fannie mae

Risk-based Standards For Private Mortgage Insurers Could Restrict Leading

August 29, 2014 by Lance Mohr

A new federal regulation proposal could change the standards for private mortgage insurers resulting in a stricter lending process. The Federal Housing Finance Agency (FHFA) is proposing a risk-based evaluation for Fannie Mae and Freddy Mac insurer portfolios. The new analysis will ensure that each approved insurer has enough capital for claims under significant market stress.

Most of us remember when the housing market crashed almost 10 years ago. Housing costs dropped, new construction stopped, and private insurers’ financial strength ratings quickly vanished. Companies were placed in receivership by federal regulators while mortgage underwriting standards were tightened and FHA, VA, and other guarantee programs drained the majority of their market shares. Prevention similar events has become a major concern for the FHFA.

In turn, they have proposed that private mortgage insurers guaranteed by Fannie Mae and Freddy Mac be subject to a risk-based capital evaluation. An analysis would be required in situations where the homebuyer is making a down payment of less than 20%, debt-to-income ratios are greater than 43%, and mortgages that do not meet specific requirements. Given FHFA adaptation of these new standards, the capacity to underwrite new mortgages by private insurers may be limited but Director Melvin Watts insists there is “sufficient industry capacity to meet the needs of high-LTV borrowers.”

The FHFA’s plan, as a Fannie Mae and Freddie Mac regulator, is to shift the risk of market share loss back to private companies while protecting taxpayers from another bailout. The majority of FHA and VA guaranteed programs have cushioned their reserves by hiking up premiums and are now transitioning back to private companies while stymieing their underwriting capabilities through new risk-based evaluations.

Such a bold move on behalf of the federal government has received mixed reactions. Some companies are supportive of the proposal citing that compliance with the new regulation would not be an issue while others balk claiming restricted access to credit and decreased underwriting capabilities.

Inman News reported that most insurers who issued statements in response to the proposal agree with David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA) who stated “the proposed eligibility requirements are comprehensive and we will be conducting a detailed review of the standards to ensure they properly balance the need for strong capital, while preserving the ability of the industry to cost-effectively serve first-time buyers and working families.”

Before you start freaking out, please remember that this is simply and proposal and the FHFA is accepting comments on the draft proposal through September 8^th. Overall, do you think this is a step in the right direction or a step backwards, comment below.

Fannie Mae – Housing Recovery Remains Positive

March 21, 2014 by Lance Mohr

Many people have a bad taste in their mouths over the condition of the housing market over the last few years and even though the market seems to be rebounding, consumer attitude does not seem to be doing the same. Many of the industry experts expect that home prices will rise in the next year. While some reports indicate that weather could have played a role in some states with an extended winter, others are noting that consumer attitudes are just not the same as they were a few years ago. After surveys showed how consumers feels about buying a home in January showed that confidence is falling, which has been that same way for the last four months.

Housing Recovery Expected to Press On Despite Recent Volatility in Consumer Attitudes
“Americans' outlook on housing and the economy has fluctuated somewhat during the past few months, but the trend for most indicators remains positive overall, according to Fannie Mae’s February 2014 National Housing Survey results. Notably, respondents' home price expectations climbed significantly in February – with 50 percent saying home prices will go up in the next year – following a measurable downturn in January, while the share of those who believe it is a good time to buy a home ticked up by 3 percentage points. At the same time, those who believe that it would be easy to get a mortgage dropped 7 percentage points from January's all-time survey high of 52 percent. Additionally, the share of respondents who say the economy is on the wrong track increased 3 percentage points to 57 percent in February, following a four-month decline. Despite a decrease in optimism across some of the indicators last month, consumer attitudes remain in generally positive ranges.

“Similar to the noisy economic and housing data published over the past few months, we've seen a corresponding increase in volatility in our survey results, particularly for home price expectations and perceptions about the ease of getting a mortgage,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.”

In summary, the attitudes of the consumers are certainly going to play a role in how the housing market changes in the near future. When consumers feel that the economy is picking up and the time to buy a house is now, home sale rise while repossessed homes tend to dip during those times. On the other hand, when consumers feel that the housing market is not worth getting into because of a sliding economy, the market falls and foreclosures might even pick up a bit for a month. The consumer attitude is important to the housing market because they are the ones that hold the cash. If money is not being exchanged, the overall market sees that in more ways than one.

Homeowners – How HARP Can Save You 1,000’s of Dollars

November 6, 2013 by Lance Mohr

My wife and I did a HARP refinance on our Fannie Mae owned mortgage and we saved around $225 per month. This was after we re-amortized our mortgage. I did not want to through 6 years of making mortgage payments out the window by amortizing the loan over 30 years. HARP is a great program but you need to get with the right lender that is looking out for your best interest and find you the best bank to go through.

How HARP Can Put Money in Your Pocket
“Is your house underwater? Did it lose value during the last recession? Could you use a few extra thousand dollars next year?

If you said “yes” to one or more of these questions, then you probably haven’t taken advantage of the Home Affordable Refinance Program (HARP). The federal government launched HARP in 2009 to help eligible homeowners with mortgages owned by Freddie Mac or Fannie Mae save money by refinancing into low-interest loans despite a drop in the value of their home.

As of August 2013, HARP has saved approximately 2.9 million homeowners as much as $12 billion a year on their mortgage interest payments. It’s estimated that new HARP borrowers who refinanced into Freddie Mac mortgages during the first nine months of 2013 reduced their mortgage interest rates an average of 2 full percentage points, from about 6.1 percent to 4.0 percent. (In some states, such as Texas, the average HARP borrower’s interest rate fell by 2.7 percentage points.)”

Here’s a good explanation of the HARP program by DuPage Credit Union.

If you mortgage is owned by Fannie Mae or Freddie Mac I would strongly suggest calling a mortgage broker. You want to have the mortgage broker shop each bank because each bank may offer a little different program. When I did my HARP refinance my lender found a bank that paid all off my closing costs. Not just some of the costs.

Friendlier Short Sale Guidelines Now in Effect

November 13, 2012 by Lance Mohr

The Federal Housing Finance Agency (FHFA) has made November 2012 a month to remember as it steps up the pace for short sale approvals. The benefit of this type of sale is the limited loss by lenders, homeowners, taxpayers and the Federal government. Changing the guidelines to allow some leeway for qualification is a boon for working Americans who have been struggling to pay on their home in Tampa or elsewhere in the United States.

The opportunity to qualify for a short sale rather than defaulting on a mortgage has been a problem for many trying to keep their mortgage payment current. New rules affecting Freddie Mac and Fannie Mae short sale mortgages will enhance more equitable treatment of borrowers. Several prominent mortgage servicers will have approval authority of short sales. There will be no requirement for a sign off by Freddie Mac or Fannie Mae.

Mortgage Guaranty Insurance Corporation and Essent Guaranty Inc. are two of those companies affected by the change. The senior vice president of servicing and REO at Freddie Mac, Tracy Mooney, noted the primary role the mortgage insurers are playing by allowing more foreclosure alternatives such as short sales to take place. Taxpayer losses are reduced while the housing market recovery continues to improve.

The definition of financial hardship has been expanded. Fannie Mae and Freddie Mac mortgages are eligible for short sale upon a proven hardship, even if the mortgage is current. That includes a divorce, disability, or the death of a co-borrower or borrower. In the event of a new job or job transfer at least 50 miles away from the current home, a hardship is now considered to exist.

Military personnel permanently ordered to another duty station now qualify for short sales. Monetary penalties, including the cash contribution promissory note, are now eliminated.

There are more cases excluded from the pursuit of deficiency judgments by Freddie and Fannie. In addition, borrowers will be evaluated by servicers. Other guidelines have been designed to turn the short sale process into one uniform program. All in all, it is a positive step towards recovery.

View all short sales in Tampa Bay at Tampa2Enjoy.

The Freddie and Fannie Bail-Out: What It Means to You

September 22, 2008 by Lance Mohr

image of fannie mae By the time you are reading this, chances are high that the U.S. government will have finalized the details of the upcoming – and much publicized – Fannie and Freddie “bail-out” but few real estate buyers or sellers have much understanding of how it impacts them personally.

Other than those who have invested directly in Freddie or Fannie, there is still cause for concern or congratulations depending upon your stance. A few things are certain;

1. Freddie and Fannie are considered “too big to fail”. Combined, these two giants guarantee funds for over half of all mortgages in the nation. This guarantee is what allows many banks to offer low interest loans to those who would otherwise not qualify. Without the guarantee, interest rates would rise, required down payments would increase dramatically and credit would become more difficult than ever. Resulting in fewer potential buyers; making it more difficult to buy or sell Tampa real estate. As it is, the other have of privately under-written mortgages continue to struggle leading to an upcoming credit crunch.

2. Critics point to the fact that the U.S. government will be “nationalizing” mortgages by becoming the lender of last resort for more than half the mortgages in the nation. While the exact details of the bail-out remain to be seen, what is certain is that the federal government is adding several trillion dollars to the national debt in order to bankroll this plan.

3. Still won’t stop the credit crunch. While the proposed bail-out will stop the bleed of current mortgages and free up funds to allow underwriters to originate more mortgages, it does nothing to assist the private banks with risky mortgages on the books. Plan to see more banks join the ranks of Countrywide as they write-off risky mortgages and continue to tighten lending standards.

4. Perhaps the most important – and more controversial – aspect of the bail-out is the purchase of preferred stock versus common stock. Most analysts agree that the current plan will provide protection for preferred stock (ie, China and other large investment funds) while allowing common stock to float with the market (resulting in billions of dollars of losses). When the news is finally released, look for the winners and losers to find out what the long term impact will be. If China and other large investors experience significant losses then it could result in dramatic constraints in the money supply, interest rates and underwriting experience for years to come. If smaller investors are hit with massive losses it could impact the stock market and national financial news during a time when consumers are frightened about their financial future.

The Bottom Line: The mortgage and real estate industry are undergoing dramatic changes with long term potential impact. Anyone interested in Tampa homes for sale should keep a close eye on the mortgage events ; missed opportunities like these might take years to present themselves again.

The Freddie-Fannie Fiasco and Tampa Real Estate

July 22, 2008 by Lance Mohr

By now everyone in the nation has heard about the government proposal to “bail out” Freddie and Fannie after the recent financial fiasco but Tampa house investors and home buyers may not fully recognize the implications for their own financial future. Here to help sort it all out is a short primer on the good, bad and ugly of the Freddie/Fannie fiasco.

The Good

While there is a great deal of controversy about the proposed “bail-out” one thing is certain; without Freddie and Fannie the future of the mortgage industry would be bleak indeed. Combined, Freddie and Fannie underwrite over 50 percent of all mortgages and nearly 70 percent of some types of “ordinary” and sub-prime mortgages. The average buyer would find it increasingly difficult to obtain a mortgage of any type in the future should Freddie and Fannie fail. Stabilizing the mortgage industry is good for future buyers and sellers (after all, you need someone to buy a home and most people will need a mortgage to complete the sale).

The Bad

Critics of the rescue plan point to the moral hazard of guaranteeing funds for share-holders and others who invested or speculated in the market. Most investments are inherently risky – that is why there are prospectus sheets to read; employees of Enron, Worldcom and other financial investments gone bad were left to suffer the losses just like millions of people do each and every year. It is what the free market and enterprise is made of so why the decision to add to the financial burden by bailing out shareholders as well? The “moral hazard” argument has many vocal advocates but is unlikely to result in more than hurt feelings since the government has made it clear the quasi government duo are “too large to fail”.

The Ugly

Whether you agree or disagree with the decision to bail-out Freddie and Fannie there are several long term implications for the future that every Tampa real estate investor and home buyer should be aware of:

1. Rising inflation. A Falling dollar, rising fuel costs, wars and now one of the biggest bail-outs in recent history are adding to the rapidly rising rate of inflation. Inflation eventually leads to everything costing more –including the cost to build new homes. While the price of real estate may continue to decline rising interest rates and escalating inflation are set to offset any gains.

2. Mortgage limits. It seems likely that the rumors of limiting mortgages from ten – to four or less – is likely to take place in the more restrictive lending environment proposed after the bail-out. This could potentially impact Tampa real estate investors who desire to use mortgages to purchase single family homes as part of their investment portfolio.

3. Tighter standards. Tighter lending standards lead to larger down payments, higher interest rates and greater difficulty acquiring a mortgage. Potential buyers are likely to find it increasingly difficult to obtain favorable rates in the future.

4. Legislative oversight. One of the most controversial provisions of the bail-out is the long list of legislative oversight which will be required of financial institutions in the future. Although all the details are not finalized, the current trends strongly suggest the move toward greater government intervention, restrictions and quality control measures sure to impact the industry for years to come.

If you have any questions about the Tampa real estate market or New Tampa, FL homes for sale please give me a call at 813-317-4009.

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fannie mae

Risk-based Standards For Private Mortgage Insurers Could Restrict Leading

Fannie Mae – Housing Recovery Remains Positive

Homeowners – How HARP Can Save You 1,000’s of Dollars

Friendlier Short Sale Guidelines Now in Effect

The Freddie and Fannie Bail-Out: What It Means to You

The Freddie-Fannie Fiasco and Tampa Real Estate

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