On January 1^st , 2010, HUD implemented a new disclosure designed to simplify the understanding of the cost of a loan.  The document is called GFE 2010.  Many things are different between the old Good Faith Estimates (GFE) and the new one, but here are some of the main differences.

1.  Lenders will no longer be able to just hand out a good faith estimate to a borrower without having these six things:  Property Address, Borrower’s Social Security Number, Borrower’s Monthly Income, Estimated Value of the Property, Loan amount and the borrower’s name.

2.  Once a Lender give a borrower a GFE, all the fees located in Box 1 cannot change.  This is good because there will no longer be any unexpected increase in lenders fees at the closing table.

3.  Yield Spread (money paid by the bank) will no longer be paid to the loan originator; it is given as a credit to the borrower.

4.  All other settlement charges (Title services, appraisals, inspections, etc.) can only increase by up to 10% on the final HUD.  This will also help to reduce deception by some loan originators who would drastically understate these fees.

While the intent of this new disclosure is so that the consumer can more easily shop for a new mortgage, the odds are that it will actually reduce the amount of “shopping” for a new mortgage.  This is because, the borrower must now give your social security number to each company they want a Good Faith Estimate from.  This is so the lender can pull the borrowers credit to make sure they can provide the loan they are giving the GFE for.  Anyone who has ever applied for credit knows that too many credit pulls can be detrimental to your credit score, so many borrowers will just pick one lender (hopefully someone they know and trust) and just run with it.

The other important thing to keep in mind about the new GFE 2010 is that, IT WILL ADD TIME TO GETTING A NEW MORTGAGE!  As with most new government rules, they are difficult for most people (even lenders) to understand.  It is now more than ever, extremely important that you work with a mortgage professional (like The Kunselman Team) that can help you to navigate the mine field of the mortgage process.  One wrong step can blow up the new mortgage.

If you have any more question about the new GFE 2010 or any other new rules, please feel free to contact The Kunselman Team so we can help you understand.

1. The $8000 first time home buyer tax credit that didn’t have to be paid back is introduced.
2. Foreclosures declined but short sales were on the rise.
3. Stated income loans went away, making it difficult for self-employed income borrowers to get a new mortgage.
4. New mortgage guidelines tightened up.
5. Large investors (unless they are cash buyers) got bumped out of the market.
6. Resurgence of the small/first-time investor.
7. Resurgence of the USDA 100% financing mortgage for rural areas.
8. The Government injected lots of capital into the mortgage backed securities keeping interest rates low.
9. The Government injects billions into the banks in the form of the TARP (Troubled Asset Relief Program) with the intent to modify existing mortgages.  The banks modify only a very small percentage of these mortgages.
10. Fannie Mae and Freddie Mac introduce the DU Refinance + and the Home Access Programs designed for home owners to refinance who initially had 20% equity when they first got their mortgage and have seen their home values decline.  Program is a moderate success.
11. Rates went up and rates went down.
12. The Home Valuation Code of Conduct (HVCC) is introduced in May.  Appraisals must now be ordered through Appraisal Management Companies (AMCs). Many reports indicate this system is very flawed and has lead to higher costs to the borrower in obtaining a new mortgage.
13. The Mortgage Disclosure Improvement Act (MDIA) is introduced in August.  It gives borrowers more information upfront before any money can be collected, but adds costly time to the mortgage process.
14. The Government extended the $8000 First Time Home Buyer Tax Credit to June ’10 and added a $6500 repeat home buyer tax credit.  Experts say there will not be any more extensions.

1. Good Faith Estimate (GFE) 2010 is introduced January 1, 2010.  Six items now required before the loan originator can provide you with a GFE: Name, Property address, Estimated Property Value, Loan Amount, Income, and Social Security Number (Credit Report). Fees locked for 10 business days from issuance of GFE.  Designed to protect the consumer from an increase in fees and encourage comparing options.  Most likely, will lead to less comparing since a GFE can’t be issued until the loan originator can pull credit.
2. Legislation on the table to repeal HVCC.
3. Federal Reserve Board debating over Yield Spread Premium (YSP).  In the past, YSP was a credit that had been paid to the loan originator by the lender.  GFE 2010 changes YSP from a loan originator credit to a borrower credit.
4. HUD to suspend the 90 day anti-flipping rule for one year starting February 1, 2010.  Existing rule prevents a home owner from selling a home that they have owned for less than 90 days.  Lenders still have to approve this new rule.

Today, The Kunselman Team is going to explain a sometimes confusing part of the mortgage process.  The differences between the interest rate and the Annual Percentage Rate (APR) can raise some questions that can be difficult to explain.

Most everyone understands what their interest rate is.  It is the rate of interest that they will be charged for the money they borrow.  It is also used to calculate your monthly payment.  Annual Percentage Rate or APR even though is sounds similar can be quite different.

APR is a calculation of the annual cost on a loan over the full term of the loan and it is found on the Truth in Lending Disclosure (TIL).  The APR not only factors in the monthly interest cost, but the upfront costs of the loan too.    The idea behind the APR is that if you are trying to compare two or more loans, this APR should give you a better idea of which is the better program from a strict numbers perspective.  Let’s look at two example loans. One has an interest rate of 6.00% and an APR of 6.50%.  The other loan has an interest rate of 5.75% and an APR of 6.75%.  Strictly on a cost perspective, loan number one is the better choice because it’s APR is 6.50% compared to the seconds loans APR of 6.75%.  The reason behind this difference is in the fees that the brokers are charging on the two loans.

Something to keep in mind also is that the new Mortgage Disclosure Improvement Act requires that if the initial APR that a lender disclosed to you changes by more that .125% by the end of the transaction, you the borrower must be notified and given three business days to review the new figures.  It is not uncommon that there could be a slight change in the APR because legitimate fees do come up during the loan process.  If there is a large change, it would be wise to sit down with your mortgage broker and get clarification on why there was such a large change.

We hope that you found this information useful and as always, if you would like to see what it feels like to work with a mortgage team that can bring a little sanity to an insane world, give The Kunselman Team a call.

Anybody that has tried to get anything done with their mortgage recently understands that things have been moving a little slow.  Well good news, the politicians in all their infinite wisdom decided that you the consumer need EVEN MORE TIME to make a proper decision about your mortgage.  The fact that on average a mortgage takes 3-4 weeks to complete and that after you sign documents on a refinance; you still have an additional 3 days to decide whether or not you want the new loan.

The Home Economic Recovery Act (See the name even sounds good) or HERA as it is also known, went into effect on July 30, 2009.  On average we are expecting that HERA will add 5 to 10 days for your new mortgage to close.  What that really means is that now instead of being able to lock rates for 30 days, many loans will have to be locked now for 45 days.  The longer the lock, the more it costs.

Now I understand what the intention behind this new law was to try and protect consumers but they are going about it the wrong way.  There are enough laws on the book.  What would be more helpful to consumers would be to enforce the existing laws.  All the laws in the world mean nothing if they are not enforced.

Something that would make more sense is giving the consumer a way to file a complaint if they feel they were tricked or lied to.  If the Department of Real Estate received enough complaints, then they could investigate a particular broker’s business, instead of changing the rules to punish everyone.  Because as I have stated before, those people who obey the existing laws will obey the new laws and those who don’t obey the existing laws, will not obey the new ones either.  They will just figure out a way around them.

The HVCC as mentioned above is just another example of good intentions gone bad.  One of the biggest problems facing our country right now is the flood of new laws being put into place.  Because of the state of the economy and incorrect opinions about what got us to this place, many politicians are creating laws based more on what they think will get them more votes instead of looking taking the time to really understand the problem so they can properly fix it.

Here is the inherent problem with trying to solve the problems in our country with more rules.  Every time you create a new law, you create more loopholes for people to get around the laws.  All the laws really do is increase the cost of doing business for those professionals who continue to operate in a legal and ethical way already.  Someone who is currently breaking the law, will just end up breaking the new laws.

What we really need in this country is more common sense.  Instead of creating new laws, why don’t we just give more power to those who have authority to enforce the laws we already have.  Before the HVCC was put into place, it was against the law for any lender or mortgage broker to influence the value of an appraisal.  The real problem was that if an appraiser felt that he or she was being pressured, they didn’t have a strong enough system put in place to give them any power to stand up to that lender or broker.

One more thing; if a law is created and at some point it becomes obvious that it is a bad law, let’s just get rid of it.  We don’t need more laws to get around the bad one.

As always, if you would like to see what it feels like to work with a mortgage broker that can bring a little sanity to an insane world, give The Kunselman Team a call.

We have all heard the saying, “If it sounds too good to be true, it probably is”, yet we have all fallen for someone who promised us the world and only delivered us disappointment. In the last month or so, we at The Kunselman Team have started to hear a lot of stories about people who were promised great things from some mortgage broker that they didn’t really know and surprise surprise, the broker did not deliver on their promise.  This is not that uncommon in this market because many mortgage brokers are desperate for business and will tell people anything to get a loan.   We had a client call us last week because they had decided to work with a broker who promised to close their loan in two weeks when we said it would take about 30 days.  The loan didn’t close in two weeks and it still hasn’t closed.

The Kunselman Team has a much better philosophy.  We believe in under promising and over delivering.  While many brokers will leave 3^rd party fees of their Good Faith Estimates to make it look like they are charging less, The Kunselman Team puts every fee that can come up so that there are no surprises except maybe that your are getting back more money than expected.  We are also realistic about the time it will take to close your loan.  Loans just take longer to do now than they did in the past.  Lenders are looking at every detail much more closely than they have in the past and that takes time.  If you are working with someone who promises to close your loan in two weeks, get it in writing and make sure you get something if they don’t deliver on their promise.

As always, if you would like to work with the best in the industry, give The Kunselman Team a call so we can help you with all your mortgage needs.

Every day when you turn on the TV you are bound to hear someone talking about the “Stimulus Package” and how it supposed to help home owners buy homes or refinance their existing mortgages but few people explain how this applies to the average person in terms everyone can understand.  Today I want to talk about two specific programs, the “First Time Home Buyers Tax Credit” and the DU Refinance+.  These are two of the better parts of the “Stimulus Package” and I would like to explain how these could help you or someone else you know, like and trust.

The “First Time Home Buyers Tax Credit” in very simple terms is a rebate you get from the government for buying a home.  Now this rebate does come with a few restrictions.   First, you must be a “First Time Home Buyer”.  That means you cannot have owned a property in the last 3 years, so just because you may have owned a home in the past doesn’t mean you can’t qualify for this credit.  Second, if you purchase a home for $80K or more you will get the full tax credit of $8,000; if you purchase a home for less than $80K, you will receive 10% of the purchase price in a tax credit.  In addition to the previous two restrictions there are some income restriction that you will want to talk to you tax advisor about.  But here is the beauty part of this tax credit too.  The tax credit is real money in your pocket.  This is not one of those programs where they will reduce your taxable income by $8,000 so you pay fewer taxes.  If you are scheduled to get a refund of $500 on your taxes, you will get a refund of $8,500 instead.  Now since most of you have probably already filed you 2008 tax returns you have two options when to collect this credit.  You can wait until you file you 2009 tax returns and you will get it then or you can amend your 2008 tax returns and get it this year.

If you have been considering buying a home, now is the perfect time.  Longmont’s real estate market has been stabilizing well and the state as a whole has actually seen its first decrease in foreclosures since they started monitoring them back in 2003.  But you cannot wait forever.  If you want to qualify for the “First Time Home Buyers Tax Credit” you must purchase a home before December 1^st, 2009.

The DU Refinance+ program is designed for those who currently own a home and would like to refinance to a low interest rate but might not be able to because their property values have declined.  There are a lot of restrictions to this program so I will cover some of the big ones but each loan is looked at case by case.  First, to qualify for this program, your current first mortgage must have Fannie Mae as its servicer.  The easiest way to find out if your mortgage is owned by Fannie Mae is to call The Kunselman Team and we can look it up for you.  (Please note that even though you don’t make your mortgage payments to Fannie Mae, that doesn’t mean your loan is not owned by them.)  If Fannie Mae owns your mortgage, the second question is “Does your first mortgage currently or in the past had mortgage insurance on it?”  If the mortgage had mortgage insurance on it at any point, you do not qualify, but if your first mortgage is 80% of you homes value or less you may qualify.

This program is particularly helpful for those who have a first and second mortgage on their home.  Many people with first and second mortgage currently owe more than their home is worth.  By current lending standards, these people would not qualify for a refinance but with the DU Refinance+ Program, as long as their first mortgage is not more than 105% of their homes value, they may be able to qualify for this refinance to lower their monthly payments.  This is not a cash out refinance!  You can only refinance your existing mortgage and the loan closing costs.  If you have a second mortgage, that company must agree to the terms of the new loan but since we are usually bettering your situation, many are being pretty cooperative.

If you or someone you know, like and trust would like to see he or she qualifies for either of these fantastic programs, please contact Luke at Luke@TheKunselmanTeam.com or Shelley at Shelley@TheKunselmanTeam.com.