Senate Approves Tax Credit Extension

Senate approves home tax credit extension

6/16/2010, 2:19 p.m. CDT ANDREW TAYLOR The Associated Press

(AP) — WASHINGTON - The Senate has approved a plan to give homebuyers an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring.

The move by Senate Majority Leader Harry Reid would give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.

The proposal would only allow people who already have signed contracts to finish at the later date. About 180,000 homebuyers who already signed purchase agreements would otherwise miss the deadline.

The Nevada Democrat added the proposal to a bill extending jobless benefits through the end of November.

© 2010 Associated Press. All Rights Reserved.

FHA Loan Costs to Increase Soon

Starting sometime later this year, the monthly cost to carry an FHA-insured mortgage is expected to rise. In a near-unanimous vote, the House of Representatives gave the FHA power to raise the monthly mortgage insurance premiums it charges to its borrowers.
Currently, monthly mortgage insurance premiums are 0.55% of the unpaid loan balance, divided by 12.  The recently approved Federal Housing Administration Reform Act provides for an increase in monthly premium of up to 1.55 percent, among other details of the bill.

Despite the ability to charge 1.55 percent, FHA officials say an increase to 0.90 percent would be sufficient to self-insure its loans.

In everyday terms, assuming a $200,000 mortgage, the math to a homeowner looks as follows:

• Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
• Expected Increase (0.90%) : $150.00 monthly mortgage insurance premium
• Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium

A increase in monthly mortgage insurance premiums will reduce home affordability for buyers in Oklahoma and strain household budgets.

The news isn’t all terrible, however.

Because higher monthly insurance premiums are expected to pad the FHA coffers sufficiently, the FHA has said it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent.

On the same $200,000 mortgage, a move like that would reduces closing costs by $2,500.

The bill awaits companion legislation in Senate and final approval into law, but considering the House’s lopsided vote Thursday, it could happen rather quickly.

If you’re planning to buy or refinance a home using an FHA mortgage, you may find that waiting to take the next step could be a costly one, long-term.

The FHA insured close to a quarter of all mortgages made in the first three months of 2010.

RD Loans Are Back!

We are pleased to announce that Neighborhood Mortgage Group will begin underwriting and funding select RD loans effective immediately.

Please call us immediately for more details. (918) 246-7100

Rural Development Loans: HR 4899 Still on the Senate floor

This is just a quick update on USDA Rural Development Guaranteed Funding and the bills: HR4899, S3266, and HR 5007.

HR 5007 was approved in the House but not the Senate. HR 4899 and S3266 are back in the Senate and different than the House Bill.


HR 4899 is the FY 2010 Emergency Supplemental appropriations (Disaster Relief and Summer Jobs) which has been up for debate in the Senate since yesterday 5/25.

The Senate has set a goal of Friday 5/28 in order to vote, and hopefully approve, HR 4899. With any luck, the Senate will approve some version of this bill with additional USDA funding by Friday 5/28, after which they are in recess until 6/7 for the Memorial holiday. The House will have to vote on this legislation too. They will also be in recess after this week until 6/7.

Rural Development Loans: What is all the fuss about?

Rural Development guaranteed loans are a staple here at Neighborhood Mortgage Group, and for a majority of our buyers. Other than VA financing, there just simply isn't another "No Money Down" loan available in today's traditional mortgage lending world.
What is all the recent fuss about RD running out of money all about? Let me try to explain...
First of all, it's important to understand that RD does not fund these loans. Which means that RD is not writing the check to your seller for you to purchase the home. They are simply "guaranteeing" the loan's performance for the mortgage lender. Should unfortunate events occur that force a homeowner into foreclosure, RD will step in financially to relieve the mortgage lender carrying their defaulted note.

Where does all that money come from? Two parts:

1. Each year the federal government appropriates a certain amount of money to the Rural Development program ($13 billion for 2010.) This money is provided in order to offset mortgage lender's claims, and to operate the general parameters of the program for the next calendar year.

2. RD (in the past) has charged each buyer a "Funding Fee" in the amount of 2% of their loan amount. These funding fees went into a large pool of reserved money, combined with the federal funding monies.

The problem is that this pool of money has historically been insufficient to cover the cost of operating the program.

Picture your bank's overdraft protection program: Your bank knows that you will be getting a paycheck soon, therefore it allows you to overdraw your bank account from time to time because they know that you will be "good for it." This isn't an exact analogy of the RD program but it's a good place to start.


RD funds (your checking account balance, in our analogy) are historically depleted by September of each year. In October the federal government decides exactly how much funding it will reappropriate to the RD program for the next calendar year (your next "paycheck" amount has been commited to you by your employer along with the date that the paycheck will arrive.) Once that reappropriation figure is announced, RD, despite not technically having the funds available, will continue to issue Conditional Commitments (commonly referred to as loan approvals or loan commitments) with the condition that their commitments are "subject to availablity of funds..." Because all parties involved (the feds, RD, and the mortgage lenders) are familiar with the process and are confident that funds will become available very soon, business continues as normal (your bills and debits continue to clear your checking account, despite the negative balance.) Make sense?

Now... Why the big fuss recently over this program? Quite simply stated: RD is already out of money for 2010. (Keep in mind that they always run out of money, just not nearly this early in the year.) And our federal government, as we all hear about on the news each night, is not exactly in an ideal position to start writing big fat checks that weren't in their budget for another 8 months.

So what to do? Well, the House of Representatives had an idea. If RD would simply raise the buyer's funding fee from 2% to 3.5% the program would then become self-funding, increasing the annual available funds to nearly $30 billion each year. That's more than double the amount provided in 2010!

Things were looking great last Tuesday when RD sent out an email to mortgage lenders stating that lenders would continue to receive those "subject to availability of funds..." commitments without interruption.

But less than 24 hours later, a second email was sent out from RD stating that they were recalling and voiding the previous announcement. This second announcement stated that a third announcement would be made available in 24-48 hours.... It's been nearly two weeks.... Still waiting on that third announcement...

My thoughts? The bill containing the RD appropriation of funds is called HR4899. The House approved it unanimously. The Senate now needs to approve it. HR4899 was on the Senate's agenda yesterday and again today. The Senate has set a goal to have this bill voted on before the end of the week. And let's hope that they do since next week they will be on a break.

So where does that leave the RD program? In limbo, quite frankly. We at Neighborhood Mortgage Group are restructuring all of our current RD loans into FHA or Section 184 Indian loans as a back up plan. If RD funds become available before a particular buyer's closing date, then great! Otherwise, we will at least have a back up loan application working simultaneously in the wings.

Current Interest Rates

Wow! 30 day rates are looking GREAT right now.

FHA 30 Year Fixed Interest Rate: 4.75% (5.090% APR)
RD 30 Year Fixed Interest Rate: 5.00% (5.501% APR)

Analysts are still recommending borrowers to float their interest rates, based upon a predicted potential drop in rates.

Call us for more details and qualification requirements.

Rural Development raises funding fee

Rural Development finally announced today that they will continue to issue Conditional Commitments once the appropriated funds for fiscal year 2010 have been exhausted. The new commitments will be "subject to the availability of funds and Congressional authority..." Which is good news, considering that as of Friday they were down to only $20,000 in the state of Oklahoma.

The Oklahoma state office for Rural Development had requested last week for additional funding to be transferred from other states carrying a surplus, but that request was still pending at the time the announcement was made today.

What does this mean exactly? Quite simply: RD loans continue! We at Neighborhood Mortgage Group will continue to underwrite and close these loans, even with the "subject to..." condition. It's business as usual for Neighborhood Mortgage Group.

But let's not jump for joy just yet. There is a slight down side. And that is that the RD Funding Fee (the fee a Buyer pays to RD to guarantee the loan) has now be raised from 2.0% to 3.5%. For example, a Buyer borrowing $100,000 would have paid a funding fee of $2,000 last week but would now pay $3,500. However, RD will continue to allow Buyers to roll this fee into their loan in lieu of paying the fee in cash at closing.

My final word on the RD program? It's still the best program on the street (unless you're eligible for a Veteran's loan.) The combination of no down payment required, allowing the Buyer to finance their closing costs into the loan, the avoidance of paying PMI (private mortgage insurance), and with interest rates still in the low 5%'s make this loan a big favorite.

Apply online today @ www.neighborhoodmg.com or call us at (918) 246-7100.

USDA Rural Development Loans: Out of Money???

USDA announces today that funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

They are not certain at this piont when additional funding will become available. In the past RD would issue conditional commitments "subject to appropriation of funds" but this will not be happening this time around given the uncertainty of the date of funds availability.

If you are not a Veteran, the only "no down payment" loan avaialable today is the Rural Development loan. If you are not already pre-approved and have not recevied your Rural Development commitment of funds your are in grave jeopardy of losing this loan. The next best option for you will likely be to switch to the FHA loan program which requires a down payment in the amount of 3.5%.

My advice to you potential buyers on the fence? Do not delay another moment! Call us today to get pre-qualified.

100% Financing on FHA Loans: A thing of the past? Not anymore!

Neighborhood Mortgage Group has partnered with a local non-profit agency to provide second mortgages covering Buyer’s down payment and/or closing costs up to $5,500. Unlike other down payment assistance programs that we currently offer, this new program has no income or geographical restrictions. Buyers also need not be first time buyers in order to qualify for this program. Sound too good to be true? It isn’t! Call us today for more information… Funds will run out fast. Don’t miss out. (918) 246-7100

Less Income, More Options

Tulsa offers several programs assisting its First-Time Homebuyers. With more and more families feeling the financial strain of the economy, education for where to turn is a must. Whether you’re in need of credit repair assistance or the down payment, help is out there.


Neighborhood Mortgage Group offers a wide range of services for its soon-to-be home owners, including financial assistance with down payments and closing cost. To be eligible for assistance, you must be a first time homebuyer, your household income must not exceed program limits and you must purchase your home within Tulsa city limits.

Because many low to moderate income families are still unable to save enough money to cover their down payment and closing cost, we offers our clients the opportunity to qualify for up to $5,000 in assistance. To see if you qualify for one of these programs call us at 918-246-7100, or we would love for you to stop by at our new location in downtown Sand Springs.

Gloomy news about the future of interest rates

The government reported this morning that the economy grew at a stronger-than-expected 5.7% clip in the last three-months of '09. That was the strongest overall growth in more than six years. It was a nice finish to an otherwise bleak year. The economy contracted 2.4% in 2009 - its worst overall performance since 1946. Inventory rebuilding contributed more than half of the power behind the blistering fourth-quarter growth rate - a pace that no one expects to be sustainable. With business and consumers still operating on the assumption that the economic glass is half empty the pace of overall economic growth through at least the next two quarters of 2010 will likely remain very slow - a condition that will tend to support mortgage interest rates at relatively low levels.


Mortgage interest rates are unlikely to move dramatically lower from current levels even as the pace of economic activity cools a bit over the coming months as the impact of the Fed concluding their direct purchase of mortgage-backed securities becomes more apparent. In their latest week ended yesterday, the Fed bought $12 billion worth of mortgage-backed securities - roughly matching what they bought last week. They have approximately $90 billion left of their original allocation of $1.25 trillion. At the current "burn-rate" the governments low mortgage interest rate support initiative will expire during the third week of March - slightly ahead of schedule. The broad consensus view is that 30-year conforming mortgage interest rates will climb at least 25 basis point higher before money managers with pent-up demand swoop in to buy mortgage-backed securities. Under current conditions there is little chance the Fed will extend or expand their direct mortgage-backed securities purchase program. The Fed's position may change "down-the-road" if the housing sector falls off of a cliff again or if private sector investors abandon the mortgage-backed securities market in droves. While such an outcome is possible - at this juncture it is not very probable.

Mortgage investors were relieved this morning as news agencies reported that Ben Bernanke has been confirmed by the Senate to serve another four-year term as the Chairman of the Federal Reserve.

Looking ahead to next week mortgage market volatility will likely increase as mortgage investors brace for the release of the January nonfarm payroll figures on Friday, February 5th, at 8:30 a.m. ET. Most analysts believe the headline payroll figure will show the economy created 5,000 more jobs than were destroyed during the month while the jobless rate held steady at 10.0%. The numbers continue to show a very slow and halting progression in the labor market statistics. If the consensus expectation proves accurate, this data will tend to be supportive of steady mortgage interest rates. In order to spawn a mortgage market rally favoring lower rates the headline payroll figure will need to post a loss of 10,000 or more and/or the national jobless will need to climb to 10.2% or higher. Don't hold your breath that one or both of those conditions show up in Friday's report.

$15,000 Cherokee Nation Down Payment Assistance

Are you a card carrying Cherokee Indian? The Cherokee Nation provides down payment and closing cost assistance for qualified Buyers. You, or your spouse, must be a recognized Cherokee Indian, your household income may not exceed 80% of the median income, and your debt to income ratio may not exceed 41%. (For more information about these income limits, call or email us.) You must not have owned another home in the past 3 years and be willing to purchase a home, with a maximum of 5 acres, in the Cherokee Nation jurisdictional boundaries (ask us for details on this eligible area.) The amount of the assistance is $15,000 and is to be used for down payment and/or closing costs. The $15,000 is considered a "soft second lien," which means that a second mortgage will be placed against the property for $15,000. However there is no monthly payment associated with this lien, and as long as you occupy the home as your primary residence for a minimum of 10 years, the lien will be released with no repayment required. If you decide to move out of the home within the first 10 years you will be expected to repay a prorated portion of the $15,000 depending on the length of time that you stayed in the home. Neighborhood Mortgage Group will carry a first mortgage against the property for the remaining portion of the financing required to purchase the home.

With this combined financing effort between the Cherokee Nation and Neighborhood Mortgage Grouop, Buyers can purchase a home with ZERO money down.

If you would like to find out more information about this program, call (918)246-7100 today.

FHA loans keep getting tougher for Buyers

By Brandi Fugate, Branch Manager
Friday, January 22, 2010

This week was not a good week for potential FHA borrowers. Not only did HUD announce plans to increase the up front Mortgage Insurance Premium (UFMIP) from 1.75% to 2.25%, but HUD also plans to lower the allowable amount of seller concessions (the amount of closing costs that the Seller can pay on the Buyer's behalf.)

In the past a Buyer purchasing a $100,000 home would have financed $98,188 which includes the $1,688.75 UFMIP fee. Now, however, that same Buyer would have to finance $98,681 which includes the higher $2,171.25 UFMIP fee. This doesn't make a HUGE difference for the Buyer, however, as the monthly payment would only raise $2.60 per month, or $936 over the 30 year life of the loan. Since the amount of the UFMIP fee is always added to the loan amount, or "rolled in" to the loan, this change alone does not have an extreme consequence for the Buyer.

What makes a bigger difference for Buyers with this new HUD announcement, is the lowering of allowable seller concessions. Seller concessions refer to the amount of the Buyer's closing costs that the Seller can pay on behalf of the Buyer. Typically closings costs and prepaid items (those charges covering a Buyer's prepaid interest, homeowner's insurance, and property taxes) will cost in the neighborhood of 6% of the sales price, assuming a minimum of $100k sales price (lower sales prices may result in closings costs exceeding 6%, as the dollar amount of the percentage is lowered yet costs remains the same.) In the past the Seller could contribute a total of 6% to cover these items, which generally meant that the Buyer did not have to pay out of pocket for any of their closing costs and prepaid items. The new HUD rule caps the Seller's credit to only 3%.

How does this hurt Buyers? Well, quite simply less Buyers will now be able to qualify for FHA financing. Now, on that $100k home, a Buyer would not only have to save their 3.5% down payment ($3,500) but also save roughly $3,000 in closing costs and prepaid items. That's an estimated $6,500 needed to buy a $100,000 home, up from only $3,500 previous to this week's announcement.

Of course Buyers have another option, not that this option is a great long term decision. Banks typically charge a 1% origination fee or 1 "point" to the Buyer. This fee is generally included in the seller concessions. However now that maximum seller concessions are lowering, the Buyer has the right to request that the bank waive their 1% fee in exchange of accepting a higher interest rate. This will lower the Buyer's closing costs by 1%, or $1,000 for that $100k house. In this example the Buyer would now only need $5,500 to buy that $100k home.

But do the math before you choose this option. For a bank to waive their 1% fee, your interest rate could go up by 0.25%. This would add roughly $15 per month on our $100k home scenario. That's over $5,000 that the Buyer would pay in interest over the 30 year loan term. Is paying more than $5,000 over the next 30 years worth saving $1,000 now?

The good news is that FHA is not a Buyer's only loan option these days. If a Buyer is willing to consider purchasing a home outside of Tulsa city limits, the home may qualify for USDA financing. USDA loans do not require a down payment at all, nor does this loan require that the Buyer pay their closing costs and prepaid items out of pocket. All costs associated with this loan type are allowed to be included, or "rolled in", to the loan amount, assuming that the house appraises high enough that the loan amount (including closing costs) does not exceed the appraised value of the home. To find out if a home that you are interested in qualifies for USDA financing, give your Neighborhood Mortgage Group a call.

FHA Raises Fees and Tightens Loan Standards

WASHINGTON - The Federal Housing Administration is raising fees and tightening lending standards to shore up its strapped finances and avoid a taxpayer bailout.

The government agency has seen its losses rise with the foreclosure rate. Its reserves have sunk below the minimum level required by Congress. A healthy FHA is vital for the housing market because it insures roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.

The changes, which will go into effect in the first half of the year, "are among the most significant steps to address risk in the agency's history," FHA Commissioner David Stevens said in a prepared statement.

The FHA does not make loans, but rather offers insurance against default. Borrowers are willing to pay for the insurance because FHA loans only require down payments of 3.5 percent of the purchase price — and that didn't change.

The new policies, to be announced Wednesday, are designed to bring more revenue into the agency, while at the same time keeping loans available.

Under the changes, homebuyers will:

• Pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from the current level of 1.75 percent. A borrower taking out a $200,000 mortgage would pay a $4,500 fee, for example, rather than the current fee of $3,500. Borrowers will still be able to wrap these fees into the total amount borrowed. FHA officials also plan to ask Congress to increase the maximum annual premium that FHA can charge.
• Need a middle credit score of at least 580 to qualify. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 will need a down payment of at least 10 percent. ((Neighborhood Mortgage requires a minimum middle credit score of 620 for all FHA loans.))
  

The changes come as borrowers with loans backed by the agency have increasingly been falling into default. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent for all loans, according to the Mortgage Bankers Association.

Mortgage lenders "will find the new rules painful but necessary," said Howard Glaser, a mortgage industry consultant and former housing official during the Clinton administration.

There also have been fears that unscrupulous operators have shifted their business to the FHA after the subprime business went bust. Last week, the agency served subpoenas on 15 mortgage companies with suspiciously high default rates for FHA loans, part of a broad crackdown on dubious lenders.

The agency has already taken action against several problem lenders. One of the nation's biggest mortgage bankers, Taylor, Bean & Whitaker Mortgage Co. of Ocala, Fla., was banned from the FHA program in August and filed for Chapter 11 bankruptcy protection. Another mortgage company, Lend America, was kicked out in November.

Weekly Rate Indicators Preview

This Wednesday brings on the release of the December Producer Price Index and the December Housing Starts and Bulding Permits reports. Neither are expected to have much of a direct impact on mortgage interest rates.

Thursday brings forth the initial jobless claims for the week ended 1/15, which analysts are expecting to see a drop from 444k to 440k which most likely tend to support steady mortgage rates. Other leading indicators of growth in the economy will likely reflect improved expectations. If so, this report will tend to put some slight upward pressure on mortgage interest rates.

Mortgage Rates Hold Steady

Thursday January 14, 2010

Following two days of improving consumer borrowing costs, mortgage rates took a small step back yesterday afternoon. Mortgage backed security prices moved higher early on in the day open which allowed many lenders to issue their best rates in over a month, however the gains did not hold up. Following the 10 year Treasury note auction and the release of the "Beige Book", MBS prices fell and many lenders were forced to reprice for the worse.

Economic data picked up today. First out was the weekly jobless claims report.

This data gives us three readings on the number of Americans who file for unemployment benefits.
1. Initial claims totals the number of first time filers for unemployment insurance
2. Continuing claims totals the amount of people who continue to file because they cannot get a job
3. Extended benefits total the number of people who are receiving emergency benefits beyond the traditional time allowed to collect unemployment insurance

Next we received the monthly Retail Sales report which shows the monthly change in the total receipts at retail stores. Since consumer spending accounts for a large majority of GDP, market participants track retail sales to gauge economic growth. The report indicated retail sales unexpectedly declined in the month of December by .3% following November's revised higher reading of a 1.8% increase. Economists had expected December retail sales to post a .5% increase. When excluding auto sales from the data, sales dropped more than expected by .2% when economists had fore casted a .3% increase. November's ex-auto sales data was also revised better to a 1.9% increase from the first reported increase of 1.2%. Even when excluding auto and gasoline sales, the numbers still disappoint declining .3%. All in all, this report is very disappointing as it was much worse than expectations.

I still favor floating your rate lock over the next few days.