Schafer Mortgage

Record setting increase in October existing home sales

2009-11-23T07:15:00.000-08:00

The consensus estimate for October existing home sales numbers was + 1.4%. This morning's report indicates an increase of +10.4%. This is great news for our industry.

Mortgage Backed Securities

2009-11-19T13:20:00.000-08:00

Last week the Federal Reserve stepped in with more buying of Mortgage Backed Securities (MBS), helping Bond prices recover from news of a weak Treasury Auction. Overall, home loan rates bounced around last week and ended the week very slightly improved.

The Fed's purchase of MBS will end in March 2010.

Homebuyer Tax Credit Passes in a Landslide

2009-11-06T07:28:00.000-08:00

On Thursday, Congress authorized the extension of the Homebuyer Tax Credit. The vote was 98 - 2 in the Senate and 412 - 12 in the House. The President's signature is expected within the coming days.

While I had little doubt that Washington would overlook the impact of the tax credit and therefore fail to extend, it must be noted that the overwhelming support in Congress can be directly attributed to the "Invasion of Normandy" style mobilization of the National Association of Realtors and it's members lobbying efforts.

Conventional / FHA / VA Minimum Credit Score moves up to 620 and DTI 45%

2009-11-02T13:42:00.000-08:00

Some of you may be surprised by this announcement with regard to the credit score, as it's been the policy for Home Team for quite sometime now. The DTI is a new piece however. I'll explain...

Fannie Mae provides all originators with a software piece called "Desktop Underwriter." You've heard me refer to "DU" as an "AUS" which is another cute acronym representing "Automated Underwriting System." Essentially what DU does is to receive all the details of a loan file from the originators "Loan Origination Software" or "LOS" and test all the information against every written Fannie Mae guideline. Did I mention it does this in seconds?

Although Home Team changed it's policy long before now regarding credit score, that change was based on our agreement with the investors who buy the loans we originate. Effective December 12th 2009, the Fannie Mae AUS known as DU will be updated to version 8.0. Version 8.0 is programmed to find loan files with credit scores below 620 as "ineligible" for delivery to Fannie Mae. This means Fannie Mae will not "buy" or pay any investors to service loans with a score below 620 and therefore no investor will buy such a loan.

DU 8.0 will also find, regardless of credit score, any loan file containing a "DTI" (Debt To Income) ratio greater than 45% ineligible for delivery. DTI is defined as the total of all debts plus the new PITI, divided by the total eligible income. DU will consider "very strong" compensating factors and may allow 50% DTI in such a case.

Analysis, lower DTI ratios are the big deal here. Almost no one is still doing scores under 620 and won’t be after 12/12. However, I have done a significant number of high DTI ratio loans this year with FHA. I've closed 3 loans this month that would not be approved if submitted after 12/12.

If you have buyers that have been pushing for higher home prices, we need to get them on contract and closed before 12/12.

Homebuyer Tax Credit Extension All But A Done Deal - Waiting For Final Vote

2009-10-29T14:16:00.000-07:00

The US Senate announced today the terms of the extension of the FTHB Tax credit...only now it's just called the Homebuyer Tax Credit. Details below:

• First-time homebuyers will continue at $8,000 -- same definition as current law.

• Tax credit for “move up” purchasers will be up to $6500. Homeowner must have used previous home as a principal residence for 5 of the 8 previous years.

• Income limits increased and are the same for first-time and “move up” purchasers: $125,000 for single filers/$225,000 for joint filers

• Limitation on eligible home prices has been increased to $800,000

• Time Frame: December 1, 2009 to April 30, 2010 plus 60 day extension if binding contract is in place by April 30, 2010

• Anti-fraud measures have been added

This is great news for our industry going into the holidays and I am glad there will be anti-fraud measures. I will update you when those details are set and available.

Federal Regulators Take Over 7 More Banks - 2009 Total Year To Date 106

2009-10-27T14:15:00.000-07:00

Last Friday the US banking system broke a 17 year standing record for number of bank failures in a single year. With the seizure of 3 Florida based banks (Partners Bank, Hillcrest Bank Florida and Flagship National Bank) in Naples and Bradenton Florida and 4 others: American United Bank of Lawrenceville GA., Bank of Elmwood in Racine Wisconsin, Riverview Community Bank in Otsego, Minnesota and First Dupage Bank of Westmont Ill. FDIC estimates 416 currently at risk of failure.

FDIC estimates the cost this year alone of bailing out failed banks tops $25 billion and expects to pay out $100 billion through 2013. FDIC is asking the healthy banks to pay 3 years premiums in advance totaling $45 billion dollars to help ease the strain.

Dont worry too much, FDIC has a blank check at the Treasury up to $500,000,000,000 (there are those pesky zeros again).

Capmark Financial Group (Formerly Known As GMAC Commercial Holdings Corp.) Files For Chapter 11 Bankruptcy Protection

2009-10-26T16:04:00.000-07:00

Capmark is (was?) one of the largest equity real estate and mortgage - related investment managers with $3.49 billion in investments under management and has a global commercial mortgage servicing portfolio of more than $288 billion. There's just one little problem...they have $21 billion in debt and only $20 billion in assets.

The plan seems to be that Berkshire Hathaway and/or Leucadia National will but or share in the servicing portfolio. Capmark is heavily in debt to Citibank, Deutsche Bank and Wilmington Trust.

History -

In March 2006 GM divested itself from GMAC Commercial Holdings selling to Goldman Sachs, KKR and Five Mile Capital Partners for 1.5 billion in cash and pay off of all intra-company debt owed GMAC. All in, the deal came to $9 billion. GM retained 21% interest in the new entity, Capmark.

You might remember that in December of '08 the Fed Reserve Board voted 4 to 1 to allow GMAC to transform itself into a bank holding company. In that same month, GMAC drew $5 billion from the TARP. Nice to see that money was put to good use.

ResCap Holding is the parent for GMAC Mortgage, GMAC RFC (Residential Funding Corp), Ally Bank, DiTech.com and Homecomings Financial.

Uncle Sam Sets Record For Debt Offering This Week - $123,000,000,000

2009-10-26T13:48:00.000-07:00

This week the Fed will have a four part, four day Treasury auction.

• Monday $7,000,000,000 - 5 Yr Inflation Index Securities

• Tuesday $44,000,000,000 - 2 Year Notes

• Wednesday $41,000,000,000 - 5 Year Notes

• Thursday $31,000,000,000 - 7 Year Notes

I have 2 comments.

First, the use of all the zeros is deliberate. Somehow, $123B isn’t quite as impactful and we should all be paying attention to these numbers. Remember, 123B or b (for billion) means $123 THOUSAND MILLION DOLLARS!

Second, ...this Uncle Sam... has anyone seen his credit score lately?

Interactive Map Showing 2009 DFW Area Home Sales

2009-10-23T08:31:00.000-07:00

Good morning all,

This is a great interactive map with a lot of information regarding Q3 sales. It includes, Sales by % change, median price, price change by %, DOM and price/sqft.http://www.dallasnews.com/sharedcontent/dws/graphics/homesales/

Notice Of Delay In FHA Guideline Changes For Condominiums

2009-10-22T15:06:00.000-07:00

Implementation of FHA’s new policy guidance for condominium project approval and condo unit financ¬ing is delayed until December 7th 2009. The new guidance which will be issued within the next two weeks will:

1) Offer additional leniencies to address the difficult market conditions and

2) Augment some por¬tions of FHA Mortgagee Letter 2009-19, providing additional information and clarification.

Until the new guidance takes effect on December 7th, 2009, lenders may continue to use the Spot Loan Approval guidance issued in Mortgagee Letter 1996-41. Further, the site condo and manufactured housing condo project changes already implemented are unaffected by this delay.
To read FHA Mortgagee Letters 1996-41 and 2009-19 please visit: http://www.hud.gov/offices/adm/ hudclips/letters/mortgagee/

FTHB Tax Credit Popular With Congress Despite IRS Reports Of Potential Fraud

2009-10-22T13:15:00.000-07:00

According to a recent IRS testimony, tens of thousands of people may have taken advantage of the First-Time Homebuyer Tax Credit; potentially defrauding the government. As of the end of September, the IRS has reportedly frozen more than 110,000 refunds pending civil or criminal examinations.

Key points in proposals to extend the First-Time Homebuyer Tax Credit (set to expire in on Nov. 30th include

1. Program to be extended for one (1) month while lawmakers examine how the program is being run

2. Program is to be extended through June 30 of 2010 and expanded to include all home buyers - estimated costs approximately $16.7 billion

While the First-Time Homebuyer Tax Credit enjoys widespread support in Congress, issues of cost and potential abuse cloud prospects of extension of the deadline. The NAR (National Association of Realtors) has estimated that one-fourth of homebuyers that have claimed the credit would not have purchased their homes without the credit. This estimate is not likely to go unnoticed in Congressional debate

Sales down - Rates up

2009-10-21T10:13:00.000-07:00

The Mortgage Bankers of America said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, slid 13.7% lower during the week ended October 16th. Applications to buy a home, a tentative indicator of sales, dropped 7.6% lower from the previous week while refinance applications fell 16.8%. The MBA said borrowing costs on 30-year fixed rate mortgages, excluding fees, rose 0.05 percentage points from the previous week to average 5.07%. This was above the all-time low of 4.61% set in March, but well below the 6.28% level of a year ago.

2009-10-20T07:15:00.000-07:00

On Monday, October 5th, the White House came very close to endorsing an extension for the First Time Homebuyer Tax Credit. The White House Press Secretary said it had been a very successful program and is on a “shortlist” of measures being considered to help further bolster the economy in its recovery. The likely-hood for an extension of the Tax Credit has been significantly improved (as much as 90% likely to pass). There has been no indication
of the Tax Credit being revised that would increase the credit above the already available $8000 limit or offered beyond first-time homebuyers within the qualifying guidelines.

What does this mean?

Unless the Tax Credit provision is made a “stand-alone” bill or attached to an existing bill,
a continuation in the program may mean there would be a lapse in availability for First
Time Homebuyers, possibly in early December - since tax bills usually move at the end of
the year (late December).
It is speculated that a steep drop in home prices may unravel as the current First Time
Homebuyer Tax Credit is left to expire December 1st, further denying economic recovery.
If extended, the $8000 Tax Credit program would cost the government approximately $1
billion for each month it is extended as talks are in place that would determine how long it will be extended.