Forclosure projections and Risk Based Pricing

New tools for assessing mortgage risk. With foreclosures projected to reach 2 million nationwide by the end of next year, bankers are rethinking how they set mortgage rates. Eventually, mortgage pricing may come to resemble pricing for, say, homeowners insurance, which takes into account dozens of factors. Lenders "want to be able to assess the risk, practically down to the biological level, that you won't pay your mortgage," says Keith Gumbinger, vice president of HSH Associates, which tracks the home-lending market.

Housing data: no secrets left. With more innovative real estate Web sites popping up, everyone now knows how much everyone else's house is worth, and consumers will continue to have unprecedented access to housing information that was once found only in multiple listing services. Source: Money

New Trends in Real Estate

New trends will reshape tastes in homes and transform how you buy and sell, experts say. So what will the housing market of the future look like? Money magazine interviewed developers, architects, lenders, and more, to paint the following picture--Smaller houses. In a February survey of potential home buyers by the National Association of Home Builders, 60 percent said they would rather have a smaller house with more amenities than vice versa. "In the past, people would say 'Give me space and I'll add the features later,' " says Gopal Ahluwalia, the NAHB's vice president of research. Newly built houses will have layouts that can "live bigger" than their square footage would suggest, with rooms that can do double duty, experts say.

FHA Guidelines

FHA case number assignments on or after 7/14/08, FHA will implement “risk based” MIP Premiums on 1 to 4 unit mortgages?



Some of the highlights regarding FHA’s Risk-Based Premiums are:



UFMIP will range from 1.25 percent of the loan amount (currently 1.50%) for lower risk borrowers, to 2.25% percent for higher risk borrowers.
No borrower who qualifies for a FHA/HUD insured mortgage will pay more that 2.25% on the UFMIP and .55% for the annual premium.
Borrowers with credit bureau scores must be risk-classified by FHA TOTAL Mortgage Scorecard (AUS).
Borrowers with no credit scores will need to be manually underwritten, and the premium will be determined by the LTV.


So what if your borrowers don’t have 3 credit scores….what then?



3 scores…the middle score is used.
2 scores…the lower of the two is used.
1 score…..that score is used.


What if there are multiple borrowers?



If more than one person is applying for the loan, you use the lower of all borrowers.



What if there are multiple borrowers, and one doesn’t have a credit score?



The borrower representing the greatest risk will determine the MIP factor to be used. Example:



If one borrower has a 620 and the other borrower has no FICO score, then the factor to be used would be the “Non-Traditional” factor.



First Time Homebuyers



HUD has always “suggested” that a FTHB complete a pre-purchase counseling course. Now, if they do, they will benefit from a lower UFMIP factor……BE CAREFUL!!!! HUD requires that this class is a one on one, face to face class that has to be completed BEFORE a purchase contract is executed. HUD wants to make sure that the borrowers understand:



Budgeting and Credit
Assessing Homeownership Readiness
Financing a Home
Shopping for a home…including the professionals involved in the process
Maintaining a home

Source: Mortgagee Letter 2008-16 addresses