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!