CalHFA Changes and Other Options for 100% Financing

Here are the changes from CalHFA

Hi All,

Be careful on CalHFA right now!!

*Note the changes below.

1) Seller credit max is 3% - even if you are doing an FHA loan
2) Nehemiah can no longer be used with Cal HFA products
3) 45.00% max DTI on manual underwriting and 55.00% on Automated
approvals
4) 3 years from BK discharge - regardless of what kind of first
mortgage you have
5) Mid low FICO of all borrowers must be 620 for 95% LTV or less or 680
for 95.01% LTV or more (Note this is LTV, not CLTV)

Please make sure you are relaying this info to your clients...

Another option for 100% financing is FHA loans with Nehemiah gifts through seller contributions (up to 6%)!

For Further information please contact our chief FHA and Nehemiah Specialist Joe Littell at joe.littell@partnersnet.com for further information.

Short Sale and Forclosure News

Banks say they want to help troubled homeowners, but they are delaying deals that could save everyone - including the lenders themselves - a lot of time and money. Lenders are taking much longer than necessary to approve short sales, according to Duane LeGate, of House Buyers Network, a short sale specialist. In a short sale, a homeowner who cannot keep up with their loan asks the lender to take a dollar amount less than what is owed on a home's mortgage, and forgive the remainder of the unpaid debt. So if a borrower has a mortgage balance of $100,000 and finds a buyer who will pay $95,000 for the house, the lender agrees to accept that $95,000 and close out the loan. "There was a much greater chance of success with these in the past," said LeGate Ideally in a short sale, everyone wins. Borrowers avoid the ugly foreclosure process that destroys their credit, while lenders recoup more of their costs than they would by s pending the time and money it takes to kick an owner out and resell the property. Lenders typically lose about 19% of a mortgage's value in a short sale, according to Clayton Holdings, a Conn.-based, provider of loan analytics, while they lose an average of 40% on loans that go into foreclosure. Coldwell Banker CEO Jim Gillespie agrees that short sales are taking too long to complete. And he speaks from firsthand experience; a short-sale offer he made on a house in Marin County, Calif. in late fall didn't win approval until April. But most buyers can't, or won't, wait that long."That's been our biggest challenge - keeping the buyers interested long enough as we wait and wait for an answer," said Jeff Morrell, a Colorado Springs real estate agent who specializes in short sales. Source: CNN/Money

Fannie Mae Removal of 5% Market Decline!!!!!!!

Following a similar decision by Fannie Mae, Freddie Mac has eliminated its controversial policy of requiring borrowers to put up larger downpayments in markets where home prices are declining. "Beginning June 1, 2008, we will allow maximum financing up to 95% LTV for most Freddie Mac mortgages in all markets," Freddie says in a May 16 e-mail message to its approved lenders. Under its declining-markets policy, the maximum amount of financing was reduced by 5% in markets where lenders determined that house prices are falling. On May 2, Freddie issued a bulletin to its lenders revising the policy so that the loan-to-value ratio of 95% became the floor for most loan products. "The practical effect [of the May 16 change] is that lenders no longer have to make that determination about a declining market," a Freddie spokesman said. As previously reported, Fannie is scrapping its declining-markets policy starting Jun e 1. Source: National Mortgage News

Industry Update

With prices falling around the nation, home price affordability has improved dramatically in many U.S. cities. As a result, 53.8% of all new and existing homes sold nationwide during the first three months of 2008 were affordable to families earning the median household income of $61,500, according to the latest Housing Opportunity Index released Tuesday by Wells Fargo and the National Association of Home Builders (NAHB). That's up from 44% during the first three months of 2007 with home prices the most affordable they've been since the three month period that ended June 30, 2004. "Three factors combined to substantially increase housing affordability," said NAHB president, Sandy Dunn, in a press release accompanying the report. "Mortgage rates returning to near the record low levels of a few years ago, a $2,500 rise in family income nationwide (from 2007 to 2008) and lower house prices." Home prices dropped about 8% compared with a year ago, according to NAHB, but that doesn't mean that buyers are flocking back to the market. "This measure can only take you so far in implications for the market," said Dave Seiders, NAHB's chief economist. "There're several factors that the index does not capture." Source: CNN/Money

Why are rates better today and what caused the improvement.

Incase you were wondering why rates are better today
and what caused the improvement in pricing…

 

Bonds are off to a tremendous start this morning in reaction to a very weak employment report. 
The economy lost 80k jobs in March and the job losses in Feb we revised to -76k from a previously reported -63k.  January’s number was revised lower, as well.  In addition, the unemployment rate increased to 5.1%.  The first quarter of 2008 has painted a bleak picture of the labor market. 

 

So what does this mean for bonds and in turn mortgages and home sales? 
You probably know that a poor employment report is good news for the bond market (as it was today).  The main reason bonds like a poor employment report is that higher unemployment means a larger supply of labor in the economy.  A larger labor pool means wages should remain low.  Lower wages generally mean lower prices and lower prices equal lower inflation.  Inflation eats away returns on long term investments.  A lower risk of inflation also means a better chance of more Fed easing.  So as long as the bond traders aren’t the ones losing their jobs they like higher unemployment.

 

In other words, when the stock market and its driving forces are hurting, Bonds are improving and vice versa. 

 

*One issue that the bond markets haven’t seen in a very long time is that there is a massive reluctance to buy mortgage backed securities because of the instability of the housing market.  What this means is that, just because the stock market takes a hit, there is still some investor reluctance to the traditional seeking of safer investments in the bonds market.

 

This is indeed a market like none of us have ever seen.  My suggestion is that you team up with someone who not only watches the market but understands it, so they can pass along information that will be affecting you directly.  For example, just like this information today and how the weak employment reports created a dip in rates and created a favorable market for home buyers and those in need of a refinance.

 

I hope this helps!

 

 

Courtesy of,

Joe Littell
Mortgage Planner

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