Historically, a Manufactured Home in a Flood Zone has been problematic. In addition to what ever “perceived risks” Manufactured Homes in general have posed to Lenders…the Scenario of a Manufactured / Mobile Home being located in a Flood Zone has always been a non-starter. In the past, although New Horizon Mortgage Concepts has usually been able to secure “Conventional Financing” for Manufactured Homes in a Flood Zone…Government Insured Financing (such as FHA and VA) has not been an option. However, the ever evolving Manufactured Home Financing trajectory has recently made the possibility of Government Insured Financing a possibility at New Horizon Mortgage Concepts. Currently FEMA (the Federal Emergency Management Agency) oversees Flood Data and Information throughout the United States. There are areas known as “Flood Zones” where, in the past, flooding conditions have been known to occur. FEMA keeps track of these events and have established Data that includes Base Flood Elevations (BFE) based on historic 100 year flood conditions. In order to get Flood Insurance, a Survey of the Property is generally required in order to determine how high above the Base Flood Elevation a Structure / Improvement is located. In general, the higher the elevation, the lower the Flood Insurance Premium will be. New Horizon Mortgage Concepts is exploring using this same process (i.e. having a Survey of the Property done) in order to get Manufactured / Mobile Homes approved for Government Insured Financing. Upon completing a Survey, an Engineering Firm provides an Engineer’s Certificate that reflects how high the Home is above the BFE. The resulting information allows an Underwriter to make a determination as to whether a Property is acceptable for Financing or not. This is yet another exciting advancement in Manufactured / Mobile Home Financing and New Horizon Mortgage Concepts is optimistic about the increased business that may transpire as a result of this evolution.
In spite of all of the conjecture that the FED was ready to raise Interest Rates at the Federal Open Market Committee meeting last week, once again they have decided to hold off. Apparently, the “economic indicating stars” still have not aligned from the FED’s perspective. Lenders and Borrowers alike exhaled a collective sigh of relief at the news because, like with previous meetings, there was considerable speculation that the time for a Rate Increase was finally upon us. In addition to the usual Domestic and Global economic indicators that the FED looks to, perhaps the fast approaching Holiday Season (i.e. Shopping Season) also contributed to their decision. Although the U.S. Economy is seemingly performing the best that it has in years, there are facets of the economy, such as wage growth for example, that are really not where they should be in many Analyst’s eyes. In light of that, it’s safe to assume that the FED is still being cautious about making any moves that could throw the Economy’s tentative recovery off of it’s current trajectory. At this point, the next FOMC meeting is not until the end of December (i.e. immediately following the Shopping Season) so it remains a good time to take advantage of the historically low Interest Rates that still prevail.
Initially scheduled to be implemented on August 1st, TRID was officially “rolled out” on October 3rd, 2015. TRID stands for TILA RESPA Integrated Disclosures where TILA is an acronym for “Truth in Lending Act” and RESPA stands for “Real Estate Settlement Procedures Act”. This latest change in the Mortgage Industry is the result of an ongoing campaign by the Consumer Financial Protection Bureau (CFPB) to simplify / clarify the Documents utilized in disclosing Loan information. The “Loan Estimate” form replaces the long utilized Good Faith Estimate (GFE) as well as the Truth in Lending form. The objective is to make the Terms of a Home Loan as clear and easy to understand as possible so that Borrower’s are able to, as the CFPB emphasizes, “know before you owe”. In addition to clarifying the Loan Terms, the new Forms also have updated disclosure periods which require that the “Closing Statement”, which replaces another previous form called the Estimated HUD, be provided to Borrower’s three days before they sign their final Loan Documents…rather that than the “24 hours in advance” that was required for the Estimated HUD. Like so many other changes that have come about since the “Economic Melt Down” of 2008 (i.e the “re-vamped’ GFE”, the “Qualified Mortgage” and “Ability to Repay”), there seems to be a lot of “quiet uproar” and “possible misinterpretation” surrounding these changes. In reality, if a Mortgage Company has been properly / accurately disclosing their Clients, then TRID will really be little more than a change of the Forms being utilized to do so. Ultimately, the most important outcome of TRID will be that Loan Terms will be easier to decipher for Borrowers, which can only help to bolster the Mortgage Industry and contribute to the overall Financial recovery of the Country.
With another meeting of the Fed looming on the horizon (i.e. this week), probably the biggest question in everyone’s mind is still: “Are Interest Rates going to go up?”. If you listen to to the numerous Financial Analysts out there…you could come away seeing it going either way. On the one hand, our Economy does seem to be on a very slow trajectory in the right direction…Unemployment Rates are down…the Housing Market is doing OK (with regard to Home Values, Sales, New Housing Starts, etc.)…Energy Prices are Low (good from a purely Consumer standpoint). So taking only these indicators into account…it might seem reasonable that the Fed would feel that it might be a good time to adjust Interest Rates up and there are Analysts out there predicting this move.
However, there are still some important indicators that the Fed has been watching, such as Inflation, which aren’t where the Fed has has stated they would like them to be before making any changes. In addition, there have been worrisome events of late taking place in another leading World Economy, namely China, that may give the Fed pause to do anything with Interest Rates at this point. China has seemingly been “devaluing” its currency and the Chinese Stock Market has been going through a challenging stretch. In light of the “global economy” in which the developed world now conducts business, these types of events in one sector of the global economy can tend to have repercussions in another. In light of that, there have been an equal number of predictions from Analysts that the Fed won’t make a move on Interest Rates at this juncture. Sooner or later Interest Rates are going to go up…but at the moment it’s anybody’s guess as to when. We’ll know more this time next week…
After the previous delay in the implementation of the Financial Assessment component that will now be utilized for Reverse Mortgages (i.e. HECM’s – Home Equity Conversion Mortgages), an effective date of April 27th is currently when it is supposed to go into effect. Any Reverse Mortgage Transactions that have had an FHA (Federal Housing Administration) Case Number generated prior to April 27th will be exempt from the new qualification process. In order to obtain an FHA Case Number, potential Borrowers will have to complete their “Reverse Mortgage Counseling” (which now includes an extended waiting period before the Loan Process can formally begin) and then Sign the HECM Loan Application & Disclosures. Once those two steps are completed, the Lender can request an FHA Case Number. As is often the case when major changes are on the horizon in the Lending Environment, there will most certainly be a last minute increase in the volume of FHA Case Number requests as Applicants rush to beat the deadline. This will undoubtedy put a strain on the Lender’s Underwriting resources and possibly even the FHA Website…although one would imagine that HUD (Housing and Urban Development) is taking steps to increase available Band Width in anticipation of the increased traffic.
At the FOMC (Federal Open Market Committee) Meeting earlier this week the “Fed” made no concrete announcements regarding the eventual increase in Interest Rates that is ultimately expected to happen. Although Janet Yellen (Federal Reserve Chairwoman) acknowledged that the Economy does seem to be gradually improving, she spoke in terms of a couple of specific metrics that are seemingly being monitored with respect to their relation to any significant changes to Interest Rate Policy. One of these is “wage growth” because, in spite of the fact that the overall Unemployment situation has improved, increases in worker wages has stagnated. The other factor cited was inflation and, here again, Yellen pointed out that despite improvements the Fed’s goal of a 2% annual inflation rate has not been achieved. There was vague talk about the possibility of Rates increasing some time this summer, but it remains to be seen what will finally be the catalyst for any increase and when that will actually occur.
Although the “Financial Assessment Component” for Reverse Mortgage (HECM) Transactions was supposed to take effect on Monday March 2nd, the Federal Housing Administration has announced that the “rollout” will now be delayed anywhere from 30 to 60 days. Over the years there has been talk about some type of Financial Assessment being instituted for Reverse Mortgages and yet it never really came to fruition. The recent announcement that it would actually go into effect in March is probably the closest it has ever come to actually being a reality…but once again the date has been pushed back. It will be interesting to see what the “Assessment Process” will actually entail…and when it will actually come to pass. No one is looking forward to this new “dimension” of a Reverse Mortgage as it runs counter to the very concept of what a Reverse Mortgage is (i.e. A Loan that you don’t make Payments on). Any and all updates regarding this topic will be closely watched and detailed here in future posts.
Although some type of “Financial Assessment” has been talked about for years in the Reverse Mortgage Industry, the practice has never fully been implemented. However, starting in March 2015 this new dimension of Reverse Mortgage Lending will actually be rolled out. In reality, what Lenders are really trying to determine is that Reverse Mortgage Borrowers have the Financial where-with-all to make their Property Tax and Homeowners Insurance Payments. The reason this is important is that failure to make these basic “Home Ownership” expenses can ultimately result in the Lender Foreclosing on the Property. Although this has always been a mandatory obligation when obtaining a Reverse Mortgage (or any type of Loan for that matter), it’s conceivable that the recent Economic Crisis (from which the Country is gradually emerging) brought about financial hardships that forced many Homeowners to default on these payments. As a result, it may be that the Reverse Mortgage Industry has become saddled with a underlying yet pervasive “myth” that the Lender was going to force the Homeowner from their Home and eventually take over the Property. This is actually far from the truth…Lenders don’t want any more “Bank Owned Properties” on their books. What a Reverse Mortgage Lender really wants is for the Home to increase in Value and for the Homeowner to remain in the Home so that when the the Homeowner eventually does leave the Home…it can be sold – resulting in the Lender capturing the Interest that has accrued over the years. So, by incorporating a Financial Assessment at the beginning of the Reverse Mortgage process, the Lender can thereby emphasize the importance of making the Tax and Insurance payments to the Homeowner. In light of that, it will make the Borrower accountable for these expenses and hopefully lessen the instances of Homeowners accusing Lenders of forcing them out of their Homes. Although the usual type of Documentation will be utilized to determine that Borrower’s have the financial means to make these payments (Tax Returns, Pay Stubs, Benefit Letters, etc,), it’s probably not the case that Borrower’s will be subjected to the same rigorous Underwriting standards used in qualifying “Forward Mortgages”, as that criteria is based upon determining that the Borrower has the “ability to repay” the Loan. A Reverse Mortgage, by design, is not expected to be repaid via the usual monthly payment process. This is yet another example of how traditional Lending Practices have to be adapted to work with the Reverse Mortgage Program.
As announced earlier this year, the FHA (Federal Housing Administration) decreased the Yearly Mortgage Insurance Premium on Monday January 26th. There are two components to FHA Mortgage Insurance…the “Up-Front” Premium and the on-going “Yearly Premium”. The Up-Font Premium is 1.75% and this Premium is almost always added to the Loan Balance and therefore “Financed”. At this point, the FHA, the “Up-Front Premium” remains unchanged. However, the yearly Premium was reduced from 1.35% to 0.85%. This reduction is significant in two ways. First of all, it means lower Monthly Payments as this Premium is added to the regular “Principle and Interest” Payments on a a monthly basis. So if a Borrower’s Base Interest Rate was 4.00% (for example), adding the 1.35% Mortgage Insurance Premium had the effect of increasing the overall Rate to 5.35%. Based on the new reduced Premium the “overall Rate” would now be 4.85% (using the same 4.00% Base Rate). In addition to lowering the Monthly Payment amount, this decrease could also help a Borrower to better qualify for a Loan because the Lower Payment might offset possible “Debt to Income” challenges a Borrower might be facing if they were borrowing at the maximum of what they qualified for. New Horizon Mortgage Concepts has already had Clients benefit from this reduction in Mortgage Insurance and we look forward to continuing to explore ways in which this new Lending Guideline change might prove advantageous to our Clients.
The FHA has just announced that it will be lowering the yearly Mortgage Insurance Premium later this month. Currently the Yearly Premium is 1.35%, but the new Premium will be 1/2 of a percent (0.5%) lower at 0.85%. In the wake of the 2008 “Financial / Housing Meltdown” in the U.S., the Federal Housing Administration (FHA) played an important role for Homeowners. FHA Insured Financing allowed Borrowers to buy a Home with Down Payments as low as 3.5% and in addition was more forgiving regarding Credit Scores and other qualifying criteria. Because the FHA was Insuring the Loan, it was also the case that the Interest Rates available for FHA Loans were lower than what was available through Conventional Financing. In exchange for all of these benefits, the Borrower paid “Mortgage Insurance” in the form of both an “upfront” and ongoing “yearly” Premium.