Fannie Mae and Freddie Mac are tightening up their timelines when it comes to short sales and REO’s. Now, loan servicers that need more than 30 days to make a decision on a short-sale are required to provide weekly status updates and give a yes or no within 60 days after receiving an offer. The Federal Housing Finance Agency who regulate Fannie Mae and Freddie Mac announced the changes to help more homeowners avoid foreclosures.
These changes will take effect immediately, and more are expected to be in place by the year’s end including those that address borrower eligibility and evaluation, documentation simplification, property valuation, fraud mitigation, payments to subordinate lien holders, and mortgage insurance. The new short-sale timeline is tight with just 30 days before a loan servicer must make a decision, and Freddie Mac expects that some will need more time.
“Short sales are more complex than routine home sales since they may involve multiple parties and long-distance negotiating,” said Tracy Mooney, Freddie Mac senior vice president, single-family servicing and REO, in a statement. “Freddie Mac’s new timelines are intended to help make the decision process more transparent and timely for short sales under the Obama administration’s HAFA program or Freddie Mac’s traditional short-sale option.”
Bank of America has also stepped up to the plate announcing that their decision time on short-sale offers has been cut to no more than 20 days. Previously, some decisions took 45 days or longer.
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FHA Mortgage insurance premiums on loans higher than $625,500 have recently seen another increase. There was an FHA increase across the board for all loan amounts on April 9th 2012. In early June there was another monthly premium increase of 25 basis points to 1.50% if you are putting down between 3.5% and 5%. Borrowers with over 5% equity or with more than a 5% down payment will see and increase of between .2% and 1.4%.
This increase means that monthly mortgage insurance costs have jumped a staggering .3% for these higher loan amounts. The announcement of an increase in fees is never good news, but at loan amounts this high it makes a very noticeable difference.
Before April 9th, 2012, mortgage insurance payment on a $625,500 loan amount would be approximately $599.44. Now, after the June 11th 2012 increase, MIP on this same loan amount is $781.86. Over a span of 62 days, the payment has increased $182.45.
Because conventional loan limits were reduced from $729,750 to $625,500 in late 2011, FHA is definitely the most forgiving and cost effective alternative to Jumbo financing available on the market.
Risk based pricing is an increase to fees – not interest rates – related to your interest rate. For example; a credit score of 640-659 previously had a rate of .375 and now has a rate of .5. An increase in fee won’t always have direct results in an increase of your interest rate, depending on how the rates are priced on a particular day.
The new increase in fee is applicable to FHA and VA and will apply to borrowers with credit scores of less than 680. There is good news however. FHA borrowers with a credit score of over 720 will get a credit of .25% that can be used to reduce your interest rate.
- Every month you are building equity on your home. Equity is the amount of money you can sell your home for, minus what you still owe on it. When you make your monthly mortgage payment a portion of that is reducing the amount that you owe. That reduction increases your equity. Mortgages are set up to increase slightly every month. It’s lowest on your first payment, and highest on your last. Therefore, as time goes by your equity grows.
- Mortgage deductions: The tax code lets home owners deduct the mortgage interest from their taxes.
- Closing cost deductions: The first year you buy your home you can claim points on your loan, regardless of whether they are paid by you or the seller.
- Property tax is deductable: Both real estate property taxes paid on your primary residence and on a vacation home are fully deductible.
- Interest on home equity loans: You can also deduct the interest you pay on a home equity loan. This lets you shift your credit card debts to your home equity loan, and pay a lower interest rate.
- If you buy a home as your primary residence for more than two years, you will qualify for capital gains exclusion. When you sell you can keep up to $500,000 in profit and not owe any capital gains taxes.
- Paying your mortgage every month is like a forced savings plan. Each month you are building more value in your home.
Over the long-term, buying a home provides cost saving perks that aren’t available in renting environment
For the first time in 20 years, United States cities are out-growing suburbs. The new census estimates that a change in population trends followed the current housing climate thanks in part to the spike in oil prices. Americans are choosing to stay put in big cities. This may have consequence for the residential “exurbs” located on the edge of metropolitan areas.
Because it was thought that these areas would just keep growing, construction of new schools and mega-malls was planned. Now those plans need to be cut back. Mansions that were being built for middle-class families are sitting empty or unfinished. These suburban regions are also showing bigger jumps in poverty than bigger cities.
America is at a turning point. It is shifting away from the faraway suburbs because of consistently rising gas prices. Part of the shift is also thanks to changing demographics. There are more young single people who are in no rush to get married and have children, and much more likely to rent. There are also the baby-boomers who prefer closer urban centers within walking distance of their home.
Overall, 99 out of the 100 fastest-growing exurbs and outer suburbs saw little or no growth in 2011, compared with the mid-decade boom. There is one exception in Spotsylvania County, VA., right outside of Washington D.C. This metropolitan area has boomed even throughout the downturn. About three-fourths of the leading 100 outer suburban areas also saw slower growth as compared to 2010.
Over the past ten years the number of low-income level people living in suburbs of major metro areas grew 53%, while in the cities only 23%. The suburbs were home to about one-third of the nation’s poor population, outranking both cities and rural areas. Another factor in the shift is that people are simply not moving. Only 11.6% of the population moved to a new home in 2011. This is the lowest number since the government began keeping track. Some of the metro areas seeing new growth, or less loss are Los Angeles, Miami, Seattle and Detroit.