New Laws for 2018

Fannie Mae Guidance on Federal Income Tax Repayment Plans

We’re officially in the midst of tax season (if you haven’t done yours already, consider this your reminder!), which magnifies the amount of borrowers we encounter who owe back taxes to the IRS.

Owed taxes that aren’t paid can result in tax liens, which take superior position to mortgage liens – an item of great concern for lenders.

While Tax Liens will always need to be repaid before a borrower is eligible for a Conventional loan, per a recent change to the Fannie Mae Selling Guide borrowers who have entered into e repayment plan are eligible under the following conditions:

When a borrower has entered into an installment agreement with the IRS to repay delinquent federal income taxes, the lender may include the monthly payment amount as part of the borrower’s monthly debt obligations (in lieu of requiring payment in full) if:

  • There is no indication that a Notice of Federal Tax Lien has been filed against the borrower in the county in which the subject property is located.
  • The lender obtains the following documentation:
    • an approved IRS installment agreement with the terms of repayment, including the monthly payment amount and total amount due; and
    • evidence the borrower is current on the payments associated with the tax installment plan. Acceptable evidence includes the most recent payment reminder from the IRS, reflecting the last payment amount and date and the next payment amount owed and due date. At least one payment must have been made prior to closing.

Note: The payments on a federal income tax installment agreement can be excluded from the borrower’s DTI ratio if the agreement meets the Fannie Mae terms for Debts Paid by Others, or Installment Debt.

Why Buy Real Estate?

Happy Saturday!

YES, Why Buy Real Estate?

When you talk with a client and attempt to encourage them to buy real estate, whether it is their first home or a second home or an investment property what can you say that is convincing? When talking to a clerk, your auto mechanic, hairstylist, acquaintance or friend, what can you say or do that will captivate their attention or create a “NEED” to inquire further to get information that will absolutely “convince” them that they need to buy, “regardless of the market”?

There are only two aspects of this that really matter:

Shelter, or Financial.

[Read more…]

NEW California Real Estate Fees!

Happy Friday! (this one may require a happy hour!)

The California Senate passed Senate Bill No. 2 (“Building Houses and Jobs Act”) which the Governor signed into law.

Commencing January 1, 2018, the bill will impose a fee, except as provided below, of $75.00 to be paid at the time of recording of every real estate instrument, paper, notice required or permitted by law to be recorded, per each single parcel of real property, not to exceed $225.00 per transaction.

The bill defined “real estate instrument, paper or notice” broadly to include: deeds, grant deed, trustees deed, deed of trust, reconveyance, quit claim deed, assignment of deed of trust, request for notice of default, subordination agreement, notice of default, release or discharge, etc.

The rule exempts: (1) transactions where a documentary transfer tax is imposed as defined in IRC 11911, and (2) any real estate instrument, paper, or notice recorded in connection with a transfer of real property that is a residential dwelling to an owner-occupier.

The rule contains several ambiguities which means that county recorders may interpret application of the rule differently. Some examples are:

** The rule doesn’t define “parcel.” Since the tax imposed is on a per parcel basis, does a piece of land with two APN numbers count as two parcels doubling the tax?

** The rule doesn’t define “transaction.” Since the tax is capped at $225.00 per transaction, if a lender needs to file a satisfaction of a loan that is paid off, is that a new transaction meaning a new tax?

** The rule doesn’t provide clarity on a transfer of real property as referenced in the exemption. Would a quit claim deed to remove a property out of a trust or add/remove a spouse count as a transfer permitting use of the exemption?

Considering the ambiguity in light of the 10% tolerances imposed by TRID, we as an industry foresee a significant cost as it relates to tolerances for recording fee in will provide further guidance as we move closer to January; however, I wanted everyone to be aware of the coming change.

This was from our compliance department this week and I will keep you posted from our end, but you may get additional clarification from CAR, title companies or your broker.

(My opinion, pure and simple: another subterfuge to find more money for out of control Sacramento government spending and “give aways” of hard earned tax-payer money)

All the best,


Paying off collections – Caution!

Happy Friday!

One of those things that causes a big surprise to consumers is finding a collection on their credit report. Occasionally they are there because of simply ignoring a debt obligation. However more often than not, we see medical collections. These may show up due to ignoring a bill from the doctor’s office or some related service that we are sure our insurance will pay for. However, it is not uncommon for some procedures or billings to still be in review when the provider’s collection services start kicking in due to lack of prompt payment and get sent to collection.

A simple collection can drop a credit score 50-80 points immediately, even if a 25.00 collection, the size does not matter! And simply paying it may not increase the score, but often drop the score!!!!

Collection companies have done a great job over the years of convincing consumers that paying off collections will raise their credit scores. Many are actually surprised to learn that paying off collections will actually lower their credit scores.

Collections are usually reported on the credit as a “9” status or collection account. This means the account has already been “written off’ and assigned to collections by the creditor. Once an account is reported this way on the credit report, the damage to the credit score is irreversible, unless that item is removed completely from the report.

If the account is paid off, the collection company reports that the account now has a $0 balance, but they do not usually delete the item off the report. The account has already become a collection, and the risk of the consumer defaulting on another account is already very high, due to that collection.

So their credit score will not go any higher if it is paid off, because paying off a collection after the fact, doesn’t lower the risk of defaulting in the future. However, the DATE OF LAST ACTIVITY is updated to the date the account was paid off. So if that account was sent to collections 3 years ago, the date of last activity is 3 years old and the impact to the credit score is not as much. But if the consumer pays off that collection today, they just update the date of last activity to today’s date, sometimes causing the scores to go DOWN as a result.

Crazy isn’t it? Your clients are trying to do the right thing and pay off collections, but their scores can be lower as a result. Help your clients work with collection companies to have their negative item removed completely from their report, if they pay it off. This will help their credit while satisfying the collection company.

I recommend always trying to have “removed or deleted”. Corrected, or shown as paid will not recover those lost points on the FICO scores.

All the best,


VA Allowable & Non-Allowable Fees


Veterans are one of the best types of buyers in the market place, with zero money down payment required up to 636,150, in OC and LA counties. However you can go above that loan amount with just a small down payment, usually less than 5% as well, and the rates are slightly better for VA loans and very few hits for lower FICO scores. Also, if the Veteran has ANY monthly disability income, the 2.15% first time use, usually financed VA Funding Fee (VA’s MI) is waived! 🙂 Here are the fees that are allowed and not allowed. The non-allowables can be paid by the seller or the Lender, or the Realtor. First the Non-Allowables:

VA Non-Allowable Fees:

  • Application and Processing Fees*
  • Document Preparation Fee*
  • Underwriting Fee*
  • Loan Closing or Settlement Fee*
  • Notary Fees*
  • Interest Rate Lock-in Fee*
  • Tax Service Fee*
  • Delivery/Wire Fees*
  • Commitment or Marketing Fees*
  • Trustee’s Fees or Charges*

VA Allowable Itemized Fees and Charges:

  • Appraisal Fee and Compliance Inspection
    • Reconsideration of value if requested by Veteran
  • Attorney Fee only if attorney was independently retained by the veteran
    • Veteran and Co-Borrower must execute a Veteran’s Attorney Certification
  • Closing Protection Letter Fee- Should not exceed $35.00 Page
  • Credit Report
  • Flood Certification Fee
  • Flood Insurance- If required
  • VA Funding Fee (unless veteran is exempt)
  • Homebuyer Assistance Program
    • Fees may not exceed $250.00 without approval
  • Hazard Insurance
  • HOA dues (prorated)
  • Loan Discount (must be able to prove discount points with rate sheet)
  • Loan Origination Fee (may not exceed 1% of the loan amount)*
  • MERS registration fee- reasonable and customary
  • Pest Inspection (Termite)- refinance transactions only, not allowed on purchase transactions
  • Prepaids (interest, taxes, assessments, etc.)
  • Recording Fees/Taxes
  • Recording of Warranty Deed
  • Septic Inspection
  • Survey (Condo loans must check with the underwriting department)
  • Taxes
    • Purchase- the portion of the taxes, assessments and similar items for the current year chargeable to the borrower and initial
    • Refinance- All
  • Tax Stamps
  • Title Endorsement-applicable environmental protection lien endorsements
  • Title Examination/Search
  • Title Insurance
  • Well Inspection

*If you do not see a fee on the “Allowable” list, assume that VA does NOT allow the veteran to pay.

Hang on to this list. Escrow companies have this list usually, but it does not hurt to forward over to them when you open a VA escrow. 🙂

All the best,


FHA Property Flip Guidelines

Happy Friday!

FHA Property Flip Guidelines

(Please note that agency/conventional loans do not necessarily have these rules, but many lenders have overlays that do have these restrictions…jumbos, some do some don’t…always check with me first-our Fannie/Freddie Direct products/conventional, typically allow flipped properties) 

Once upon a time FHA didn’t have a restriction on the purchasing of a property recently acquired by the seller (AKA a “Flip”) … then along came the “FHA Prohibition on Flipping” provision, circa 2003. A brief waiver to the anti-flipping rules was provided by HUD back in 2014, but the waiver has since expired.

Today, we must abide by FHA’s strict rules surrounding flip situations – so make sure to pay close attention to the chain of title on your FHA purchases!

Here’s a summary of the current FHA guidance:

The term Property Flipping refers to the purchase and subsequent resale of a property in a short period of time.

The eligibility of a property for a Mortgage insured by FHA is determined by the time that has elapsed between the date the seller acquired title to the property and the date of execution of the sales contract that will result in the FHA-insured Mortgage.

FHA defines the seller’s date of acquisition as the date the seller acquired legal ownership of that property.

FHA defines the resale date as the date of execution of the sales contract by all parties intending to finance the Property with an FHA-insured Mortgage.

Resales Occurring within 90 Days or Fewer After Acquisition:
A property that is being resold within 90 days or fewer following the current owner’s date of acquisition is not eligible for an FHA-insured Mortgage.

Resales Occurring Between 91-180 Days After Acquisition:
A Mortgagee must obtain a second appraisal by another appraiser if:

  • the resale date of a property is between 91 and 180 days following the acquisition of the property by the seller’s; and
  • the re-sale price is 100 percent “over the purchase price” paid by the seller to acquire the property.

The required second appraisal from a different appraiser must include documentation to support the increased value.

If the second appraisal supports a value of the property that is more than 5 percent lower than the value of the first appraisal, the lower value must be used as the property value in determining the adjusted value.  The cost of the second appraisal may not be charged to the borrower.  The Mortgagee must obtain a 12-month chain of title documenting compliance with time restrictions on resales.

Exceptions to FHA property flipping restrictions are made for:

  • properties acquired by an employer or relocation agency in connection with the relocation of an employee;
  • resales by HUD under its real estate owned (REO) program;
  • sales by other U.S. government agencies of Single Family Properties pursuant to programs operated by these agencies;
  • sales of properties by nonprofits approved to purchase HUD-owned Single Family properties at a discount with resale restrictions;
  • sales of properties that are acquired by the seller by inheritance;
  • sales of properties by state and federally-chartered financial institutions and Government-Sponsored Enterprises (GSE);
  • sales of properties by local and state government agencies; and
  • sales of properties within Presidentially Declared Major Disaster Areas (PDMDA), only upon issuance of a notice of an exception from HUD.

The restrictions listed above and those in 24 CFR 203.37a do not apply to a builder selling a newly built house or building a house for a borrower planning to use FHA-insured financing.

All the best,


New Enhancements to FNMA Selling Guide

Here are again some new enhancements to the FNMA Selling Guide, which are already effective as of July 29.  I trust they will keep it coming! There is certainly more stuff to change! 🙂

Alimony Income is Getting a Face Lift:

 Lenders will now have the option of reducing the borrower’s monthly qualifying income by the amount of the monthly alimony payment in lieu of including it as a monthly payment in the calculation of the debt-to-income (DTI) ratio. Going forward, lenders may choose to use either option – reducing income or treating it as a debt – when qualifying borrowers. [Read more…]

Condo Buyer’s Guide: What you need to know when buying a condo.

Happy Friday! The OC Fair begins…

Please see attached a great brochure to hand out to prospective clients related to buying a condo or townhome. If a first-time buyer, or someone downsizing, this brochure could say a lot about it for you. Attach your card and mail or just e-mail it.  Click here to download a copy.

Keep your eyes peeled for a big announcement in the near future on a new strategy to “wake up” the public and start talking about and wanting to buy real estate! This will rock your boat! (in a good way) 🙂

All the best,


REAL ESTATE LAW UPDATE: Equitable Easements

From real estate attorney Scout Souders.

New Case Expands The Scope of Equitable Easements in California.

In the case of Hinrichs v. Melton, 2017 DJDAR 4168 (May 3, 2017). The Court of Appeal fashioned an equitable easement despite no preexisting use of the servient owner’s property. This is the first time a preexisting use of the servient owner’s property has been dispensed with. The court determined that because the neighbor’s property needed access and the owner of the servient tenement did not use this portion of his property an equitable easement was in order. [Read more…]