How the Government Shutdown will Effect Financing

How the Government Shutdown will Effect Financing

 

Most Government Sponsored Entities like Fannie Mae and Freddie Mac and VA are operating as normal and continue business as usual. FHA is staffed with limited personnel and trying not to delay closings or have their business deterred but I would watch FHA loans and applications very closely(like you weren’t already) to make sure there is no funny business.

 

The big challenge at the moment for all in the industry is the IRS having its doors closed. On nearly every mortgage loan application borrowers are required to complete the IRS Transcript request form called the 4506-T. This form is sent by the lender to the IRS and they provide the lender with tax transcripts verifying income from tax returns for the previous years requested. This is how the lenders quantify borrowers W-2’s, 1040’s, business income and just about every other possible income from credible tax returns or reported income. The IRS will likely not be processing any 4506-T requests during this shutdown. Depending on the duration of the shutdown, requests may be delayed and there may be a backlog of requests that the IRS will need to process when they do re-open. Additionally the Social Security verifications from the Social Security Administration are not available.

 

In the meantime, EverBank’s policy for this is if tax returns were prepared by a third party, our Processor and/or Underwriter must independently validate the existence of the third party via an internet search and/or obtain verification of the CPA license. If the returns were prepared by an entity such as H&R Block, the office location should be verified. In general EverBank will not suspend loan closings due to the absence of 4506-T validation, however Underwriters still have the responsibility to conduct proper due diligence of the income documentation provided in loan files. Any red flags need to be addressed as thoroughly as possible without the assistance of the tax return transcripts at this time. Significant red flags in a loan file that cannot be addressed or cleared may warrant postponing a closing until a tax return transcript can be obtained from the IRS.

 

In general lenders are hopeful mortgage loans will not be delayed and optimistic the shutdown will not last more than a few weeks. Origination companies, correspondent banks, and warehouse lenders may react differently as they access the risks associated with an extended shutdown. If it does last more than a month we may be in for some rocky times on the mortgage side, for now let’s go with business as usual and be mindful when entering contract with an FHA buyer.

 

Hope this information is helpful and re-assuring.

Thanks, Patrick

 

Patrick Gardner
Mortgage Loan Officer
Office: 415.423.1424
Cell:  510.599.8499
Fax: 415.477.2146
patrick.gardner@everbank.com

 

Everbank.com/pgardner
NMLS ID: 378888

Government Shutdown Threatening Housing Recovery

Government Shutdown Threatening Housing Recovery

Which Oakland Condominium Buildings (Condos) Qualify for FHA Loans?

Close to half of all condo sales in Oakland in 2010 utilized FHA backed loans.  Though FHA guidelines have gotten a bit more conservative, most borrowers that meet FHA guidelines with credit scores above 680 qualify. 

The loan limit for single family homes (including condominiums) in Alameda County, as of 6/7/2011, remains $729,750.  In 2010, condominiums sold for an average of less than $300,000, so most condominiums qualify for FHA financing, right?  Wrong.

It has become a bigger challenge for a condominium building to qualify for FHA financing than for the borrower to qualify due to the condo building approval process implemented by the FHA.

As of 5/23/2011, there were 42 condominium buildings in Oakland that are approved by the FHA.  Here is a list of those buildings:

1. 1755 Broadway, Oakland, CA 94612
2. 360 Vernon Street, Oakland, CA 94610
3. 3738-3740 Laguna Avenue, Oakland, CA 94602
4. 407 Orange Street, Oakland, CA 94610
5. 525 Mandana Boulevard, Oakland, CA 94610
6. 532 30^th Street, Oakland, CA 94609
7. 55 Fairmount Avenue, Oakland, CA 94611
8. 590 El Dorado Avenue, Oakland, CA 94611
9. 666 Oakland Avenue, Oakland, CA 94611
10. 77 Fairmount Avenue, Oakland, CA 94611
11. 423 7^th Street (8 Orchids), Oakland, CA 94607
12. 926 Chester Street (Chester Street Lofts), Oakland, CA 94607
13. 127 Bayo Vista Avenue, Oakland, CA 94611
14. 1411 Center Street (Cigar Factory Lofts), Oakland, CA 94607
15. 455 Crescent Street, Oakland, CA 94610
16. 460-468 Crescent Street, Oakland, CA 94610
17. 3721 Fruitvale Avenue (Diamond Park Townhouses), Oakland, CA 94602
18. 424 Orange Street, Oakland, CA 94610
19. 330 13^th Street (Golden Bridge Lofts), Oakland, CA 94612
20. 388 Santa Clara Avenue, Oakland, CA 94610
21. 322 Hanover Avenue, Oakland, CA 94608
22. 3403-3409 Haven Street (Haven Street Lofts), Oakland, CA 94608
23. 2316-2324 Lakeshore Avenue, Oakland, CA 94606
24. 10 Moss Avenue (Manor Park), Oakland, CA 94610
25. 585 9^th Street (Market Square), Oakland, CA 94607
26. 7100 Mountain Boulevard (Monte Vista Villas), Oakland, CA 94605
27. 4504-4508 Montgomery Street, Oakland, CA 94611
28. 425 East 11^th Street (Mutual Creamery Lofts), Oakland, CA 94606
29. 567 Oakland Avenue, Oakland, CA 94611
30. 1201 Pine Street (Pacific Cannery Lofts), Oakland, CA 94607
31. 989 Webster Street (Pacific Renaissance Plaza II), Oakland, CA 94607
32. 565 Bellevue Avenue (Park Bellevue Towers), Oakland, CA 94610
33. 180-320 Caldecott Lane (Parkwoods Condos), Oakland, CA 94618
34. 740 Canyon Oaks Drive, Oakland, CA 94605
35. 288 Whitmore Street (Rockridge Manor), Oakland, CA 94611
36. 388 Santa Clara Avenue (Santa Clara Commons), Oakland, CA 94611
37. 401 41^st Street (Temescal Station), Oakland, CA 94609
38. 222 Broadway (The Ellington), Oakland, CA 94607
39. 320 Lee Street, Oakland, CA 94610
40. 3825 High Street (Villa Del Lago), Oakland, CA 94619
41. 1695 15^th Street (Willow Court Lofts), Oakland, CA 94607
42. 1219 Wood Street (Zephyr Gate), Oakland, CA 94607

 If you are interested in obtaining an FHA loan for a condo project that is not on th list, it is possible to get a condo building approved.  I am happy to assist with this process.  It requires, among other things, the approval of the home owner’s association.

If you are interested in purchasing a condo in the East Bay with an FHA loan or getting your building approved for FHA financing, please feel free to contact me to discuss.

We also have a good place for you to see what listings are available in most of these buildings:  http://www.caldecott.com/?page=building_directory&buildings.  If you don’t see a building here, drop me a line and I can assist you with more information.

Andy Read
Broker
Caldecott Properties
aread@caldecott.com
510.594.2400 x 222

FHA Announces Some Big Changes!

I wanted to let you know that FHA Commissioner David Stevens made some big announcements today.  FHA’s capital reserves are evaporating, and they’ve been working on some solutions for a while now.  In the announcement, they stated the goal of “trying to better position the FHA to manage its risk while continuing to support the nation’s housing market”.

Here’s a link to the press release, and below are some highlights.

Higher Mortgage Insurance, Larger Down Payments, Higher Fees

It’s going to get tougher to qualify FHA borrowers. Key changes coming are:

• upfront Mortgage Insurance Premium fee increased from 1.75% to 2.25%
• reduction of maximum seller contributions from 6% to 3%
• Congressional request to increase maximum monthly mortgage insurance premiums from 0.55% 

One key item was missing: The widely speculated notion that down payment minimums would increase from 3.5%. Homebuyers can still access the market with just 3.5% down. However, the new guideline requires a 580 FICO score to be eligible for 3.5% down. Lower FICO borrowers will need a 10% down payment.

Get Familiar with ‘Investor Overlays’

But just because FHA will allow a 580 FICO doesn’t mean banks will approve a 580 borrower. Banks use FHA Guidelines as a base for their own underwriting rules, which are often more strict. FHA is on the prowl for lenders who approve FHA loans that result in higher than average default rates – and cancelling them from FHA lending. So banks have good reason to create ‘investor overlays’ rather than approve loans right at the brink of non-approval.

With the new focus on policing FHA approved lenders, ‘investor overlays’ will be a hot topic for the coming year. Guidelines are going to vary between banks, and not all banks will approve the same deal.

RPM is a HUD-approved lender, and we underwrite and fund from our own accounts. We work with the largest FHA lenders in the nation, so your clients need to apply only once and we’ll align them with the bank source that hasthe best pricing and least overlays.

Timing

These changes are expected to be effective in the spring. Official dates should be announced tomorrow.

Thank you,
John

John C. Glynn, CMPS
RPM Mortgage
415 674 1283 direct
866 898 0227 fax
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