Gulf Coast Associates' Blog: Mortgage Information

The Federal Reserve Board announced yesterday morning it has approved the long awaited final rule amending Regulation Z (Truth in Lending) which it believes will help protect consumers by promoting responsible lending practices. According to Fed Chairman Bernanke, "the new rules will apply to all mortgage lenders and should protect consumers by prohibiting unfair, abusive or deceptive home mortgage lending practices." In addition the new rule also sets additional advertising standards and requires certain disclosures to be given to consumers earlier in the mortgage transaction process.

Highlights of the final rule include the following:

1.  The definition of "higher-priced mortgage loans" (secured by a consumer's principal dwelling). This new defined…

In one of the largest bank failures ever, IndyMac Bank was seized this afternoon by federal regulators. The Office of Thrift Supervision said it transferred IndyMac's operations to the Federal Deposit Insurance Corporation because it did not think it could meet its depositors' demands. The bank will reopen on Monday morning under government supervision and regulators will begin a complete investigation into the bank's operations.

IndyMac Bank was one of the largest savings and loans in the country with about $32 billion in assets; it specialized in making subprime loans and has been reeling from losses on defaulted mortgages it made during the peak of the housing boom. The failure had been widely expected as its stock price fell to mere pennies a share…

Effective July 14, 2008, FHA will implement a risk based premium policy for its mortgage insurance (MI) on 1 to 4 unit single family mortgages. The premiums will vary slightly based on the term of the loan (i.e. 30Yr versus 15Yr), so for the purposes of this post, we have focused on the single family premiums for a loan term over 15 years.

As with everything surrounding today's mortgage market, these new guidelines are another step towards tighter qualification standards and higher borrower costs. In fact, we find the new guidelines rather amusing as most wholesale lenders have enacted their own criteria and will no longer fund FHA loans for borrowers with lower FICO Scores - many now have credit score limits in the 560-580 range.

FHA’s New Risk-Based MI…

The Federal Housing Administration announced today it will temporarily lift the 90-day waiting period for property resales financed using an FHA loan. The 90-day waiting period was established in 2003 to help counter predatory lending practices and investor house flipping. Because of the glut of foreclosed and abandoned homes that are harming many neighborhoods, FHA will lift the waiting period for one year.

While Federal Housing Commissioner Brian Montgomery said "The action we take today will allow home buyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country," the move will not be as substantial as one might think. The reason for this is because FHA also requires that homes…

Imagine the surprise of many home sellers when they become aware that Fannie Mae, Freddie Mac and most of the major lender guarantors have identified their Metropolitan Statistical Area (MSA) as a declining market. Talk about a kick in the head. Like many across this country, they first had to come to terms with the fact their homes are declining in value. Now, they also must face the situation where many potential home buyers will be penalized if they attempt to buy their homes with conventional mortgage financing.

So, just exactly how do these metropolitan statistical areas get these "declining market" designations? We thought you might find a review of the situation helpful.

Fannie Mae and Freddie Mac are Government Sponsored Enterprises (GSEs) and…

Fannie Mae announced today it will be scrapping its extra 5% down payment requirement for properties identified as being located in a declining market. The change will affect conventional, conforming mortgages that the company will purchase or guarantee and is an additional part of the company's recent Keys to Recovery initiative.

The company had been under pressure from both Realtors® and industry insiders alike since it adopted the policy in December, 2007. Marianne Sullivan, one of Fannie Mae's senior vice presidents said "This new down payment policy reinforces our goal to support successful home-owning, not just home-buying, as we seek to bring liquidity to all communities and help the housing market recover."

The new policy will take effect June 1,…

Beginning July 14, 2008, FHA will implement a new flexible premium pricing structure that HUD believes will assist more homeowners struggling to keep up with their high-cost subprime adjustable rate mortgages. According to HUD Deputy Secretary Roy A. Bernardi, “fair pricing will allow FHA to reach more troubled homeowners without placing excessive risk on its insurance fund.”

Up to now, FHA had one premium structure that charged borrowers 1.50 percent of the loan balance upfront and .50 percent annually regardless of the borrower’s credit standing. Under the new pricing structure, FHA’s upfront mortgage insurance premium will range from 1.25 percent to 2.25 percent based on borrower credit risk.

The new pricing plan is set to coincide with modifications…

For those of you who follow our blog, you know we try very hard to keep you up to date with all the changes that are occurring in the mortgage lending industry on an ongoing basis. Unfortunately, since around the beginning of March, we have had our hands full trying to keep up with the overwhelming increase in our real estate business due to the fact it was the height of our "season" here in Southwest Florida and business is booming again. Our belief is that what has occurred for us here in our real estate markets this winter will also show up and spread across the rest of the country as we move into summer. At least we hope so!

So, in order to keep you up to date, we have decided to do a synopsis of what has occurred over the last 45 days that should be…