You have heard a lot of rumors about the lending practices in Minnesota that went into effect August 1st. To my surprise, a lot of mortgage brokers I talked to (even recently) had no idea what was even coming until the emails start pouring into their in box telling them their programs are now gone.
Realtors-If you have a purchase closing soon in this great state, do yourself a favor and keep in contact with the lender-and I'd do it whether you are the buying or selling agent! If you have a "full documentation" program, chances are you should be fine-if you are working with a "stated" , "No doc", "option arm", etc. then I'd be double checking to make sure you still have a buyer!
The new laws affect broker shops and some financial institutions so, unless your lender has a state or federal charter-most don't, the law changes apply and have a big affect on our area!
So how do the lenders know who is and isn't effected by this law? Most lenders don't want to worry about it so they made it simple and just shut down these programs for everyone in the state. There aren't too many lenders that are still willing to offer the programs that are affected by the new law.
So, what exactly does it cover? Well, some of the important areas include:
Again, there are more changes but I just wanted to touch on the ones that affect the "Realtor world" and to advise you to get to know the mortgage person that is working on your client. A pre-approval letter that was done before August 1st, may be worthless-it's worth a phone call to ask; "what type of loan are they getting, is it a full documentation program". They don't have to tell you any specifics but, I'd be asking for reassurance that their loan will close.
While this new law is currently affecting only Minnesota, nationally, loan programs are getting pummeled daily-especially the "Jumbo" loan programs (over $417,000). It's making it a lot harder to loan money. Guidelines are rapidly tightening/changing.
Lenders are still dropping like flies and it's not over yet. Housing prices will probably get worse yet before better. People that bought with an ARM and can't go stated to refinance to a fixed rate may have to walk away from their homes. This new legislation may have the opposite effect of what it was intended for.
FHA will be coming back strong-make sure your preferred lender is FHA approved!
Just friendly advice-Minnesota is in for major changes with this new law. it pays to make a quick phone call to make sure your files are still good!
Good news for Wisconsin border towns-you'll probably get more real estate traffic because the loan programs aren't effected over there-yet! (of course, you'll also be getting bombarded with brokers trying to stay in business by working over the state line).
My last word......
There's been so much press about homes going back to the banks that some people that I've talked to-who a year ago would never consider this option, are taking the attitude of"no big deal, everyone is doing it I'll just walk away" and that, my friends, is what is scary-that it's become acceptable to just give the house back to the bank.
I just wanted to give my two cents on our area and what's happening with our industry-it effects all of us some more than others but, its huge be ready for it the best you can!
This will indeed stink for everyone! Be ready because it's coming, Fannie and Freddie are implementing this so, in order for the lenders to make these loans saleable, they will have to utilize these add ons.
IMPORTANT !!!!!!!
FannieMae and FreddieMac have recently issued changes to loan level pricing adjustments that will take effect for loans purchased in early in 2008, however our Investors for new locks will need to implement these changes well in advance of the FNMA/FHLMC purchase dates.
These pricing changes are for Conforming Loan Programs with the following terms only:
Pricing adjustments will apply to loans with terms of 20 years, 25 years and 30 years with LTV's of 70.01% and above, with certain "representative" credit scores, as follows:
Credit Scores below 620 2.00 point charge
Credit Scores from 620-639 1.75 point charge
Credit Scores from 640-659 1.25 point charge
Credit Scores from 660-679 0.75 point charge
This isn't specific to any one lender, its new FNMA/FHLMC guidelines. For our bank personally, Citimortgage has already implemented these pricing changes.
Lock your people and get the pre-qualified buyers off the fence! This can be eaten in pricing but, it'll drive rates up for everyone!
BTW, This makes FHA just a stronger avenue!
Freddie Mac conforming loan limits are unchanged for 2008
Through December 31, 2008, Freddie Mac will continue to purchase home mortgages up to the following loan amounts:
For properties in the United States (except Alaska, Hawaii, Guam & U.S. Virgin Islands)
They have left the loan amounts unchanged because of current market conditions.
Don't forget you or your buyer can buy a 4 plex with a conforming mortgage loan amount of up to $801,950! This doesn't include any 2nds that may be added to the financing and, because it would be owner occupied, you don't need to have a current landlord/rental history to include rental income!
Also-FHA loan limits for the St Paul metro area are currently $276,683 and......a second can also be added to this amount!
Michael
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