New Rules Have Lenders Checking Credit Reports the Day of Closing

As of June 1, mortgage lenders began re-pulling credit reports of borrowers just before a loan closes. Lenders are looking to make sure the applicant has not incurred any new debt prior to closing the loan. The change in procedure is part of Fannie Mae's Loan Quality Initiative (LQI). The LQI encompasses many aspects of mortgage underwriting. Basically, FHA as well as Fannie and Freddie are making an all out effort to improve their loan quality for mortgage backed securities.
Why check credit? When someone buys a home, they also find themselves in the market for a new refrigerator, washer/dryer,  furniture ,ect. .                                                                                                                     Search Homes
  
Sometimes these purchases are financed with credit cards. When this happens the balance of the applicants credit card rises which will change their monthly payment and possibly their credit score. The already approved loan will have to go back to the underwriter to make sure they still qualify with the higher debt. Sometimes purchases for furniture and appliances are financed with a store credit card, or "12 months same-as-cash." These are still debts that show up on a credit report and may impact qualifying.
None of us want to find out the day of closing that a previously approved applicant no longer qualifies because they went on a shopping spree. Please advise your homebuyers that they should not be making any purchases with credit or acquiring any debt before their mortgage closes.
Dan Shaw,  People's Mortgage Company

if you are looking for that 2nd home call Linda Wieczorek AZhomes4u@gmail.com

Fannie Mae Increases Penalties for Borrowers Who Walk Away

Fannie cracking down on walkaways

'Strategic defaults' can lock buyers out of market for 7 years By Inman News, Thursday, June 24, 2010.
Fannie Mae says it will get tough on borrowers who engage in "strategic defaults," or walk away from a home that's worth less than what's owed on the mortgage even if they can afford to keep making their payments.
Economist Mark Zandi of Moody's Analytics has estimated that 9 million homeowners are "underwater" by more than 20 percent, making them more likely to consider a strategic default.
Fannie Mae said Wednesday that it will not only refuse to guarantee another loan for seven years if it has evidence that a borrower chose to default on their loan, and will seek to recoup losses in court through deficiency judgements in states that allow lenders such recourse.
There's a carrot-and-stick aspect to the new policy. Troubled borrowers who work with their servicer on foreclosure alternatives such as loan modifications, short sales, or deeds in lieu of foreclosure can be eligible for a new loan in two to three years if they can show extenuating circumstances such as job loss, illness or divorce.
"Walking away from a mortgage is bad for borrowers and bad for communities, and our approach is meant to deter the disturbing trend toward strategic defaulting," said Terence Edwards, Fannie Mae's executive vice president for credit portfolio management, in a press release (http://www.fanniemae.com/newsreleases/2010/5071.jhtml).
"On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time."
Under policy changes announced in April, borrowers may be eligible for a loan guaranteed by Fannie Mae within two years of a short sale or deed in lieu of foreclosure.
Those who can demonstrate extenuating circumstances such as a job loss will be required to make downpayments of at least 10 percent, and those who cannot must make 20 percent downpayments.
Fannie Mae usually requires five years for borrowers who have been foreclosed on to reestablish credit, but those who can demonstrate extenuating circumstances may qualify in as soon as three years.
Next month, Fannie Mae says it will instruct its servicers to begin monitoring delinquent loans facing foreclosure and issuing recommendations for cases that warrant the pursuit of deficiency judgments.
While Fannie Mae won't be able to obtain deficiency judgements against borrowers who default on their first loans in "non-recourse" lending states, in some of those states it might have recourse to seek deficiency judgements on refinance and home-equity loans.
In the 1930s, many states including California passed laws that barred lenders from suing homeowners who defaulted on their mortgages for losses above and beyond what lenders were able to recover when foreclosing on and reselling the borrower's home.
California lawmakers are considering a bill that would extend some protection from deficiency judgments for borrowers who refinanced their mortgages.

Exceptional real estate investment in Phoenix, HOW bout that FHA buyer!!

Phoenix, Arizona is one of the lowest priced housing markets in the West, with exceptional real estate investment opportunities.

But..... How bout that FHA BUYER!!! or shall we call them discouraged qualified buyers.

Not only are we seeing 7-10 offers on every decent low priced REO property, but of those offers about 50% of them are all cash. This has become a problem for the First time FHA buyer, who are constantly losing out to these cash bids.

Trying to sell lender owned homes to FHA buyers can be very frustrating, very time consuming and an extremely long process. Most of the REO listing in the MLS will say they accept FHA financing but when they have other offers for either Cash or Conventional terms it seem like the FHA offer is on the bottom of the pile.

Hopefully as banks release more of their foreclosed properties and the competition lessens as we approach the holidays, sellers will again start looking at FHA buyers. It's a shame that so many will miss out on the $8000 tax credit, lets hope for an extension there.

Fannie Mae Loosen Underwriting on Mortgage Refinance

This is a real PLUS ++++ Tho help everyone who needs to Refinance

By:Bill Rice | February 06, 2009
Fannie Mae has posted new guidelines for approving homeowners attempting to lower their loan payments with a mortgage refinance.
In a notice posted to lenders yesterday, Fannie Mae announced that they will drop some credit score qualifications, income documentation standards, and even waive the need for appraisals in some scenarios. Changes apply only to those loans owned or guaranteed by Fannie Mae.
Fannie Mae currently holds more than 40 percent of the $12 trillion US residential mortgages and is seeking to streamline the "back-log" of homeowners refinancing. According to Bloomberg reports, Fannie Mae spokesman Brian Faith indicated that this is an adjustment to allow homeowners to take advantage of near-record low interest rates.
Security analysts are concerned about potential harm to mortgage bond investors and insurers. Significant concern surrounds discussions of no-appraisal refinancing--concerns that borrowers with less than 20 percent home equity can forgo mortgage insurance. However, Fannie Mae anticipates using automated valuation models to screen appraisal waivers.
Fannie Mae's changes will allow homeowners to refinance up to 80 percent of the current value of their home with credit scores even below its current 580 minimum. The program will also lower income documentation requirements to a single current pay stub.
Fannie Mae Refi Plus program will expedite a majority of mortgage refinance applications that have surged on record low mortgage rates. This refinancing process will leverage Fannie Mae's automated risk assessment systems to validate market values and credit risk without traditional appraisals, inspections, and income documentation.
The streamlined Fannie Mae program, DU Refi Plus, will begin April 4, 2009. Statements from Faith estimate that this program will potentially aid millions of homeowners take advantage of record low mortgage rate to secure a lower payment