The Senate could vote on the bill, HR 5623, as soon as tomorrow, although the death of Sen. Robert Byrd, D-W.Va., has slowed the pace of work in that chamber. Read full story here.

There is a buzz in the real estate and mortgage world that says that FHA is moving towards changing how they charge insurance premiums – again!  And the proposal I am hearing is going to reduce the number of  people who are eligible for the FHA Program, as well as make the program less attractive.

Let’s start by explaining that, contrary to the public’s consensus, the FHA is not a lender, they are a government owned insurance company.  They collect premiums from borrowers and insure lenders of repayment, if those borrowers default on their mortgages….this insurance allows lenders to loosen their underwriting standards and approve many more applicants.  Presently, they charge these premiums in two different ways:

1. The UFMIP (Up Front Mortgage Insurance Premium) for most FHA loans is levied at 2.25% of the loan amount.  The good news is that while it is a closing cost, the UFMIP can be (and usually is) financed….added on top of the base loan amount.  So, for example, on a $200,000 base loan amount has a $4500 UFMIP; therefore, the total loan amount is $204,500.  Because it is financed in the loan amount, our borrower is paying $24.17 in their monthly P&I payment to cover it (at a 5% note rate).
2. The second insurance charged is the MMIP (Monthly Mortgage Insurance Premium).  Currently, for most FHA loans is calculated by multiplying the principal balance of the loan by .55% and dividing by 12.  Because the principal balance is constantly being reduced as payments are made, the MMIP adjusts downward annually until such time as the principal balance is reduced to 78% of the purchase price (which will be a minimum of 5 years, but typically 12-14 years).  In our $200,000 example the MMIP is $91.67.  This amount, too, is added to the mortgage payment.

As you know, a major factor in approving borrowers is that borrower’s ability to repay the loan which is determined by dividing their debt by their income.  Any increase in payment makes it harder to qualify.  In our example, our borrower’s qualification includes a total of $115.84 to cover the FHA insurance premiums.

Now look at the proposed changes.  FHA wants to reduce the UFMIP to 1% and increase the MMIP to 1.55%.  On its surface it doesn’t look tragic, but let’s look at our example $200,000 loan.   Our total loan amount is now $202,000, which means the monthly impact of the $2000 is $10.74 (as opposed to the $24.17).  BUT, our MMIP has been increased to $258.33 (a whopping $166.66 more)!  In total, our borrower’s mortgage payment will go up $153.23!!!!

What’s the real impact?  The same borrower that qualifies for a $200,000 FHA loan, based on their income, will only qualify for $172,000 loan.  They will have to look in different neighborhoods and/or sellers will need to reduce their prices further to keep the same buyers interested in their home.  It has the same effect as interest rates going up more than 1%….I shudder to think what the cumulative effect will be if this happens AND rates go up.

I am asking you to call your elected officials and tell them that they need to stop the FHA from implementing this….NOW!!!

PS- I recognize the FHA needs to increase revenue to cover losses on bad loans, but I suggest they increase the UFMIP (when I started in the business it was 3.8% and no MMIP, for example) because our borrowers need not come up with more cash to close, as it is financed, and it has a much lower impact on people’s ability to qualify.  PLUS, the FHA gets more money now and doesn’t have to wait to collect it monthly over years.

This blog post was brought to us by our good friends over at kcmblog.com and Dean Hartman, the Chief Planning Officer at Continental Home Loans.

Certain state laws provide for a “redemption period” after a foreclosure or tax sale has occurred, during which time the prior owner may reclaim the property upon payment of all amounts owed. Unexpired redemption periods create an unacceptable title defect on the subject property, and do not conform to the existing policy that requires the property to have “good and marketable” title. As such, Fannie Mae is clarifying the Selling Guide to state that properties with unexpired redemption periods have unacceptable title defects. Therefore, these mortgage loans are not eligible for delivery to Fannie Mae until after the expiration of the redemption period. The purchase of additional insurance, a redemption bond or similar coverage during the redemption period does not remedy the title defect and the mortgage loan remains ineligible for delivery to Fannie Mae.

Good Luck! And happy hunting for those foreclosures!

Put your credit cards away, there will be nothing for you to buy at this On-Line Workshop for Real Estate Agents.

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This class will show you no less than 7 specific strategies that top producers are using to get virtually 100% success rate with their listing presentations.

You will see at least 3 that I bet you have never seen, didn’t even know existed…….

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These are the undercover strategies that the top producers have been secretly using to have their best 12 months ever!!!!

We will also be answer the questions that you posted on our InterNet TV Show.

But I warn you, this will not be a warm and fuzzy love fest. If the phrase Tough Love makes you uncomfortable, you may want to pass on this.

Be one of the 200 to see this (if there are any spots left)

Join Us Thursday, April 1st at:

2 p.m. EST
1 p.m. CST
12 p.m. MST
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Some of the things that will be covered will be

1. How to get more buyers than you could ever follow up on

2. How to get Virtual Tours done without paying $300 each

3. How to turn Craigslist into a printing press for money

Join Us Thursday, April 1st at:

2 p.m. EST
1 p.m. CST
12 p.m. MST
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In its press release, the FOMC also noted that the U.S. economy “has continued to strengthen” and that the jobs markets “is stabilizing”. It also said that business spending has “has risen significantly”.

This is a slight departure from the Fed’s January statement in which housing was not mentioned and business spending was said to be “picking up”.

It’s also the sixth straight statement from the FOMC in which the Fed described the economy with optimism. This is a signal to markets that 2008-2009 recession is over and that economic growth is returning.

The economy is not without threats, however, and the Fed identified several:

1. High unemployment threatens consumer spending
2. Housing starts are at a “depressed level”
3. Consumer credit remains tight

The message’s overall tone, however, remained positive and inflation is within tolerance limits

Even bigger new for you and I in the mortgage world, Bernake also confirmed the end of its $1.25 trillion commitment to the mortgage market by March 31, 2010.  This is huge for the Real Estate Mortgage Markets. See my earlier post FED Pulls Out in 37 Days: You Need to get Your Butt in Gear! from February 2010 for my thoughts. Fed insiders estimate that the bond-buying program lowered mortgage rates by 1 percent since its start.

Mortgage market reaction to the Fed press release is, in general, ambivalent. Mortgage rates are unchanged this afternoon.

The FOMC’s next scheduled meeting is a 2-day affair, April 27-28, 2010.

4.5 FNMA Mortgage Coupon 8-2008 to 2-2010

Remember all the writing I did in the past year about how the Federal Government has been artificially propping up the mortgage markets and keeping interest rates low?

It is all coming to an end … in 37 days!

*HINT* If you click the graph at left, it will open a new window so you can examine it closer. As you can clearly see, the moment the FED announced this program in Nov 2008 mortgage bond pricing improved, which means interest rates went immediately down. You can also see that in the summer of ’09 the improved again when the FED announced it would extend the program through 1st quarter 2010.

In case you don’t remember, since November of 2008, the Federal Reserve Bank of New York has been the single-largest buyer of Mortgage-Backed-Securities (MBS) on the Bond Market. This is where interest rates are determined. It’s all about supply & demand.

Mortgages are packaged and securitized, and major investors buy those MBS securities as investments. The larger the demand, the lower interest rates need to be. If demand falls, then interest rates will need to rise to make the MBS more attractive to investors.

Without this market, banks would not be able to replenish their funds to do more loans. Now you can see how important this is.

Part of the original Stimulus Bill was for the Federal Reserve to purchase over $1trillion in MBS. This has been happening in phases over the last 15mo, and IS the ONLY REASON rates have been this low. In other words, the US government has bought more MBS than all the other buyers combined, making demand strong.

The program was originally scheduled to end Dec 31st, but was extended through March 31st. (see the chart above in summer ’09 when they announced the extension) What will happen then? True market forces will take over. Many experts believe rates will jump rather quickly, and others say gradually. Either way, EVERYONE agrees that rates will go up probably by summer at the latest.

IF YOU ARE BUYING, YOU NEED TO GET YOUR ‘You Know What’ IN GEAR. Is it worth the risk to wait? When all the market data points to a rate increase, and not a decrease, there isn’t a compelling reason to hold back any longer. Same with refi’s. If you wait, you could miss the chance of a lifetime.

Call or email me today. Rates are still fantastic. If you are a first time or move up buyer, you have to call. Time is running out on the Tax Credit!

The chart above is a graphical representation of the foreclosures that have been filed in our state of Oregon by county.  At first it doesn’t appear all that bad, however this is for just the month of January. Take a look at the chart below and tell my what you see?

From the chart above we can see that Oregon is ranked 9th.  The media would have you believe this problem is a lot more national… from the chart it’s obvious that it’s not. Nevada, Arizona, California and Florida make up a full 50% of the foreclosure data. 40 states are under the average!

So, this makes a unique problem but also creates opportunity.  Foreclosures are selling like mad across the country and right here in Oregon.  Our higher foreclosure rate has let to some unique buying opportunities.  If you want to buy a foreclosure, here are some sites that can get you started.

• HUDForeclosed.com offers free access to homes
• Foreclclosure.com offers free access to homes
• RealTrac offers free access to homes

Once you have found a list of home you like contact your real estate agent.  As a side note, you are going to want a competent agent.  Negotiating these types of purchases  are not normal so you need an agent with the right experience.  If you need help finding someone, I can get you a few referrals.

I am very familiar with Short Sales, REO (bank owned) and Foreclosures and can arrange for mortgage financing if you are not in the fortunate position to pay cash.  My rates are competitive and we can still close fast even with all the new regulations.

Despite the improvement last week overall, mortgage pricing remains significantly worse from the all-time lows set in late-November.

Oddly, last week’s most prominent mortgage-related story wasn’t the most influential one.

On Wednesday, the Federal Open Market Committee adjourned from a two-day meeting. It voted to leave the Fed Funds Rate unchanged from its current target zone of 0.000-0.250 percent. This wasn’t news, per se — markets expected the “no change” vote.

However, in its accompanying press release, the Fed appeared more rosy in its economic outlook, citing improving labor markets and low levels of inflation. Results like this are a mixed bag for rate shoppers, but is generally welcomed as good news.

Rates were unchanged after the FOMC release.

The bigger story last week comes from Greece.

Concerns for the country’s debt burden have been in play for weeks, but last week, Standard & Poor’s officially downgraded Greece’s debt rating. The move triggered concerns regarding broader Eurozone debt, especially considering the recent issues in Dubai.

U.S. mortgage markets benefitted from Greece’s troubles as “safe haven” attracted investors, driving down rates Thursday afternoon.

Debt concerns should remain in focus this week. Furthermore, there’s a bevy of domestic data that could swing rates in either direction, too. Most notably, watch for Tuesday’s housing data, Wednesday’s inflation data, and Thursday’s consumer confidence data. Each can be a powerful influence on rates.

There will be less volume on Wall Street because of Christmas and less volume tends to spur mortgage rate volatility. Be wary of swings in either direction.

Markets close early Thursday and will be closed Friday.

With more homes coming online, home prices may be slow to rise nationwide.

A “Housing Start” is a privately-owned home on which construction has started. In November, starts rose by nearly 9 percent while remaining within the same tight range we’ve seen since June.

More interesting that Housing Starts, though, is the accompanying data for Housing Permits. After a 5-month plateau, Housing Permits finally broke through, posting its largest number in 12 months.

This, too, bodes poorly for sellers.

Housing permits are precursors to housing starts so because the number of permits are higher today, we expect that the number of starts will be higher just a few months from now.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

More permits means more starts which, in turn, leads to a larger home inventory. And when home supplies grow faster than the home demand, prices fall.

Throughout the early part of 2010, low mortgage rates and federal tax credits should help hold demand high but if builders flood the market with new, quality product, sellers may find that they’ve lost some of their leverage.

For home buyers, the rise in starts is welcomed.

In its press release, the FOMC noted that the U.S. economy “has continued to pick up”, that the jobs markets is getting better, and that housing market has shown “some signs of improvement” lately.

It’s the fourth straight statement in which the Fed speaks optimistically about the U.S. economy — a signal that the worst of the recession is likely behind us.

The economy isn’t without threats, however, and the Fed identified several, including:

1. Tight credit conditions for consumers
2. Reluctancy of businesses to hire new workers
3. Lower overall housing wealth

The message’s overall tone remained positive, however and inflation appears to be held in check.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to honor its $1.25 trillion commitment to the mortgage bond market. That plan — due to expire at the end of March 2010 — should be noted by today’s homebuyers. Fed insiders estimate that the program suppressed rates by 1 percent through 2009.

Mortgage market reaction to the Fed press release is negative. Mortgage rates are rising this afternoon.

The FOMC’s next scheduled meeting is January 26-27, 2010.