FLC's Mortgage Update

Time lines related to Foreclosures & Short Sales for both FHA & Conventional loans.

FHA Loans
2 Years after a BK – discharge date
3 Years after a short sale or foreclosure
1 exception to the short sale rule – if the client is current on his mortgage and all other debt at time of short sale, and an extenuating circumstance can be documented, then the client could get another FHA loan sooner. Call for more details.

Conventional or Fannie & Freddie Loans
2 Years after a short sale with no mortgage or credit lates.
4 Years after a short sale with credit lates.
5 Years after a foreclosure for a primary residence
7 years after a foreclosure for a 2nd home or investment property.

Welcome back Mortgage Insurance (MI) to 2nd Homes
Primary Residences – 5% down – all property types – 680 Fico Needed – 42% DTI – Max $417,000
Primary Residences – 10% down – all property types – 740 Fico needed – 42% DTI – Max $500,000
Second Homes – 10% down – SFR’s & Detached PUD’s only – no Condo’s – Fico 720 – 42% DTI – Max $417,000

Rates are on the Rise
Fed’s Mortgage Back Security (MBS) Program ended 3/31/10 – 1.2 Trillion MBS were purchased helping to keep mortgage rates low over the past 2 years. Fed is no longer buying our MBS and will soon begin to sell off some of its massive MBS portfolio, which will only add to the already increasing supply of MBS and treasury notes being sold by our country. This will force the Fed and banking systems to increase their rates to attract investors back to these debt instruments. A lot like what we saw in the housing market but the opposite, too much supply caused home prices to drop, too much supply in debt, causes home loan rates to increase. Couple this with inflation, and we should see rates in the 6% range by the end of the year.
What does this mean, this means that you need to be talking to your buyers and sellers, and equip them with the facts so they don’t miss out on a great time to sell or buy.

FHA Changes Coming
Nothing is written in stone yet, but sometime soon we will see the down payment increased to 5% from the current 3.5%.
Max seller concession on FHA loans is currently 6%, but will be only 3% very soon.

Jumbo $$$$$$ Jumbo $$$$$$
What people don’t know is that Jumbo mortgages are available, and the rates are great. There has been a definite spike in new jumbo mortgage’s being written, so get the news out to your clients.

Property Flips, FHA & Conventional
FHA – 90 Day Flip Rule has been temporarily suspended for the year – allowing FHA loans to purchase more homes. AGENTS BEWARE – not all banks want these loans, especially if there is more than a 20% increase in sales price for the buyer from seller’s acquisition cost. Transactions with a 20% increase in price, requires 2 appraisals and a home inspection ordered by the lender.
Conventional Flips – any sales price greater than 10% in the last year – many banks won’t do these loans either. AGENTS BEWARE – make sure your lender will do these transactions. FLC Will.

AGENTS BEWARE – not all condo projects meet FHA, Fannie & Freddie requirements. There are many condo projects in town, which cannot be lent on. Make sure to check with your FLC lender to see if your condo project qualifies. FLC will lend in many projects that other lenders will not because of a variety of issues. It can be because of litigation, or lack of proper insurance, or too many foreclosures or HOA delinquencies, or even because the CCR’s have verbiage that is not allowed, the list goes on and on, trust us.

Franklin Loan Center is committed to keeping you in the loop, because knowledge is power. We believe that we can make a difference for you and your client, so feel free to call your Franklin Loan Center representative today, we are anxious to serve. Our mortgage banking platform, gives us the ability to process, underwrite, draw docs, and fund loans all under the same roof.

FHA Mortgage Down Payments May Be On the Rise - KESQ.com Palm Springs, Coachella Valley - Weather, News, Sports:

FHA Mortgage Down Payments May Be On the Rise - KESQ.com Palm Springs, Coachella Valley - Weather, News, Sports:

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Mortgage 101

Mortgage 101
By Walter Neil and Patrick Mahon of Franklin Loan Center


What you need to know about FHA, to become a knowledgeable & successful realtor in 2009. FHA loans have accounted for more than 50% of all the buyers in 2008 and here is why.

· Federal Housing Administration
· Primary Residences Only
· Low Down Payments – 3.5%
· 620 Fico Score Required
· Liberal Qualifying DTI Ratios – easy to qualify
· Subsidized Rates – 5%
· 30 Year Fixed Loans
· No Pre-Payment Penalties
· Full Doc Loans
· New Loan Amounts Until the end of 2009 for Riverside county 500K
· Old Max Loan Amount was $355,350.

Gifts Allowed – Down Payment & CC - Family Members Only
Non-Occupant Co-Borrowers Allowed – Co-Signer - Family Only

· Co-Signer can help with Income & Assets only – Not Credit!

· No Qualifying for Monthly Mortgage Insurance & Subsidized Premiums – Required
o $250,000 LA x .55% = $1,375/Year / 12 = $114.58/Mo
o Not to be confused with Upfront Mortgage Insurance Premium (MIP) Required
o $250,000 LA x 1.75% = $4,375

· This Fee is financed into the Base Loan Amount – creating the Note Amount or $250,000 + $4,375 = $254,375
· Seller cannot pay this fee for the Buyer – but borrower can pay it themselves if they don’t want to finance it. This never happens. Diff. $23
· Seller can pay up to 6% of the Sales Price – towards the buyers recurring & non-recurring CC. - SP $259,000 x 6% = $15,540

· Recurring Fees – Interest, Property Taxes, and Insurance ( Impound Acct )
· Non-Recurring Fees – Lender Fees, Escrow, Title and Appraisal.

Impound or Escrow Accounts are required on all FHA Loans!

· 1st Yr Fire Ins. Premium + 2 Months Reserves
· Property Taxes – Depends on time of year

Non allowable Fees to be paid by buyer – Tax Service $82 – That’s It.

· FHA has Minimum Standard Home Requirements - Property Deficiencies
-Too many to name them all – but some common deficiencies are:

No AC, or AC that blows cold air, No Stove, Any safety hazard, like broken windows, exposed wires, pool half filled, or standing green water. No toilets or fixtures throughout house.

203(K) FHA Rehab Loans – Include the costs to fix deficiencies in the loan.
· Must have a minimum of 5K of hard costs, not cosmetic.
· Borrower must advance $$ upfront for repairs and get reimbursed by bank later.
· Maximum amount of repairs to be financed is 50% of sales price or 35K Max, or which ever is lower.
· Rehab work must begin in 30 days & be finished within 6 months.
· 45 days to close – minimum – prepare your clients for a challenge.

You Might Not Know

· All Borrowers must provide a copy of their SS Identification Cards
· Non-Traditional Credit is no longer available – must have a credit score
· FHA will not finance a home that was purchased in the last 90 Days – Flip Rule
· Household debt for both spouses must be counted regardless of who is on the loan.
· Cannot have more than 1 FHA loan at a time – except for a few exceptions. Relocating & Medical Reasons.
· Co-Sign debts, will only be ignored if the liability is ion both names, and documented with CxC.

Loan Types & Loan Amounts

Traditionally there are only 2 Categories/Buckets when dealing with loan amounts, but with today’s legislation and stimulus packages we have temporarily created 3 Categories/Buckets until the end of 2009.

Bucket 1 – Conforming Loans or Fannie & Freddie
Loan Amounts $75,000 - $417,000

Bucket 1.5 – Conforming High Balance or Fannie & Freddie – Temporary
Loan Amounts $417,001 - $500,000

Bucket 2 – Jumbo Loans or Non-Conforming
Loan Amounts $500,001 & Higher

Bucket 1
· Best Rates – 4.75% @ 1pt 30 Yr Fixed
· Lowest Down Payment Requirements - 5%
· Lowest Fico Scores Required - 620
· Most Liberal Qualifying Guidelines
· Best Product Selection

Bucket 1.5
· Next Best Rates – 5.250% @ 1pt 30 Yr Fixed
· Higher Down Payment & Fico Requirements

Bucket 2
· Higher Rates – 6.5% @ 1Pt Fixed Rates
· Minimum 20% Down Payment
· Higher Fico Scores Required – 680
· Conservative Qualifying Guidelines

Occupancy & Down Payment

Primary Residence
· USDA – 100% Financing
· VA – 100% Financing
· FHA – 3.5% Down
· Conventional – 5% Down ( MI Restrictions )
· Conventional High Balance - 10% Down
· Jumbo – 20% Down

Second / Vacation Home
· Conventional & High Balance – 20% Down
· Jumbo – 25% Down

Investment Property / NOO
· Conventional & High Balance – 20% Down
· Jumbo – 25% Down

Mortgage Insurance (MI)
· Only available on Primary Residence
100% Financing (That’s Correct – It Still Exists)

1) USDA Rural Housing Development Program
USDA – U.S. Dept. Of Agriculture

· Program Qualifications & Highlights
· The Two Requirements to qualify are Property’s Address & Borrowers Income
· To find property eligibility you can go to this website http://eligibility.sc.egov.usda.gov
· Most common areas of interest for us are DHS, Coachella, Thermal, and some parts of Indio.
· Income Limits:
· 1-4 Persons $70, 750
· 5-8 Persons $93,400
· Primary Residence Only
· Low Fico Scores – 620 – Exceptions Made
· No MI
· Liberal Qualifying Ratios
· Gifts Allowed
· No Reserves required
· Great Rates – 5%
· Full Documentation
· No Limit to Seller Contributions
· No Co-Signers Allowed
· No Maximum Sales Price or LA – income limits will determine
· 30 Year Fixed Only
· Maximum Loan Amount 102% - 2% Upfront Fee
· Loan can include CC if Appraisal exceeds the Sales Price
· No Pools allowed
· Write up your purchase contracts on these deals exactly the same way you would on any other deal that has bank financing. Nothing special, no fees required to be paid by seller.

2) VA Loans

· Must be a Veteran & Qualify (Eligibility)
· Primary Residence only
· Good Credit Required – 620 Min.
· No MI
· Funding Fee 2.15% or Higher – Financed
· No Co-Signers
· 6% Max Seller Contributions
· Great Rates – 5%
· Full Documentation
· Appraisal Process is Slow
· Buyer is not allowed to pay certain fees on this loan program. Such as… Escrow Fees, etc.

Canadian Financing - Black & White

· 30% Down
· Minimum Loan Amount $200,000
· 5 Year Fixed Balloon @ 6.5%
· 25 Year Amortization
· 2nd Homes Only – Not Investment Properties
· Full Documentation
· No Pre-Payment Penalties

Reverse Mortgage – Refi or Purchase
1. Age
2. Equity
· 62 years or older
· Equity in home to Refi or down payment for purchase-gift
· Max Loan Amount $625,000
· Down Payment 50%

· You Loose Title Your Home and any Future Appreciation – Not the Case
· I don’t want to be responsible to pay off the mortgage for my parents - Non-Recourse loan - never owe more than what the home is worth.


Homestyle Loan Program is a rehabilitation loan like the 203K loan for FHA, that allows the cost of renovations to be financed into the loan amount, except with one major difference, this product can be used on 2nd homes, and investment properties.

· 30 & 15 Year Fixed Products Only.
· Primary – 5% Down.
· 2nd Home – 20% Down.
· Investment Property – 25% Down.
· Maximum Renovation costs are 50% of the “as completed” value of the property.


1. Fannie / Freddie still limit the amount of financed properties you can have. When buying a primary residence you are limited to 10 financed properties. When buying a 2nd home or an investment property you are limited to 4 financed properties.

2. Buying a new Primary Residence, and want to rent out your current home to help you qualify, not so fast.
FHA requires 25% Equity to count rent on existing home
Fannie / Freddie requires 30% Equity

3. Want to refinance you home? Home better not have been on the market in the last 6 months!

4. Never put in a purchase contract a credit for repairs to be done after the close of escrow, only CC credits can be used on contracts.

5. Appraisal Issues – non permitted square footage, lenders won’t give any value to it. Make sure public record matches your listings.

For any other questions, comments or concerns please feel free to contact

Walter Neil at (760) 779-8137

Patrick Mahon at (760) 779-8100