Here is a crucial update on issues that will now be affecting the market as of yesterday. This means your business too, so I want to share this with you.
The changes are summarized below for your benefit.
Following these summaries are some key tactics to focus on which will help you grow in this market.
Keep in mind these are NOT lending institutional changes. These are FNMA/FHLMC changes and they apply to EVERYONE.
*They will especially affect First Time Home Buyers and High Loan to Value refinances.
1) “Adverse Market Conditions" Adjustment
You will notice loan level pricing adjustments for credit scores and LTV/CLTV. These apply to ALL FNMA loans over 70% LTV with scores less than 680.
Again, these adjustments are per the changes announced by FNMA and FHMLC. Jumbo loan amounts are not governed by these entities but they will be subject to risk based pricing as well.
2) Maximum Seller Contribution Reduction
The maximum seller contribution for Loan to Value’s (LTV’s) above 90% is now 3% (except for investments loans, which is always 2%).
Again, for purchases…the solution is to gain an additional 3% to help in taking care of down payment and closing costs is the down payment assistance programs.
3) Declining Market LTV Reductions
All California properties will require the maximum LTV and CLTV limits to be cut by 5% for the program maximum.
This is for: Conventional Conforming, Jumbo, Seconds and My Community.
At this moment (which it can change), Cal HFA is not effected by this change (unless you go I/O) and neither are the FHA and VA products. If you want maximum financing on a FLEX product, your maximum LTV is 95% for a property in California. Pease note that your appraiser must still provide 2 closed comps that support value that are dated within 60 days of the appraisal.
4) Lock Policy for Existing and New Locks
All of the above apply to any loans that are not already locked.
If your loan is locked, you need to make sure you meet your lock expiration date or your pricing and guidelines will change. Any changes or extensions to an existing lock will require the implementation of all pricing and underwriting guidelines that are in effect as of the date of the change. A common example would be if you locked your loan on a conforming fixed rate product and you now have an EA-1 finding that requires you to change your lock, your pricing and guidelines will change.
How to navigate through these changes
The solutions to gain maximum financing (as I have reported in earlier snapshots) will be FHA and Down Payment assistance programs for loans $417,000 or under. (FHA just increased loan amounts to conforming limits of $417,000).
Keep in mind that “applied knowledge is power” and the more you know; the more freely you will be able to use your gifts and talents accordingly to serve your client’s in the best way possible. Always keep learning and following up on industry activity as well as self development.
Have your prospects get qualified BEFORE you show them properties.
Communicate with your lender about any up-front challenges that could possibly arise so that there are no last minute “surprises” and the home buying process goes smoothly for all parties involved.
Maintain and cultivate your database. This is a goldmine that is rarely utilized to its fullest potential.
Fire prospects that waste your time and are not serious... Hint* Beware the “Hurry up and wait” game.
Cross sell your strategic partners and create referrals through reciprocation and strategically positioned social proof.
Take strategic action to establish higher and higher levels of credibility which will draw prospects to you and separate you from your competition.
Final Thought…
The way to gain a good reputation is to endeavor to be what you desire to appear.
– Socrates
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