Mortgage News & Opinion

Affordable Housing Programs in Utah

Jim Beech — Wed, 12 Nov 2008 22:48:57 GMT

Direct Mortgage encourages you to review the Utah affordable housing guide located here: www.homesweethomeutah.org. This site showcases both state-wide and regional programs that could be invaluable in helping your clients purchase a home.

Just some of the programs mentioned in the guide include:

NeighborWorks Salt Lake — grants for down payment assistance (DPA)
Davis Community Housing Authority — 0% loans for DPA
Utah Housing Corporation, Single Parent FirstHome program — low interest rate loans
Utah Individual Development Account Network — matched savings accounts
American Dream Down Payment Initiative — DPA for first-time home buyers

Remember as you use these programs to fund your loans with Direct Mortgage.

Wishing you the greatest success,

Direct Mortgage

Mortgagee Letter 2008-11 -- Nontraditional Credit Verification and Evaluation

Jim Beech — Thu, 16 Oct 2008 14:46:50 GMT

RE: Nontraditional Credit Verification and Evaluation

Mortgagee Letter 2008-11 provides guidance for establishing and evaluating nontraditional credit histories.

Key highlights of the mortgagee letter include:

Using nontraditional credit is appropriate when the borrower has insufficient trade lines with Equifax, Experian, or TransUnion and a credit bureau score cannot be derived OR to augment “thin-file” credit reports where a credit score was generated but based on only a few trade lines.
Three (3) credit references are needed, covering the most recent 12 months activity from date of application.
It is preferred that all nontraditional credit references be verified by a credit bureau and reported as a nontraditional mortgage credit report (NTMCR) in the same manner as traditional credit references.
A satisfactory credit history is to include:
- No history of delinquency on rental housing payments
- No more than one 30-day delinquency on payments due to other creditors
- No collection accounts/court records reporting (other than medical) filed within the past 12 months.

If you have questions regarding this notice, please contact your Account Executive or Broker Support at brokersupport@directcorp.com or 800-924-3884.

Mortgagee Letter 2008-11 and other FHA resources can be found on our website:
http://www.directmortgagewholesale.com/FHA_Loan_Resources_Links.html.

Updated Underwriting Guidelines -- Conversion of Existing Homes to Rentals

Jim Beech — Tue, 30 Sep 2008 16:50:53 GMT

RE: Conversion of Existing Homes to Rentals

In response to the submission of false rental income documentation and the practice of "buy and bail", the Federal Housing Administration (FHA) has issued Mortgagee Letter 2008-25 (see attachment). The underwriting instructions found in this letter are effective on all case numbers dated on or after September 19th, 2008.

Direct Mortgage follows the underwriting analysis guidelines found in Mortgagee Letter 2008-25. Below is a summary of the instructions:

For principal residences being vacated in favor of another principal residence, underwriting may NOT consider any rental income from the property being vacated, except under two circumstances:
1) Relocation due to a new employer or a transfer to another office that causes an unreasonable commute. Proof of lease agreement for one or more years is required.

2) 75% LTV or lower, as determined by a recent appraisal or by comparing the unpaid principal balance to the original sales price.

Direct Mortgage is committed to approving and funding loans that allow homeowners to responsibly fulfill their housing needs.

If you have questions regarding this update, please contact your Account Executive or Broker Support at brokersupport@directcorp.com or 800-924-3884.

FHA Changes - Case Numbers July 14th and Later

Jim Beech — Wed, 06 Aug 2008 16:42:09 GMT

The following changes to FHA loans are effective on all new case numbers dated July 14th and onward.

Standard FHA Risk Based Premium
Mortgage insurance premiums will now be risk based. Upfront MIP ranges from 1.25 to 2.25, while the monthly MIP can be either .50 or .55. Premium amounts are based on loan-to-value (LTV) and credit score.

Direct Mortgage Corp will continue to accept a minimum credit score of 580 or no credit score.

See Mortgagee Letter 2008-16 for the premium matrix and more details.

FHASecure Expansion
The FHASecure eligibility criteria have been expanded. As summary of changes appears below:

All conventional rate and term refinances (ARM or Fixed) into an FHA loan are required to be done as a FHASecure.
Conventional refinances into an FHA cash out (more than $500) will be done as a standard FHA
Upfront MIP is 2.25 if refinancing a delinquent non-FHA ARM; if the LTV is > 95%, the monthly MIP is 0.55.
Minimum 580 FICO®
Standard county limits
Allows a short pay (or write down)
Allows Lates
- If LTV > 90%, then the following lates prior to rate reset are allowed
  - Two 30 days

One 60 day

If LTV ≤ 90% then the following lates prior to rate reset are allowed
- One 90 day late

Three 30 days

See Mortgagee Letter 2008-13 for more details.

FHA Streamlines
Upfront mortgage insurance premiums have been reduced from 1.5 to 1.0.

Declining Markets - Higher LTV Now Available

Jim Beech — Tue, 08 Jul 2008 20:00:52 GMT

The maximum LTV/CLTV on standard agency loans in declining markets is now 95% under certain circumstances. Guidelines: 1 Unit, Single Family Residence Primary Residence Purchase, Rate & Term Max $417,000 Min 680 FICO® No Secondary Financing Fixed Rate Only

FannieMae Announcement 08-16

Jim Beech — Tue, 08 Jul 2008 16:09:00 GMT

Updated Policy for Converting Primary to Secondary/Investment Residence

Please see the Fannie Mae "Announcement 08-16". This document introduces and/or updates policies pertaining to bankruptcy and foreclosure, conversion of principal residence to second home or investment property, and representation and warranty requirements. Please read this bulletin carefully and contact Broker Support or your Account Executive if you have any questions.

Since this announcement validates and reflects Direct Mortgage Corp's commitment to originate quality loans, we're making several changes in alignment with the announcement. First and foremost, the policy for the conversion of principal residence to second home or investment property will be applied to all DMC loans, including FHA loans and loans processed using Loan Prospector. Second, ALL new loans registered on or after July 1 are subject to these policy enhancements.

2008 Economic Stimulus Act

Jim Beech — Wed, 13 Feb 2008 18:58:17 GMT

The Economic Stimulus Act, Direct Mortgage, and You!

HR Bill 5140, the Economic Stimulus Act of 2008—which effectively increases conforming loan limits—has passed Congress and may become law as early as today.

Direct Mortgage is poised to act rapidly on this exciting development.

The first step in making these modifications available to borrowers is for FHA, Fannie Mae, and Freddie Mac to execute the changes, followed by the secondary market’s implementation. Then as quickly as the new limits are available to us, we will incorporate them into our loan products. Direct Mortgage will notify you as soon as these changes are available.

Highlights of the Stimulus Act:

General

Provides a temporary conforming loan limit increase for Fannie Mae, Freddie Mac, and FHA loans
The increases terminate at the end of this year (December 31, 2008)

Increases for Fannie Mae and Freddie Mac:

The maximum loan amount may equal up to 125% of the area median price
The loan amount may not exceed 175 of the 2008 HUD county limit
As long as the mortgage is originated by the end of the year, the actual purchase may take place in 2009

Increases for FHA:

Lesser of
- 125% median house price for 1-family residences; for 2-, 3-, or 4-family properties, a percentage of the median house price equal to the ratio of 2008 loan limits of 2-, 3-, or 4-family property compared to a 1-family property; or
- 175% of current 2008 loan limits
The limit for high cost areas may go as high as $729,750
The limit in low cost areas may go as high as $271,050
These limits may be raised by an additional $100,00 if warranted
HUD has 30 days from the enactment of the bill to publish revised median house prices and maximum loan limits.

Higher Limits Currently Available:

Direct Mortgage currently offers non-conforming loan programs. Call 800-924-3884 to find out more about our non-conforming loans, or go to www.directmortgagewholesale.com.

How to Manage Your Mortgage If Your Lender Closes or Files for Bankruptcy

Jim Beech — Wed, 02 Jan 2008 16:44:25 GMT

The following is a reprint from an FTC publication released Dec 19, 2007. Click the following link for a PDF version: How to Manage Your Mortgage If Your Lender Closes or Files for Bankruptcy.

When a mortgage company closes or files for bankruptcy, its customers may be left wondering about the impact on their own loans. The Federal Trade Commission (FTC) says consumers should continue to make their mortgage payments as usual. The nation’s consumer protection agency has several situation-based tips for consumers who need to know what to expect in today’s mortgage market:

If your lender files for bankruptcy after your loan closes: Loans and the rights to service them often are bought and sold. A mortgage servicer collects your monthly loan payments, credits your account, and handles your escrow account, if you have one. If your mortgage servicer is different from your original lender — and your original lender goes out of business — continue to make your payments to the mortgage servicer by the date they’re due.

If your mortgage servicer files for bankruptcy or goes out of business: It’s very likely that a mortgage servicer that files for bankruptcy will sell its assets under the supervision of the bankruptcy court to another financial institution and transfer the servicing of your loan to another company. A mortgage servicer that simply goes out of business probably would transfer the servicing of your loan to another company as well.

How will you know if your loan has been transferred? Read your mail and your email — and pay attention to phone calls and messages that deal with a change of lender, a late payment, or a payment that wasn’t received. To avoid a scam, the FTC says, review the notices and call to confirm the new loan servicer before you send a payment.

If your loan is transferred to another servicer: Regardless of the reason for a loan transfer, you should get two notices: one from your current servicer and one from the new servicer. The current servicer must notify you at least 15 days before the effective date of the transfer — unless you got a written notice at your settlement. The effective date is when the first payment is due at the new servicer’s address. The new servicer also must notify you within 15 days of the transfer.

By law, the notices must include particular information:

the name and address of the new servicer;
the date your current servicer will stop accepting your payments;
the date the new servicer will begin accepting your payments;
telephone numbers for both the current and the new servicer that you can use to call toll-free or collect for more information about the transfer; and
whether you can continue any optional insurance, like life or disability insurance, whether you need to do anything to maintain coverage, and whether the insurance terms will change.

The notices also must include a statement that the transfer will not affect any terms or conditions of your mortgage contract, except those directly related to the servicing of your loan. For example, if your mortgage contract has an escrow account to pay property taxes and insurance premiums, the new servicer can’t close the escrow account.

In addition, you have a 60-day grace period after a transfer to a new servicer. That means you can’t be charged a late fee if you send your mortgage payment to the old servicer by mistake

— and your new servicer can’t report that payment as late to a credit bureau.

The FTC advises all mortgage holders to read their monthly statements. If your statement is late — even by just a few days — call the mortgage company to track it down. Keep records of your payments, including billing statements, canceled checks, bank account statements, or online account histories if appropriate. If you have a dispute, continue to make your mortgage payments, but challenge the servicing in writing and keep a copy of your letter and any enclosures for your records. Send your letter by certified mail, and request a return receipt, or send it via fax, and keep the transmittal confirmation.

If you have an escrow account: An escrow account is a fund held by your servicer. You pay into the fund to cover charges like property taxes and homeowners insurance. Typically, your payments are included as part of your monthly mortgage payment, and the servicer pays your taxes and insurance from this fund as they come due. Even if your servicer files for bankruptcy or goes out of business, it is responsible for making the escrow payments in a timely way.

The Real Estate Settlement Procedures Act (RESPA) covers escrow accounts. If your mortgage servicer administers an escrow account for you, it is required to make escrow payments for taxes, insurance, and any other charges when they are due. The mortgage servicer also is required to give you a free statement every year that details the activity of your escrow account. This statement should show your account balance and reflect payments for your property taxes, homeowners insurance, and other charges. But it is your responsibility to review the statement to make sure the appropriate entities and payments are made.

If one recipient of escrow funds lets you know that a payment is overdue, call the others that are supposed to be paid from your escrow account — for example, state or county governments for property taxes, insurance companies, or homeowners associations — to make sure the funds are being transferred in a timely way. The Department of Housing and Urban Development (HUD) enforces the Real Estate Settlement Procedures Act. Contact HUD with questions or comments about RESPA by email (hsg-respa@hud.gov) or by phone (202-708-0502).

If your lender files for bankruptcy before your loan closes: If you’ve been pre-approved for a mortgage and learn that the lender has filed for bankruptcy, call to find out if or when the company intends to make good on your loan. If the lender can’t — or has gone out of business altogether — start shopping around for another mortgage immediately.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

RESPA-related Inquiries and Disputes

Under the Real Estate Settlement Procedures Act (RESPA), your mortgage servicer must respond promptly to your written inquiries. If you think you have been charged a penalty or a late fee that you don’t owe — or if you have other problems with the servicing of your loan — continue to make your regular monthly mortgage payment, and contact your servicer in writing in a separate communication. Send your letter — including your account number and an explanation of why you think your account is incorrect — to the customer service address. Don’t write your note on your payment coupon.

Timeline: The servicer must acknowledge your inquiry in writing within 20 business days of receiving it, and take action within 60 business days. The servicer must correct your account or determine that the accounting is accurate, and then send you a written notice of the action it took and why, and the name and phone number of someone to contact for more information or help.

In any case, do not subtract the disputed amount from your mortgage payment. Some mortgage servicers may refuse to accept what they consider a “partial” payment: they could return your check and charge you a late fee, or claim that your mortgage is in default and start foreclosure proceedings.

The Federal Trade Commission (FTC) is the nation’s consumer protection agency. Here are some tips from the FTC to help you be a more savvy consumer.

Know who you’re dealing with. Do business only with companies that clearly provide their name, street address, and phone number.
Protect your personal information. Share credit card or other personal information only when buying from a company you know and trust.
Take your time. Resist the urge to “act now.” Most any offer that’s good today will be good tomorrow, too.
Rate the risks. Every potentially high-profit investment is a high-risk investment. That means you could lose your investment — all of it.
Read the small print. Get all promises in writing and read all paperwork before making any payments or signing any contracts. Pay special attention to the small print.
“Free” means free. Throw out any offer that says you have to pay to get a gift or a “free” gift. If something is free or a gift, you don’t have to pay for it. Period.
Report fraud. If you think you’ve been a victim of fraud, report it. It’s one way to get even with a scam artist who cheated you.

By reporting your complaint to 1-877-FTC-HELP or ftc.gov, you are providing important information to help law enforcement officials track down scam artists and stop them!

Want Next-Day Underwriting?

Jim Beech — Wed, 24 Oct 2007 14:53:24 GMT

Receive Priority Underwriting

Want next-day underwriting? You can have it when you collect and submit the following documents* to the underwriting queue at the same time.

Doc Order Form
Lock Confirmation
Final 1008
Credit Report
Income Documentation
Asset Information
Purchase Agreement OR Payoff (if refinance)
Title
Appraisal
Signed 1003
Signed 4506-T
Signed Disclosures (can be PTF condition)
Evidence of Insurance

Submit as a minimum these documents and you'll enjoy a rapid turn around time!

Please contact broker support with questions at 800.924.3884 or brokersupport@directcorp.com

*Additional conditions may apply.

FHA Approval

Jim Beech — Tue, 23 Oct 2007 15:12:44 GMT

Now's the time to become FHA approved!

Obtaining FHA approval takes some initial legwork and money, but it’s an investment well worth it. With the scarcity of loan products available to meet the needs of moderate income and credit-challenged borrowers, FHA may be a viable alternative source of financing.

Direct Mortgage offers FHA loans for both purchase and refinance, fixed or ARM. If you are already FHA approved, we encourage you to consider FHA loans for your borrowers and to apply for Direct Mortgage additional sponsorship. If you are not yet approved, please submit an application to us for original sponsorship.

To apply for sponsorship, you’ll need to gather certain documents (see list below), fill out an application (HUD 11701) and application fee form and send it all to Direct Mortgage along with your $1,000 application fee. We will review the material and forward it to HUD together with a sponsor cover letter.

The process may take 5 to 7 weeks not including mailing time.

Required Documents:

Sponsor cover letter – Direct Mortgage provides
Fee - $1000
Application Form
Credit Reports – complete originals
Resumes
Financial statements
Licenses
State DBA approval – if DBA is used
Facilities evidence
Quality Control Plan
Funding program
Sanctions letter
Partnerships, LLCs, and Not-for-profits require additional documentation

Here is a summary of requirements to become FHA approved taken from the FHA Title II Mortgagee Approval Handbook 4060.1. Detailed requirements and instructions can be found within this handbook.

Summary of Requirements:

must be a corporation, partnership, or other chartered institution, and must be a permanent organization having succession. A sole proprietorship or trust is not an acceptable business form for approval as a FHA mortgagee.
must obtain all required business licenses prior to, or in conjunction with, approval as a FHA mortgagee. Except for a supervised mortgagee, copies of all required licenses must be submitted with the application. A state-licensed mortgagee must also submit a letter certifying to the Department that it has not been refused a license or sanctioned.
must submit documentation that they have State approval for both their legal name and any “doing business as” name they use.
must have and maintain an adjusted net worth of at least $63,000, plus $25,000 for each registered branch office up to a maximum required adjusted net worth of $250,000. . . . All calculations must be prepared by a CPA pursuant to chapter 7 of the most recent version of HUD IG Handbook 2000.04
must maintain liquid assets of 20 percent of its adjusted net worth or $100,000 whichever is lesser.
must pay all its own operating expenses
must employ trained personnel that are competent to perform their assigned responsibilities.
must have sufficient staff or permitted contractor support for loan origination, processing, underwriting, servicing, and collection activities, to the extent that the mortgagee engages in these activities.
may contract out certain administrative and clerical functions that do not materially affect underwriting decisions or increase the risk to FHA.
home office and each branch office must be able to provide prompt responses to applicant or mortgagor inquiries
“must comply with the Fair Housing Act, Executive Order 11063 on Equal Opportunity in Housing, the Equal Credit Opportunity Act (ECOA), the Real Estate Settlement Procedures Act (RESPA), the Home Mortgage Disclosure Act (HMDA), and all other Federal laws relating to the lending or investing of funds in real estate mortgages.
must follow all applicable statutes, regulations and HUD written instructions, including program handbooks and mortgagee letters on loan originations
may not use mortgagor escrow funds for any purpose other than for which they were received.
may not pay any fee, kickback, compensation or thing of value (including a fee representing all or part of the mortgagee’s origination fee) to any person or entity in connection with a FHA insured mortgage transaction, except for services actually performed and permitted by the Department.
must spend a majority of its time and assets in the production of real estate mortgages and in the lending or investment of funds in real estate mortgages, or a directly related field.
required to have at least one qualified sponsor at all times.

If you would like more information about FHA loans or the approval process, call Direct Mortgage at 800.924.3884.

View a list of our FHA and other loan programs.