Advertisements

The real estate market is crashing around us. Refinances get harder to finish every day. Usually because the borrower’s home is worth less than it was when they bought it two years ago. Subprime lending is a faint shadow of what it used to be. Every day FNMA and Freddie Mac or the mortgage insurance companies tighten up the reins on us just a little bit more.

Today, Countrywide – the biggest or next to biggest lender in the country most of the time – actually had to make an announcement that it wasn’t going to file bankruptcy in order to stop its stock from falling further!

Worst of all, today Freddie Mac announce that it had lost $2.02 billion in the third quarter and “absorbed both a $1.2 billion provision for credit losses as well as a $3.6 billion charge in mark-to-market activity for its portfolio assets.”

The shares of Freddie Mac fell 29 percent today for a total of 61 percent this year, while Fannie Mae values tumbled 25 percent today for a total of 52 percent for the year. And all indications are that this decline has a long way to go.

Both of these entities are going to have trouble selling mortgage bonds for a while. This means that in order to sell those bonds the yields have to be higher to attract investors and, in the present climate you’ll have trouble selling them at all. You can ignore all talk about “Fed rate cuts” and the “10 year treasury yield” you keep hearing about. Mortgage interest rates and the availability of mortgage money to lend are determined by the yields on FNMA and Freddie Mac mortgage bonds.

The worst thing to me is that this probably effectively kills any efforts to raise mortgage limits for conventional OR FHA loans.

Alright then, you say, why the happy subject line?

Well, there is at least one diamond in this pile of coal. For the last couple of years that old standard bulwark of the real estate/mortgage industries – the first time home buyer – has been steadily pushed out of the housing market as prices just plain rose out of the reach of the average couple just beginning their careers.

Now the tables are turning. Foreclosures are setting records every month. Thus the above mentioned losses for Fannie Mae and Freddie Mac. Also, although HUD is not really foreclosing on more homes than they have been, those homes are not selling as quickly when HUD puts them on the market.

A couple of years ago it was not uncommon to see HUD foreclosures sell above the original listed price as soon as the first bid deadline hit. Now, ever increasing numbers of those houses are hitting the “extended listing” phase which occurs when HUD removes the “owner occupied only” requirement from the bidding and a boatload of investors once piled in to bid on them.

On October 5, 2007, HUD started offering a bonus to owner occupied buyers of those extended listing properties that opens up a world of opportunity to first time buyers in Georgia. On October 10, HUD extended this program to all owner occupied buyers. Although I haven’t checked, I am sure that this same offer is probably being repeated all over the country. A borrower who uses an FHA loan, and also doesn’t bid above the listed price, can buy those homes for $100 down! No down payment assistance needed and all customary closing costs paid up to 3%. (This means that on lower priced properties, the borrower will have to pay a slightly higher interest rate because many items such as attorney/title fees are fixed and don’t go down with the sales price.) Even better, if the listing on the house indicates that it includes a repair escrow the loan can still fit under the standard FHA program (203b) as long as the repair escrow is less than $5500.

Details of the program are available here: http://shrunklink.com/afko (I “shrunk” the link because it was too long to fit.)

So all you first time homebuyers, real estate agents and mortgage originators – quit whining and get to work.

- Carl Pruitt is an FHA loan specialist who has been in the mortgage/real estate businesses for 22 years.

P.S. Loan Originators, as discussed above, subprime lending is probably never going to return in it previous form. If, like me, you have received a great deal of personal satisfaction out of earning a living by helping people who never thought they could own a home, FHA loans are the future.

Even FHA is changing but it still provides an opportunity to get these borrowers into a home with low fixed rate 30 year loans. Maybe even 40 year loans in the near future to keep the payment down. Now is the time to become an expert in FHA lending.

I have spent as much as $800 a year to get practical guidance and regular guideline updates on FHA loans from a popular service. Earlier this year I found a source for this same information at a much lower price. So low that when I originally ordered it, I was sure that I was going to take advantage of the 30 day no questions asked guarantee. How good could it be for $89 when I was paying ten times that much before.

Well, not only was it as good as what I had used before … it was better. It has saved loans for me already this year. This is the same training program used and recommended by the National Association of Mortgage Brokers for FHA training. I could go on and on about it. In fact, I guess I have! Instead, let me give you this link to take a look at it and see what you think. All the details are there. In fact, you can even get samples from the manual to look at. Here is the link you need – http://fhatrainingsource.com


Filed under: Consumer Information • Down Payment Assistance • FHA Updates • HUD Homes • HUD Regulations • Industry Information

Like this post? Subscribe to my RSS feed and get loads more!