Paul market, my FHA buyers constitute nearly 70% of all my originations.

 I certainly am not suggesting as a seller, that you steer away from FHA buyers.  Quite the contrary.  What I am suggesting, however, is that you know the rules and guidelines.  Knowledge is power and that power will keep ALL buyer pools open and get your flip to a successful closing.

So what's the big deal about flipping your home in record time from acquisition?  Simply put (given the example above), you might as well forget about the FHA buyer.  FHA will NOT insure a mortgage on a property in which the owner of record has held that property less than 90 days.  You may be thinking, "Well that's okay.  By the time we close, we will be over that 90 days."  WRONG.  FHA defines that 90 days as:

• Seller must be owner of record for a minimum of 90 days AND
• The buyer's purchase contract may not be dated inside those 90 days

In summary, you cannot go under contract with an FHA buyer until 90 days have lapsed from your date of acquisition.  Time yourself correctly and you will open your home sale to hundreds of buyers.

Other dates to be cognizant of:

• 90-180 days from acquisition:  A 2^nd appraisal will be required if the sale is between these dates AND you are selling your home 100% or above your acquisition price.  NOTE:  The buyer cannot pay for this appraisal. 
•  Up to 12 months from acquisition:  Underwriter reserves the right to require additional documentation in support of the resale value.  Note to flipper:  If you have the home priced right and the appraisal report is able to identify and support the value,  more times than not, you will sail right through this without having to provide any documentation.

What do you do now?  Get that home up for sale and have it priced right.  If you have a little time on your hands, that's okay.  If a conventional buyer doesn't come around, you have a few days to re-polish the wood and perhaps throw in a furnishing or two to stage your finished gem.  And when that FHA purchase contract presents itself, you are ready.  "Ain't no hiccups happenin in this transaction."  Right on...because you have the knowledge and that is a powerful thing. 

Happy Selling from The MN Mortgage Mom