Your MN Mortgage Mom's Blog

Just purchasing a home and it needs a few repairs?  Or perhaps you are already a homeowner in need of funds to "fix up" your castle?

Either way, you may want to stay away from the sometimes expensive rehab loans and look to the State as a wonderful alternative.

The State of MN offers a very attractive program for your home improvement projects for MN residents. 

 Appropriately called the "Fix Up Fund".

Here are the highlights:

• Household income at or below $96,500
• Property must be owner-occupied
• You can hire a contractor or do the work yourself
• Up to a 20 year term
• Loan amounts up to $35,000
• Most repairs that will improve the efficiency of your home are okay...no swimming pools, please!
• Whoa!  And those who complete the improvements may be eligible for a rebate, up to 35% of the cost of repairs.  Nice!

The best part is the rates are VERY low...currently at 5.99%!

For more information, contact a sponsoring lender today.

Amidst the rising foreclosures in our country, the Federal Housing Administration has seen dramatic losses and its reserves have fallen below Congressional required levels. 

In response, FHA is raising fees and tightening lending standards in an effort to bring more revenue to the agency and continue to keep FHA loans available to YOU, the consumer. 

If you are waiting to purchase a home during the Spring/Summer market, you will be amongst the borrowers affected by the new changes.  It may be time to get off the fence now, instead of later! 

Although specific dates have not yet been announced, here is a snapshot of the upcoming guidelines:

Raise the UFMIP (up front mortgage insurance premium) to 2.25%.  Right now, that premium is 1.75%.  We will still be allowed to "roll" the premium into the loan, but this increase will absolutely increase the total loan/payments that the home buyer is approved upon.  This change is scheduled for this spring.

FHA is also seeking legislative authority to increase the annual premium (currently .55%)...More to come on that, as all of this continues to unfold.

Reduce allowable seller paid closing costs from 6% down to 3%.  If you are a first-time home buyer who is "cash strapped", this could be a significant blow to your ability to purchase a home.  This change is scheduled for early summer.

So what is The MN Mortgage Mom's recipe for success?  Don't wait!  If you have the means and ability to purchase a home, do it now!

Mortgage Client:  "I'm confused.  I don't understand.  None of this makes sense.  This paper does not even give me the numbers I need to know."

Loan Officer: "Why, Mr. and Mrs. Mortgage Client, you are absolutely correct...all this confusion compliments of our wonderful government and their ivory tower."

Could government just leave well enough alone?  Yes, the MN Mortgage Mom is on a rant!

As of January 1, 2010, the newly overhauled Good Faith Estimate (GFE) and HUD-1 Settlement statement went into effect.  And boy, what a confusing mess it is!

Last week, I met with a new client who has bought and sold real estate several times. This client is very well informed and experienced. As we were going through the mortgage documents, we came upon the new GFE. I began going through it when my client said, "Excuse my profanity, but what is this s**t?" I explained to him the changes, compliments of our wonderful government and their ivory tower. He expressed, "This is a joke. Is there any way I can get the old document?"

First, who other than the government can take a 1 page, detailed document of all fees and turn it into a 3 page bundled up mess??

To make matters worse, it does nothing to help the mortgage consumer understand some fundamental and critical numbers:

• 
  Cash-to-Close--There is no indication whatsoever on the new GFE as to how much money will be required from the borrower to bring to closing. Huh?
• 
  Total Monthly Payment--Ummm, yes, most borrowers want to know what their total payment is. Gotta look for it on another mortgage document!
• 
  Seller Paid Closing Costs--For those who are purchasing a home, it is nice to see how seller paid closing costs paid on behalf of the borrower/buyer will affect their bottom line cash needed at closing. You guessed it! Not on the GFE anymore! Gotta look for it on another mortgage document again.
• 
  Details--Many of my clients are very detail oriented. They want to know exactly what they are spending their money on. Rightfully so! The new GFE takes all of that away. Now fees are BUNDLED. Great for the lender, not so great for the consumer.

Here's my point. I am not ranting because this has just made my job more difficult. It has, but I will get used to it very quickly. I am used to constant change, being in the industry as long as I have. However, my point is these new forms do nothing to provide clarity to the consumer in a concise, easily documented fashion. Sure, these numbers can be found elsewhere in other mortgage documents, but GEEZ! At the consumer's expense in the growing sea of mortgage confusion?

All of this, compliments of our wonderful government and their ivory tower.

Short Sales and Deed in Lieu of Foreclosure (commonly referred to as Cash for Keys) have received major attention on the Hill.

The Feds are stepping in AGAIN, perhaps to the advantage of everyone...homeowners, buyers and the real estate community. 

In an effort to curtail foreclosures, the Feds have introduced HAFA, Home Affordable Foreclosure Alternatives, effective April 2010.

This is a big push to get banks to approve and move expeditiously on allowing homeowners to short sale their homes or possibly turn in their keys WITHOUT deficiency recourse.

Up until now, foreclosures have outnumbered short sales and loan modifications 20:1.  Banks have been very non-responsive to short sales...or they take "a month of Sundays" to even respond to an inquiry.  Homeowners, buyers and agents may see some relief around the horizon. 

With HAFA, banks will be required to streamline and simplify the process of short sales or DILs. 

Here are the highlights:

• Allows homeowner to receive preapproved short sale terms before property listing
• Prohibits servicer from reducing real estate commissions as a condition of approving the short sale. Great news for the agents!
• Homeowners are fully released from future liability for the debt...No more deficiency judgments!
• Servicer must respond within 30 days of the homeowner requesting a short sale.  Yes!  An established time frame!
• $1,500 relocation incentive to the homeowner
• The bank MUST respond within 10 business days of receiving an executed purchase agreement, it's decision on approval or denial.  You read it right...TEN DAYS!
• The servicer (bank) may not charge the homeowner administrative processing fees...the servicer must pay all out of pocket expenses

Click on the provided link above to read the entire directive.  It even includes a short sale agreement.

Happy Holidays from The MN Mortgage Mom!

If there is one question that I get asked the most, it is "Sherri, how low will mortgage rates go?"  Or another version, "Will interest rates go down further?"

Let me start by saying, THAT is the million dollar question.  In the last 3 weeks, I have seen 30 year fixed rates as low as 4.375%, only to jump up to 5.375%.  What a wild, wild roller coaster we are on!

I subscribe to many rate and market commentaries, alerts, updates and news.  I have been in this industry for nearly a decade.  And the Rate Game is the most difficult THING to put my thumb on these days.  Nothing makes sense.  Statistical data has been blown-out-of-the-water.  Experts predict down and then they go up. 

There seems to be a lot of buzz waiting for the government to bring the interest rates down to 4.5%.  Well, we've been there and lower.  Economic data can be major market movers, as we have witnessed with the change in mortgage interest rates several times per day.  Some experts predict that rates will continue to fall and others believe our Treasury is going to BUST and rates will sky rocket.  What gives?

If that isn't enough, let's take this a little further...inside the workings of the mortgage industry itself.  Rates are low...they were REALLY low 2 weeks ago.  But now we are seeing some crazy things going on.  Fannie Mae and Freddie Mac just announced more LLPA's (loan level pricing adjustments).  These are all the "adjustments" that get layered on top of the rate for certain loan scenarios.  For example:

• Want to do a cash out refinance?  Be prepared for an LLPA.
• Have a credit score under 740?  Could mean another LLPA.
• Buying an investment property?  HUGE LLPA!
• Buying or refinancing with a 1st and 2nd mortgage?  Yep!  You're getting it now...another LLPA.

So let's say 30 year fixed rates are at 4.5%.  You want to refinance.  You have a 699 mid credit score, you need to take a little cash out to pay off a bill and your loan-to-value ratio is 80%.  Think you will get a 4.5% rate?  Not even close...Unless you want to pay points to cover all those little LLPA's.

To make things even a little more interesting, there is now talk of major lenders beginning to absorb their costs of lost interest rate locks by charging fees.  These fees will be "absorbed" in their interest rates, meaning an inflated, higher rate or charging the fee outright.  See my blog, What?  Mortgage Rates Go Up When They Are Going Down? for more information on this.

If I can offer my 2 cents of advice on the Rate Game, it would be this:

1. If you feel inclined to shop different lenders, do it ahead of time, find a lender or loan officer you trust and stick with that person.  Yes, that means conversation, getting a GFE and doing your homework up front.  If not, you may end up losing...I have seen it happen on many occasion.  Rates can change several times a day.  Don't chase 3 or 4 lenders.  By the time they all get back to you, rates may have gone up.
2. With that research, make sure you find a loan officer who is current on economic news and has the technology to inform you of possible upcoming rate changes before they happen.
3. Be prepared to lock at a moment's notice.  That means, giving your loan officer every conceivable way to get a hold of you.  Remember what I said earlier...we are on a roller coaster ride and the ride just keeps getting wilder!
4. If you are refinancing, know what the value of your home is, or at least an accurate estimate.  Remember LLPA's?  They can hurt when you find out you really have a loan-to-value ratio of 80% and not 50% that you wished for.  Also, know what you want to do with your refinance.  Is it just rate-and-term?  Are you taking cash out?  What do your credit scores look like?  When you choose your loan officer, have this discussion.  Know what your certain set of circumstances are and how those may affect the interest rate.  It will save your loan officer from having to deliver the bad news that you really can't get that wonderful rate unless you pay points and it will save you from frustration.
5. This one may sound bold, but here it is, anyway...Don't get too greedy.  You may miss the boat all together.  If you are waiting for rates to go down to 4.25% without closing costs, you most likely will never move forward.  Rates are at a historical low.  If it feels right and the payment fits, LOCK !

When most industries are boasting the paperless era, the mortgage industry continues to inundate our consumers with more paper!  Every year it seems that we are presented with new state and federal disclosures.  What do all these forms mean?

Well, here it is...Everything you wanted to know about mortgage documents, but were too afraid to ask!

The following descriptions are meant to be abbreviated explanations of lending disclosures.  Of course, I recommend that you read them in their entirety, ask your loan officer questions where they arise and seek professional counsel should you feel it necessary.

 Uniform Residential Loan Application (1003)

 The lender uses this form to record relevant financial information about an applicant who applies for a residential mortgage.  This form will represent the information shared in the interview concerning residence history, income, assets, liabilities, details of the proposed transaction and declarations about the applicant, his/her intentions and his/her past. 

Good Faith Estimate (GFE)

 This document is a written estimate of expected closing costs that a lender must provide a prospective home loan borrower.  Brokers and lenders are required by law to make as accurate an estimate as they can.

Truth In Lending (TIL)

 The purpose of the Truth In Lending Act (TILA) is to promote the informed use of consumer credit by requiring disclosures about its terms and costs in a standardized manner.  This document will show you your Annual Percentage Rate (APR) which is the cost of credit on a yearly basis, expressed as a percentage. This is required to be disclosed by the lender and it includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. APR Does not include title insurance, appraisal and credit report.

Borrower's Certification and Authorization

 This document affirms your application intentions, its accuracy, consequences of lying, and authorizes your lender or its assignee to verify your application information and modify the method by which your income may be documented for the purposes of loan processing and approval.

Credit Authorization

 This document allows your broker/lender to obtain and share your credit report with lenders, investors or other relevant 3^rd parties for the purpose of fulfilling your request for an extension of credit.

RESPA Servicing Disclosure

 The Real Estate Settlement Procedures Act (RESPA) requires the lender or mortgage broker to tell you in writing whether it expects that someone else will be servicing your loan (collecting your payments).  In this document, you'll find the lender's history of servicing and transferring servicing rights.

4506-T Request for Transcript of Tax Return

 This document authorizes your lender to obtain transcripts (i.e. Form 1040 series, Form 1065, Form 1120, Form 1120A, Form 1120H, Form 1120L, and Form 1120S) as well as supplemental filed materials (i.e. Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript) for verification and quality control purposes. 

Credit Score Information Disclosure

 In connection with your application for a home loan, the lender must disclose to you the score that a credit bureau distributed to the lender used in connection with your home loan, and the key factors affecting your credit scores.

Equal Credit Opportunity Act Notice

 The Equal Credit Opportunity Act (ECOA) ensures that all consumers are given an equal chance to obtain credit.  This notice informs you of that right and what to do if you feel you've been discriminated against.

Disclosure Notices

There are several elements to this disclosure.  It is an affidavit of your intention of occupying the property or not, a description of your rights under the Fair Credit Reporting Act, a reiteration of your rights and redress under the ECOA, a description of your right to privacy, an authorization to your current affiliates to release information to your lender for the purpose of compiling a mortgage loan credit package, an affirmation that your lender has not coerced you to use a specific insurance company and an affirmation that you received a copy of the Consumer Handbook on Adjustable Rate Mortgages, if applicable.

Fair Lending Notice

 The Fair Lending Notice outlines what constitutes different forms of illegal bias, prejudice and discrimination and provides contact information to federal agencies for further questions about your rights or whom to contact if you wish to file a complaint.

Patriot Act Disclosure

 Federal law requires all financial institutions to obtain, verify, and record information that identifies every customer.  This document simply informs you that we'll be collecting the required information to be in compliance with this act.

 Patriot Act Information Form

 This form gives you the option of which form of identification you'd like to use to satisfy the Patriot Act requirements.  Please choose the identification form that is most convenient for you and fill out the requested information.

Net Tangible Benefit...IMPORTANT!

 Loan officers in Minnesota are prohibited from brokering or making a loan that does not provide a borrower with a "net tangible benefit."  This disclosure outlines that this requirement exists and how the benefit is identified.

Ability to Repay the Loan

 Minnesota requires that consideration be given to a borrower's capacity to repay the loan that they are applying for.  This disclosure verifies this fact, affirms your income as represented by you or on your behalf to your lender and outlines the method by which they evaluate your capacity to repay the loan.  It also serves as a warning that, if you think you might not be able to afford this loan, that you should not proceed with the loan process.

Escrow Accounts

 Of late, many less scrupulous companies have disclosed terms of loan offers without representing the complete monthly payment that includes taxes and insurance.  This disclosure outlines how an escrow account works and shows our estimate, at this time, of what will be included on a monthly basis in your escrow account.

Whew!  Now that's a lot of language!  Always work closely with your loan officer, ask questions, read your mortgage documents and make sure you know what you are signing. 

 

 

Mortgage Rate confusion!!   

Here's the question...how low will rates eventually go?  This is an interesting question to say the least, in the current times.  We are currently experiencing a refinance boom in this country.  That's the good news.  The bad news: It is expected that at least 50% of all those interest rate locks will fall through.  In other words, thousands of homeowners have locked in their rates in hopes to refinance to a better position with their mortgage.  50% of these will not close...due to denials, low home values and a whole slew of other reasons.  How does this affect us?  Let me explain:

 When a consumer decides to lock in their rate, the lender is committing those funds on the secondary market.  When these locks expire or don't get fulfilled, the investor charges the lender a fee.  With 50% of the rate locks expected to fall through, this equates to big losses for lenders.  What can happen?  There is speculation that lenders may start charging a FEE to lock in an interest rate to protect themselves from the losses.  To the consumer, this may mean an upfront fee to lock or a fee that is incorporated into the rate.  So, even though rates may go very low, if lenders decide to charge this fee, the consumer gets to decide to pay the fee or take a higher rate to "bury" the fee.

Unbelievable!  It will be interesting in the coming weeks and months to see how lenders respond to the losses of thousands of unfulfilled rate locks.  No matter what, the consumer gets to pay. :(

Far too seldom do we recieve warm praises in this somewhat "thankless industry".  I have held several careers in my lifetime and this is bar-none, the most challenging of all.  Long hours, endless need for research and guideline changes almost every day.  I am the Financial Planner, the Accountant, the Researcher, the Preacher, the Teacher and the Psychologist all wrapped into one role of Mortgage Loan Consultant.

Nevertheless, it is bar-none the most rewarding career ever.  I am helping and changing people's lives on a daily basis.  I want to thank those who have taken a moment to give me their praises.  It makes those not-so-good days all worth it!  And yes, I am, for the first time ever going to toot my own horn on my blog!

I have had the good fortune to receive a string of kind words from clients:

My plans for refinance had changed at one point and in a moment's notice, I was back on the scene again. Let me start by saying that Sherri Sherpy was with me through the entire journey. I have been going through a divorce and this was one of those "evils" that I had to deal with. I received several good faith estimates and Sherri explained line by line the costs associated. Everything from setting up a new escrow account to why the numbers were the way they were. I DID NOT receive the same courtesies from others. Most of them showed the numbers to be very low. I would have been COMPLETELY surprised at closing and quite unhappy to say the least. Sherri also kept me abreast of the rates daily (sometimes more often than just daily) and I locked when it was great for me to do so. I just closed yesterday. She was fast, efficient and truly a consumer advocate. What a great teacher.

Annette  (12/31/2008)

I had been working with another lender. I had many questions. Sherri not only answered every single one of my questions with the most detail, but she answered them at all hours of the day and night. I am very impressed with her responsiveness and knowledge on financing. I look forward to working with Sherri as we find and purchase our new home.

Andrew Stettner  (12/28/2008)

What a breath of fresh air! I have recently spoken to two other loan officers (one from a big bank) and wondered, where do these people come from??? I like to work with local people considering I am spending this much money. Sherri's name was given to me and I gave her a call this morning. She answered EVERYTHING for me. She was very patient and took 45 minutes of her time to help me get through all of my concerns. The other two I had spoken to either beat around the bush or were a bit rude in answering some of my questions. Plus she has a great sense of humor! I am meeting her tonight at Starbucks and let me say, I definitely look forward to it!

Taylor  (12/11/2008)

From The MN Mortgage Mom, "Thank you SO much!"

When many of us cannot refinance to take advantage of the historical, low rates due to declining values,

Veterans are afforded some relief.  As they should be! 

If you currently have a VA loan, you are in luck. 

Consider this:

• NO APPRAISAL NEEDED.  It does not matter what the current value of your home is.  We will not require an appraisal.
• NO INCOME DOCUMENTATION.  That is right.  You can refinance your current VA loan into another and NOT supply any income or asset documentation

This is particularly unique when we consider our laws in MN.  One and a half years ago, laws were passed prohibiting any mortgage transactions with no income verification.  In other words, there are no longer any MN mortgages transacted without full documentation of income and assets.  Not true for MN VA refinance loans!

There are only a few guidelines to qualify:

• Must have a minimum 580 credit score
• Must have a current VA loan with no lates in last 12 months
• We must be able to pull a clear CAIVR (meaning you have no delinquent federal debt)

That is it!  If you haven't taken action and taken advantage of the very low rates, it may be a great time to do so now.  What a great way to bring in the New Year by saving some cash!

Ph: 612-363-1106

Email: ssherpy@minnmortgage.com

Web: www.sherrisherpy.com

 

 

I have heard and read a lot about the Cash for Keys programs that banks offer renters or current occupants after the home has been foreclosed on.  Cash for Keys is basically a monetary incentive that the bank will offer to the resident to move out by a certain date, thereby gaining possession of the property quicker and cutting losses.

To read a great article loaded with details on this, go to John Occhi's post, "I Don't Get It!  The Bank Forecloses on Their home and Then Pays Them To Move...Or Why Cash for Keys.

So what is Cash for Keys...with a twist?  Well, today I had lunch with a friend and was literally blown away.  Now some of you may read this and think, "Gosh, that's not so surprising."  But I was speechless and for those of you who know me, that is an anomaly in and of itself.

I knew my friend was not doing well.  He was plagued with over $100,000 in medical bills and the finances were going downhill fast.  He did not want to face foreclosure, so he called his mortgage companies (he had a 1st and 2nd mortgage) to see if something could be worked out. 

He called the 2nd mortgage company and asked if they would be willing to remove the lien from his house.  They were willing to do so for $5,000.  He did not have that kind of cash, so he then called the 1st mortgage company and asked if they would help.  Long story short, the 1st mortgage company paid the 2nd mortgage company the $5,000 to release the lien.  Then the 1st mortgage company turned around and paid my friend a good amount of money to "turn in his keys". 

No foreclosure process EVER took place. 

What blew me away the most?  On his credit report, the mortgage companies reported:

Mind boggling, but I am very happy for my friend!