Fannie Mae Just Made It Easier To Get a Mortgage


Lending product HomeReady expands to include refis

homeready-logo-stackedThe government is once again expanding access to credit in an effort to capture a wider audience by making homeownership more available through Fannie Maes latest update.

Thanks to new research and lender input, Fannie Mae announced its new HomeReady mortgage that will replace MyCommunityMortgage, Fannie’s previous affordable lending product.

The latest product is designed to help creditworthy borrowers with lower and moderate incomes access an affordable, sustainable mortgage.

“HomeReady will help qualified borrowers access the benefits of homeownership with competitive pricing and sustainable monthly payments,” said Jonathan Lawless, vice president for underwriting and pricing analytics at Fannie Mae.

“We are also confident this mortgage option will create business opportunities for lenders serving the changing demographics and borrower needs seen in today’s market.

Back at the end of last year, Fannie expanded its MyCommunityMortgage product to include an option for qualified first-time homebuyers that would allow for a down payment as low as 3%.

At the time, the 3% down payment option was only allowed if at least one co-borrower was a first-time buyer. However, with the new update, first-time and repeat homebuyers can purchase a home using HomeReady with a down payment of as little as 3%.

Lenders can now also reach a wider audience due to a new functionality through Desktop Underwriter that will automatically flag potentially eligible loans.

In addition, lenders can fully leverage Fannie Mae’s integrated suite of risk management tools for greater certainty and efficiency.Desktop Underwriter-Logo

While this will still be a small percentage of Fannie’s portfolio overall, this update will still help lenders find borrowers who are getting skipped over.

Also, in more good news for lenders, Fannie Mae’s pricing is more favorable and simplified for lender use, and eliminates or caps standard loan level price adjustments.

This is welcomed news after Tuesday’s announcement from the Mortgage Bankers Association that total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – decreased to $6,984 per loan in the second quarter of 2015, from $7,195 in the first quarter of 2015.

As for borrowers, they will be required to complete an online education course to prepare them for the homebuying process and provide post-purchase support for sustainable homeownership.

The education course, called Framework, is provided by the Housing Partnership Network and the Minnesota Homeownership Center, and is based on the requirements of the HUD Housing Counseling Program and the National Industry Standards for Homeownership Education and Counseling.

Additionally, the lending requirements borrowers simplified.

Equal HousingUnder the update, income from a non-borrower household member can be considered to determine an applicable debt-to-income ratio for the loan, helping multi-generational and extended households qualify for an affordable mortgage. According Fannie Mae’s research, these extended households tend to have incomes that are as stable or more stable than other households at similar income levels, positioning them well for homeownership.

Other HomeReady flexibilities include allowing income from non-occupant borrowers, such as parents, and rental payments, such as from a basement apartment, to augment the borrower’s qualifying income.

Fannie will provide more details to lenders in the coming weeks through a Selling Guide announcement, with HomeReady guidelines anticipated for Desktop Underwriter inclusion in late 2015. Fannie Mae anticipates accepting loan deliveries under the HomeReady guidelines in late 2015 as well.

HomeReady will be available to borrowers at any income level for properties in designated low-income census tracts, and to borrowers at or below 100% of area median income for properties in high-minority census tracts or designated natural disaster areas.

For properties in remaining census tracts, HomeReady borrowers must have an income at or below 80% of AMI. Approximately half of census tracts will be subject to the 100% AMI limit or have no income limit.

By: Brena Swanson,

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Are REOs ready for a comeback?


Clear Capital: Increases in distressed, seasonal changes suggest yes

A new report from Clear Capital suggests that REOs and short sales may be on the rise again.

“With stocks plummeting last week and the global economic impact on our domestic economy and housing markets still unknown, distressed sales continue to be a critical market indicator,” the report says. “Just like in the fashion industry’s iconic September issue, learn to be a trendsetter—from stateside to Puerto Rico—by letting distressed market measures give you full perspective of the market.”

REO comeback 1Nationwide, quarterly distressed saturation (or the percentage of REOs and short sales to all sales) increased by 0.7% in August 2015, from 15.4% to 16.1%. While we are closer to historic, pre-2008 rates of distressed saturation which hovered around 4% of all sales, increases in distressed activity leading into winter could shift momentum towards peak distressed saturation levels of 40%.

Notably, the West’s and Midwest’s distressed saturation rates have exceeded that of the nation, increasing by 0.9% and 1.2%, respectively, while the largest gains in distressed saturation came in the South, with a 1.5% increase from 18.6% to 20.1%. The Northeast was the only region to experience a decrease in distressed saturation, where rates dipped 0.3% from 14.3% to 14.0%.

“Distressed saturation continues to be a challenge we face in today’s housing market,” says Alex Villacorta, vice president of research and analytics at Clear Capital. “In fact, today’s ‘traditional’ housing market continues to be defined by distressed saturation levels. In Act One, at the start of the downturn, distressed properties were an albatross around housing’s neck. In Act Two, between 2011 and 2013, investors stepped in, buying, rehabbing and selling or renting distressed properties, which gave way to higher demand and rising prices.

“While the overall effect of higher rates of distressed saturation in Act Three of the recovery is unknown, one thing is clear; when it comes to housing, REOs and short sales are not a passing fad,” Villacorta said.

For the past three years, distressed saturation in the San Juan MSA has been steadily increasing, having grown eight percentage points, from a reading of 9% in 2013 to 17% today. This trend is unusual in the current housing environment. Over the same three year period, nearly all of the major metro markets have experienced steady declines in distressed saturation. In terms of pricing, this near doubling of the saturation rate has corresponded with a rapid change in price declines from a yearly loss of 1.5% in 2013 to a yearly rate of decline of 10.2% today.REO comeback 2

 The Midwest is the only region to see quarterly gains in price appreciation, nearly doubling from 0.4% to 0.7%. The region still lags behind the West, which experienced declining gains of 0.1 percentage points, yet still continues to report highest quarterly growth at 1.2%. The South and Northeast appreciation rates remained stagnant, reporting 0.8% and 0.2% growth over the quarter. (Chart 1)

Regional performance is echoed at the MSA-level. The San Jose, CA and Detroit, MI MSAs both report healthy growth rates of 2.1%.

While the South did not see accelerated price gains, continued growth through August could be a sign that this region is on firm footing moving forward. Seven of the 15 top performing markets are located in the South, while four of the lowest performing MSAs are in the Northeast.

Villacorta said that last week’s crash leaves the economy and housing tenuous at best, especially as we move from the promise of the summer buying season. The last third of the year will reveal whether the housing recovery can withstand broader global volatility.

“If investors pull out, oversupply of distressed inventory could bring us back to Act One,” he said. “Or, a renewed source of distressed inventory could revive demand from investors and traditional homebuyers, alike, in an inventory-starved market. The driving factor will be whether traditional consumers will be willing, and more importantly, be able to participate. As the global and domestic economic outlook unravels, we will continue reporting on its effect on housing.”

By Trey Garrison

Reprinted from

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CoreLogic: Underwater mortgage share down to 10.2% in 1Q15


More than 254K properties regained equity

New analysis shows 254,000 properties regained equity in the first quarter of 2015, bringing the total number of mortgaged residential properties with equity at the end of Q1 2015 to approximately 44.9 million, or 90% of all mortgaged properties, CoreLogic (CLGX) reports.

Nationwide, borrower equity increased year over year by $694 billion in Q1 2015. The total number of mortgaged residential properties with negative equity is now at 5.1 million, or 10.2% of all mortgaged properties. This compares to 5.4 million homes, or 10.8%, that had negative equity in Q4 2014, a quarter-over-quarter decrease of 4.7%. Compared with 6.3 million homes, or 12.9%, reported for Q1 2014, the number of underwater homes has decreased year over year by 1.2 million, or 19.4%.

This report diverges with a report last week from Zillow (Z), meanwhile, which released its 2015 Q1 Negative Equity Report, saying that negative equity fell in the first quarter of 2015 to 15.4% from 16.9% in the fourth quarter of 2014, and 18.8% during the same time period a year ago.

Negative equity, often referred to as “underwater” or “upside down,” refers to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

For the homes in negative equity status, the national aggregate value of negative equity was $337.4 billion at the end of Q1 2015, falling approximately $11.7 billion from $349.1 billion in Q4 2014. On a year-over-year basis, the value of negative equity declined overall from $388 billion in Q1 2014, representing a decrease of 13% in 12 months.

Article- picture 1

(Source: CoreLogic)

Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming have insufficient equity data to report at this time.

Of the more than 50 million residential properties with a mortgage, approximately 9.7 million, or 19.4%, have less than 20% equity (referred to as “under-equitied”), and 1.3 million, or 2.7%, have less than 5% equity (referred to as near-negative equity). Borrowers who are “under-equitied” may have a more difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints. Borrowers with near-negative equity are considered at risk of moving into negative equity if home prices fall.

“The CoreLogic Home Price Index for the U.S. was up 2.5% during the first quarter of 2015, which has improved the equity position of homeowners,” said Frank Nothaft, chief economist for CoreLogic. “About 90% of homeowners now have housing equity and, as a result, have experienced an increase in wealth, which can spur additional consumption and investment expenditures. The remaining 10% of owners with negative equity will find their home value rising while they continue to pay down principal on their amortizing mortgage loan.”

Article- picture 2

(Source: CoreLogic)

“Many homeowners are emerging from the negative equity trap, which bodes well for a continued recovery in the housing market,” said Anand Nallathambi, president and CEO of CoreLogic. “With the economy improving and homeowners building equity, albeit slowly, the potential exists for an increase in housing stock available for sale, which would ease the current imbalance in supply and demand. There are still about 5 million homeowners who are underwater and we estimate that a further 5% appreciation in home values across the U.S. would reduce the number of owners with negative equity by about one million.”

Highlights as of Q1 2015:

  • Nevada had the highest percentage of mortgaged residential properties in negative equity at 23.1%, followed by Florida (21.2%), Illinois (16.8%), Arizona (16.8%) and Rhode Island (15.7%). Combined, these five states accounted for 31.4% of negative equity in the U.S.
  • Texas had the highest percentage of mortgaged residential properties in positive equity at 97.7%, followed by Hawaii (96.9%), Alaska (96.8%), Montana (96.8%) and North Dakota (96.2%).
  • Of the 25 largest Core Based Statistical Areas (CBSAs) based on mortgage count, Tampa-St. Petersburg-Clearwater, Fla. had the highest percentage of mortgaged residential properties in negative equity at 23.1%, followed by Chicago-Naperville-Arlington Heights, Ill. (19.1%), Phoenix-Mesa-Scottsdale, Ariz. (16.9%), Riverside-San Bernardino-Ontario, Calif. (13.9%) and Warren-Troy-Farmington Hills, Mich. (13.4%).
  • Of the same largest 25 CBSAs, Houston-The Woodlands-Sugar Land, Texas had the highest percentage of mortgaged properties with positive equity at 97.9%, followed by Dallas-Plano-Irving, Texas (97.6%), Denver-Aurora-Lakewood, Colo. (97.1%), Portland-Vancouver-Hillsboro, Ore-Wash. (97%) and Anaheim-Santa Ana-Irvine, Calif. (97%).
  • Of the total $337 billion in negative equity, first liens without home equity loans accounted for over half at $181 billion, or 53%, in aggregate negative equity, while first liens with home equity loans accounted for $157 billion, or 47%.
  • Approximately 3.1 million underwater borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $229,000. The average underwater amount is $58,000.
  • Approximately 2 million underwater borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $295,000. The average underwater amount is $78,000.
  • The bulk of positive equity for mortgaged properties is concentrated at the high end of the housing market. For example, 94% of homes valued at greater than $200,000 have equity, compared with 85% of homes valued at less than $200,000.

Reprinted from Trey Garrison

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“What is FHA’s 90 Day Anti-Flip Rule?” – ASK THE PIG [VIDEO]


Question: What is FHA’s 90 Day Anti-Flip Rule?

For a number of years now, FHA has enforced a 90 day anti-flipping rule which prevents an investor from reselling a home to a buyer using FHA financing until that have owned the property for at least 90 days.  While some investors might think this is a moot point, since most renovation properties take at least 90 days to rehab and sell, that is certainly not always the case.  There have been numerous occasions in which I have purchased and resold in less than 90 days, because the property was a very LIGHT rehab, or need nearly no renovation whatsoever.  

While most deals do involve BOTH a distressed property AND a distressed seller, that is not always the case, and some times the property will need very little to no work.  Just last year, I purchased a home in Pensacola for $50,000 and resold it THE NEXT DAY for $79,900 after spending just $400 to trim the bushes, mulch the beds, and stage the home.  Thankfully I had a cash buyer, but had it been someone using FHA financing, I would have had a LONG wait before I could close and realize my profits.

This “anti-flipping” rule wasn’t as big of an obstacle for investors in the past, as FHA financing was a very small part of the overall mortgage market.  However, when the market crashed and banks were reeling, government insured loans through FHA began to take on a much larger share of the market and so it became a bigger issue for those who were looking to flipping to buyers in less than 90 days.

Thankfully, someone at FHA had a massive “A-HA!” moment back in 2010, and they issued a waiver of the anti-flipping rule.  They understood that investors were a huge BENEFIT to the overall real estate market, and that their role of buying distressed home, fixing, and re-selling to strong buyers was a stabilizing force in the market the would help expedite the recovery.  Unfortunately, many of the lenders who were issuing these loans were skittish and uncomfortable with the new rule after numerous threats of “buy-backs”, penalties, and fines from the government regulatory agencies, and so they added what are known as “overlays” to the FHA guidelines.  So, they effectively ignored the anti-flipping waiver, and continued to require sellers to be on title for 90 days, sometimes not even allowing a CONTRACT to be written until the 91st day.

Sadly, this social awareness of the necessity of investors in the marketplace, and their benefit as a force to help recycle old dilapidated real estate into good, quality, affordable housing has disappeared from the minds of the powers that be at FHA.  As a result, the decided not to extend the anti-flipping waiver last year, and investors became evil once again on January 1st of 2015, and now have to be punished with an extra long wait to re-sell if they happen to buy a good deal.  

So, what’s the lesson to be learned for active real estate investors?  

Number 1 – Multiple offer situations – If you receive multiple offers on a house, you may want to take extra care to review all of the TERMS of the deal, including the type of FINANCING.  Though one offer might be higher in purchase price, if it’s an FHA offer that requires you to wait an extra 30-60 days before you can sell, you may end up netting less money due to increased holding costs such as debt service, utilities, insurance, property taxes, etc.

Number 2 – Review Sales Data BEFORE Purchasing or Marketing – As I mentioned in our recent meeting entitled “The Gatekeepers”, Realtors have access to data on the MLS that can you provide you with which types of financing are more popular in a certain area, whether cash, conventional, FHA, or VA.  If an area is heavy with FHA buyers, you may decide to market to a different area, or at least be aware of it going in to the project so you can estimate your holding costs accordingly. 

What’s your experience with FHA buyers and/or the 90 day anti-flipping rule?  Let me know your thoughts below!



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Here’s the Real Reason College Grads Aren’t Getting Homes


The debt cycle goes psychological.

StudentDebtA recent post from Liberty Street Economics, the blog from the Federal Reserve Bank of New York, gave the public finance perspective on student loan debt.

As you all may be aware, the current administration is looking at ways to help college students receive a greater proportion of tuition assistance.

The Fed’s Director of Research, James McAndrews, in remarks to the National Association of College and University Business Officers, cited higher tuition costs coupled with more people attending college as the primary reason for the big jump in the nation’s student loan debt.

Which, by the way, is jaw-droppingly staggering:

“Between 2004 and 2014, the total student debt in the U.S. tripled from $364 billion in 2004 to $1.16 trillion in 2014,” he said.

That’s a lot of debt. And we know it’s keeping grads from buying homes.

But there is more to it, when looking deeper at the numbers. And, by doing so, we can learn how this debt is shackling generations out of the housing market.

Warning: There is no near-term upside to this conclusion.

In McAndrews’ remarks, we learn that college grads aren’t just renting because they’re waiting to pay down student loan debt first.

No, it’s much worse. In truth, more and more college grads can’t even pay down their student debt in the first place!

Read this passage, the bolding is mine:

So what is causing the withdrawal from home and car purchase markets? It is likely that rising student debt and an uncertain economic outlook have depressed demand. But most likely, declines in credit supply play an important role as well. Our analysis shows that average credit scores have fallen for student debt holders relative to those with no student debt. Clearly for the substantial and growing group of student loan borrows who are delinquent or have defaulted on their debt, access to credit is reduced through potentially long-lasting negative effects on credit scores. Better data is required to evaluate the extent to which the decline in car and home loan originations is concentrated among those delinquent on their student loans and those who dropped out of college, or whether it is more widespread among all those with student loans.

As of the fourth quarter of 2014, about 17%, or 7.3 million borrowers, were 90 days or more delinquent on their student loan payments. That’s nearly double the rate in 2004.graduate-coming-home

But more worrying is that the more delinquent, the more likely one is to still live with their parents. And let’s be honest, an extended period of living at home leads to behavioral changes over time. The longer they stay, the less likely they feel an immediacy to leave.

As Raphael Bostic said, at some point, they’ll eventually pair up and move on.

But in the meantime, questions remain as to when any meaningful change to the tuition-financing mechanisms may actually take place.

McAndrews makes the case that none of this should ultimately prevent someone from getting a college degree. Lifetime earnings, he says, will eventually even it out.

Having employed and managed more than a few college grads in my time at HousingWire, I strongly disagree. I’ve seen firsthand how little a job can help dissolve one’s psyche when crippled by massive student loan debt.  It’s common and it’s a curse.

The Fed is looking for solutions, but so far has more questions than answers, and though it clearly wants to reform the system, it doesn’t yet know how.

“We at the New York Fed will continue to search for new facts to put on the table and push the debate forward,” said McAndrews, and I believe him.

Especially after learning how awful it can be for these college grads with little financial freedoms. They are those robbed of both their choice and their liberty to create a community.

It’s one thing to sacrifice short-terms hopes and dreams at the expense of higher education.

It’s another, more real and more tragic, phenomenon to lash financial neophytes with mountains of debt that cannot even be discharged in bankruptcy.

For these graduates, there is literally no way out anytime soon. And though that’s the real reason they aren’t buying homes, it’s also not the real reason we need to be worried.

By Jacob Gaffney/

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