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FEDERAL Housing Administration mortgages, the government-insured loans that have surged in popularity in recent years, will be getting slightly more expensive this spring.

The F.H.A. announced this month that it was raising the annual mortgage insurance premium for borrowers by a quarter of a percentage point — to 1.1 or 1.15 percent of the loan amount for 30-year fixed-rate loans, and 0.25 or 0.50 for 15-year or shorter-term loans.
The higher premium applies to F.H.A. loans taken out on or after April 18.


The agency called the change a “marginal increase” that would be “affordable for almost all home buyers who would qualify for a new loan.”

But industry experts say that some consumers, especially those considered marginal borrowers, may now be prevented from buying or refinancing a property.
The annual premium for 30-year loans was already changed in November, to 0.85 percent or 0.9 percent; the level used to be 0.50 percent or 0.55 percent. (The annual premium for 15-year or shorter-term loans, previously zero to 0.25 percent, did not change at that time.)
“It’s going to make fewer people qualify” for the loans, said Michael Moskowitz, the president of Equity Now in New York. “It’s the equivalent of a quarter-point increase in interest.”
The increase does not apply to F.H.A. loans already in place, or to F.H.A. reverse mortgages or home-equity conversion (HECM) loans.
According to the housing administration, the new rate structure would raise the cost of a $157,000 mortgage, a typical F.H.A. loan amount, by about $33 a month, or $396 a year.

The agency requires that all borrowers of loans it insures pay the premium.

Consumers with non-F.H.A. loans who put down less than 20 percent are typically required by their lenders to take out private mortgage insurance, to insure the lender against the risk of default.
F.H.A. loans are typically taken out by those who cannot qualify under the stiffer down-payment and credit-score requirements of Fannie Mae or Freddie Mac, the government-controlled buyers of most loans.
The housing agency requires at least 3.5 percent, while Fannie Mae typically requires 5 to 15 percent, or more. Last November, F.H.A. began requiring a minimum credit score of 500, and for credit scores below 580 — a level at which Fannie and Freddie do not back loans — a 10 percent down payment.
Last year, more than 19 percent of all residential mortgages, and more than 30 percent of all home purchases, were made with F.H.A. loans.

In 2005, F.H.A. loans made up just over 4 percent of residential mortgages, and nearly 5.6 percent of home purchases.
Since the mortgage crisis began in 2008, “F.H.A. has been the only haven for borrowers,” said Sean Welsh, a senior loan officer at Campbell Financial Services in West Haven, Conn.
But the agency’s capital reserves have fallen below levels mandated by Congress, which is why the rise in the annual insurance premium was authorized.
Mr. Welsh said the increase, while “not too bad,” was still “additional pain” atop the November change.
F.H.A. loans used to be the province of niche lenders, but in recent years big banks have entered the market in a big way.
In fact, Wells Fargo recently lowered its minimum required credit score for an F.H.A. loan to 500 from 600. The bank also reduced its required debt-to-income ratio, or the amount of a borrower’s gross monthly income that can go toward paying off debt, to 43 percent.

For lower-credit F.H.A. borrowers, the bank raised its minimum down payment to 10 percent.
“We don’t anticipate a significant impact on individual consumers from the mortgage insurance premium hike,” said Tom Goyda, a Wells Fargo spokesman. “F.H.A. is still an important source of funding for first-time home buyers and those who don’t have a lot for a down payment.”

By Lynnley BrowningFor more: http://nyti.ms/eqMIIf

Question:

Mike, there are some foreclosures we can not bid on because it goes to potential homeowners first. Isn’t that discrimination? Can they get by with it?

Thanks Mike,
Farril

 

ANSWER:

Great Question Farril. Sorry, but you lose on this one.

HUD has been doing since I started investing decades ago.

“Investors Are NOT a Click Here for Full Video/Article (Members Only)

Freaked by the housing market , more would-be home buyers are opting for rentals driving rents up along the way.
But it’s not just rising rents that new renters have to worry about. A handful of new costs could make renting less than the bargain it appears.
The average national vacancy rate for rentals fell 17% last year to 6.6%, according to Reis, Inc., which tracks rental performance data. And as renting has gotten more popular, prices have jumped.
The average monthly rent, including studios, one- and two-bedroom apartments is now $986, based on Reis data. Before the recession, the average was just $930.
And in some markets, it’s far worse: In New York, rents are up 9% on average in the last five years; in San Jose, they’re up 8%.
The market is only likely to get tighter.
For the first time in memory, the federal government is actively encouraging people to rent, rather than buy.
The Obama administration’s recent housing proposal calls for Click Here for Full Video/Article (Members Only)
STARTING April 1, under a new compensation rule from the Federal Reserve, borrowers who get their mortgages through brokers will most likely pay less for their services and must be offered the lowest possible interest rate and fees for which they qualify.
The new rule also affects those dealing with small banks and credit unions, which typically do not fund loans from their own resources. But most banks and other direct lenders, including the few mortgage companies that function like banks, are exempt.
The new rule is known as the Loan Originator Compensation amendment to Regulation Z, part of a strengthened Truth in Lending Act passed by Congress in 2008.
Designed to prevent consumers from being steered into high-cost, risky loans, it covers how a loan originator — or any person or company that arranges, obtains and/or negotiates a mortgage for a client — is paid.
Under the new rule, a lender can no longer pay a loan originator a lucrative rebate known as a yield-spread premium, which is tied to the rate or terms of the mortgage. Banks and other lenders can continue to pay commissions to brokers, but these payments must now be based solely on the loan amount.
In the past, the higher the interest rate and points, the more money a broker stood to earn.

Brokerage firms typically earn a yield-spread premium of 1.5 to 2.5 percent of the loan amount, with higher-rate loans paying closer to 2.5 percent. The brokerage and its broker, or loan officer, typically split the rebate.
On a $400,000 loan at 5.25 percent, that might total $8,000, based on two points paid, with a point being 1 percent of the loan amount.
In the new system, the brokerage can earn a fixed commission from the lender, but the amount is not tied to the loan terms.
Also, the brokerage cannot pass on a part of the commission to the broker, who must now be paid an hourly wage or salary.
The exception is for loans where the lender pays the borrower’s points to the brokerage, typically for higher-rate loans. (The commission range is expected to be 1.5 to 2.5 points.)
It is also forbidden for a loan originator to collect payments from both the consumer and the lender in a single transaction.
If a broker is paid a commission by a lender (based on the loan amount), he or she cannot also charge the consumer points, or fees for application or processing.
The consumer will still, however, need to pay the broker for third-party services like appraisals.
An exception to the new rule involves lenders who finance mortgages in their own names from their own resources, a practice known as warehouse-lending, and then sell the loans to investors like Fannie Mae. The exception also applies to other companies that fund mortgages from their own resources.
Some mortgage companies originate and close mortgages in their own names through funds from third parties, typically other banks — a practice known in the industry as table funding. The new rule applies to them as well.
Thomas Martin, the president of America’s Watchdog, called the rebates “a rip-off” and said the Fed rule was “very welcome.”
Brokers who match consumers with lenders argue the rule undercuts the value they offer consumers. “It unfairly makes these brokers less competitive” against the big banks, said Mark Yecies, an owner of SunQuest Funding, a mortgage broker and lender in Cranford, N.J. “I will now get paid the same amount to process a plain-vanilla loan as I will a complex loan of equal size that requires more work.”
He added that “bigger banks will capture a bigger percentage of the origination market, and they will raise rates.”
Mike Anderson, a director at the National Association of Mortgage Brokers, said that the rule would “likely put a lot of independent brokers out of business.”

But the Mortgage Bankers Association says brokers would still be competitive with banks because many consumers like to work with brokers, and banks cannot handle all of the business.
by Lynnley Browning
For more: http://nyti.ms/gS6OHz

New Fed Rule for Mortgage Brokers
STARTING April 1, under a new compensation rule from the Federal Reserve, borrowers who get their mortgages through brokers will most likely pay less for their services and must be offered the lowest possible interest rate and fees for which they qualify.
The new rule also affects those dealing with small banks and credit unions, which typically do not fund loans from their own resources. But most banks and other direct lenders, including the few mortgage companies that function like banks, are exempt.
The new rule is known as the Loan Originator Compensation amendment to Regulation Z, part of a strengthened Truth in Lending Act passed by Congress in 2008. Designed to prevent consumers from being steered into high-cost, risky loans, it covers how a loan originator — or any person or company that arranges, obtains and/or negotiates a mortgage for a client — is paid.
Under the new rule, a lender can no longer pay a loan originator a lucrative rebate known as a yield-spread premium, which is tied to the rate or terms of the mortgage. Banks and other lenders can continue to pay commissions to brokers, but these payments must now be based solely on the loan amount.
In the past, the higher the interest rate and points, the more money a broker stood to earn.
Brokerage firms typically earn a yield-spread premium of 1.5 to 2.5 percent of the loan amount, with higher-rate loans paying closer to 2.5 percent. The brokerage and its broker, or loan officer, typically split the rebate. On a $400,000 loan at 5.25 percent, that might total $8,000, based on two points paid, with a point being 1 percent of the loan amount.
In the new system, the brokerage can earn a fixed commission from the lender, but the amount is not tied to the loan terms. Also, the brokerage cannot pass on a part of the commission to the broker, who must now be paid an hourly wage or salary. The exception is for loans where the lender pays the borrower’s points to the brokerage, typically for higher-rate loans. (The commission range is expected to be 1.5 to 2.5 points.)
It is also forbidden for a loan originator to collect payments from both the consumer and the lender in a single transaction. If a broker is paid a commission by a lender (based on the loan amount), he or she cannot also charge the consumer points, or fees for application or processing. The consumer will still, however, need to pay the broker for third-party services like appraisals.
An exception to the new rule involves lenders who finance mortgages in their own names from their own resources, a practice known as warehouse-lending, and then sell the loans to investors like Fannie Mae. The exception also applies to other companies that fund mortgages from their own resources.
Some mortgage companies originate and close mortgages in their own names through funds from third parties, typically other banks — a practice known in the industry as table funding. The new rule applies to them as well.
Thomas Martin, the president of America’s Watchdog, called the rebates “a rip-off” and said the Fed rule was “very welcome.”
Brokers who match consumers with lenders argue the rule undercuts the value they offer consumers. “It unfairly makes these brokers less competitive” against the big banks, said Mark Yecies, an owner of SunQuest Funding, a mortgage broker and lender in Cranford, N.J. “I will now get paid the same amount to process a plain-vanilla loan as I will a complex loan of equal size that requires more work.”
He added that “bigger banks will capture a bigger percentage of the origination market, and they will raise rates.”
Mike Anderson, a director at the National Association of Mortgage Brokers, said that the rule would “likely put a lot of independent brokers out of business.”
But the Mortgage Bankers Association says brokers would still be competitive with banks because many consumers like to work with brokers, and banks cannot handle all of the business.

by Lynnley BrowningFor more: http://nyti.ms/gS6OHz

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The Do’s and Don’ts When Handing Out Rental Application to a prospect and the fatal mistakes many investors, landlords, and property managers make when the applicant submits their application to you.

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