Real C'ville Bubble Blog - March Q&A

Real C'ville Bubble Blog's Q&A with yours truly, posted on 3/26.

Charlottesville Real Estate: Mortgage Information Spring 2009

The informed readers of the Bubble Blog provided the questions and I did my best to provide the answers.

Geitner on Meet The Press 3/29/2009

I was impressed with how FED Chairman Geitner handled the questions from David Gregory on Meet The Press Sunday morning. Judge for yourself.

Geitner on the importance of bank lending:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Geitner explains banking plan:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Geitner reacts to Krugman's critiques:

Visit msnbc.com for Breaking News, World News, and News about the Economy

David Gregory: "The rules of this program will not change?"
Tim Geitner: "No, they cannot change."

We'll see if Congress complies.

Fed Continues MBS Buy

The Federal Reserve Bank of New York continues to make large buys of mortgage-backed-securities.  For the week ending Wednesday (March 25), the Feds purchased $47.3 billion from government-sponsored entities. 

To date, the Feds have taken on $341.55 billion in MBS.  

More at the Housing Wire

Investment Properties Affecting New Mortgages

Some homeowners who are looking to refinance their primary residences may find they have some difficulty qualifying for a new loan, even though little has changed in their situation of income and credit over the last year.

They may be hindered by investment property they hold.

Specifically, revised Fannie Mae guidelines apply to borrowers who instead of selling a former home to buy a new primary residence turned it into a rental property.

Fannie Mae now requires that you have at least 30% equity in that former primary residence before you can count the rental income.   This can be a hefty hurdle in today’s soft real estate market.

An investment property could’ve easily declined in value over the last three years. 

Furthermore, to show that the 30% equity value exists, borrowers will need to get an appraisal of that former property, as well as a rental analysis performed by a licensed appraiser.

As it is and was, underwriting guidelines only allow borrowers to count 75% of their rental income on investment properties.  The other 25% is ignored, chalked up to property maintenance costs and possible tenant lapses. 

But that 75% is golden when it comes to getting a new loan, even on the primary residence.  Many borrowers need to count those rent checks in their overall income.  Otherwise, their debt to income ratio (DTI) is too high to qualify for a new loan.

In this situation, the borrower may not be in any financial trouble.  They may be bringing in enough money from their salary and rental income to handle all their obligations.  But the underwriter can’t see it this way. 

She looks at the two mortgages and other debt.  And she can’t balance this with any of the borrower’s rental income.    She can’t approve the loan because the borrower, on paper, doesn’t make enough money.

Thus some borrowers trying to refinance their present home can’t qualify.

Again, this specific requirement only occurs on rental properties the borrower once resided in.  It does not apply to houses that were bought and never lived in by the owner.

FED Announces $750 Billion More and Poof!... MBS Prices Surge, Rates Drop

'Rambo Fed' Will Buy Treasuries To Combat Crisis (Bloomberg, 03/19/2009)

"Yesterday’s decisions will add $750 billion in purchases this year of mortgage-backed securities issued by government- sponsored enterprises Fannie Mae, Freddie Mac and Ginnie Mae, for a total of $1.25 trillion. The Fed has already announced $217.1 billion in net purchases out of $500 billion planned through June, under a program unveiled in November.

The central bank will also double to as much as $200 billion this year its planned purchases of debt issued by Fannie Mae, Freddie Mac and Federal Home Loan Banks. The Fed bought $44.4 billion of the so-called agency debt as of March 11."

And here's a snapshot of what happened in the Agency MBS market:

Fannie Mae 4.5 coupon


Rates improved by .125% to .25% yesterday afternoon.

Do You Have A Fannie Mae Loan?

One of the first requirements in qualifying for a refinance or modification through Fannie Mae's Making Home Affordable program is actually having a Fannie Mae Loan.

Now you can find out with Fannie Mae's recently release online tool:

Fannie Mae Loan Lookup


And if you're loan isn't with Fannie Mae, it could be with Freddie Mac (who also has Making Home Affordable programs):

Freddie Mac Loan Lookup

HASP Refinances Clarified - GSE's Home Affordable Refinance Program

Along with the Obama Adminstration's announcement of the Homeowner Affordability and Stability Plan on Wednesday, Fannie Mae & Freddie Mac has also released information about their role in the plan.

Termed the "Home Affordable Refinance", the two GSEs will be relaxing certain guidelines and price adjustments on refinances to help homeowners reduce their housing costs. Here are the significant features of the new refinance program:

1.) Allows up to 105% Loan to Value (LTV) and no maximum Combined LTV (1st and subordinate loan combined).
2.) No minimum credit score.
3.) May not require an appraisal (appraisal waiver) or exterior-only appraisal.
4.) Eligible property types - primary residence, 2nd/vacation home & investment properties
5.) Limited cash out only - no additional equity allowed to be taken out, but closing costs and up to $2,000 may be included. Existing subordinate loan(s) must be re-subordinated.

The BIG Caveat: The Home Affordable Refinance is for existing Fannie Mae or Freddie Mac mortgages only. No subprime, Alt-A, Jumbo, Reverse or Government loans.

Want to know if you're eligible? Visit www.financialstability.gov/makinghomeaffordable

Here are the new Matrices, showing the credit score, LTV & property type price adjustments.

The Homeowner Affordability and Stability Plan Unveiled (sort of)

The Homeowner & Stability Plan (HASP), courtesy of USTreas.gov:



Treasury's Executive Summary (PDF)

Section 1, the part about low cost refinancing, is still unclear. Apparently 3 to 4 million homeowners could benefit, but they still haven't said how. Details of the details are forthcoming, I guess :-)

Stock Market Drops, MBS Market Pops

Agency (Fannie Mae & Freddie Mac) mortgage backed securities improved today as the stock markets saw heavy losses on the first business day in March.


FNMA 30yr 4.5 coupon

Mortgage rates improved by approximately .125 to .25% from Friday's rate sheets, ending the day up 40 basis points. The MBS market was the beneficiary of the "flight to safety" while the Dow Jones Industrial Average dropped nearly 300 points to under 6,800.