May 15, 2009

DU Refi Plus™

Introduced in April 2009, DU Refi Plus™ is designed to provide several automated underwriting enhancements. The flexibilities within DU Refi Plus™ will include reduced documentation requirements for existing Fannie Mae borrowers, as well as expanded eligibility criteria. Some additional highlights of DU Refi Plus™ include:

• Maximum of 105% LTV
• Unlimited CLTV/HCLTV
• All property types are eligible, including co-ops, condos, manufactured homes and PUDs
• Primary homes and investments are eligible up to 4 units, while second homes are eligible for 1-unit properties only
• Properties limited in the past to 75% LTV/CLTV/HCLTV will become eligible to 80% LTV/CLTV/HCLTV (including 3- to 4-unit primary residences, 2-unit primary residences with high balances, second-home co-ops and investments)
• Minimum credit score of 580 will be waived if the LTV is 80% or less
• Minimum credit score of 680 will be waived if the LTV on an ARM is 80% or less
• Only one current pay stub and a verbal VOE will be required for salaried employees
• Only one-year tax returns will be required for self-employed or commissioned borrowers
• Appraisals may be waived in certain circumstances

The highlights presented in DU Refi Plus™ are numerous. However, DU Refi Plus™ also presents a few restrictions, as well. Some of the restrictions within DU Refi Plus™ include:

• No cash-out refinancing (limited to 2% of the loan size or $2,000)
• No new subordinate financing
• Pre-existing subordinations must be re-subordinated
• No paying off existing 2nds (cash-out refinancing prohibited)
• ARMs with fixed terms less than 5 years are prohibited
• Interest-only mortgages are prohibited
• Balloon mortgages are prohibited
• MyCommunityMortgages (MCM) are prohibited
• Texas 50(a)(6) mortgages are prohibited
• HomeStyle Renovation mortgages are prohibited

Enhancements to DU in the month of May (not yet confirmed) include

• Minimum 580 credit score will not be required on any DU Refi Plus™ loan
• Minimum 680 credit score will not be required on high-balance ARMs
• Maximum DTI will continue to be determined by DU
• If a loan goes beyond the maximum DTI, an Ineligible recommendation will be given
• Mortgage insurance is not required on a loan if the LTV is greater than 80% and if the existing mortgage does not have MI
• Mortgage insurance is only required if an LTV is greater than 80% and the existing Fannie Mae loan has MI (options for MI include obtaining the standard level of MI or obtaining the same coverage already in effect)
• Project reviews for condos, co-ops and PUDs are not required
• Condo or co-op hotels/motels are not eligible and will receive an Ineligible finding

The links below will provide more detailed information, directly from Fannie Mae, pertaining to DU Refi Plus™.

Fannie Mae Announcement 09-04 on DU Refi Plus™
The refinance initiative instituted by the Making Home Affordable program as announced by the U.S. Department of the Treasury has provided Fannie Mae the opportunity to establish and introduce DU Refi Plus™, a program that will make the refinance process as straightforward as possible.

Fannie Mae FAQ (DU Refi Plus™ included)
More than 50 questions, including those on DU Refi Plus™, pertaining to the Making Home Affordable program are answered here.

DU Refi Plus™ April Enhancements
Brian Faith, Managing Director of Communications for DU Refi Plus™, announced on February 4, 2009 that Fannie Mae’s effort to support the market and provide liquidity will include expanded refinance options through DU Refi Plus™. This link identifies the updates that will be included with the April release.

DU Refi Plus™ May Enhancements
Additional enhancements to DU Refi Plus™ that will be unveiled the weekend of May 2, 2009 are thoroughly represented on this Fannie Mae link.

With the increased flexibility offered within DU Refi Plus™, coupled with the near record-low mortgage interest rates, now might be the best time to refinance and PrivoCorp is positioned to process your loans faster than the rest.

May 13, 2009

A revolutionary program that give home buyers easier access to money.

The Memphis Area Home Builders Association is launching a program that will allow first-time homebuyers to borrow their down payments and repay it from their $8,000 federal tax credits.“This means Memphis Area Home Builders Association (members) can sell homes by loaning people their down payment so they can get in basically for no money down,” said Hodgkins, owner of Oaktree Homes LLC. “But that (loan) is to be repaid by the assignment of their tax credit.”

The program is the first of its kind in the nation and could jumpstart the county’s sagging new home sales by giving potential homebuyers access to money at closing instead of making them wait for their amended tax returns, which can take weeks or months to receive.

The stimulus bill, earlier this year established the first-time homebuyers tax credit of $8,000.
The program was geared for anyone who has never owned a home or who hasn’t owned one within the past three years. It provides the credit to first-time buyers who close a loan on the purchase of their principal residence between Jan. 1 and Nov. 30, 2009, and the money doesn’t have to be repaid unless the recipient moves from that home within three years.The only problem with the program, many homebuilders have argued, is the tax credit takes awhile to arrive after a buyer files an amended tax return.

The MAHBA program was the brainchild of Glays. Glays began researching HUD rules and found out that an “anticipated tax credit” was exempt. He said,“Under HUD rules, any anticipated cash coming in can be used as part of the qualifications for underwriting a mortgage."

This program doesn’t secure the down payment with the property, but rather with the assignment of the tax credit. Glays said if you know you’ve got money coming in from any source, “you can get a mortgage on the premise that you’re going to get that money and it’s going to be liquid for you to use.”

Anyone who qualifies for the first-time homebuyers tax credit and who is buying a home from an MAHBA member qualifies for the association’s down-payment loan. The tax credit does have income limits and other restrictions.MAHBA will assess a $500 service fee for the loan, including the paperwork needed for the amended tax return and bank account setup to handle the arrival of the $8,000 tax credit.

PrivoCorp is expecting an increased volume of loans based on plans like these.

May 4, 2009

Increased activity in the housing sector

According to private data released on Monday, more Americans signed contracts to buy homes in March than economists expected, bolstering hopes that low mortgage rates and cheap prices could be helping to stabilise the housing market.The number of people signing contracts to buy existing homes rose 3.2 per cent in March from the previous month, according to an index produced by the National Association of Realtors.However, the increased activity was concentrated in the south and west of the country, where the index rose 8.5 per cent and 3.9 per cent respectively. In the north-east and mid-west, it fell by 5.7 per cent and 1 per cent respectively.This increase in activity could be due to first-time buyers drawn in by some of the most affordable houses for 30 years.Lawrence Yun, chief economist at NAR, warned that it did not necessarily mean the housing market had bottomed: “We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around.”Many believe that this increase in the housing market will lead the economy out of recession.

Low mortgage rates leads to spending boost

Here's some information from the European Press ...
Record low interest rates allow millions of borrowers to switch to cheaper home loans and this enables US homeowners to save close to $18bn on their mortgage repayments this year.“In aggregate, this adds up to about $2.5bn in extra spending cash in the pockets of those homeowners to spend over the coming year.";says Frank Nothaft, chief economist at Freddie Mac.

Refinancing trends is expected to be boosted by the government’s plans to help more borrowers to qualify for mortgage re-negotiations.This means that this year’s savings for homeowners could reach $18bn.The savings are based on refinancing loans that qualify for backing by Freddie Mac and rival Fannie Mae with a 5 per cent interest rate.

Under the government program, borrowers who have mortgages owned by Fannie Mae or Freddie Mac can refinance without additional mortgage insurance costs, even if the loan is more than 80 per cent of a home’s value.Under the government program, borrowers who have mortgages owned by Fannie Mae or Freddie Mac can refinance without additional mortgage insurance costs, even if the loan is more than 80 per cent of a home’s value.

Drop in the number of Refi applications.

Refinancing applications surprisingly dropped last week, despite the fact that primary mortgage rates indicators remained stable or declined. The MBA's refi index dropped by more than 20% week/week, and reported at its lowest level since the week ending March 13th (before the Fed's announcement of its Treasury purchase program). Application activity softened in spite of a drop in the Freddie Mac survey rate, which matched its all-time low of 4.78%.

There could be three possible causes for this decline in Refi applications:

1) the MBA's report is an aberration (possible);
2) the posted averages for mortgage rates are understating the actual rates quoted borrowers (unlikely); and/or
3) Borrowers are being told that they can't refinance due to credit or equity issues (likely).

If the last factor is the culprit, it means that the primary mortgage market is beginning to exhaust the available population of borrowers that have the credit, means, and equity to refinance. Lenders and brokers should keep an eye on these numbers over the next month or so, as it could be a good leading indicator of how robust activity will be as we approach the summer.

May 1, 2009

Federal Reserve striving to push mortgage rates to an all time low.

The Freddie Mac survey rate recently hit an all-time low of 4.87%, and qualifying borrowers can find sub-5% rates fairly easily. The recent actions of the Fed have pushed fixed mortgage rates to all- times low. By Buying the Treasury securities outright, the Federal Reserve has acted to push both intermediate- and long-term Treasury rates lower. In order to drive down primary mortgage rates, the Federal Reserve has also bought huge amounts of agency debentures and mortgage backed securities. The Fed is expected to continue these activities, as they are part of the arsenal they are using to fight the financial crisis and the resulting recession. Seems like mortgage rates are not going to be going anywhere in the near future.