Jeff Buchweitz at Fairfield Mortgage is the preferred lender for my Keller Williams realty market center, and I intend to copy and paste his informative “Mortgage News You Can Use” newsletter, regularly.
First, the biggest news of the week – The Mortgage Insurance Tax Break is Gone.
On Dec 31st, Congress let 58 tax code benefits expire, including credits for home energy improvements, credits for builders of energy-efficient new houses, and home buyer tax deductions for mortgage insurance. The mortgage insurance deduction has been a key mortgage financing benefit in place since 2007 which benefitted home buyers with income of $110k per year or less. Combined with the new fees they are imposing on Conventional loans this Spring, Congress continues to increase the costs of homeownership rather than reduce them! It should be noted that Congress still has the power to reauthorize all or some of the write-offs retroactively this year, but the current political atmosphere raises doubts about that happening. Its time to let our elected representatives know how we feel!
FHA Extends Anti-Flipping Waiver Through End of 2012
To cut down on fraud, FHA has had an anti-flipping regulation in place for years preventing a seller from selling a home owned less than 90 days. In an effort to accelerate the resale of foreclosed properties, FHA waived this rule in Feb of 2010 and then extended the waiver through the end of 2011. FHA recently announced that they are extending the waiver through the end of 2012. This announcement has been well publicized but its important to understand that this is simply an extension of FHA’s policy for most of the last two years. So, although this is good news, it is not necessarily new news. It is also important to understand that most every FHA investor has "overlays" on top of the stated FHA guidelines that make the FHA guidelines more restrictive. The most liberal overlays allow for the anti-flipping waiver BUT with the strict limitation that the resale price not be more than 20% greater than the acquisition price, even if there were renovations. An exception would need to be granted for a resale value of more than 20%. The bottom line is always be careful when your FHA buyers are buying homes that the seller has recently acquired. Check to see when the seller acquired the property and make the Loan Officer aware of the acquisition date if it was within the last six months.
What Every Lender Wants the Realtor to Know When Writing a Contract:
The “Financing Contingency Exhibit” is a wonderful addendum to the Purchase & Sale Agreement and something that the realtor should make a standard part of every financed transaction. Here are a few tips when completing this form:
Always show the interest rate a good .25% to .5% more than the prevailing rate in case rates rise between the binding contract date and the rate lock-in date.
If you are not sure how much the buyer will put down, shoot high on the loan-to-value showing the highest % you anticipate the buyer will finance.
Selling Agents, always maximize the number of days that your buyer has to satisfy the Financing & Appraisal Contingencies. Anything less than 20 days will not leave enough time for the lender to get the home appraised and the loan approved. Be firm that at least 20 days are needed!
Listing Agents, always write the name of your most trusted Loan Officer in the space underneath Section 2. What an opportunity to require the buyer making an offer on your listing to pre-qualify with your favorite Loan Officer.
The news from Europe has been mostly negative over the last week. Economic growth in Germany has been slower than expected. Negotiations on restructuring Greek debt also have not progressed as planned. S&P is downgrading the debt of several European countries, including France. Lastly, the European Central Bank (ECB) has given no indication that it will provide relief to the troubled countries. As a result of all of this turmoil, investors shifted funds to relatively safer investments, including US mortgage-backed securities (MBS), which has helped mortgage rates move lower. However, we already know that Congress is imposing new fees on Fannie Mae and Freddie Mac later this spring that are going to cause mortgage rates to bump up as much as .25% over the weeks ahead. Anyone in the market to lock a mortgage rate should do it as soon as possible.
The most significant economic data due out this week are the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Wednesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, Industrial Production, an important indicator of economic growth, will come out on Wednesday. Housing Starts will be released on Thursday, and Existing Home Sales will come out on Friday. Philly Fed and Empire State round out a very busy week.
Please call me or call Jeff if we can answer any of your specific questions…