Is HVCC On Its Way Out?

Generally speaking, mortgage folks are a pretty optimistic bunch, although “trust but verify” is an approach that many use in their business lives.

It turns out that the HVCC, which has good intentions but arguably poor implementation and ramifications, could be on its way out. The House Financial Services Committee has just passed an amendment to the Consumer Financial Protection Agency Act to phase it out, and allow all loan originators, licensed or registered in accordance with the SAFE Mortgage Licensing Act, to order appraisals directly. H.R. 3126 is the number of this bill. Although this is just a committee vote, and still has a long way to go, it is a “first step” The Consumer Financial Protection Agency Act is expected to be merged with a number of other regulatory reform bills before moving to the House floor for a vote, and any differences must be ironed out within the House and then with any Senate versions before going to the President.

FHA Adopts HVCC Requirements

Effective October 1, 2009, all FHA transactions must adhere to the appraisal guidelines outlined in the Home Valuation Code of Conduct that is currently in place for conventional financing.

This change in FHA guidelines has been enacted to limit the communication between loan officers and the appraisers assigned to case files. Loan Originators, Loan Officers, and Mortgage Loan Production Staff are not permitted to have any substantive contact with the appraiser and must direct all appraisal orders and communication through an Appraisal Management Company.

In addition, FHA appraisals are only valid for a period of 120-days from the date of the appraisal.

While the new FHA guideline does not specifically state that FHA has adopted HVCC guidelines, the new directive mirrors the requirements of HVCC.

REAL FINANCE SOLUTIONS Has a New Technology Partner!

ATTENTION ALL RFS CONSULTANTS

REAL FINANCE SOLUTIONS is excited to let you know that we are adding a new technology partner that will allow us to upgrade our technolgy and add additional revenue streams.

Please pass the word to everyone on your team that it is important to attend next week's Wednesday night RFS Consultant Training Webinar as we will be introducing our new partner and giving you an overview of our new system.

Just a hint of what is to come...are you ready for your own self replicating website? Be sure to tune in Wednesday night at 9:00 p.m. EST.!

New Conforming Mortgage Guidelines , Effective September 1, 2009

I am re-posting a recent blog from our partner Ed Hollinshead, GHMC; the author of The Wealth Catalyst Report.

The information contained in this blog is very important and essential for you and your clients to understand.

As a reminder, Fannie Mae is rolling out new lending guidelines Tuesday, September 1, 2009.

Starting next week, being approved for a home loan could be much more difficult.

The new rules mark the first major underwriting update since April of this year. The changes are mostly geared at fraud prevention.

Among the updates:

1. Stock options are no longer eligible for "reserves"


2. Relocating families can't use the "trailing" spouse's projected income for qualifying


3. "Tip" income must be documented and verified


4. Lenders must call employers to verify employment


5. Lenders must verify tax transcripts against IRS records

But there are other changes, too. As examples:

1. Owners and buyers of 2-unit homes are subject to new minimum FICOs with larger down payment and equity requirements.


2. Only 70% of stock, bond and mutual fund values may be used as reserves.


3. Only 60% of retirement assets may be used as reserves.

Consider this post to be your advance warning. Not everyone that qualifies for a mortgage on Monday, August 31 will qualify on Tuesday, September 1.

Therefore, if you have a pending need for a mortgage -- for either a purchase or a refinance -- it's probably best to talk with a lender as soon as possible. The deadline is based on the date of application -- not the date of closing.

Read the complete Fannie Mae announcement online.

Do You Have a Social Networking Stragegy?

As many of our followers know, Real Finance Solutions is a proponent of leveraging Social Networking principles as a means to grow and manage your business. Successful implementation begins with an understanding of the main uses of Social Networking and developing your strategy.

Until now, we have focused on the various tools and platforms of Social Networking. Today, I would like to discuss the main uses of this business strategy. First, Social Networking provides an ideal platform for building and organizing your team. As you on-board new members to your team, one of your first objectives should be to educate them on the values of Social Networking, and if they are not currently using these tools, be sure introduce Facebook, LinkedIN, Twitter, etc. Every member of your team should be connected to you, Real Finance Solutions, and each other in order to leverage the shared knowledge and experiences of the entire network.

Second, Social Networking enables your team to organize around a project and work together for shared success on a particular strategy or objective. Team members can collaborate with one another and stay updated on each other progress as you move forward.

Third, and possibly most important, Social Networking allows you to build a knowledge base for your clients. Every member of your team bring special attributes and experiences that will contribute to addressing the following question; "Will I have the answer?" You need to remain focused on being a resource to answer your clients questions as they arise.

I strongly encourage you to make Social Networking a significant part of your business and engage every member of your team to follow this path to future success.

The Nutter Burger.....

So much for economic news and tips for our clients to improve their financial lives; today we are unveiling the making of the Nutter Burger; and the most outrageous hamburger preparation I have found in a long time.

Be careful, carrying the ingredients to the grill may require a small vehicle; but it is worth the effort.

Start with a 1/2 pound burger and introduce the following ingredients, liberally, to the top-side (ONLY) once the meat hits the cooking surface:

1. Splash Louisiana's favorite; Crystal Hot Sauce, across the entire surface of this meat lovers masterpiece;

2. Follow with a second liquid infusion of Lea & Perrins Worcestershire Sauce;

3. Close your eyes and sprinkle Tones Garlic Pepper to your heart's content;

4. Don't be shy with the application of Cajun Spice;

5. As if the Cajun Spice was not enough; follow up with some pure ground Cayenne Pepper to bring natural health benefits to your burger experience;

6. No grilling event is complete without Lawry's Seasoned Salt;

7. Introduce the sweet flavor and warm aroma of Sweet Basil as though you were grilling Southern European style;

8. In honor of the Southern European influence, add a dash of Italian Seasoning to each burger;

9. Top everything off with some Smoke Flavors; don't go crazy here....just a pinch will do;

10. I love cheesburgers, but resist the temptation to add any cheese to this burger; enjoy the purity of your work of art.

The Nutter Burger is being introduced to the general population after years of feeding travel baseball teams across Northeast Ohio. Chef Rod Nutter, complete with a classic Bull Durham accent, shares hours of baseball stories while he diligently prepares the coals in the iron grill that has been called upon for the past 15-years to deliver this work of art.

Chef Rod said, "I never leave home without my Nutter-Bag of blends and spices; and can't think of a better place to enjoy one of these burgers than at a baseball diamond on a summer afternoon."

We couldn't agree more and vow to continue the tradition of the soon-to-become famous Nutter Burger.

Jobless Rate Improves - Rates May Move Up......

The unemployment rate improved this morning as U.S. job market showed signs of improvement. The unemployment rate dropped to 9.40%, the lowest rate since August, 2008, according to the U.S. Labor Department. The Labor Department report released this morning reported a net loss of 247,000 jobs in July, less than expected.

What does this mean for interest rates? We may see rates inch up slightly on this news because positive economic data leads to investment into the stock market; which takes away investment in the Bond market. As we have discussed in the past, Bond market activity is directly related to the movement of interest rates.

What to loo for moving forward........ Any rate increase should not be significant, however, clients that are not yet locked and may be closing in the next couple of weeks may be at risk of a slightly higher interest rate than they expected. Rate movement may lead to an increase of .25% to .375% in the interest rates being quoted in the market place.

Real Finance Solutions is dedicated to bringing you up to date market data that will allow you to keep your clients informed of news that effects their bottom line.

Educate, Educate, Educate.......

With more and more first time homebuyers entering the market, we can never overlook the importance of educating them on the real estate world they are about to enter. From the very moment they find their dream home, our clients are staring down the barrel of a process they have no idea how to manage. This is where we come in.......

As RFS professionals, it is our mandate to prepare our clients and provide them counsel in order to understand the entire real estate process. Does this mean WE have to be experts in every aspect of real estate, mortgage lending, and title; NO, but we need to rely upon the experts in these fields to help navigate the process.

Get to know the lenders in our network; understand what they bring to the table. Many of our lending partners have multiple years of experience behind them, understand the totality of our industry, and are eager to help you build your business. The good ones know how to research and find answers to questions they don't have answers to.

Not a licensed Realtor? Build a team around you of knowledgeable real estate professionals that understand the market and requirements of buying and selling homes. The same applies for our title company partners; stuff happens at the closing table that has an effect on real estate transactions on a daily basis. Get to know these professionals and leverage their knowledge.

Remember, our partners are seeing a multitude of transactions and are exposed to a full range of unique situations with each and every client they touch. Think of our partners as giant databases. With every transaction comes a learning experience and we need to access the collection of data that they are exposed to.

The bottom line is that every successful transaction is the result or preparation and planning. Take the initiative and begin tapping into the vast knowledge and resources our partners have to offer.

Home Sales Rise - Lifting Interest Rates

The National Association of Realtors (NAR) announced that pending sales of existing home rose 3.60% in June, recording a fifth straight monthly gain. NAR's Pending Home Sales Index (PHSI) is released during the first week of each month and is designed to be a leading indicator of housing activity.




The latest news on housing activity caused the price on 10-Year Treasury Notes to drop, sending yields to their highest levels in more than six weeks. As the price of Treasury Securities falls, the yield increases; which is reflected in an increase in mortgage interest rates. Typically positive economic data of this nature will result in a "sell-off" of securities, causing the price to drop and rate to increase.



It is very important to understand that the 10-Year Treasury is NOT the leading indicator of mortgage rates. Mortgage professionals monitor the activity of the 30-Year Treasury Bond; however, the 10-Year is often quoted in news releases and it's activity is readily available in general market reports. The 30-Year Bond was trading significantly lower on the housing data.



Overall, the housing data is viewed as an indication that the struggling U.S. housing market may be reaching its bottom level. Furthermore, this news may be a sign that home prices will be back on the rise soon as inventory shrinks. It is quite possible that we may see a "sellers" market again in the near future; the time to buy is now while home prices and interest rates enjoy lower levels.

Real Finance Solutions Update

Good Monday Morning.

Real Finance Solutions just completed a explosive month of growth and I want to share some of our July highlights with you.

• We have added 26 new RFS Consultants to our network; which now stands at 111 strong!


• Team Building Leaders: Jose Bautista (Fremont, CA) has added 10 new team members and Steve Carter (Columbus, OH) has added 6 new team members


• Business Development Leaders: Cody Ann Moran (Atlanta, GA) has submitted 8 new transactions and Johnny Mosley (Detroit, MI) has submitted 7 new transactions.

I am also excited to announce that we will be bringing you a Weekly Update from Real Finance Solutions at the close of business each Friday beginning August 7. Our Weekly Update will keep you informed on the growth of our network as well the activities of our business leaders. In addition, we will we will include an RFS Focus where we will introduce you to the rising stars in our network and provide a forum to share our success stories with one another.

Thank you for an amazing July and we look forward to the continued growth and success of our network as a result of our dedicated RFS Consulting Team!

Are You Ready.......?

I wanted this morning's edition of RFSinsights to re-address the mission of REAL FINANCE SOLUTIONS, because I believe that we truly have the Solution to the problems in the mortgage industry. I also feel that these problems are affecting the quality of life for millions of families across America and that we can make a difference if you are willing to help.

As most of you know, I have been advocating that consumers team up with honest, ethical real estate and mortgage professionals so that they can avoid becoming victims of predatory lenders since 1987. No one wanted to hear the message for many years and it has been an uphill battle getting my message across.

To state the obvious…"America is in an economic turmoil."

I truly believe we can help; together, we need to get the word out to consumers that REAL FINANCE SOLUTIONS is here to help them make educated decisions when buying, selling, refinancing or investing in real estate.

It is interesting to me that so many people, such as Jeff Wirsing (Mortgage News Daily), feel that there still is not an answer to the mortgage industry. In his July 30, 2009 post, Proposing Real Change in the Mortgage Industry, Jeff asks "What if we were to start from scratch, on a blank white board, and completely re-invent the process of originating a mortgage? What might that look like?". This is precisely what REAL FINANCE SOLUTIONS has accomplished; we have re-invented the process of originating a mortgage.

It all begins and ends with taking care of the consumer first and success will take care of itself. That is the philosophy behind REAL FINANCE SOLUTIONS.

As RFS Consultants you are in the unique position to provide consumers the education they need so that they can make educated decisions. It really is all about empowering the consumer to understand the process from loan application to closing and also in understanding the impact their mortgage has in their ability to create wealth. They also need to understand the predatory lending practices that still exist in the marketplace and how they can avoid becoming victims of predatory lenders.

It is up to you as RFS Consultants to learn all you can about the tools and information available to you as a member of REAL FINANCE SOLUTIONS and to use those tools to educate consumers before they make loan application. You have the opportunity to be part of the solution, not part of the problem. The question is… are you ready to commit to learning the system and applying the tools you have available to help consumers? If so, you will find that as you counsel and educate consumers so that they can use their mortgage as a tool to build wealth and financial independence, you are also helping yourself build wealth and financial independence.

If you are ready to make a major commitment to improve the quality of your life and the lives of others then PLEASE JOIN US on our weekly Wednesday night Webinars so that you can learn to use the tools available to you as a RFS Consultant. Please contact every member of your team and ask them if they have read this email and if they are ready to commit to learning the system.

If you have not given Getting Started Interviews with all of your team members and would like for me to participate in one with you please send me an Email and let me know what times would work best for you. I am committed to doing everything I can to help you and your team reach your financial goals and I feel it all starts with the Getting Started Interview and making sure our RFS Consultants know how to access the tools they have available to them to counsel consumers.

We now have over 100 members in our system. We had 28 RFS Consultants join us last Wednesday night for our RFS Consultant training. While I was thrilled to have those 28 I could not help asking myself, “Where are the other 70+ members”? Don’t they have dreams and goals they would like to achieve to live the life they truly want to have? If so how can we help them reach those goals if they don’t participate in the Webinars? And if they don’t participate in the Webinars how are we going to reach all the families that need our help?

What can I do to help you make a commitment to building your business with REAL FINANCE SOLUTIONS?

We need you to make a commitment to participate in the training and learn how to use the tools available so we can have a powerful team providing counseling to consumers that need our help. We can’t do it without you. There are thousands of consumers across the nation making the decision to buy, sell, refinance or invest in real estate without having the opportunity to receive the counseling they need before they make their decision on which loan is right for them.

Please register to join our Wednesday night RFS Consultant training webinars and give us the opportunity to help you build your business so that you can truly reach your financial goals. It really all begins with you, doesn’t it?

I have just one question for you, “ARE YOU READY?”

December 1, 2009 - Deadline for First Time Homebuyer Tax Credit

The deadline to purchase your first home and qualify for the First Time Homebuyer Tax Credit is fast approaching. Your home must be purchased by December 1, 2009; this means you must CLOSE on your purchase on or before this date. The American Recovery and Reinvestment Act of 2009 increased the ceiling on the tax credit from $7,500.00 in 2008 to $8,000.00 in 2009; making this the ideal time for first-time homebuyers to purchase a home. Additionally, the credit does not need to be paid back as long as you continue living in the home as your primary residence for 3-years without selling it!

A Tax Credit is a dollar for dollar savings on your taxes. Think of it as a gift certificate used to lower your tax bill to the IRS. This makes the offering much more exciting than a tax deduction; which reduces your taxable income but does not directly reduce your tax obligation.

Here are some key points to remember:

• The credit amounts to 10% of the purchase price not to exceed $8,000.00


• A First-Time Homebuyer is defined as someone who has not owned a home in the last 3-years


• No repayment if you live in the home as your primary residence for 3-years


• Single tax payers with incomes up to $75,000.00 per year and married couples with a combined income up to $150,000.00 per year qualify for the full tax credit


• If you are married, both spouses must be first-time homebuyers


• You cannot purchase the home from a related party like a spouse, direct ancestor, or direct lineal descendant (child or grandchild); however, you can qualify for the credit if you purchase from siblings, nephews, nieces, and others


• If more than one unmarried individual is purchasing the home, the credit can be split up; however, the combined total cannot exceed the ceiling of $8,000.00


• Home MUST transfer on or before December 1, 2009 in order to qualify

To ensure compliance with requirements imposed by the Internal Revenue Service, we inform yo that any U.S. Federal tax advice contained in this communication (including any attachments or links) was not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding tax-related penalties, or (ii) promoting, marketing, or recommending to another person any transaction or matter addressed in this communication. I recommend that you counsel with properly licensed legal, tax and investment advisors for specific advice pertaining to your personal situation.

Gift of Equity - A Growing Trend?

We have received numerous questions recently concerning the sale of real estate between family members and whether or not the seller may "gift" equity in the property to the buyer. In addition, our friends at Gateway Title Agency in Cleveland-OH have also identified the growing trend in the transfer of real estate between family members. In a recent blog posting, Rachel Torchia, Owner of Gateway Title Agency, states "Gateway Title received five title orders for real estate transfers between family members within a 24 hour period and closed two similar transactions within the past couple of days." This, coupled with the direct questions we are receiving from the field, calls for Real Finance Solutions to share information that may help your clients; both buyers and sellers.

First, is it acceptable to give a "gift of equity" when selling real estate? The answer is YES. Let's first examine the agency guidelines associated with a Gift of Equity:

• Both conventional and government underwriting guidelines call for the donor (seller) to be a direct relative of the recipient (buyer). a qualified relative is defined as the borrower's spouse, child, or other dependent, or by any other individual that is related to the borrower by blood, marriage, adoption, or legal guardianship. Fiance or domestic partner is also acceptable. (Source: AllRegs)


• Fannie Mae and Freddie Mac (conventional guidelines) call for the borrower to contribute 5% of the purchase price from their own funds into the transaction. Beyond the first 5%, the borrower may receive a gift of equity. Some programs designed for first time home buyers may allow a minimum of 3% from the borrower's own funds. If the gift of equity will contribute more than 20% of the sales price, the borrower does not need to document the use of their own funds.


• FHA (government lending guidelines) permit 100% of the required down payment (minimum - 3.5%) to be derived from a Gift of Equity.


• Every gift, whether a cash or Gift of Equity, must be supported by an executed gift letter; which outlines the relationship between the borrower and donor with all appropriate contact information as well as documentation for the source of funds being used for the gift.

In addition to the rules associated with using a gift for the purchase of real estate, our clients need to understand the IRS regulations surrounding gifts. A great source of information is made available by the IRS and may be found at: http://www.irs.gov/pub/irs-pdf/p950.pdf. We advise you to direct your clients to this publication and consult with a licensed tax professional to better understand the tax laws that must be followed.In general, the recipient of a gift does not pay taxes; but the donor may be subject to gift taxes. The current annual exclusion is $12,000.00 per individual; meaning that you may generally give a gift up to $12,000.00 each, to any number of people, and the gift will not be taxable (IRS Publication 950, page 6). Furthermore, a married couple can each give a gift of up to $12,ooo.oo to the same individual without being subject to gift tax. Again, advise your clients to consult with a tax professional to obtain sound counsel.

Real Finance Solutions strives to educate our team of professionals to remain current on trends that effect the real estate industry and benefit our clients.

Guidelines referenced in our material are for information purposes only and are not intended to interpret laws and regulations that are mandated by the Federal Government or any agency associated with mortgage lending; i.e. FHA, Fannie Mae, Freddie Mac.

New Disclosure Guidelines May Impact Your Closing Dates

Many new government laws and other changes are occurring in the mortgage industry to help ensure the home financing process is transparent and understandable to consumers. In 2008, amendments to the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA) we passed by congress, and the Federal Reserve Board published regulations under the Truth in Lending Act (TILA).

The HERA-Mortgage Disclosure Improvement Act (HERA-MDIA) amends the Truth in Lending and goes into effect July 30, 2009. MDIA changes requirements surrounding early and final disclosures to consumers and addresses the timing of when fee can be changed.

Four key elements every RFS Consultant needs to know:

1. 7-Business Day Rule. Historically, consumers and sellers would agree on a closing date, and then service providers would work as best they could toward meeting that date. Moving forward, contracts can still be written with a specific closing date in mind, but all parties to the transaction need to understand that the earliest any home financing transaction can close is 7-Business Days AFTER the consumer is issued the initial mortgage disclosures.

2. Upfront Fee Collection. Historically, upfront fees could be collected immediately (i.e. Application Fee). Beginning July 30, 2009, upfront fees CANNOT be collected, including the appraisal fee, until the lender is reasonably certain that the consumer has received the initial disclosures. This rule may impact the timing of ordering an appraisal.

3. Consumer Appraisal Review. The consumer must receive the appraisal at least 3-Business Days PRIOR to the mortgage closing.

4. TIL Re-disclosure Due to APR Increase of More Than .125%. An increase of more than .125% in the Annual Percentage Rate (APR) from the initial Truth in Lending Disclosure (TIL) requires the TIL disclosure to be revised and reissued to the consumer. The consumer must receive the revised TIL disclosure at least 3-Business Days before the closing.

As always, it is imperative that you plan ahead and help your client navigate through the home buying process with a thorough understanding of the processes that have been put in place to protect their interest.

Keep Your Eye On The Target ...... Credit Scores

As discussed in previous posts, it is crucial to educate your clients on the importance of their credit scores. Minimum score requirements are on the rise and recent news suggests we will not see any private programs for borrowers with scores below 620 and Loan-To-Value ratios above 90%. Consider the data from a report from Barclay's:

• Two million loans are currently delinquent


• 75,000 per month are falling behind


• 5.0% of all Fannie Mae mortgage loans are delinquent


• 3.6% of all Freddie Mac mortgage loans are delinquent


• Defaults are concentrated on loans with higher LTV ratios, lower credit scores and higher loan balances; delinquency rate is 18%

While the news is staggering, it provides further support to the value Real Finance Solutions bring to the table to help our clients. Education on the value of maintaining credit quality and avoidance of predatory lending will pay huge dividends in coming month.

The real estate purchase market is gaining steam and RFS Team members are well positioned to deliver valuable service and capture market share.

Conventional Financing - One Notch Tighter

The belt is getting one notch tighter for borrowers seeking conventional financing. While not across the board, the trend is moving toward a minimum 660 credit score in order to qualify for a conventional loan. We are hearing from various lenders that this change is either being applied now or will soon be.


In addition to the minimum credit score requirements, conventional mortgage lenders are enforcing stricter guidelines when a borrower's credit history is reporting a bankruptcy, foreclosure or short sale*:

• Chapter 7 Bankruptcy; minimum of 4-years since discharge or dismissal and 680 credit score
• Chapter 13 Bankruptcy; minimum of 2-years since date of discharge and minimum 4-years since date of dismissal and 680 credit score
• Foreclosure; minimum of 7-years from completion date and 680 credit score
• Short Sale; minimum of 2-years from time of sale and 680 credit score

FHA insured mortgages, on the other hand, are a bit more forgiving:

• Chapter 7 Bankruptcy; minimum of 2-years since discharge or dismissal and 620 credit score
• Chapter 13 Bankruptcy; consideration may be giving after 1-year
• Foreclosure; minimum of 3-years from completion date and 620 credit score
• Short Sale; left to lender discretion and overall credit profile

Unfortunately, our economy has introduced these circumstances to more potential borrowers. The best advice we can give our clients is to seek appropriate counsel and leadership when they are faced with credit challenges. In addition, our clients need to prepare a sound financial plan for their futures and have an understanding of path to financial success.

How Strong Is Your Pre-Approval?

We are well aware of the value presented by a Pre-Approval certificate when our clients are faced with competing offers on a home. But in today's lending environment, Pre-Approvals are even more valuable is assuring the preparedness of our clients. Credit requirements have tightened, credit scores are becoming more stringent, and lender qualifications are changing by the day.

In order for a Pre-Approval to be a valuable asset, we need to prepare our clients to provide the appropriate documentation and understand the details of mortgage financing. The Pre-Approval process is detailed analysis of a client's Income, Assets, and Debts. Essentially, we are evaluating the stability and likelihood of continuance of employment and income; the availability of acceptable liquid assets; and the quality of credit history. Once we have assembled this information along with supporting documentation; our lending partners are able to make an informed decision and provide useful counsel to our clients.

As you prepare your clients for this process, please remember to collect the following information:

1. Past 2-years federal tax returns; all schedules

2. Past 2-years W-2, 1099, and K1 statements for all sources of income

3. Most recent pay stub that reflects a minimum of 30-days income

4. Past 2-months bank statements (savings, checking, investment account, IRA, etc.)

5. Borrower authorization for credit verification

6. Proof of identity; i.e. copy of driver's license or government issued ID and Social Security Card

While this list is not inclusive of all information that may be necessary, it is sufficient to begin the process and develop a baseline for Pre-Approval.

Remember, not all Pre-Approvals are created equal; and unless the lender has sufficiently documented the findings you may find the Pre-Approval not worth the paper it is written on. Real Finance Solutions strives to educate our counselors and clients on the importance of being prepared as they enter the home buying process.

FHA Regains Leadership Position in Lending

The mortgage lending environment has come full circle in the past 15-years; from the days of strict lending guidelines through the wild-west days of sub-prime options, and back again. Thankfully, the lenders that are survivors carry with them the knowledge and experience necessary to provide sound counsel to home buyers.

One of the old, reliable warrior products that has re-emerged as a leading alternative for home buyers is offered through the Federal Housing Authority, FHA. FHA is does not actually lend money; they simply insure 100% of the loan amount a lender funds.

FHA financing is fast becoming, if not already, the product of choice for many home buyers. To support this notion, the Mortgage Bankers Association reported that FHA insured mortgages represented 38% of the purchase market in June 2009. This is up from 27% of the market in June 2008 and up a staggering 35% since 2005 when FHA held only a 3% market share.

Why has FHA lending escalated to the top of the list for many Realtors and home buyers? Consider these facts on FHA insured mortgages:

• Minimum down payment is only 3.5%


• Credit score requirements as low as 620 (with the minimum down payment!)


• Flexible income, asset and credit requirements


• Allows up to 6% seller contribution toward buyer's closing costs


• Available to all property types; 1-4 family; HVCC not mandated


• No mortgage insurance at 90% LTV with 15-year term mortgages


• Creative renovation programs with the 203K option


• $100 down payment with HUD properties

While these features are attractive, you must be sure you are working with a knowledgeable lender to guide you through the requirements of an FHA insured mortgage. A successful transaction is dependent on a lender that is sensitive to the needs of the borrower yet respectful to the requirements of the underwriting guidelines.

FHA financing is here to stay and Real Finance Solutions is proud to work with dependable lenders that meet the strict mandate of becoming advocates for the consumer.

Teamwork Is Key Under HVCC

Over twenty five years in real estate and lending has taught me one thing; expect change, nothing stays the same. With this in mind, welcome HVCC. The Home Valuation Code of Conduct is making real estate professionals, both Realtors and lenders, pay closer attention to the mortgage loan "process" and keep a close eye on key dates. The days of submitting a contract to a lender and having the appraisal back within hours are gone; under HVCC, be prepared to wait up to two weeks for an appraisal; and this assumes the lender is placing the order immediately. Any delays on the front-end process may cause significant delays near closing.

Why? HVCC rules restrict the open lines of communication that once existed between the lender (loan officer) and appraiser. Anyone related to loan production (i.e. loan officer, processor, underwriter, etc.) are prohibited from selecting the appraiser and placing an order; they must now direct appraisal requests through an Appraisal Management Company (AMC). In addition, questions related to "value" are prohibited without a formal appraisal being completed. These rules are not necessarily a bad thing; HVCC has been put in place to protect our borrowers from unscrupulous lenders and unrealistic values.

Members of Real Finance Solutions and our partners need to be proactive to guide our clients through the mortgage loan process, anticipate potential delays, and take the necessary steps to avoid delays. What can be done:

• Realtors, once a purchase agreement has been executed, deliver the complete contract with all addendums to the lender.


• Realtors, make sure the lenders has a complete list of interested parties and their contact information; i.e. listing agent, home inspector, title company, closing agent, etc.


• Lenders, review the entire contract, addendums and contact information upon receipt with no delays and understand the dates outlined in the contract.


• Lenders, once the inspection has been approved, do not delay ordering the appraisal. You are now on the clock.


• Realtors and Lenders, communication is key to a successful transaction.

Debate will continue as to whether or not HVCC rules should remain, but for now, the guidelines stand. As buyers re-enter the market, we must all be prepared to deliver quality service. HVCC simply raises the bar and requires that all interested parties to a real estate transaction communicate effectively and have a complete understanding of the entire transaction.

Real Finance Solutions strives to educate our members on the details so our respective clients are receiving the best service available.

First Time Homebuyer Tax Credit

The home purchase market is heating up and Real Finance Solutions is dedicated to bringing you value added information for you to share with your clients.

One of the most exciting provisions of the Housing and Economic Recovery Act of 2008 was the First-Time Homebuyer Tax Credit. The credit was expanded as part of the most recent economic stimulus bill (The American Recovery and Reinvestment Act of 2009). The credit is designed to encourage first time home buyers to go ahead and make the leap to purchase their first homes. Combine this tax credit with the fact that home prices and interest rates are at historical lows, and it is indeed an ideal time for many first-time homebuyers to purchase a home!

Here are some things to keep in mind:

• A first time home buyer is defined as someone who has not owned a home in the last three years


• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit


• You cannot purchase the home from a related party like a spouse, direct ancestor, or direct lineal descendent (child or grandchild); however, you can still qualify for the credit if you purchase a property from siblings, nephews, nieces, and others


• If you are married, both spouses must be first-time home buyers


• If more than one unmarried individual is buying the property, the credit can be split up among all the individuals who qualify. However, the total credit taken cannot exceed $8,000 for homes purchased in 2009.
  

For Homes Purchased Between January 1, 2009 and December 1, 2009:

• The credit amounts to 10% of the purchase price of the home not to exceed $8,000.


• The tax credit DOES NOT need to be paid back if you continue living in the home as your primary residence for three (3) years without selling it.

Real Finance Solutions provides this information as reference only and does not intend to offer tax advice. It is good practice for Residential Finance Specialists to refer your clients to a qualified tax accountant for appropriate counsel.

Welcome to Real Finance Solutions INSIGHTS

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Your RFS Team