In This Week's "Good News":

Freddie Mac Releases New 105% Refinance Program

In a program recently released, Freddie Mac will now allow refinances up to 105% of the property's current appraised value.

• Mortgage insurance is not required, unless the loan being paid off has mortgage Insurance
• 0 X 30 payment history for 12 months on existing mortgage, or 0 x 30 for life of loan if < 12 months (3 months seasoning required)
• If new P&I payment increases by 20% or less, no income, asset or employment documentation is required
• Allowed on 1 - 4 unit primary and investment properties, 1 unit second home
• No min fico if new P&I payment is not increasing more than 20%, otherwise 620 min.
• No DTI requirements if P&I payment is not increasing more than 20%, otherwise 45%
• Home Value Estimate (HVE) may be accepted in lieu of an appraisal
• Condo approval not required

*** Please contact me if you or your client's would like to see if they qualify, or have any questions regarding this or the Fannie Mae refinance program.

New Update to ‘RegZ' to Begin in July of this Year

Last Thursday, the Federal Reserve Board approved final regulations that amend the disclosure requirements for mortgage loans under Regulation Z (Truth-in-Lending).

The modification put in practice the Mortgage Disclosure Improvement Act (MDIA), enacted in July 2008 as a revision to the Truth in Lending Act (TILA).

The receipt of cost disclosures to be supplied to consumers earlier on in the mortgage application process appears to be the main goal of the MDIA.

There is a large similarity to the final rules issued by the Board in July 2008, however, the MDIA expands and adds to those regulatory provisions.

Under the MDIA, creditors will have to conform by the guidelines of the new ruling beginning on July 20, 2009.

As under the old guidelines, consumers are required to be provided, by lenders, with a good faith estimate, which includes an itemized list of fees and costs associated with their loan. This list, usually, termed a "Good Faith Estimate", must be provided within three business days of applying for a mortgage loan.

Of importance, the new ruling broadens this requirement by also forcing early disclosures for second homes and other dwellings besides the primary dwelling.

Additionally, the ruling will include providing a revised annual percentage rate (APR), and waiting three additional business days prior to closing the mortgage.

Creditors/Lenders will also be required to wait seven business days after providing early disclosure before they can close the loan.

This final ruling takes full effect on July 30, 2009 and applies to all application taken on or after the roll out date. While this will undoubtedly cause some problems for timely mortgage closings and loan fundings, but it will undoubtedly keep the entire transaction ‘above board'.

In This Week's "Take It How You Will" News:

FHA Allowing First-time Homebuyer Tax Credit toward Down Payment

In a letter released by HUD earlier this week, HUD will now allow the first-time homebuyer tax credit to be used as a down payment on the purchase of a primary residence.

It goes further to state that the tax credit can be used either as secondary financing (second mortgage) or as a short-term loan, otherwise known as a bridge loan, enabling home buyers to come in with little or nothing down.

I will note here, that the tax credit can also be used for closing costs and other prepaid expenses.

A First-time homebuyer is defined as a person(s) who have not owned property in the three years preceding purchase. These individuals are entitled to receive up to $8,000 that doesn't need to be paid back if the home is retained for three years. It's a dollar-for-dollar reduction and also refundable, meaning the tax credit may be claimed even if the homebuyer doesn't have sufficient federal income tax to offset it.

There are some rules and regulations tied to the so-called tax credit advance loans, like qualifying ratios and no cash in-hand.

HUD Secretary Shaun Donavan stated: "We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment".

He went on to state: "So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to "monetize" the tax credit through short-term bridge loans."

Unfortunately, this was the very practice that led to and continues to lead to billions in losses by HUD.

Statistically: similar seller funded down payment assisted loans accounted for just 14 percent of all FHA loans outstanding, but accounted for 31 percent of all FHA foreclosures, so far.

If you have any questions or comments about this recent change by HUD, please contact me.

In This Week's "Wait and See" News:

Well, it shouldn't be a shock after last week's modest gains, that as of weeks end ongoing tumultuous economic news virtually wiped out all of the gains.

The good news: this market downturn has led to mortgage interest rate decreases for most loan products - good news for borrowers, especially after last week's rate increases.

Markets ended the week like this: DOW down @ 8268.64 (-62.68), NASDAQ down @ 1680.14 (-9.07) and the S&P down @ 882.88 (-10.19).

Of significance for next week: Look for the Building Permits and Housing Start numbers (May 19), as well as, Leading Economic Indicators for the month of April (May 21) -- if these numbers come in as most economists believe, it will likely have a stabilizing effect for mortgage interest rates.

Next week's Economic Calendar:

Week of May 18 - May 22
Date ET Release For Prior
May 19 08:30 Building Permits Apr NA
May 19 08:30 Housing Starts Apr NA
May 20 10:30 Crude Inventories 05/15 -4.63M
May 21 08:30 Initial Jobless Claims 05/16 NA
May 21 10:00 Leading Economic Indicators Apr NA
May 21 10:00 Philadelphia Fed May NA

* Remember, typically, weaker than expected news is beneficial to a mortgage rate decrease and an increase in bond yields, and more positive than expected news will cause mortgage rates to increase and stocks to increase in value.

In This Week's "Not So Good Right Now" News:

More Bad News for Taxpayers

Freddie Mac just released its numbers for Q1 of 2009, and reported a net loss of $9.9 billion. It is also looking to receive another $6.1 billion from the Treasury Department to avoid collapse, a scenario that would potentially prove catastrophic for the housing market and, ultimately, the global financial system.

Statistically, the quarterly loss at Freddie Mac is nearly 10 times that of the year-ago period and follows a $7.2 billion loss for the fourth quarter of 2008.

The government-run company (or should I say government-guided company), along with Fannie Mae (another government-guided company), are the nation's largest sources of mortgage funding. These agencies own or guarantee a combined $5.2 trillion of a home-loan market reaching $12 trillion.

Since September, the loss breakdown recorded 9.1 billion in credit-related expenses, $7.5 billion in write-downs on securities and $13.3 billion of losses on derivative hedges and mortgage guarantee assets, Freddie said.

What does the future look like? The Obama administration has proposed a total budget of $47.5 billion for the Department of Housing and Urban Development (HUD) for fiscal 2010 - $7.4 billion more than the spending level approved by the House in a fiscal 2009 "omnibus" bill - but did not include Fannie Mae and Freddie Mac in the federal budget.

Since being taken over by the Federal Housing Finance Agency last September, Fannie and Freddie have been provided a credit line of up to $200 billion which they can tap into in order to help keep them solvent.

Last week, Fannie Mae requested $19 billion in federal credit after losing $23.2 billion in the first quarter.

It is reported that the government-run agencies needed funding due to their excessive liabilities in relation to their assets, presenting a negative net worth for both.

The combination of funds will mainly cover deficiencies on mortgage guarantees and mortgage-related investments the government-run companies made throughout the housing market's booming years.

More Than Half of the Largest Banks Fail Government Imposed "Stress Test"

I am writing this article to correct the inadequacies of our current public news system, which has been stating that nearly all of the nation's largest banks had past the government applied "stress test" with albeit ‘mostly flying colors'.

In truth, of the 19 banks the government tested, 10 need to raise $75 billion in additional capital in order to survive a deeper recession, the government report card reflected late last week.

The government "stress test" was intended to measure whether or not the nation's 19 largest banks would need to raise additional capital in order to stay afloat should a likely extended recession become imminent.

Last Thursday, the Federal Reserve released the results of its "stress tests" and found nine of the banks secure enough stating additional capital was not needed, at least in the short term.

By far, Bank of America Corp. takes the lead in the amount of capital needed in order to survive a worse recession, or an ongoing recession that the nation faces currently.

According to the report, Bank of America needs to raise $33.9 billion of capital.

Bank of America is attempting to meet this shortfall by recently selling 13.5 billion shares of its 17% interest in China Construction Bank Corp. to Hopu Investment Management Co. and Temasek Holdings Pte.

The next four banks that trail BofA in need of raising capital are; Wells Fargo & Co., needing $13.7 billion, GMAC LLC, $11.5 billion, Citigroup Inc., $5.5 billion and Morgan Stanley, $1.8 billion.

Banks that were found to be short on capital are required to submit a proposal of how they will acquire the needed capital by June 8 for review by this administration's regulators.

If they fail to raise the necessary capital on their own, the government will tap into more bailout fund in order to make the banks secure.

The Obama administration's has stated that none of the banks will be allowed to falter. This begs the question "Then why are banks not required to lend?" After all, is this not the way that banks usually acquire ‘working capital' and ‘asset based investment portfolios', which is typically used not only for liquidity, but for broad based asset security.

The remaining five banks needing to raise capital are Regions Financial Corp. of Birmingham, Ala., SunTrust Banks Inc. of Atlanta, KeyCorp of Cleveland, Fifth Third Bancorp of Cincinnati, and PNC Financial Services Group Inc. of Pittsburgh.

I will note here that the 19 largest U.S. banks, which were required to take the test, hold a combined two-thirds of the total assets and half of the loans nationwide.

Mortgage Rate Trends:

The Week's National* Conforming Loan Averages:
30 year fixed: 4.84% Down
15 year fixed: 4.51% Down
5/1 ARM: 4.90%Up
30 year Jumbo: 5.00% Down!!!
15 year Jumbo: 4.87% Same

* Keep in mind that these rates are national averages', rates may be lower in your region of the country. If you would like a ‘real time' quote, give me a call, or drop me an e-mail.

FHA/VA 30 year fixed interest rates drop somewhat from last week - expect rates to be in the range of 4.875 to 5.125 percent.

Rural Housing rates are remaining stable this week: look for the 30 year fixed to be in the range of 5.00 to 5.25 percent.

If you have a client(s) that you are having trouble getting qualified through your normal channels, or questions/comments regarding any information contained in this newsletter, please feel free to contact me.

Sincerely,
Richard Shreeve, Editor
Toll Free Direct: 1-800-466-1809 (Your Lender of Choice)

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