Very Important Information for Anyone Who Has Had a Short Sale

During the weekend of August 16, 2014, Fannie Mae will update Desktop Underwriter® (DU®) Version 9.1 with yet another change:

Short Sales (Deed-in-lieu of Foreclosure and Pre-foreclosure Sale):

warning-sign200The waiting period requirements for borrowers who have had a previous deed-in-lieu of foreclosure or preforeclosure sale (Short Sale) are being updated to now require a four-year waiting period. Only this last year it was updated to allow for only a two-year period. Now, Fannie Mae is changing it back again to a four-year waiting period. Please pass the word…

If you know of anyone with a short sale in the last few years, have them call me or e-mail me immediately to get a purchase or refinance started BEFORE THE AUGUST 16 WEEKEND. Many banks have implemented this pre-maturely. We are allowing two year period until Aug. 16 weekend!

OTHER REASONS TO RESTRUCTURE/REFINANCE YOU EXISTING MORTGAGE:

  • Take Cash-out to make Home Improvements or for Down Payment on a new 2nd Home or Investment
  • Payoff a 2nd OR Heloc, especially those set to adjust soon
  • Refinance out of FHA Loans into Conventional (possibly without MI, or a more favorable PMI policy)
  • Borrower’s that went FHA due to credit seasoning, now eligible for conventional loan
  • VA Loans – We have VA Cash-out Refinance available to 100% LTV!
  • 62 and over, consider a Reverse Mortgage to Live in Home Without Mortgage Payments

**Pre-Approvals (professional courtesy for my clients and those they refer) are positively required before you shop for a new home, a second home or investment property. Higher values are being created by low rates and a shortage of inventory and cash offers are very common now.

**Reverse Mortgage Changes – …and more to come. These products are becoming more and more challenging to tap equity for those 62 and over. But the first week of August there are some positive changes that will roll back the tightest equity restrictions of a year ago to become slightly more tolerable. i.e. access to a little more equity by seniors on this product. Caution: A skilled consultation is a requirement for anyone you love or care about before a person enters into any reverse mortgage transaction, whether purchase or refinance.

**HOME VALUES are definitely higher, many areas as high as 2007 values, and are allowing many folks to refinance who were formerly under water. Even if there is not 20% equity we need to do a careful review of how limited equity and partial mortgage insurance might still make a huge impact by refinancing. Many are consolidating debt with the low interest rate environment.

and remember… with today’s continued volatility and sharp swings in the market, new Federal regulations and guidelines, trusted market knowledge and EXPERIENCE is as important as price in your mortgage decisions. If you have any questions or concerns, please contact me.

Don Parsons
Certified Mortgage Planner & Consultant
CMP, CMPS, RMA, CLA
Commerce | Mortgage

450 Newport Center Drive Suite 350
Newport Beach, CA 92660
Direct: 949.428.3099
eFax: 949.423.6818
don@donparsons.com
dparsons@commercemtg.com
www.donparsons.com

NMLS #287222
Arizona Licensed also #0927145

HELOCS (Home Equity Line of Credit) Will Pose a New Threat

warning-sign200When it is reported that the Feds did not raise rates or they did raise rates, THIS IS NOT referring to LONG TERM MORTGAGE RATES. This is the Federal funds rate. When you take the Federal Funds rate of .250 plus the current 3% spread, you get the going prime rate of 3.250. This is the index that most credit cards and Helocs are tied to for adjustments. The Feds have not changed this rate since Dec. 16, 2008 and may not change it again for another year or two, let’s hope…..for those with Helocs.

Remember that the Feds raise the Fed rate or lower the Fed rate when they think the economy needs slowing down or stimulated. When they take the “first” step of tightening or loosening, approximately every 6 weeks, it is non-stop for 12-18 months at increments of .250 to .500 usually. So this is how much your rate and payments will go up, in most cases immediately, not at the end of the month, non-stop until they decide enough tightening is sufficient.

If you are at your 10 year point, unfortunately your loan could also begin a final recast or final amortization. If your loan is 50,000 or less your loan could amortize over 15 years. If your current balance is greater than 50,000 you may have an option for a 30 year amortization. Most rates right NOW at the recast rate are usually between 7-8.5%. Some banks may offer a Heloc modification or refinance but I would not count on this.

One of the most onerous rules to date is that if you pay off a Heloc or 2nd trust deed by combining it with your 1st trust deed, which in most cases is the wisest thing you could do, you are penalized by calling it a “cash out event” with higher fees, which lead to a higher interest rate. If you have 20% equity or more you are fine, and at 40% equity, there is no “hit or fee”. (These apply via Fannie/Freddie as LLPA’s-Loan Level Price Adjustments, not lender overlays) And this is usually on 417,000 or lower loans, not high balance loans where you often have to have 25% equity. The only exception is if the 2nd lien was part of your original purchase transaction, which is not very common. One other exception is a portfolio loan which allows this to be treated correctly, as a rate and term refinance, NOT a cash out event, but the product selection at this time is a venue of 1,3,5,7 & 10 year fixed ARM loans only, not 30 year fixed. Lastly, as we begin to see some rule changes solving similar problems in other areas, we would hope to see this grievous issue addressed with a rule change… just not holding my breath….

So, if you have a Heloc and we have not talked in the last several months, it may be time to review your situation again, especially with the latest appreciation of homes.