Mortgage denied: Sometimes, for no good reason...

According to a report in CNN, Getting a mortgage just keeps getting tougher, and many homebuyers are getting rejected for loans they could easily afford.

The issue: Tighter standards from Fannie Mae and Freddie Mac, the government entities that back mortgages made by banks.

Banks are reluctant to make loans without the Fannie and Freddie guarantee, and loans backed by them account for just about every mortgage written these days.

In 2009, the agencies lifted the minimum credit score that borrowers must have from 580 to 620. That's probably for the best.

But they've pushed through a host of other requirements as well, and that means real estate deals don't get done, even for some relatively low-risk borrowers.

"You can have one Fannie/Freddie guideline you violate and that gets you rejected," said Alan Rosenbaum of GuardHill Financial.

A quarter of all mortgage loan applicants get denied for loans, according to the Federal Reserve. Many other potential homebuyers never even try to get loans, said Jerry Howard, president of the National Association of Home Builders.

"The pendulum has swung too far in the other direction," Howard said. "This overreaction is retarding the housing market recovery." (Homes: What a million bucks buys)

Here are some of the reasons that banks must turn down borrowers for mortgages:
Too few of the condos in your association have been sold

For Fannie/Freddie lenders to approve a mortgage to finance purchase of a condo, a large majority of the units -- 70% -- have to be already sold or under contract to individuals. Before 2009, the threshold was 51%.

If more than 30% are still owned by the company that built the complex or sponsored its conversion from rental units, the mortgage will be denied, no matter how qualified the buyer is.



read more visit- http://money.cnn.com/2011/04/19/real_estate/low_risk_mortgage_denied/index.htm

New commonsense mortgage rule... any thoughts..?

According to a report in bankrate,The Fed is proposing a rule that would require lenders to make sure borrowers can afford payments before they are issued a mortgage loan.

Isn't that common sense? You would think so but it was the lack of basic, commonsense rules that allowed lenders to give out mortgages to people who clearly couldn’t afford them during the housing bubble. The reckless lending practices resulted in a high volume of defaults that contributed to the financial crisis.

Only now regulators seem to have realized that minimum underwriting standards should be required.

According to the 474-page proposal, a creditor would be prohibited from "making a mortgage loan unless the creditor makes a reasonable and good faith determination, based on verified and documented information, that the consumer will have a reasonable ability to repay the loan, including any mortgage-related obligations (such as property taxes)."

The rule is being made pursuant to the Dodd-Frank Act and would apply to all consumer mortgage loans except equity lines of credit, timeshare plans, temporary loans and reverse mortgages.

Lenders would be required to follow basic underwriting standards, including verifying borrowers' income and assets, employment, debt obligations, monthly debt-to-income ratio, credit history and monthly mortgage payments.

But the problem is the rule doesn't spell out a guideline with numbers or ratios to determine if the borrower can afford the loan. Regulators are expecting lenders to be "reasonable" and use "good faith" to make the determination. Good luck with that!

And since every rule has an exception, here are the exceptions to the proposed rule:

* Lenders could be shielded from liability if they opt to making a qualified mortgage, which would be defined under the rule as a loan that does not contain negative amortization, interest-only payments or a balloon payment. Qualified mortgages would also exclude loan terms exceeding 30 years and loan with total points and fees that exceed 3 percent of the total loan amount. The underwriting of the mortgage would have to be based on the maximum interest rate that applies in the first five years. Don't confuse this with a "qualified residential mortgage," which relates to another rule that regulators are considering.
* Lenders would be allowed to write balloon-payment mortgages in "rural" and "underserved" areas without having to worry about this rule.
* Borrowers, who currently have a "non-standard mortgage" with risky features such a negative amortization loan, would be allowed to refinance with a "standard mortgage," without having to show proof of income and assets.

Do you agree with these exceptions?

Read more... visit-http://www.bankrate.com/financing/mortgages/new-commonsense-mortgage-rule/

Wells Fargo cuts 1,900 mortgage jobs..

Wells Fargo & Co. cut 1,900 employees from its mortgage unit nationwide as mortgage refinancings slowed, the bank said Thursday.

San Francisco-based Wells (NYSE: WFC) announced the layoffs on March 23, giving affected employees 60 days' notice.

The bank blamed the cyclical mortgage business for the cuts, Reuters reports.

Wells saw mortgage originations fall to $386 billion last year from $420 billion in 2009, according to Bloomberg.

The cuts represent less than 1 percent of Wells' 272,000-plus work force.

Many of the employees were temporary hires brought in as refinancing surged on lower interest rates.

The bank said some of the affected employes would be moved to other departments.

House votes to kill Obama mortgage plan. just take a look..

According to a report in CNN,The House passed a bill Tuesday to kill a signature Obama administration program that helps homeowners stay in their homes but has faced criticism as ineffective.

The House voted 252 to 170 to stop any new funding for the Home Affordable Modification Program (HAMP). Eleven Democrats joined Republicans to defund the program.

The program taps the federal bailout that saved the big banks, providing incentives to mortgage servicers to modify mortgages for borrowers behind on their payments.

"To many struggling Americans seeking permanent mortgage relief, HAMP offered little more than false hope. More homeowners have been kicked out of the program than have received permanent relief," Rep. Darrell Issa, the California Republican who chairs the House Oversight Committee, said in a statement.


Read more just visit-http://money.cnn.com/2011/03/29/news/economy/republicans_kill_hamp/

Long Government Shutdown Would Harm U.S. Economy, Hit Washington Hardest

According to the bloomberg.com report says,

An extended U.S. government shutdown would cause increasing harm to the nation’s economy, with the Washington area -- home to about 350,000 federal workers -- bearing the brunt of the damage.

“The economic damage would mount pretty quickly,” in a two- or three-week shutdown, said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The longer this drags on, the greater the odds it undermines confidence more broadly.”

The direct costs of lost income to federal workers and contractors would be about $6 billion a week, said Zandi. “The dollars and cents would start to add up.”

Congressional leaders remain stalemated over funding the U.S. government, with President Barack Obama unable to broker a compromise after several White House meetings -- the most recent one last night -- with House Speaker John Boehner, an Ohio Republican, and Senate Majority Leader Harry Reid, a Nevada Democrat. The lawmakers’ staffs were continuing negotiations into the night.

In brief remarks after last night’s session with Boehner and Reid, Obama said that a shutdown could severely hamper the economic recovery and job growth.

“We’ve been working very hard over the last two years to get this economy back on its feet,” he said. “For us to go backwards because Washington couldn’t get its act together is unacceptable.”
Midnight Deadline

Failure to reach a deal on funding for the remaining six months of the fiscal year would trigger a government shutdown at midnight tonight, causing more than 800,000 “non-essential” federal workers to be furloughed without pay.

Among services that would be halted are some mortgage processing by the Federal Housing Administration and loan approvals by the Small Business Administration, while some tax refunds would be delayed. Air traffic control, emergency management and federal law enforcement would continue.

Lockheed Martin Corp. (LMT), the world’s largest defense contractor, said it would keep its factories open and pay its employees’ salaries and benefits.

read more just visit-http://www.bloomberg.com/news/2011-04-08/long-government-shutdown-would-harm-u-s-economy-hit-washington-hardest.html

Vendor Glut Drives Up Fees - interesting article - Ferrari versus home purchase.. what ...???

There was a recent article in the National Mortgage News about the fees associated with home loans. According to Patrick Stone, President of the Williston Financial Group, told the annual Real Estate Services Providers Council meeting that five to 18 different vendors are involved in the typical real estate transaction, “making for a complex and disappointing experience” for consumers. And costly, too. Whereas the fee to purchase $250,000 worth of securities is $1,250 and the commission to buy a $250,000 Ferrari is $7,500, Stone pointed out, home buyers generally pay a whopping 8%—a total of $20,000—in fees to purchase a $250,000 house.

Stone, who had a lengthy career at Fidelity National Financial, including eight years as president, said firms that operate affiliated business arrangements can and should “drive some of that cost out” of the transaction. “If you control the point of sale,” he ventured, “you should be able to cut the cost almost in half.”

During his talk, Stone, whose firm acquired the Millennium Title Group in 2009 and TransUnion National Title Insurance last year, also took exception to purveyors of national housing statistics. And he suggested that the housing finance sector can get along just fine without Fannie Mae/Freddie Mac. He said oft-quoted indices such as Case-Shiller do more harm than good because they distort the fact that housing is local. By reporting a national decline in house prices, he explained, the indices suggest that all localities are suffering when in fact many are doing well. The same goes for reports about foreclosures and borrowers who owe more than their homes are worth, he added. “Underwater borrowers are not a universal problem,” he said, adding that while every state has its share, the problem is heavily concentrated in just six states.

Read more visit-http://www.nationalmortgagenews.com/on_features/vendor-glut-drives-up-1024108-1.html?CMP=OTC-RSS

While what is being said is very true, all stakeholders need to figure out the specific areas where costs can be taken out of the equation. An interesting benchmark was identified in the article and all efforts need to be made to figure out how costs can be reduced. Can the existing title (from a certain title company) be used to reduce the costs? Also, in the Ferrari example, are the insurance costs taken into effect?

Here are some fees associated with a vehicle purchase

Non negotiable fees

• Destination Charge
• Sales Tax
• Title, Registration & License

Negotiable fees

• Documentation Fee
• Market Adjustments
• Transportation Fee
• Dealer Prep
• Dealer Additions
• Finance Fees
• Processing & Miscellaneous Fees