No Seasoning on Cash Out Refi after Cash Purchase

Effective immediately on Fannie Mae loans:

Borrowers who purchased the subject property within the past six months are eligible for a cash-out refinance if all of the following requirements are met:

1. The new loan amount is not more than the actual documented amount of the borrower's initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV, CLTV, and HCLTV ratios for the transaction).


2. The purchase transaction was an arms-length transaction.


3. The purchase transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property.


4. The source of funds for the purchase transaction can be documented (bank statements, personal loan documents, HELOC on another property). Any loans used as the source for the purchase transaction will be required to be repaid on the new HUD-1.


5. All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.

Note: The preliminary title search must not reflect any existing liens on the subject property. If the source of funds to acquire the property was an unsecured loan or HELOC (secured by another property), the new HUD-1 must reflect that source being paid off with the proceeds of the new refinance transaction

7 Nasty Credit Myths that Won't Die

A decade has passed since the vault cracked open and we started learning how credit scores really work.

For years, the creators of the leading credit scoring formula, the FICO, didn't want consumers to know the scores existed, let alone what went into them. In early 2000, however, E-Loan started letting customers see their FICO scores. That free experiment was quickly shut down, but the secret was out.

Pressure from consumer advocates and lawmakers finally persuaded the FICO creators -- a company named Fair Isaac, now known as FICO -- to reveal later that year the 22 factors, grouped into five categories, that went into creating its scores.

We've been adding to our knowledge ever since. But 10 years later I'm still hearing many of the stupid myths about credit and credit scoring that prevailed 10 years ago, plus some that have sprung up since.

These myths aren't just annoying. Their prevalence is keeping people from understanding one of the most important numbers in their financial lives. Credit scores are used:

-By lenders, to determine whether you're approved for loans or credit cards, along with the interest rates and terms you get.
-By insurers, to set premiums.
-By cell phone companies, to see who qualifies for a contract and who doesn't.
-By utilities, to determine whether you need to leave a deposit and how much.
-By landlords, to decide who gets apartments and rental houses.
-Failing to understand credit scores and how they work, in other words, really can put a dent in your financial life.

Here are the seven most dangerous myths that need to be dispelled:

Myth No 1: "If you handle your finances responsibly, your credit scores will take care of themselves."
Fact: A credit score is not a financial-health score. It doesn't measure your income, assets or financial savvy. There are some behaviors that may be good for your wallet that aren't good for your scores.

Keep in mind that credit scoring formulas have one primary purpose: to help lenders gauge the likelihood you'll default -- based on how you handle credit. If you stop using credit or use it in a way the formulas don't like -- using only one card, shutting down a bunch of accounts or maxing out your cards, even if you then pay them off in full -- your scores could suffer.

Myth No. 2: "Checking your credit hurts your credit scores."
Fact: Checking your own credit reports and scores does not affect your scores. Period.
A credit check could hurt you if you asked a friend at a bank or car dealership to pull your credit reports. Such transactions probably would be coded as "hard" inquiries, or as applications for credit, which could ding your scores. But checking your own credit is otherwise a non-event.

This persistent myth is particularly destructive, because it discourages people from knowing what's going on with their credit reports and scores. Many reports contain serious errors that result in your being turned down for a loan or paying a much higher interest rate than you deserve. You need to visit AnnualCreditReport.com at least once a year to view your free credit reports from the three bureaus and dispute any serious errors. If you'll be in the market for a major loan, such as a mortgage or an auto loan, you'd be smart to buy your FICO scores from myFICO.com to see how lenders are likely to view your application and get tips from improving your numbers.

Myth No. 3: "Asking for lower limits will help your credit."
Fact: Having sizable credit limits is a good thing for your scores, as long as you don't use them to run up debt.

Lenders like to see a big gap between your available limits and the amount of credit you're actually using. A lower limit reduces that gap, which can be bad news for your credit scores. Of course, if you can't trust yourself not to use your available credit, the damage to your credit scores may be the least of your worries. Otherwise, though, you probably should leave your credit limits alone.

Myth No. 4: "You need to carry a credit card balance to have good scores."
Fact: You don't need to be in debt or pay a penny of interest to have good credit scores.
Your credit reports and scores don't "know" whether you're carrying a balance or paying it off in full every month. That's because the balance reported to the credit bureaus typically is the balance from your last statement, not what was left over after you got that statement and paid the bill. So you might as well pay in full and save yourself the interest.

This myth encourages people to carry unnecessary debt, putting them at the mercy of credit card issuers and eroding their financial security.

Myth No. 5: "You should never close an account if you can help it."
Fact: The prevailing myth used to be that closing accounts could help your scores, which, we've learned, isn't true. But the knowledge that shutting accounts can hurt your scores has caused some people to balk at closing credit accounts, even when they probably should.

If your issuer is charging you a fee you don't want to pay, for example, closing a card or two shouldn't be a crisis if you have good scores, other open accounts and no plans to apply for credit in the immediate future. If you do plan to apply for a mortgage, car loan or new credit card, though, you should hold off on closing any accounts until after you've been approved.

Myth No. 6: "How you handle credit indicates how trustworthy you are."
Fact: People get in financial trouble for all kinds of reasons, including simply getting sick (medical bills were a factor in nearly two-thirds of consumer bankruptcies in 2007, according to Harvard University researchers).

There's no evidence of a link between information on credit reports and the likelihood an employee will commit fraud, but employers persist in thinking there is. (By the way, employers typically use credit reports to evaluate applicants, not credit scores.)

Furthermore, there is evidence that employers are abusing their power to review credit reports. Some states have already banned or limited pre-employment credit checks, and a bill was introduced in 2009-2010 session of Congress to do the same, although the legislation didn't go anywhere.

Myth No. 7: "All credit scores are pretty much the same."
Fact: There are hundreds of different credit scoring formulas. Even the scoring formula used by most lenders, the FICO, comes in different iterations. One lender may use the most up-to-date formula while another might use an older version that gives a different result. There are FICOs tweaked to accommodate car lenders, credit card lenders and finance companies, in addition to the "classic" FICO used by most mortgage lenders.

Some purveyors of other scoring formulas point to these different versions to try to convince people that it doesn't matter which score you get, since there are so many variations. Indeed, if you're simply looking for a guidepost as you try to shore up your finances, any of them can give you an idea of your credit's relative strength.
But if there's real money at stake, you want to get a score that's at least in the same ballpark as the one your lender will be using, and that's typically a FICO. If you're buying a credit score that doesn't say it's a FICO, it's not a FICO -- and it could be dozens or even hundreds of points different from the one your lender sees.

Liz Weston, www.money.msn.com

Life After Bankruptcy

Life After Bankruptcy

Bankruptcy is an uncomfortable subject for a variety of reasons. The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

Here are some additional steps you can take to make the bankruptcy process as painless as possible:

Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.
Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.
Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.
Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.

Tips for Rebuilding Credit:

If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)
Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.
While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.

Home Loan Rate Trends

What is the Velocity of Money and How Does it Impact Home Loan Rates?

If you’ve been watching the economic news, you’ve probably noticed that market experts and traders have been keeping a close eye on the Commerce Department’s Personal Spending and Personal Income reports. Obviously, those reports provide insight into the health of our economy, but did you know they also influence home loan rates? That’s right, personal spending can actually influence the interest rates that are available when you purchase or refinance a home.

Here's why. It has to do with something called the velocity of money. Even though the government keeps pumping money into the system, nothing happens until that money is spent or lent – and passes from one hand to another or one business to another. The speed at which this money passes between parties is called the velocity of money. With the job market still very sluggish, consumers aren't spending much money these days, and businesses are still reluctant to spend money to make investments in their business. With the present velocity at low levels, inflation remains subdued and that's good for home loan rates. That's because rates are tied to Mortgage Bonds and inflation is the archenemy of Bonds, so low inflation is good for Bonds and rates. However, once velocity increases, the excess money in the system will cause inflation – which is bad for rates, since even the slightest scent of inflation can cause home loan rates to worsen. While we certainly want to see better economic recovery news in the near future, we have to remember that there's an inverse relationship between good economic news and Bonds and home loan rates. Weak economic news normally causes money to flow out of Stocks and into Bonds, which helps Bonds and home loan rates improve. Strong economic news, on the other hand, normally has the opposite result.

Currently, home loan rates are at a historically low level, but that situation won’t last forever. That means now is an ideal time to purchase a home or refinance before the velocity of money – and rates – change. If you or anyone you know would like to learn more about the current economic situation and how to take advantage of historically low home loan rates, then please contact me.

FIVE MAJOR TAX DEDUCTIONS THREATENED

Five major tax deductions are up for discussion for elimination, starting with mortgage interest:
•Mortgage interest deduction
•Charitable contributions
•State and local taxes
•Employer-provided health insurance
•Tax-deductible retirement plans

See full story at: http://www.usatoday.com/money/perfi/taxes/2011-04-14-tax-breaks-under-fire.htm

Realtor Bonuses Offered with Program

HomePath financing incentives are now available which allow up to 3 1/2% seller contribution to buyer's closing costs. This incentive is good through 6/30/2011.

Realtor Bonuses are offered through this program also. Call Taum for details - 480-967-8286 and hear a little bit more from Taum by clicking here:

http://www.youtube.com/watch?v=faAv9B1KnWg

Mortgages Now More Expensive, Harder to Get, Take Longer....That's Government in Action Again...

Real Estate Industry News

Mortgage Proposals Could Cost Borrowers, Some Say

Mortgage loans could get more expensive, and harder to get, under proposals presented by the Obama administration to reform Fannie Mae and Freddie Mac, some consumer groups said recently.
The administration's proposals suggest varying levels of government support for mortgages. But only one of those proposals would maintain a strong role by the government for consumers in the mortgage market, according to the Consumer Federation of America, a nonprofit advocacy group.
Plans to rely heavily on banks and investors to provide mortgages, without much federal support, could lead to fewer long-term, fixed-rate mortgages, higher prices and less access to secondary markets for small banks and credit unions, the CFA and others said.
"The administration has laid out a series of options that could lead to the abandonment of a nearly 70-year commitment to affordable homeownership for working American families," said Barry Zigas, CFA's director of housing policy, in a news release.
Other administration proposals that might affect borrowers:
³Raising the minimum down payment for a Fannie- or Freddie-backed home loan to 10%
³Reducing the maximum mortgage amount that can be financed or insured by Fannie, Freddie or the Federal Housing Administration
³Increasing the fees charged by Fannie, Freddie and the FHA
It's important to note that the proposals are just a starting point for what is sure to be a lengthy discussion about the future of mortgage finance in America.
The Mortgage Bankers Association's chairman called the release of the administration's proposals "another important milestone on the road to stabilizing the mortgage market."
One of the concepts outlined by the administration resembles a previous MBA proposal, said Michael D. Berman, chairman of the MBA.
"Our proposal envisions an explicit, but limited, government guarantee of lower-risk mortgage-backed securities. The guarantee would be paid for by fees used to build a fund to protect taxpayers," Berman said in a news release. "This is the most prudent approach, one that places the primary risk on private investors and ensures sufficient liquidity during times of economic stress in order to provide affordable mortgage finance in all types of mortgage markets."
Reduced access to loans
For sure, if the government scales back Fannie and Freddie, and fees involved with government-backed mortgages rise, it will inevitably curtail the availability of affordable mortgage credit for some borrowers -- particularly people with marginal credit or little money to put down, said Greg McBride, senior financial analyst for Bankrate.com.
"The consequence of reining that in and expecting the private market to fill the void is that some consumers will find that credit isn't available -- and when it is, it will cost a good bit more," McBride said.
While broad changes to the government-sponsored entities could bring higher costs to consumers, mortgage costs have been going up already anyway, in the form of loan-level price adjustments from Fannie and Freddie and fee increases from the Federal Housing Administration, said Keith Gumbinger, vice president of HSH Associates, a publisher of mortgage and consumer loan information.
And with a private mortgage market nearly non-existent today, it's far from clear exactly how -- and when -- policies will change, he said.
"This is a pretty broad framework," Gumbinger said of the administration's proposals. But, finally, people in the industry have a framework on the table to argue about, he added.
"Hopefully, we can preserve mortgage markets that existing players can profit in, and move away from the excesses and polices that pushed us to where the market went as far as it could and fell over," Gumbinger said.
For its part, the National Community Reinvestment Coalition said the proposed policies could lock working-class families out of homeownership.
"There is universal agreement with the principle that people who cannot afford homeownership shouldn't be put in an unsustainable loan," John Taylor, president and chief executive of NCRC, said in a news release.
"However, the administration's proposal may be overly narrowing the window of opportunity for many blue collar and low- and moderate-income people from realizing their dream of homeownership."

By: Amy Hoak, www.marketwatch.com