FHA Mortgage Insurance

HUD's Required Lender Protection

Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requirements include mortgage insurance primarily for borrowers making a down payment of less than 20 percent.

Annual Mortgage Insurance Premium
President Obama signed a bill in August of 2010 giving HUD the flexibility to increase Annual Mortgage Insurance Premiums. Under the law, effective as of October 4th, 2010, HUD is allowed to increase the amount of the Annual Mortgage Insurance Premium from .5% to 1.5% on loans with a down payment of 5% or more. The Insurance Premium on loans with less than 5% down payment increases from .55% to 1.55%.

HUD is not implementing the maximum amount at this time. As of October 4th, 2010, loans with a down payment equal to or greater than 5% will be charged an Annual Premium of .85% and loans with a down payment of less than 5% will be charged .90%.

Upfront Mortgage Insurance Premium
Effective for loans on or after October 4th, 2010, for FHA regular purchases and refinance products, the Upfront Mortgage Insurance Premium is 1.00%, which is decreasing from 1.5%.

FHA's monthly mortgage insurance payments will be automatically terminated when these conditions occur:

•For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78%, provided the mortgagor has paid the annual premium for at least 5 years.

•For mortgages with terms 15 years and less and with loan to value ratios 90% and greater, then annual premiums will be canceled when the Loan to Value ratio reaches 78%, regardless of the amount of time the mortgagor has paid the premiums.

•Mortgages with terms 15 years and less and with loan to value ratios of 89.99% and less will not be charged annual mortgage insurance premiums.

Mortgage Loan Originator Requirements (New Law)

Anyone acting as a mortgage loan originator (MLO) without and MLO license endorsement will be guilty of a crime punishable by six months imprisonment plus a $20,000 fine. And a broker cannot employ or compansate a real estate licensee for MLO activities unless that licensee has a license endorsement. This law has also given the Department of Realestate (DRE) the authority to deny or revoke a MLO license endorsement or take other action. This amends the MLO requirments for finance lenders and residential mortgage lenders under the Department of Corporation. Senate Bill 1137, effective January 1, 2011.

To verify if a Mortgage Company and Mortgage Loan Originator is licensed you can go to:

http://www.nmlsconsumermortgage.com

KEY INDICATORS [1/11/11]

Gold $1378.50/ounce [down]

Crude Oil (Brent) $97.53/brl [up!]

U.S. Dollar to:

Euro .7749 [up]

Japanese Yen 81.95 [down]

6-mo Treasury Bill Yield 0.17%

10-yr Treasury Note Yield 3.36%

[6-month unchanged, 10-yr up 6 bps]

11th Dist Cost of Funds 1.571%[-]

30-yr Fixed-rate Mortgage 5.12%

15-yr Fixed-rate Mortgage 4.51%

1-yr ARM 3.78%

[HSH average includes jumbo rates: 30-yr down 7 bps; 15-yr down 5 bps; 1-yr ARM down 6 bps]

Freddie Mac weekly average rate 4.77% [prior week: 4.86%]

Mortgage Bankers Association Mortgage Applications Index week ending 12/31:

Overall Up 2.3%; down 3.9% the week prior

Purchase Money Loans:

Down 0.8%; up 3.1% the week prior

Refinancing Loans:

Up 3.9%; down 7.2% the week prior

Jobless Claims 1/1:

409,000 prior week 391,000 Continuing claims down 3500 to 4.103 million

Employment Report Dec:

Unemployment rate fell from 9.8% to 9.4% - 103,000 new payrolls (disappointingly weak)

FannieMae WaysHome- Learn Your Options If Your Drowning In Your Home

Today, January 6, Fannie Mae launched WaysHomeTM, a new interactive video to educate homeowners about their options to avoid foreclosure, motivate them to make the right decisions, and encourage them to seek help. WaysHome is part of Fannie Mae's Know Your OptionsTM consumer initiative to help today's struggling homeowners and is available on KnowYourOptions.com.

Overview
A unique and innovative learning tool, WaysHome allows homeowners to put themselves into real-life situations and make decisions -- then see the consequences of these decisions play out in front of them. Through WaysHome, homeowners can:

1. Participate in an interactive video simulation.
2. Select a character and go through the simulation "playing" that character.
3. Follow characters as they encounter financial hardships and challenges that affect their ability to pay their mortgage.
4. Choose different paths based on real-life situations.
5. Experience the positive outcomes or negative consequences of their choices
(i.e., if they avoid taking action, foreclosure may be their only option).
6. Learn about options that may be available to help.
7. Discover the right paths to avoid foreclosure, know their options, and find their way home.

Benefits to You
Our research shows that many homeowners still don't know about -- or understand -- their options to avoid foreclosure. In fact, many homeowners who are seriously delinquent or in foreclosure have little to no contact with their mortgage company. WaysHome is designed to bridge that gap and encourage homeowners to take action before it's too late.


WaysHome Video Link
http://flsvideo.com/assets/Ways-Home/

Weekly Market Update

Thanks largely to the likelihood of passing a tax deal, interest rates have been climbing at a rapid pace and analysts have brought worries about rising future inflation back into the economic discussion. It may at first seem like just another swing-- from concerns about possible deflation to anxieties about rising inflation, and back again but this time the worries may have some staying power.



The two central issues here are extensions of tax benefits: first to the unemployed, second to higher-income taxpayers. What is remarkable about these two central issues is that, taken together, they amplify a few worrisome possibilities for the economy's future. Specifically extending unemployment benefits expands the economy's growth- a good thing but probably an inflationary thing. Further, foregoing receipt of higher taxes from wealthier citizens most likely means that we will have to auction even more Treasury securities which is also potentially inflationary.



Now, a strengthening economy, both of these measures should help the economy grow (in the short term, at the least). This nearly always translates into higher inflation and in anticipation of that our interest rates will start to climb as indeed they already have. Further, the likelihood of even more massive auctions of Treasury securities increases the near certainty that interest rates will rise (as demand for Treasury securities fails to fully cover the number of securities being auctioned; its a supply-and-demand equation).



The credit markets don't wait until after something has happened; they react in advance of whatever their investors believe will happen. Investors have begun to worry about inflation already and they anticipate that the seeds of higher interest rates are being sown. Thus Treasury security interest rates are already on the rise and may continue to rise for as long as the tax deal is in place or until something else captures the attention of traders, investors and economists.



It is difficult to predict what, if anything, will grab the markets attention so it seems relatively likely that the rising interest rate trend will be with us for quite some time. However, the bond guru Bill Gross of PIMCO Securities placed a $5.5 million bet on municipal bonds a few days ago. He apparently feels bond prices have fallen quite far and are likely to recover. (Bond yields decline as bond prices rise.)



The take away here is that while rates are clearly on the rise and could continue to rise, the economy is still reacting to external forces to government programs and legislation and not to forces inherent to the current economy itself.



KEY INDICATORS [12/14/10]



Gold $1401.60/ounce [down]

Crude Oil (Brent) $91.55/brl [up]

U.S. Dollar to&

Euro .7577 [up]

Japanese Yen 83.37 [up]

6-mo Treasury Bill Yield 0.18%

10-yr Treasury Note Yield 3.38%

[6-month up 1 bp, 10-yr up 30 bps]

11^th Dist Cost of Funds 1.654%[-]

30-yr Fixed-rate Mortgage 4.95%

15-yr Fixed-rate Mortgage 4.33%

1-yr ARM 3.82%

[HSH averages rates: 30-yr up 9 bps;15-yr up 7 bps; 1-yr ARM up 9 bps]



Mortgage Bankers Association Mortgage Applications Index

week ending 12/3

Overall

Down 0.9%; down 16.5% from the week prior

Purchase Money Loans

Up 1.8%; up 1.1% from the week prior

Refinancing Loans

Down 1.4%; down 21.6% from the week prior



Jobless Claims 12/4

421,000 prior week 436,000 (rev) total insured 4.086 million, down 191,000



Producer Price Index (PPI) Nov

Up 0.8% month-to-month with food/energy prices removed, up 0.3% (1.2% annualized)



Retail Sales Nov

Up 0.8% month-to-month without auto sales, up 1.2%

Home Affordable Refinance Program (HARP)- Refince up to 125% LTV

Fannie Mae will accept mortgages refinanced through the Home Affordable Refinance Program (HARP) with loan-to-value (LTV) ratios between 105.01% and 125%. The initiative is aimed at helping borrowers refinance their underwater mortgages. Loans owned or serviced by Fannie Mae or Freddie Mac are eligible for the program.

Loans modified through the program are required to either lower a borrower’s monthly payment or move them into a more stable mortgage, i.e. going from an adjustable-rate mortgage to a fixed-rate loan.

Guideline Highlights:

• LTV > 105% to 125% with an unlimited combined loan to value (CLTV) for existing subordinate financing.
  
• Owner Occupied Single Family Residences, including PUDs. (Condos are not eligible)
  
• 620 minimum credit score
  
• Conforming limits only (Loans < 417,000). This is not available for high balance loans.
  
• A full appraisal or interior/exterior 2055 is required.
  
• 30 year term only.

Program Uses Job-loss Coverage To Lure Home Buyers

Realtor Program Lets Californians Offer Unemployment Coverage As Home-sale Incentive

(AP) LOS ANGELES (AP) - With job-loss fears keeping many on the housing market's sidelines, California's real estate agents' association has devised a scheme that uses unemployment insurance to lure wavering buyers into the fray.The California Association of Realtors program allows home sellers to fund insurance plans that pay buyers up to $1,500 a month toward their mortgages for six months if they're laid off from their jobs.The so-called Home Payment Protection Program is a nod toward the role job concerns are playing in the housing market, especially in high-unemployment states such as California, where 12.4 percent of the population remains without work."Most people out today wanting to buy houses have a fear: What happens if I lose my job?" said CAR president Beth L. Peerce. "This takes some of that stress away."Mortgage payment protection programs are nothing new, but what distinguishes the California scheme is that the protection is being pitched as a selling point for reluctant buyers, which sellers advertise as part of their home listings.Under the program, which covers buyers who lose their jobs within 12 months of escrow closing, a seller can choose to pay $200 for six mortgage payments of up to $1,000 each, or $275 for six mortgage payments of up to $1,500 each.CAR began offering the service last month but doesn't plan to begin advertising it widely until January, Peerce said.National Association of Realtors spokesman Walter Molony said he knows of no other states that are offering similar incentives for job-fearing home-seekers.The focus on consumers wary of making big purchases in a shaky economy recalls Hyundai Motor Hyundai Motor America's offer to buy back cars from people who lose their jobs.Analysts have credited that program with helping boost Hyundai sales since its introduction in January 2009, despite the ongoing economic doldrums.University of Southern California business professor Lars Perner, who specializes in consumer behavior, thinks the realtors' program could embolden those who have been putting off buying a home because of job insecurities."Taking away some of that fear of getting into big trouble is something that could easily tip the balance," he said.But Howard Wial, who directs the Brookings Institution's Metropolitan Economy Initiative, said the plan would help only a limited number of borrowers with middling mortgage payments and relatively short amounts of time spent without work.Indeed, nearly half of the state's unemployed had been out of work for an average of more than six months, according to state statistics based on the year ending in September.Meanwhile, although the state's average mortgage payment was $1,055 in September, according to tracking firm MDA DataQuick, the insurance payouts wouldn't cover mortgages in higher priced counties where sales have been most sluggish.Average monthly mortgage payments in San Francisco and Orange County were $2,469 and $1,772 in September, DataQuick said."It could have some impact on home sales, but I wouldn't overstate it," Wial said of the CAR plan. "I think it's a small step."

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