Dec 032018
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Rising home prices have prompted federal regulators to raise the loan limits for conventional loans starting in Jan. The maximum loan amount for a conforming loan on a single-family home, one eligible for acquisition by Fannie Mae or Freddie Mac, will rise to $484,350.

The Federal Housing Finance Agency (FHFA) reviews the loan limits each year as established by the Housing and Economic Recovery Act (HERA) and adjusts them as necessary to reflect changes in home prices. FHFA reported its housing price index rose 6.9% since the third quarter of last year, so it adjusted the loan limit higher by the same amount.

Higher limits apply in certain “high cost” areas where 115% of the local median home price exceeds the new limit; however, FHFA hasn’t indentified any of those “high cost” areas in TX. Higher limits also apply to two, three, and four unit properties.

For some historical perspective, conforming loan limits go back to the early 1970’s, when the single-family loan limit was $33,000. Congress set the limit to $417,000 in 2008, where it remained for several years until average home prices rebounded from the great recession.

FHA and VA set their loan limits independently of the conforming loan limit, and I’ll report those as soon as they’re available.

Fannie housing index says it’s a good time to buy

 Real Estate Market  Comments Off on Fannie housing index says it’s a good time to buy
Oct 312018
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Fannie Mae’s housing index fell slightly last month, but it remains on trend, suggesting the housing market continues to strengthen slowly. The good-time-to-buy component of the index rebounded strongly last month, gaining 5 points. Apparently, the strong economy has buoyed homebuyer sentiment enough to overcome rising interest rates. However, the component still is significantly lower than earlier in the year and is down year-over-year.

The good-time-to-sell component remained flat last month; however, it’s still trending higher and is well within reach of its recent all-time high.

Surprisingly, the components that measure personal finances both fell last month. The net share of respondents who said their income is significantly higher than last year fell by 4 points, and the net share who feel confident about job security fell 1 point. However, this last component is strongly positive (+79%), so the decrease probably isn’t meaningful. The right track/wrong track component widened to 21 points in favor of the economy being on the right track, and that could explain the strength of the good-time-to-buy component.

Neither the home price nor mortgage rate component of the index showed any surprises. Respondents still overwhelming expect home prices and mortgage rates to rise in the next year, and the net share expecting a rise increased for both components last month.

More low down payment options

 Loan Programs, Residential Mortgage  Comments Off on More low down payment options
Aug 222018
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Fannie Mae and Freddie Mac have 3% down conventional loan programs that target low-to-moderate income folks. We used to call these community lending programs because they’re designed to fulfill Fannie and Freddie’s mandate to provide assistance for mortgages to low and moderate income families and underserved areas. The programs go by the monikers HomeReady and HomePossible.

Unlike the programs we discussed yesterday, you don’t have to be a first-time homebuyer to qualify. However, if the buyers are first-timers, one of them must complete a homebuyer education course for the HomePossible program. For HomeReady, one must complete homebuyer education regardless of first-timer status.

The programs are income-limited. By that I mean your total income cannot exceed a limit, which can differ even within a given county. For both programs, the limit typically is set to an area’s median income. However, the programs waive the limit in disaster areas and in certain areas Fannie and Freddie consider to be underserved. Call me if you want some help determining the income limit for your area.

So, given the programs we discussed yesterday, who cares that we have another 3% down program? Three reasons:

– Conventional low down-payment programs require mortgage insurance, which can bump up your housing payment quite a bit. HomeReady and HomePossible have lower mortgage insurance rates than the other low down payment programs.

– Second, the programs’ easier guidelines may make it easier for you to qualify.

– Finally, you don’t have to be a first-time homebuyer. For HomePossible, you can’t currently own other real estate, but Freddie carves out some exceptions to that in cases of divorce or inheritance.

The programs have other features and restrictions that may make one more appropriate for you than the other. Give me a call to see what’s the best fit for your situation.

Freddie adds another low down payment option

 Loan Programs, Residential Mortgage  Comments Off on Freddie adds another low down payment option
Aug 202018
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Freddie Mac recently joined Fannie Mae in offering a 3% down conventional loan program with no income limitations. Freddie calls its program HomeOne, and like Fannie’s program, it targets first-time homebuyers.

A lot of folks hear that, first-time homebuyers, and tune out, but you may be a first-time homebuyer and not realize it. Fannie and Freddie define a first-time homebuyer as someone who hasn’t owned real estate in the last 3 years. Freddie expands that definition to allow folks who owned a home with their ex-spouse to qualify.

If you’re buying a home with another person, only one of you has to be a first-time homebuyer. And if all of you are first-time homebuyers, one must complete a homebuyer education course prior to closing. The cost is minimal, and most folks complete the course online.

The programs are limited to single-family homes and condos and have a min credit score of 620. The 3% down payment may come from your own funds or from an acceptable gift source, such as a family member. It can’t come from the seller, but the seller can contribute up to 3% of the price towards your closing costs.

With this offering, Freddie and Fannie finally have comparable low down payment programs. The two have nuanced differences, so give me a call to see if one program is more appropriate for you than the other.

Next time, we’ll look at conventional low down payment options that specifically target low-to-moderate income folks.

Fannie housing index shows market still strong

 Real Estate Market, Residential Mortgage  Comments Off on Fannie housing index shows market still strong
Jun 302018
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Fannie Mae’s housing index rose to another record high last month despite the continued divergence of attitudes about buying and selling a home. The good-time-to-sell indicator rose 1 point last month and now stands at +46 while the good-time-to-buy indicator fell by 1 point and stands at +28. A positive reading means more consumers think it’s a good time to buy or sell than not, so both indicators still suggest strength in the housing market.

The good-time-to-sell indicator has been rising steadily over the past year and is 14 points higher year-over-year. The good-time-to-buy indicator has been relatively flat over the past year, which is good news given the increase in mortgage rates and home prices over the same period.

One possible contributor to the still positive good-time-to-buy indicator is consumers’ attitudes about renting. An overwhelming majority still say they would buy rather buy than rent if they were going to move. In addition, consumers expect rents to rise faster than home prices over the coming year, meaning waiting to buy a home could be an expensive choice.

Respondents continue to report strong personal financial conditions. Again this month they expressed an increased sense of job security, and more reported that their incomes had increased significantly in the last year. Both indicators also are higher year-over-year.

Record number say good time to sell a home

 Real Estate Market, Residential Mortgage  Comments Off on Record number say good time to sell a home
May 182018
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

Fannie Mae’s housing index soared to a record high last month despite a negative reading from one of the index’s key components. The net share of respondents who said now is a good time to sell a home increased 6 points from last month to 45%. This good-time-to-sell sentiment has been on a steady rise for the last couple years, but unfortunately it doesn’t seem to have resulted in additional home inventory for sale, which remains very low.

Respondents also reported stronger personal financial conditions. They expressed an increased sense of job security, and more reported that their incomes had increased significantly in the last year.

The net share of respondents who think home prices will continue to rise jumped 7 points this month, and the average expected increase was 3.9%. While that might seem a negative for homebuyers, respondents said they expect rents to rise an average 5.7% over the same period.

The one black mark in the survey was the net share of respondents who think now is a good time to buy. That component fell 3 points last month. It’s likely the combination of higher prices, higher mortgage rates, and fewer homes for sale contributed to the fall. However, these same factors may increase buyers’ sense of urgency even if they don’t think it’s a good time to buy.

Fannie says consumers stoked about housing

 Real Estate Market  Comments Off on Fannie says consumers stoked about housing
Feb 242018
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Fannie Mae says consumers are stoked about housing. Does this portend an active spring home season?

Fannie’s Home Purchase Sentiment Index rose to an all-time high in Jan with 5 of the 6 survey components improving. Interestingly, the only component that didn’t improve was the percentage of households saying their income rose significantly over the last year. That result may change as the tax cuts kick in.

Of the components that rose, the main driver was respondents’ belief that home prices will keep rising. 58% said prices will rise whereas only 6% believe they will fall.

Respondents also believe this is a good time to buy a home (by a 59% to 32% margin) and a good time to sell (by a 65% to 27% margin). The good time to sell reading was also an all-time survey high. It will be interesting to see if this translates into more housing inventory this spring.

Finally, I thought it was interesting given the recent rise in mortgage rates that the share of respondents thinking rates will rise remained fairly constant. I suspect that component also may change in the coming months.

Moving mortgaged rental property to LLC is okay

 Investment, Loan Guidelines  Comments Off on Moving mortgaged rental property to LLC is okay
Jan 292018
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Investors in residential real estate have long been dogged by the “due on sale” clause in the standard promissory note. It states that the lender may call the note due upon the sale or transfer of ownership of the property. A preferred vehicle for ownership of investment properties is a limited liability company because it provides some legal separation between the property and the investor’s other assets.

Fannie Mae requires that a borrower be personally liable on a note, meaning the borrower must sign the note in his/her name. Fannie won’t allow the name on the property’s title to be different from the name on the note, so investors sometimes quit claim the property title to their LLC after closing. However, this could trigger the due on sale clause if the loan servicer chooses to enforce it.

I have great news! Late last year, Fannie changed its servicing guidelines so that a change of ownership to an LLC in which the borrower owns a majority interest is acceptable and does NOT violate the terms of the note.

A couple important caveats:

– The change applies only to loans purchased by Fannie after 6/1/16; and

– The title must revert to the borrower prior to refinancing.

Fannie still will not allow the LLC to sign the note, and it still requires the property’s title to match the borrower’s name. However, Fannie will allow the time the property was held in the LLC to count towards the 6-month seasoning period for a cash-out refinance.

I did check with Freddie Mac, and it has not followed Fannie’s lead on this issue.

Equifax data breach prompts Fannie to change guidelines

 Loan Guidelines, Residential Mortgage  Comments Off on Equifax data breach prompts Fannie to change guidelines
Jan 202018
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The recent Equifax data breach affected millions of consumers. One of the remedies suggested by cybersecurity experts was for consumers to freeze their credit files with Equifax. The credit bureau made it easy for consumers to initiate the freeze, so many followed the advice.

Unfortunately, cybersecurity experts aren’t mortgage experts, so they didn’t realize the potential ramifications of freezing one’s credit. Mortgage guidelines require a lender to obtain credit information from all three major credit bureaus. If credit has been frozen, the applicant must unfreeze the file before the lender can approve the loan.

Fannie Mae recognized the potentially significant impact of this situation and changed its guidelines. For now, if a borrower’s credit file is frozen at one credit bureau, a lender can proceed as long as credit data is available from the other two bureaus and at least one of them reports a score.

How mortgage credit scores are unfair

 Credit Scoring  Comments Off on How mortgage credit scores are unfair
Nov 302017
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Your mortgage credit score is based on a credit model developed almost 20 years ago, and Federal Housing Finance Agency (FHFA) Director Watt says that’s not going to change anytime soon.

Many in the credit industry acknowledge that the FICO 4 model, the use of which is required by Fannie Mae and Freddie Mac, is deficient. It doesn’t differentiate between paid and unpaid collections. Nor is it able to distinguish medical collections, which seem to have little predictive value of credit risk. It also poorly models student loan debt, which has ballooned in the last 10 years, and only incorporates negative information for rent and utility payments.

Congress is trying to force a change through The Credit Score Competition Act, which would encourage Fannie and Freddie to consider other credit scoring models, including the newer FICO 9 and VantageScore models.

Watt contends that Fannie and Freddie already consider the same or greater levels of credit data in their computer models that determine whether a borrower qualifies. He also notes the change would be quite expensive. He prefers to wait until after Fannie and Freddie merge their investment security platforms, slated for 2019.

However, Watt fails to mention that Fannie and Freddie impose a minimum credit score, which prevents folks from qualifying regardless of how Fannie and Freddie tune their computer models. Fannie and Freddie also use credit score for determining interest rates and mortgage insurance coverage.