Happy Halloween Week!

Happy Halloween Week!

Franklin Loan Center has the competitive platform you need to navigate this lending environment. We are a mortgage bank which means we can approve your deals in-house with our own underwriters who want deals approved, closing quickly, drawing loan docs with my team members, and funding NOW!! We are NOT the average broker who doesn’t have control of underwriting or funding. Use us to stay competitive.

Take control of your deals and refer them to Franklin Loan Center today!

I’m NEVER too busy for any of your referrals. This week’s rate sheet is attached.

Be prepared to set your clocks back 1-hour this Saturday night as Daylight savings will kick in until the Spring!

More inflation news will follow

“THOSE WHO CAN SOAR TO THE HIGHEST HEIGHTS CAN ALSO PLUNGE TO THE DEEPEST DEPTHS.” Lucy Maud Montgomery. Despite all of the government’s efforts, markets here and around the world plunged this week as the financial crisis continues to grow.

On Tuesday, the Fed and Treasury Department announced plans to purchase short-term commercial paper that many companies rely on to finance their day-to-day operations, to help businesses with their short-term credit and funding needs. The government hoped this announcement would help ease uncertainty, restore confidence, and give Stocks a boost. They hoped for a similar result on Wednesday when the Federal Reserve cut the Fed Funds Rate by 50 basis points, and coordinated an emergency global interest rate cut with the European Central Bank, Canada, the UK, Switzerland and Sweden. The Central Banks in Asia followed suit and cut their benchmark interest rates overnight as well.

However, on Thursday, Stocks plummeted nearly 700 points to a five-year low, and on Friday Stocks ended the day another 126 points lower (after plunging 500 points three times throughout the day). Bonds and home loan rates also worsened sharply in the second part of the week, as Bonds dropped below several important floors of support, and home loan rates ended the week .50% higher than where they began.

From a historical perspective, we are in the midst of a brutal bear market that began on October 9th 2007. Remember that a decline of 20% constitutes a bear market…and a 10% decline is a “correction.” The last bear market occurred between March 24th of 2000 and October 9th 2002 saw a 49% drop. Overall, the average bear market lasts for 12.3 months, with the average decline being 32%. The current bear market is right in line with the average historical time frames, and the extent of the decline is worse than previous bear market averages, but still slightly better than the bottom made in 2002. So the historical data might suggest that we could be nearing a bottom. I will continue to monitor this situation closely, and let you know how this will impact home loan rates in the weeks and months ahead. One bright spot is that oil prices are also plunging, falling from a high of $147 per barrel last July to around $80 per barrel Friday morning…which at least makes a tr ip to fill up at the gas station slightly less painful.

PLUNGING PORTFOLIOS ARE SOMETHING WE NEVER WANT TO SEE HAPPEN, AND NEITHER ARE PLUNGING SAVINGS ACCOUNTS. CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW FOR SOME GREAT TIPS ON STAYING WITHIN YOUR BUDGET!

Forecast for the Week

Last week was a volatile one despite the lack of scheduled economic reports, and this week several big pending reports could add to the volatility…even with the markets being closed on Monday in observance of Columbus Day. Wednesday will bring the wholesale inflation measuring Producer Price Index and the Retail Sales report for September. The Retail Sales report is a measure of the total receipts of retail stores, and changes in these numbers are closely followed as a timely indicator of broad consumer spending patterns. It will be especially important to see what kind of impact the financial crisis has had on recent spending trends.

More inflation news will follow on Thursday, as September’s Consumer Price Index (CPI) report, which gives a read on inflation at the consumer level, will be released. CPI tells us how much more expensive goods and services are this month over last month, and this widely watched inflation indicator will definitely make headlines. And given what’s been happening in the markets, it will be important to note what’s happening in the housing sector, which Friday’s Housing Starts and Building Permits Report for September will reveal.

Remember when Bond prices move higher, home loan rates move lower…and vice versa. As you can see in the chart below, Bonds and home loan rates worsened this week, due to a variety of factors. I will be watching closely to see if Bonds and home loan rates can change direction.

What is the expected impact of HOPE for Homeowners (H4H)?

What is the expected impact of HOPE for Homeowners (H4H)? Per HUD.gov

The Congressional Budget Office estimates that as many as 400,000 homeowners could avoid foreclosure through this program over the next three years.

What is the value of the HOPE for Homeowners program to lenders?

Only FHA approved mortgagees can originate H4H loans. H4H loans may benefit lenders by helping them avoid foreclosure expenses. Although the lender will likely have to write down their existing loan in order to originate an H4H loan, it is still less expensive than foreclosure and disposition of property.

Why should existing lien holders accept the short payoff that is required under the terms of the law?

HUD understands that it will be a challenge to encourage lien holders to accept short payoffs in order to participate in this program, especially when there are other loss mitigation tools available that may provide a more suitable solution. However, in instances where those tools are ineffective, we believe that the holders of these mortgages should accept the short payoffs in lieu of the tremendous losses associated with foreclosure. Similar challenges exist with subordinate lien holders but by offering them the opportunity to have an interest in FHA’s share of future appreciation in the property, we hope to entice these lien holders to participate as well.

What advice should loan servicers/lenders give borrowers who are facing difficulties fulfilling their obligations on their existing mortgage(s)?

The H4H program is another loss mitigation option to keep borrowers in their homes on sustainable and affordable terms. Lenders should provide information to borrowers on possible options include contacting a HUD approved counseling agency. Borrowers may call 1-800-569-4287 or visit http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm

When can I start originating H4H loans?

The program is effective from October 1, 2008 to September 30, 2011.

Eligibility and Underwriting issues

How does the H4H program differ from FHA Secure?

Under H4H:

• Any type of first mortgage as long as it was originated on or before January 1, 2008.

• All existing lien holders must waive prepayment penalties and late charges, as well as extinguish all liens against the property.

• Existing first lien holders are required to accept the proceeds of the H4H mortgage as payment in full.

• Borrowers will be required to share both the initial equity created with the H4H loan, and future appreciation.

• The maximum loan amount is $550,440, nationwide.

How does the appreciation sharing piece work?

To entice subordinate lien holders to participate in the negotiation process and release their liens, FHA has the authority to share its future appreciation entitlement with them. At settlement, subordinate lien holders will receive a certificate that evidences their interest as an obligation backed by HUD, with payment conditional on the value of HUD’s appreciation share.

Are there special underwriting requirements for the H4H program?

Yes, in addition to standard underwriting procedures, the underwriter must:

• Determine that the borrowers existing total monthly mortgage payment is in excess of 31% of their gross monthly income in March of 2008.

• Determine the borrower’s total monthly mortgage payment on the new H4H loan is less than the borrower’s total monthly mortgage payment on existing loans.

• Determine that the DTI’s are at or below 31/43. However, if the borrower has successfully completed a 3 month trial modification, ratios can be expanded not to exceed 38/50.

• Review income as reported on the transcript or copy of the borrower’s income tax returns for the previous two years.

How is the total monthly mortgage payment on the existing loan(s) calculated for the purpose of qualifying the borrower for the H4H program?

The total monthly mortgage payment is defined as the fully indexed, fully-amortizing Principal, Interest, Taxes and Insurance (PITI) payment. This includes homeowner’s association dues, grounds rents, special assessments, and all subordinate liens as of March 1, 2008.

Can I add a non-occupying co-borrower to help qualify?

No, however you may add a non-occupying ,co-signer who does not have any ownership interest in the property.

What if there is currently a non-occupying co-borrower on the loan?

The non-occupying co-borrower will need to quit claim their interest in the property prior to the occupying co-borrowers applying for the H4H program.

What loans are eligible for refinance under the H4H program?

Any type of mortgage is eligible for refinancing under the H4H program, including conventional (prime, Alt-A, subprime), or government backed (FHA, VA, or Rural Development), fixed or adjustable rate mortgage.

The loan must have originated on or before January 1, 2008, the borrower must have made at least six (6) payments on the existing mortgage, and the total monthly mortgage payment exceeds 31% or the borrower’s March 2008 gross monthly income. The borrower may be current or delinquent at the time the new H4H mortgage is originated.

What properties are eligible?

The property to be refinanced must be the borrower’s primary and only residence in which the borrower has an ownership interest.

Only 1-unit properties are eligible, including condominiums, cooperative units and manufactured housing permanently affixed to realty.

Does the borrower have to be delinquent on their existing loans to be eligible for the H4H program?

No, the borrower may be current or delinquent at the time of application for the H4h mortgage.

What must the existing lienholders do?

Existing first mortgage lien holders must waive any and all prepayment penalties and late payment fees, agree to accept the proceeds from the H4H mortgage as payment in full, and release their outstanding mortgage liens.

Existing subordinate lien holders must waive all prepayment penalties and late payment fees as well as release their outstanding mortgage liens.

Will I have to get a new appraisal or can I use an AVM?

In all cases a new FHA appraisal must be ordered specifically for the H4H transaction and the appraisal should be no more than 3 months old at the time of closing.

What are the rates for the Upfront Mortgage and Annual Insurance Premiums (UFMIP)?

The Upfront Mortgage Insurance Premium (UFMIP) is 3% and the Annual is 1.5%

Can the UFMIP be financed?

Yes, however the maximum LTV under the H4H program is 90% regardless of whether or not the UFMIP is financed.

Will there be additional disclosure requirements?

Yes, the originating lender must provide the HOPE for Homeowners Consumer Disclosure and Certification form at the time of initial application for the Program.

Are there additional lender certifications?

Due to the statutory requirements and the unique nature of the program, lenders and underwriters will execute a certification assuring HUD that they have underwritten and closed the loan in accordance with the H4H program guidelines.

What is the maximum LTV for the H4H program?

The maximum LTV for the Program is 90%, including any financed UFMIP.

Who can pay closing costs?

Standard FHA policy regarding closing costs is applicable, including the 1% cap on origination fees.

• Borrowers may pay closing costs from their own assets,

• They may be financed into the mortgage provided the 90% LTV limit is not exceeded,

• The servicing lender, originating lender and/or a third party (e.g. a Federal, state or local Program) and/or

• The originating lender my pay the borrower’s closing costs and prepaid items through premium pricing.

Is subordinate financing allowed to pay closing costs, like under FHASecure?

No. Subordinate financing is not allowed in the first 5 years of the mortgage except in when necessary to ensure maintenance of property standards.

Will Wall Street be receptive to purchasing these new loans?

These loans can be securitized in Ginnie Mae FS Pools, making them attractive to Wall Street and other investors.

Mortgage Bonds are soaring higher

Mortgage Bonds are soaring higher on this weekend’s announcement that Fannie Mae and Freddie Mac will come under control of the government.

The government’s move to create a line of $200 billion to back all Fannie Mae and Freddie Mac loans at all costs is great news for homeowners. First, it ensures the continued liquidity of conforming loans nationwide and, second, it ensures that buyers of this type of Bond have a safe investment going forward. There’s no doubt that this will help the US housing market move through the current crunch that we’re in.

So far this morning, the news has lead to a nice rally in pricing. When combined with the break above the 200-Day Moving Average, this may lead to attractive rates. Therefore, I recommend floating for now.

Jobs Report for August

Wow another great – shortened week! I know you are getting busy out there! Let me know what I can do to help. Make it a great weekend!

Market Update

The Jobs Report for August came in this morning at 84,000 jobs lost. But the real buzz in trading is the swelling unemployment rate, which jumped from 5.7% to 6.1%. This marks the highest unemployment rate since September 2003.

Mortgage pricing has been on a rally for the past several days and looks like it’s about to turn the other way. It’ll interesting to see what happens next week! Stay tuned!

Market Update

Market Update

Mortgage Bonds are trading higher this morning, despite a report that manufacturing in NY is stronger than anticipated.

Normally a better-than-expected economic report would be bad for Bond prices. However, the declining prices of oil, precious metals and other commodities have decreased inflationary pressures and have helped push Bonds higher so far today.

We got a rally late today for the better I recommend floating for now.

Writing an FHA and Nehemiah Program Offer: Structuring the Purchase Agreement


These are the instructions for writing an FHA and Nehemiah offer.

First and foremost, the seller must pay the tax service fee of $81.00.

Check the FHA Loan box.

Page 1:

If asking the seller to pay for a closing cost credit FHA allows a 1-6% closing cost.

“Seller to contribute 3% for non-recurring and recurring closing costs.”

If asking the seller to contribute toward the Nehemiah Program the seller can be asked to contribute up to 6% plus a $599 processing fee for re-sell (Short Sale and Foreclosure) properties and $399 for new construction.

“Seller to contribute 3% of the sales price toward the Nehemiah Program plus $499 processing fee.”

Page 6: Other financing terms (line 24)

“The seller is aware the homebuyer is receiving downpayment assistance through the Nehemiah program as set forth in the related Participating Home Agreement.”

Addendum – Participating Home Agreement to be completed and submitted with the offer.

0. Print the attached Participating Home Agreement to complete and
submit with offer.
1. Calculate the percentage of downpayment assistance requesting
1-6%. Typically 3%.
2. Add the processing fee. $499 for re-sell properties and $399 for
new construction.
3. Add the two dollar amounts together for a total dollar amount due
to the Nehemiah Corporation of America.