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Very Important Update Regarding FHA Financing

Here is the latest information on FHA Mortgage Insurance increases:

FHA publishes MIP changes ( http://bit.ly/acon4I )

Main points:

• • • Effective for case numbers assigned on or after October 4^th, the new MIP structure will be implemented.
    • Upfront premium will be 1% for all forward mortgages (purchases and refinances including streamlines)
    • Annual premium
      • Over 15 year terms
        • 90 bps for LTVs over 95%
        • 85 bps for LTVs of 95% or less
      • 15 year term or less
        • 25 bps for above 90% LTV
        • No annual premium for 90% LTV or less

So what does this mean for you and your clients?

On a $200k loan amount at today’s annual FHA MI rate is $91.67 per month in mortgage insurance (MI).

On a $200k loan amount at the new annual rate is $150.00 per month, an increase of $58.33 per month.

On the surface, a reduction in the upfront MI sounds like a nice trade off for the increased annual mortgage insurance right?  Well…let’s take a look at that.  On a $200k loan amount that reduces the upfront MI by $2,000 that was rolled into the loan so it reduces the P&I payment by about $6.00 per month.  Sounds good so far right?

But with the increased annual MI the overall PITI payment goes up by more than $52.00 per month.  Over the next 10 years, before that MI drops off on it’s own, the buyer will pay over $6,000 in additional annual mortgage insurance premiums.

Since mortgage insurance is a pure finance charge that directly increases the APR, it essentially and very directly increases the cost of financing to your buyers.  Not to mention the increase in the debt to income ratio which could have some clients looking for a less expensive house or simply not qualifying to buy.

This basically makes the cost of FHA financing for the buyer more than $4,000 higher in the first ten years.  And if that isn’t a new tax, I don’t know what is.

This change is set to take place for FHA case numbers assigned on or after October 4th, 2010.  October 4th is a Monday.  Make sure your case number is assigned by Friday October 1st, 2010 to avoid the increase.

Please feel free to call me with any questions.  If you find this information to be a great reason to contact your database, I always appreciate your referrals.

Spencer Anglin.com | NMLS# 226533
Velocity Financial, LLC | Office Map | Phoenix Homeowner’s PIT Stop Blog
O: 480.287.5719 | C: 602.705.6293 | F: 1.866.589.5742
Click here for the HUD Cost Settlement Booklet

Watch The Video – Milton Friedman:  Liberty and Equality?

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Wouldn’t you do your taxes with a CPA if it was the same price as Turbo Tax?

Is YOUR loan originator licensed?  Find out here:
NMLS License LookupI am sure you have heard about this by now, but if you have not let me share again.

Effective July 1, 2010 all Mortgage Bankers and Mortgage Brokers in the State of Arizona were required to have their loan originators licensed.

Now based on an exemption in the laws the big Interstate Chartered Banks do not require their loan originator working for a big bank such as Chase, Wells Fargo and Bank of America to be licensed.

This is because, compared to the mortgage brokers, the chartered banks have lots more money to spend on lobbyists that get Congress to write laws in their favor.  This has happened for decades.  Banks do not like mortgage brokers because mortgage brokers give consumers more choices and creates more competition.  Which we all know is much, much better for the consumer.

Now I am not trying to make this into a David versus Goliath story, but I am trying to emphasize the huge differences and implications this change will have on the consumer.

Here is a chart to show the differences:

SAFE ACT AZ LO’s Chartered Bank LO’s Licensed Yes No FBI Background Yes No Fingerprinted Yes No Assurity Bonded Yes No 20 hours upfront education Yes No 8 hours continuing education Yes No Credit checked Yes No Fed and state testing Yes No Complaint mechanism w/ DFI Yes No Licensing  fees and renewals Yes No

So I think the choice is clear.  The funny part is the cost for the service based on rates and fees are about the same.  The best analogy I can use is having a choice of working with a CPA vs. Turbo Tax but paying the same price.

Spencer Anglin.com | NMLS# 226533
Velocity Financial, LLC | Office Map | “Whatever it takes…and then some.”
O: 480.287.5719 | C: 602.705.6293 | F: 1.866.589.5742

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HUD Comment Period: “Required Use” Affiliated Business Arrangements

<<< Call To Action >>>

Please take some time to comment to HUD during the comment period on “Required Use”.  I would also recommend reading this extremely informative blog from Bob Willett of Sacramento, CA: http://sacrelender.com/?cat=41

From National Association of Independent Housing Professionals (NAIHP):

Affiliated Business Arrangements:

“As many of you know, RESPA Reform originally contained a provision prohibiting the “required use” of specific settlement service providers, where discounts and/or incentives were offered. HUD was forced to withdraw that provision last year, after the National Association of Home Builders filed suit in objection.

HUD is again exploring language to clarify “required use” and is asking for your comments.

To be perfectly clear, NAIHP is NOT opposed to Affiliated Business Arrangements. Our concerns pertain to consumers forced to use certain settlement service providers, as a condition of receiving discounts and/or incentives. Research has shown these discounts and incentives are frequently made up elsewhere in the transaction, often by higher interest rates and closing costs.

Please click on the link below and give HUD your comments. If you have personally witnessed harm to consumers, please give them this information. You can upload supporting document attachments.

We support consumer incentives and discounts, PROVIDED consumers are NOT required to use specific mortgage companies, title companies, or any other settlement service providers to obtain them. One stop shops often eliminate competition and provide no benefit to consumers.”

You can comment by clicking here to comment:  CLICK HERE

Here is what I wrote to HUD if you are looking for talking points:

“Required Use” Clarification –

My concerns pertain to consumers forced to use certain settlement service providers, as a condition of receiving discounts and/or incentives. Research has shown these discounts and incentives are frequently made up elsewhere in the transaction, often by higher interest rates and closing costs.  Furthermore, this hinders competition which, in turn, leads to a reduction in consumer choice which ultimately leads to increased costs for the consumer.  One only needs to see the increased costs of appraisals due to the implementation of the Home Valuation Code of Conduct (HVCC) to see how lack of consumer choice increases costs and provides no benefit to the consumer.

In addition, if a home builder has “required use” for a lender that is a bank (IE: Wells Fargo, BofA, etc) then they are under even less scrutiny to provide transparency because the lending institution is not required to disclose the service release premium (SRP) to the consumer.  SRP is exactly the same thing as yield spread premium (YSP) which is credited to the consumer on broker transactions.  This is even more detrimental in providing accurate information and choices to the consumer.

Basically, if “Joe Schmo” seller trying to sell his home in the resale market cannot do it, why should a builder, bank (REO homes) or any other seller be allowed to dictate through “required use” incentives where any buyer receives their services?

This leveling of the playing field needs to happen on the services and lending side in order for consumers to get a truly fair deal from lenders and other service providers.  Providing consumer choice is the only way to truly protect the consumer.

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New Listing Presentation For Agents

Be sure to check out the latest in online property marketing technology!  Then comment below and tell me what you think.

Watch the presentation at:
www.AZRealtorAdvantage.com

Brought to you by Spencer Anglin, NMLS# 226533
Is YOUR loan originator licensed?
Find out here:  License Lookup
www.SpencerAnglin.com 602-705-6293