Nearly 70 Percent of Industry Professionals See Lower Down Payment As Positive

The majority of mortgage industry professionals said they believed that the lowering of the down payment to 3 percent for first-time homebuyers by Fannie Mae and Freddie Mac was a step in the right direction for the housing market, according to theCollingwood Group's November 2014 Mortgage Industry Outlook Report released earlier this week.

In a survey conducted online distributed to a diverse group of mortgage and housing industry professionals, 69 percent of respondents said that lowering the down payment was a move in the right direction for housing, while 31 percent said it was a move in the wrong direction, according to the Collingwood Group. Though the survey respondents represented professionals who work in all phases of the mortgage process, the largest percentage of respondents (50 percent) were lenders or originators.

According to the Collingwood Group, the survey respondents who believed lowering the down payment was a positive move said it reflected concern of policymakers with current market dynamics, and it indicated a willingness on the part of the Federal Housing Finance Agency (FHFA) to ease lending standards. At the same time, most respondents pointed out the existence of other high loan-to-value (LTV) products and said they believed the Federal Housing Administration (FHA) offered the best option.

"The announcement of a low down payment mortgage option may create more opportunities for buyers to afford housing; however, it falls short of appropriately loosening tightened credit standards for other LTV loans," one anonymous survey respondent said in the report. "The 97 percent allows the GSEs to capture loans that would otherwise go to FHA."

According to the Collingwood Group's report, this point raised the question as to whether FHA would lower its insurance premiums sometime in 2015 in order to compete. A spokesperson said it has not been determined whether the premiums will be lowered.

"FHA has made no decisions regarding the premiums," HUD press secretary Cameron French said. "We are regularly evaluating a number of factors to ensure our premiums are at the right levels. As a result of the most recent annual report, we are looking through new information and will use that to inform any future decisions."

For more information contact

Jerry Gusman, The Gusman Group

jerryggroup@aol.com

GSEs Officially Lower Down Payment to 3 Percent for Qualifying First-Time Homebuyers!!

Following months of talk and speculation, bothFannie Mae and Freddie Mac announced on Monday they will begin allowing qualifying first-time borrowers to purchase homes with just a 3 percent down payment.

By lowering the down payment down to 3 percent, leaders from the GSEs and the Federal Housing Finance Administration (FHFA) hope to increase homeownership and particularly household formation by offering loans to those who can afford mortgages but lack resources to make a 20 percent down payment plus closing costs.

Those who have pushed for the lower down payment, such as FHFA Director Mel Watt, have endured criticism from lenders due to the perceived risk involved with making a mortgage loan such a high maximum loan-to-value ratio.

"These underwriting guidelines provide a responsible approach to improving access to credit while ensuring safe and sound lending practices," Watt said in a prepared statement. "To mitigate risk, Fannie Mae and Freddie Mac will use their automated underwriting systems, which include compensating factors to evaluate a borrower’s creditworthiness.  In addition, the new offerings will also include homeownership counseling, which improves borrower performance. FHFA will monitor the ongoing performance of these loans."

Freddie Mac has announced the launch of Home Possible Advantage, which is an affordable, conventional mortgage with a maximum loan-to-value ratio of 97 percent to qualified low- and moderate-income borrowers. Home Possible Advantage mortgages can be used either to buy a single unit property or for a "no cash out" refinance of an existing mortgage, and they are available as 15-, 20-, and 30-year fixed rate mortgages.

In order to qualify for a Home Possible Advantage mortgage, first-time homebuyers must participate in an approved borrower education program, such as CreditSmart offered by Freddie Mac.

"Home Possible Advantage gives qualified borrowers with limited down payment savings a responsible path to homeownership and lenders a new tool for reaching eligible working families ready to own a home of their own," Dave Lowman, EVP of Single-Family Business at Freddie Mac said. "Home Possible Advantage is Freddie Mac's newest effort to foster a strong and stable mortgage market."

Likewise, Fannie Mae is now offering mortgage loans with a maximum 97 percent LTV ratio to qualifying first-time homebuyers. Such a mortgage can be obtained through Fannie Mae with a 3 percent down payment under Fannie Mae's standard offering or its My Community Mortgage Product if one of the co-borrowers is a first-time homebuyer.

In addition, homeowners with an existing Fannie Mae mortgage who are not eligible for the Home Affordable Refinance Program (HARP) can refinance their loan up to the level of 97 percent LTV if they meet eligibility requirements.

"Our goal is to help additional qualified borrowers gain access to mortgages," said Andrew Bon Salle, Fannie Mae Executive Vice President for Single Family Underwriting, Pricing and Capital Markets. "This option alone will not solve all the challenges around access to credit.  Our new 97 percent LTV offering is simply one way we are working to remove barriers for creditworthy borrowers to get a mortgage. We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers."

In order to mitigate risk and ensure the loans Fannie Mae acquires are properly underwritten, the company has implemented practices that include requiring income documentation and verification and eliminating risk-layering on purchase money loans.

Fannie Mae reported in its announcement regarding the new loan guidelines that private capital will be in the first loss position. Mortgage insurers and other risk sharing partners must conclude that the lower down payment loans are prudent in order for them to be originated and sold in the secondary market to Fannie Mae. Also, whereas some lenders have tightened mortgage availability due to uncertainty around the circumstances that would result in a loan repurchase request, Fannie Mae is working to provide lenders withgreater clarity regarding these requests.

Also, to help better evaluate risk on loans, Fannie Mae is offering new tools to lenders, such as Collateral Underwriter, which will be available early in 2015. It is the same appraisal review tool that Fannie Mae uses and will be available to Fannie Mae's customers at no additional charge.

For more information contact

Jerry Gusman, The Gusman Group

888-213-4208

jerryggroup@aol.com

I Want To Sell My Home? Is The Market Right To Sell?

Have you been thinking about selling your home? Been waiting for the values to rise or your local market to get better so that you can get maximum price?

As we wind down 2014 we experienced a market of many changes. We started off the year in a sellers market. With low inventory and prices at their peak. We quickly however saw a dramatic change after the first quarter of the year to a buyers market, Even though inventory was still low buyers became fewer for many reasons. Lender guidelines becoming more stringent, and loan limits in some areas lowered. For what ever reasons many buyers left the market making seller compete for the smaller pools of buyers. This resulted in properties sitting on the market longer and in mid year price reductions were the norm.

So is now a good time to sell? Will 2015 bring a better market for sellers? Although we don't see a lot that will change in 2015, Maybe the elections being concluded will instill more of a sense of security and ease minds to take on the obligation of a mortgage payment. This for sure will be a welcome change. In my opinion this is one of our biggest hurdles to overcome. 

In parts of Southern California's Inland Empire, areas like Rancho Cucamonga, Upland, North Fontana, FHA will only loan up to 355k. This is the maximum loan amount for these areas where the average price of a home is around 400K. Statistics show that over 50% of home buyers utilized an FHA loan. Does this nmean we have lost over 50% of our potential buyers in these areas? It sure appears so and explains another reason for the slow down in the market.

Should you still sell?  Absolutely! You can never know exactly what the future will bring. But, it's a good bet the new year will bring higher interest rates, making house payments less affordable. As the market slows so will home values. Inthe beginning of 2014 the low inventory spurred buyers over paying for homes just to be able to get a home, bidding wars were common raising the prices. Now properties go for months not days with no interest causing sellers to lower prices and eventually lowering values. Get your home on the market before this happens......it's already happening in some areas.

There are many reasons to sell now besides the few I mentioned. Price your home right and hire a savvy agent that will market your home. The key to getting top dollar for your home is exposure. Exposing your property to as many potential buyers as possible to find the one that is willing to pay your asking price. The beginning of the year also brough many seller to sell on thier own, For Sale By Owner. That works better in a sellers market like we had then, but, not in this market. You need to utilize an agent that specializes in marketing homes not just listing them. Also using an agent has many legal benefits and liability concerns that will side in your favor. In most cases using an agent will raise your selling price at least enough to cover your costs......SO what do you have to lose?

Here's to a great 2015 selling season!

Freddie Mac Announces New Foreclosure Prevention Guidelines, Revisions

Government-sponsored enterprise Freddie Mac has announced a set of new loss mitigation and foreclosure prevention guidelines and revisions in Guide Bulletins 2014-19 and 2014-20 that include a new deeds-in-lieu of foreclosure incentive, increased foreclosure timelines, and additional foreclosure relief for service members and their dependents.

Freddie Mac is offering a supplemental incentive of up to $7,000 for new borrower evaluations for deeds-in-lieu of foreclosure that are conducted on or before December 1, 2015. Borrowers in Connecticut, District of Columbia, Illinois, Maryland, Massachusetts, New Jersey, New York, or Pennsylvania who complete a Freddie Mac standard deed-in-lieu of foreclosure transaction are eligible. The new deed-in-lieu borrower incentive is scheduled to go into effect on February 1, 2015, but servicers at Freddie Mac have been encouraged to implement the new incentive as early as November 14, 2014.

Foreclosure timelines have been increased in 47 jurisdictions for all foreclosure sales completed on or after November 1, 2014, as a result of Freddie Mac's recent review of state foreclosure timelines. An updated list of Freddie Mac's state foreclosure timelines can be found in Guide Exhibit 83.

As part of Freddie Mac's commitment to active duty servicemembers, Freddie Mac is offering additional foreclosure relief to service members and their dependents. Foreclosure relief will be extended to mortgages while the service member is active for one year after military service ends when the borrower: 1) is a service member and the mortgaged property is the service member's primary residence, regardless of when the mortgage loan was originated; 2) is a dependent of the service member and the mortgaged property is the primary residence of the service member or his or her dependent; 3) was a service member who died during active military service and the mortgaged property continues to be the primary residence for a dependent of the service member. Servicers can determine if a borrower is eligible for these benefits by checking Freddie Mac's Mortgage Relief Options for Service Members web site.

Most Industry Professionals Expect Business to Change Little in Next Six Months

In a survey conducted as part of The Collingwood Group's Mortgage Industry Outlook Report for October 2014 released on Monday, the majority of mortgage industry professionals who were surveyed said they did not expect business conditions to be drastically different in the next six months.

Along a one to 10 scale with one being "much worse" and 10 being "much better," 34 percent of respondents said they expected business conditions to be "a little better" in six months (a six on the scale), while 22 percent said they expected business conditions to be "a little worse" (a five on the scale), The Collingwood Group reported. Many respondents said seasonal trends tend to affect their outlook on business conditions, such as one lender who reported that the winter months hurt production last year, and they expected that to be the case again this year.

Only about 3 percent of respondents said they thought business conditions would be much worse in six months, while only about 1 percent responded they thought business conditions would be much better, according to The Collingwood Group. A majority of respondents indicated "uncertainty, yet tepid optimism" regarding business conditions, The Collingwood Group said in the report.

The Collingwood Group reported that none of the survey respondents expected the results of the recent mid-term election to significantly impact the mortgage industry.

"I remain optimistic we’ll see a move towards collaboration," said Collingwood vice chairman Brian Montgomery, who is a former FHA commissioner. "The Republicans will hold both chambers for the first time in almost a decade so I suspect they’ll be anxious to move forward on a host of issues that go beyond housing finance reform."

Likewise, most survey respondents said there had been little change in business conditions since this time last year. Business conditions were either "a little worse" for 22 percent of respondents or "a little better" for 31 percent, according to The Collingwood Group. Overall, the numbers were almost split 50-50 when rating business conditions better or worse since last year – 48 percent said they were worse while 52 percent said they were better, according to The Collingwood Group. About 4 percent said business conditions were much worse since last year, while about 1 percent said they were much better.

For more information contact

Jerry Gusman, The Gusman Group

888-213-4208

Survey: Many Still Believe Housing Recovery Still Three to Five Years Away

In a quarterly survey of more than 100 real estate experts and economists, real estate data firm Zillowfound 40 percent of respondents believe it will take another three to five years for the housing market to normalize, based on current home price trends and homebuyer activity.

Nearly a third of panelists took a more optimistic view, predicting the market will stabilize one to two years from now, while one in five responded that housing has either already returned to normal or will within the next 12 months.

When asked about headwinds facing the market right now, respondents pointed to low household formation rates, which have been stymied in part by a challenged economy. According to another recent study from Zillow, more than a third of adults living in the U.S. were living with at least one roommate as of 2012, up from a quarter in 2000.

While those renters represent millions of potential new formations in the years to come, they remain stuck where they are as jobs and wages slowly grow.

Demographic issues are also at play, Zillow reported. While more millennials seem to be holding off on major commitments—including homeownership, marriage, and parenthood—a growing number of Americans nearing retirement age are also opting to stay in their homes longer, keeping the nation's housing inventory from making any meaningful recovery.

"We've reached a point in the recovery where the only real cure-all is time," Zillow Chief Economist Dr. Stan Humphries said. "[T]he landscape is slowly changing, as incomes begin to grow, negative equity fades and new households start to form. These shifts won't occur overnight, but they are happening. Patience will be a virtue over the next few years as we wait for these traditional fundamentals to more fully take hold in the market."

Repeat Foreclosure Percentage Increases to Tie All-Time High

The percentage of September's foreclosure starts that were repeat foreclosures rose by two percentage points month-over-month to account for 53 percent of foreclosure starts, tying the highest percentage for a single month, according to Black Knight Financial Services' September 2014 Mortgage Monitor.

In all, there were 91,000 foreclosure starts nationwide during September, an increase of 11.5 percent from August but a decrease of 16.5 percent from September 2013, when 109,000 foreclosure starts were reported, according to Black Knight. For September 2014, Black Knight reported that 48,200 of the 91,000 foreclosure starts were repeat foreclosures – a total of 53 percent, which tied July 2014 for the highest percentage in a single month since Black Knight began tracking the data in January 2008.

September 2014's percentage of repeat foreclosures represented an increase of 2 percentage points from August (41,500 out of 81,600, for 51 percent) and 4 percentage points from September 2013 (53,400 out of 109,000, a total of 49 percent). September 2014 was the eighth consecutive month in which the percentage of repeat foreclosures accounted for 50 percent or more of foreclosure starts and the 28th consecutive month in which the percentage totaled 40 percent or more. The percentage has not been below 40 percent since May 2012, when 80,800 out of 218,900 foreclosure starts were repeat foreclosures for a total of 37 percent, according to Black Knight.

The lowest percentage of repeat foreclosures was reported in February 2008, just prior to the housing bust, when 29,100 out of 205,000 foreclosure starts were repeats (14 percent). The percentage has been 20 percent or more every month since March 2009; the last month where repeat foreclosures made up less than 20 percent of foreclosure starts was February 2009 (48,200 out of 265,300, 18 percent), according to Black Knight.

The highest overall number of repeat foreclosures for any one month was reported in March 2011, when 109,500 repeat foreclosures were reported out of 263,900, for a total of 41 percent. The only other month in which the total number  of repeat foreclosures exceeded 100,000 for a month was in March 2012 (103,800).

For more information contact

Jerry Gusman, The Gusman Group

888-213-4208, jerryggroup@aol.com

Fannie Mae Expects Slow But Sure Housing Growth in 2015

Where the U.S. housing market is concerned,Fannie Mae chief economist Doug Duncan said he is anticipating overall weaker home sales in 2014 than in 2013. But he expects that overall home sales in 2015 will post their best performance since 2007 despite seeing only moderate growth for the year.

The forecast on the state of the nation's housing market and on the overall economy were included in the Fannie Mae Economic & Strategic Research Group's October 2014 Economic Outlook, published on Thursday.

"We lowered our expectation for housing starts just slightly to one million units for 2014, but our view of mortgage originations has not changed," Duncan said. "Our estimate for 2013 was in line with the recent release of 2013 data under the Home Mortgage Disclosure Act, and our projection of total production in 2014 is little changed at approximately $1.1 trillion. For 2015, we are cautiously optimistic that ongoing labor market improvements, low mortgage rates, rising inventories, and some easing of lending standards will boost home sales by roughly 5.0 percent. However, we still believe housing will continue along its upward grind rather than have the breakout year some are expecting."

Economic growth has been slow on a global scale this year, but that has not dimmed the outlook for the U.S. economy, according to the findings of Fannie Mae's ESR Group. Real economic growth in the U.S. seems poised to exceed 3.0 percent for the second half of 2014, which is expected to provide a solid basis for continued growth into 2015.The slow global economic growth may prevent the Federal Reserve Board from making any interest rate policy changes until Q3 2014, it has not prevented a positive outlook for the economy in the U.S.

"Given the expected strengthening economic activity in the U.S. in the second half of the year, we continue to expect to finish just above 2 percent growth for all of 2014," Duncan said. "The risks are tilted to the downside due to current geopolitical events in Russia, Ukraine, Hong Kong, and the Middle East, as well as the economic slowdown in the Eurozone, China, and Japan. However, recent data suggest these factors have not significantly swayed American consumers. Real consumer spending is poised to pick up in the second half of 2014 from the first half, due in large part to improving labor market conditions, continued declines in gasoline prices, and a subdued pace of inflation."

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

Financial Regulators Finalize QRM Rule

Federal regulators announced on Tuesday they have finalized a rule establishing a risk retention framework for mortgage lenders securitizing and selling loans.

The so-called qualified residential mortgage (QRM) rule, which was put up for consideration by FDIC's board of directors Tuesday morning, would require banks to retain at least 5 percent of a loan's risk when packing mortgages to sell to investors in the secondary market. The rule comes as a response to last decade's housing bubble, when lenders let their standards slip and passed on the risk to investors, resulting in an economic crash as those mortgages defaulted.

The QRM rule is one of the bigger provisions mandated by the 2010 Dodd-Frank Act, with co-author Barney Frank remarking in the past that risk retention is "the single most important part of the bill."

Regulatory leaders agreed, assuring lawmakers last month that they were close to completing the rulemaking.

The road to finalizing a QRM rule has been a bumpy one. Regulators—including FDIC, HUD, the Federal Reserve, the Securities and Exchange Commission, the Office of the Comptroller of the Currency (OCC), and the Federal Housing Finance Agency (FHFA)—first proposed a draft in 2011.

The group released a second proposal in 2013, removing some of the more contentious provisions—in particular, a requirement that banks must retain risk on mortgages with down payments lower than 20 percent—in response to industry concerns.

The finalized rule is more closely aligned with the Consumer Financial Protection Bureau's (CFPB) qualified mortgage (QM) rule implemented early this year. Both rules exclude from qualification mortgages with debt-to-income ratios exceeding 43 percent, and both prohibit loans with riskier features like balloon payments or terms longer than 30 years.

In separate statements released Tuesday, regulators expressed optimism that the finalized rule will give the housing finance sector greater certainty, opening the door for more activity from private investors.

"Aligning the Qualified Residential Mortgage standard with the existing Qualified Mortgage definition also means more clarity for lenders and encourages safe and sound lending to creditworthy borrowers," FHFA Director Mel Watt said. "Lenders have wanted and needed to know what the new rules of the road are and this rule defines them."

Comptroller of the Currency Thomas J. Curry said securitizations can provide an incentive for lax underwriting if the weak credits can be transferred from originators to investors with no further responsibility for the loans.

"The rule we are approving today will require lenders to retain some of the risk for the loans that go into securitized pools except for home mortgages that meet the standards necessary under the qualified residential mortgage, or QRM, exception," Curry said. "Under this rule, QRM is equivalent to QM – that is, the Qualified Mortgage rule approved by the Consumer Financial Protection Bureau."

Industry groups were also optimistic about Tuesday's announcement, praising policymakers' efforts to avoid confusion by lining up QM and QRM together.

"This rule was required by Dodd-Frank to ensure that loans sold into the secondary market are properly underwritten, a goal which the QM rule also helps to ensure.  It is appropriate and good policy to align the two," said Frank Keating, president and CEO of the American Bankers Association. "This will encourage lenders to continue offering carefully underwritten QM loans, and avoid placing further hurdles before qualified borrowers, allowing them to achieve the American dream of homeownership."

Fore more information contact

Jerry Gusman, The Gusman Group

888-213-4208

Housing Market Cools Off as Inventory Slows

Housing indicators cooled off slightly in September, marking the annual start of what is typically a slower season for the market, according to a report from listings site Realtor.com.

At the national level, Realtor.com reported the median age of September's housing stock was 90 days, four days longer than August's median age as home shoppers back off for the season. Compared to last year, however, September's median inventory age was down three days, indicating demand is still there.

The number of listings last month was approximately 1.87 million, down 2.7 percent annually and 7.9 percent monthly. The decline compares to Redfin's latest analysis, which showed an unexpected bump in inventory from new listings. Redfin's data measures a narrower list of markets nationwide.

As other market indicators have seen steady improvement, inventory has remained a consistent problem, with shortages across the country limiting buyers' options and pushing prices beyond affordability in some areas. According to the National Association of Realtors' latest existing-home sales report, the nation's housing stock sat at a 5.5-month supply in August, short of the six- to seven-month supply considered to be a balanced market. New homes were in even shorter supply at nearly five months.

"To truly relieve the inventory shortage on a sustained basis, new home construction needs to rise by at least 50 percent from the current levels," said Lawrence Yun, chief economist for the National Association of Realtors.

Though the market's pace has slowed nationally, Realtor.com found 12 major metros are still selling quickly, with each one seeing a median inventory age of less than two months. Those markets include a number of California metros—Oakland, San Jose, San Francisco, San Diego, and Los Angeles-Long Beach—as well as a handful of others around the country, including Denver, Seattle, Houston, Austin, Omaha, Melbourne, and Washington, D.C.

Though largely spaced out geographically, those markets have a number of factors in common that are helping to drive their local housing markets: Notably, they feature the best opportunities for math and science professionals, and they're home to large baby boomer populations.

As Realtor.com explains in its report, the first group tends to pull in a higher median income and brings enhanced buying power, while the second group is rapidly coming to an age when they have to make retirement-related housing decisions.

"When we see homes moving quickly in a particular market, we expect the trend to be supported by signs of local health like growth in economic production and employment," said Jonathan Smoke, chief economist for Realtor.com. "This month, we also observed more out of the ordinary trends including high proportions of math and science professionals, as well as baby boomers in each of the fast moving markets. As the technology industry grows and aging baby boomers decide to make housing moves to support their retirement, we'll continue to see strong housing demand associated with these factors."

For more information contact

Jerry Gusman, The Gusman Group

888-213-4208

A total of 811 U.S. county housing markets (52 percent) were rated as "better off" than they were two years ago, compared to only 11 percent (176 markets) categorized as "worse off," according toRealtyTrac's 2014 Election Housing Scorecardreleased on Tuesday.

Meanwhile, 560 counties (36 percent) were categorized as a "toss-up" as far as the health of housing market in those counties, according to RealtyTrac.

The total population of the markets in the better off category was about 140 million, which accounted for 50 percent of the population in all the housing markets RealtyTrac analyzed for the election housing scorecard. The total population of the worse off markets was 24 million, about 9 percent of the population in markets analyzed. The housing markets that rated as a toss-up had a total population of about 115 million, or 41 percent of the population in markets analyzed.

"The housing market recovery has truly taken hold in about half of the country, but the recovery is weak or experiencing a relapse in the other half," said Daren Blomquist, vice president of RealtyTrac. "Whether because of good government policy, sheer luck or otherwise, the majority of county housing markets in six of the eight states with close U.S. Senate races are better off than they were two years ago. This should favor the incumbent, or the incumbent’s party, all else being equal — which of course we know it is not. The only exceptions were Iowa and Alaska, where the majority of county housing markets were classified as toss-ups compared with two years ago."

RealtyTrac's election housing scorecard rated 1,547 county housing markets in the U.S. based on five factors that affect the health of housing: housing affordability, unemployment rates, median home prices, and foreclosure starts all compared with two years ago, as well as the percentage of seriously underwater homeowners.

With three weeks remaining before the election, RealtyTrac examined the housing market in eight states where the Senate Race is most highly contested: Alaska, Arkansas, Colorado, Georgia, Iowa, Kansas, Louisiana and North Carolina. The states that had the highest population out of those eight states in the better off category were Colorado (99 percent, 4.8 million) and Kansas (97 percent, 2 million). The states that had the highest population in the toss-up category were Alaska (81 percent, 387,000) and Iowa (62 percent, 641,000). Only three of those eight states reported at least one county in the worse off category: Iowa (29 percent, 304,000), Georgia (5 percent, 427,000), and North Carolina (4 percent, 387,000), according to RealtyTrac.

For more information contact

Jerry Gusman, The Gusman Group

jerryggroup@aol.com

How to get a mortgage right now, even with bad credit

In his interview with HousingWire, Mel Watt, the director of Federal Housing Finance Agency urges the opening of the mortgage credit box to less-than-optimal borrowers.

"We are getting lenders to reduce some of the credit overlays," he said in the exclusive interview.

Furthermore, FICO scores will ignore debts that have been paid off or settled, and a lesser weight will be assigned to medical bill collections, which account for about half of all unpaid collections on consumers’ credit reports.

Nonetheless, the average FICOs have been going down steadily since 2006 and it’s not hard to see why, what with the housing crisis, the financial meltdown and the general recession and record unemployment and underemployment.

So what can those with a FICO that is under 620 do to get a mortgage?

1. Prepare to pay more

People with poor credit can still get a mortgage, but they will pay far more than even those with credit scores on the margin.

Guidelines from the U.S. Department of Housing and Urban Development and the GSEs, Fannie Mae and Freddie Mac, advise waiting at least two years after a short sale, so long as credit after the short sale is good.

Sellers should be advised to do their homework on the mortgage brokers they are working with – shady and dodgy operators are like bottom feeders, looking to prey on those who are more desperate and who aren’t financially savvy, which is how they see people with poor credit.

2. Refinance ASAP

A bad credit mortgage may seem like the borrower is signing away their life on a bad deal, but so long as the borrower maintains their credit after the mortgage is signed, they can be eligible to refinance for a much better deal within two years, and their credit will have improved.

In short, a bad credit mortgage is a short-term solution that gets them in a home. It's important to bear in mind that bad credit needn't follow the borrower longer than necessary.

3. Ask about options

The 30-year mortgage is a popular choice, but maybe not the right one if the borrower's credit is weak. Adjustable rate mortgages are also a possibility, depending on the circumstance, during which time the borrower can work on repairing and maintaining their credit while paying at a lower interest rate than are offered on fixed-rate mortgages.

Many people who had their credit torn up in the recession were not the typical bill skippers. They were hard-working, responsible people whose world was upended through layoffs, downsizing, the loss of contract work, and a dozen other legitimate reasons.

4. Get a co-signer

Many have some other assets, or have family members who are responsible. These people may be willing to co-sign. Federal Housing Administration rules allow for a co-signer on loans.

Above all, check with HUD, FHA, the FHFA, Fannie Mae and Freddie Mac for information on pathways to homeownership for those who have damaged credit.

It is possible to get a mortgage with bad credit today. Possible, but still challenging.

For more information contact

Jerry Gusman

The Gusman Group

(888) 213-4208

jerryggroup@aol.com

Analyst Predicts Home Price Decline In Report to White House

Former Goldman Sachs executive Joshua Pollard sent a sobering 18-page report to the White Houseon September 17 warning of a potential downturn in home prices that could put the country back into a recession before the ripples of the previous one settle.

According to Pollard, the former head of the Goldman's housing research team, home price appreciation is outpacing income, and the United States is on the brink of a 15 percent decline in home prices over the next three years. Rising interest rates and values will cause already overvalued homes (Pollard says values are 12 percent higher than they should be) to be even further out of sync with reality and generate an unnatural surplus that will itself lead to a slowdown in investor purchases.

Flipped homes have declined 50 percent in the last year, and home flippers are losing money outright in New York City, San Francisco, and Las Vegas according to the report.

If Pollard is correct, the impact on the U.S. economy would be seismic. Overvalued homes, according to his report to President Obama, make up $23 trillion of consumer asset value and "serve as the psychological linchpin" for $17 trillion of invested capital.

Put together, that 15 percent decline translates to a $3.4 trillion cut to consumers' net worth.

"As an economist, statistician and housing expert, I am lamentably confident that home prices will fall," he wrote. "Home price devaluation will expose a major financial imbalance that could lower an entire generation's esteem for the American dream."

Student debt and a 45 percent underemployment rate for recent college grads has handicapped millennial buyers already, Pollard wrote.

Pollard outlined three distinct stages of the decline—the first of which, the "hot-to-cool" stage, is already underway. This is where home price growth slows and turns negative in large markets across the country. Investors slow their purchases, homebuilders lose pricing power as absorption rates decline, and press outlets shift their market pieces from positive to mixed.

In Stage II, the "demand-to-supply" phase, new negative shocks cause investors to shift from raising prices in an effort to outbid competition to reducing prices to beat future declines. In Stage III, the "deflation and response" phase, consumers come to the decision that now is a bad time to buy a home. Fewer people seek mortgages and banks become less willing to lend. Consequently, deflation hits, taking jobs with it and triggering calls for new policy.

In other words, Pollard fears the recent past will be prologue. His report squarely targets public finance and housing officials and calls upon the White House to devise "forward-looking monetary policy that balances the risk of raising interest rates," create a skilled trade externship program for laborers whose jobs are most at risk whenever housing investments drop, and "forcefully rebalance number of homes to the number of households" by reducing the number of new builds as well as the number homes that can force prices down—particularly those that are already vacant, unsafe, and expensive to rehabilitate, the report states.

"The shift from a good market to a bad market occurs quickly, exaggerated by the circular currents of confidence from consumers, investors and lenders in Unison," Pollard wrote. "When unnatural levels of demand or supply impact the market, prices are pushed in lockstep."

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

jerryggroup@aol.com

Survey: Misconceptions Holding Back Homebuying

While nearly seven in 10 Americans agree that now is a good time to become a homeowner, a large number remain reluctant due to their own misguided understanding of the financing process, according to survey results released Monday.

In a poll of more than 2,000 consumers, Wells Fargo found 68 percent feel that now is a good time to buy a home, and 95 percent want to own if they don't already.

The results jibe with Fannie Mae's latest consumer housing survey, in which 64 percent of Americans said now is a good time to buy (matching the survey's record low).

"Although the homebuying process has changed in many ways in recent years ,our survey found Americans still view homeownership as an achievement to be proud of and many believe that now is a good time to buy a home," said Franklin Codel, head of Wells Fargo Home Mortgage Production.

On the other hand, while nearly three-quarters of respondents in Wells Fargo's survey said they "know and understand" the financial process involved in buying a home, large numbers also expressed doubt or misguided notions about homebuying requirements. For example, Wells Fargo reported, 30 percent of respondents expressed belief that only people with high incomes can obtain a mortgage at this point, and 64 percent said they believe only those with a "very good"” credit score can buy a home right now.

While 64 percent of respondents said they have an understanding about how much of a down payment is needed to purchase a home, nearly half said 20 percent is required. Forty-four percent also said they know little or nothing about closing costs.

While most lenders report that lending requirements at the moment are still high as a result of enhanced regulations and reluctance to take risks, Codel says lenders would be well served to work on educating homebuyers about all programs available to them—especially the millennial crowd, most of which pointed to lack of down payment funds as one of their biggest hurdles to homeownership.

"It is important for prospective homebuyers to feel empowered to ask lenders and real estate agents questions about available options, such as down payment assistance or FHA [Federal Housing Administration] or VA [Veterans Affairs] loans for veterans," he said. "Informing prospective homebuyers about their options is the first step toward helping them realize their goals."

On the other hand, the survey also found most Americans are confident in managing their personal finances, with 82 percent saying they know how to save, invest, and work within a budget. In addition, 63 percent said they have a "rainy day fund," including more than half of millennial-aged respondents.

With so many Americans focused on keeping their financial houses in order, Codel says there's a decent opportunity to turn those consumers into responsible homeowners with an educational push.

"[W]e have an opportunity as lenders, nonprofit agencies and real estate agents to better inform Americans about credit ratings, mortgage costs and housing affordability," he said. "This would help demystify the homebuying experience for many consumers."

For more information contact

Jerry Gus,man, The Gusman Group

(888) 213-4208

jerryggroup@aol.com

Fannie Mae Relaxes Waiting Period for Distressed Borrowers

Fannie Mae recently released a report revising the waiting periods for distressed borrowers with a derogatory credit event such as a foreclosure, bankruptcy, short sale, or deed-in-lieu of foreclosure on their credit history to obtain a new loan.

For borrowers with a short sale or deed-in-lieu of foreclosure on their record, Fannie Mae's new mandated minimum waiting period to become eligible for a new loan is four years. The time is shortened to two years if there are extenuating circumstances. According to Fannie Mae, extenuating circumstances are defined as "nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations."

If a borrower has a foreclosure on his or her credit record, the new minimum waiting period is seven years. Under extenuating circumstances, that period is shortened to three years with some additional requirements for up to seven years.

For those with a bankruptcy (chapter seven or 11), the waiting period is four years (two years with extenuating circumstances). For distressed borrowers with a chapter 13 bankruptcy, the required waiting period is now two years from the discharge date and four years from the dismissal date. If there are extenuating circumstances, the waiting time from the dismissal date is shortened to two years.

If there are multiple bankruptcy filings on a borrower's record, the waiting period for a new loan is five years if there has been more than one filing in the previous seven years.  Under extenuating circumstances, the waiting period is cut to three years from the most recent dismissal or discharge date.

Fannie Mae said in the report that it is "focused on helping lenders to provide access to mortgages for creditworthy borrowers while supporting sustainable homeownership" and that the new policy "provides opportunities for borrowers to obtain a loan to Fannie Mae’s maximum LTV (loan-to-value) sooner after the preforeclosure (short) sale or DIL."

The new policy is effective for loans with application dates on or after August 16, 2014.

Under the previous policy, the standard waiting period for borrowers with a derogatory credit event was two years with a maximum 80 percent LTV ratio; four years with a maximum 90 percent LTV ratio; or borrowers were eligible for a new loan after a standard seven-year waiting period. For borrowers with extenuating circumstances, the previous waiting period was two years with a maximum 90 percent LTV ratio.

For More information contact

Jerry Gusman, The Gusman Group

888-213-4208

jerryggroup@aol.com