Florida Mortgage : Learning Center

We have been utilizing Fannie Mae’s Desktop automated underwriting system since it’s arrival in the mid 90’s.  Prior to this automated system of evaluating risk for Florida home mortgage loans, debt ratios (your monthly debts including your mortgage payments, divided by your gross monthly income) were capped at 36%. 

Boy, did things change in the automated world of mortgage risk analysis.

With great credit scores and verifiable liquid reserves, Desktop underwriting approval recommendations allowed Florida homeowners or home buyers to have debt ratios as high as 60%!  This was based on Gross income; not the Net income you get to deposit in your bank account on Friday’s. 

Recently, we have seen a shift in the amount of debt Fannie Mae will allow using their Desktop system.  In fact, a debt ratio of 45% seems to be the new reasonable cap on allowable mortgage and consumer debt.  Keep in mind, this ratio can increase slightly as long as the amount of mortgage borrowed or your loan-to-value is reduced.  The less you owe on your Florida home, the greater the allowance on mortgage debt, from Fannie Mae’s point of view.

Florida mortgages with respect to Fannie Mae underwriting has tightened a bit and we expect more tightening before things begin to settle down.  Of course if you have any questions regarding the availability of mortgage credit in this ever changing financing arena; call your Florida Mortgage Professional for advice.

Stephen Thaggard

If you are keeping up with the mortgage markets you already know of the expectation we all have regarding the Federal Reserve’s upcoming September 18th meeting.The anticipation of a Fed Funds Rate being slashed by at least 0.25% if not 0.50%; has already improved conventional Florida mortgage loan rates everywhere.

This expectation as usual has allowed many wholesale lenders and banks to reduce their Fannie Mae conventional type mortgage rates.  In fact, here in Florida, we can offer 30 year fixed rate mortgages, for qualified borrowers, at 6.375%; with no discount points and no origination fees.  I believe these low rates will be made available as long as theFed lowers the Fed Funds Rate by at least 0.25%.  However, if there is no movement, bank rates will increase simply because lenders have positioned themselves on the assumption that rates they trade at will improve.  Keep an eye on September 18th.

If you are considering refinancing in Florida or purchasing your first home; don’t hesitate to call your trusted Mortgage Professional for answers and direction.

Stephen Thaggard 

There is good news for Florida homeowners and first time home buyers thinking of relocating to Florida.  The mortgage market has cooled down, slightly, and loan program guidelines are being rewritten as I write.  There is light at the end of this tunnel and it’s the Mortgage Professional who will guide home buyers and homeowners through the tunnel.

We are going back in time where buying your first home meant actually having to save money first. Many lenders have already reduced their positions on 100% financing, though it still exists.  Several 2nd mortgage lenders have either closed or only provide financing up to 95% of the appraised value or purchase price.  Even credit score requirements have dramatically changed on many conventional type mortgage programs.  If your credit scores are less than 680, you might want to seek credit advice on how to improve your credit profile.  Fannie Mae has tightened and higher qualifying credit scores are now required for mortgage financing.

I believe lenders are developing new mortgage programs to assist first time home buyers and existing home owners.  They will have to as foreclosures seem to headline the Florida Real Estate markets every month.  We are getting many calls on refinancing requests to consolidate credit card, student loan and car loans into one lower fixed rate payment.  This is a great first step to consider if you have an adjustable loan that is getting ready to reset.  Or if your Florida property taxes and/or homeowners insurance has increased so much that a monthly debt reduction plan would help.

Of course with any mortgage financing consideration, always ask a trusted Florida Mortgage Professional. 

Stephen Thaggard

The Federal Reserve finally made an unannounced move to lower the discount rate by 0.5% last Friday.  This discount rate is the  rate that the Federal Reserve charges to banks for short term loans.  This move should allow lenders to ease their mortgage program and underwriting tightening for Jumbo loans as well as sub prime. Alt-A and Conventional mortgages.

At BeechTree Mortgage, we are still experiencing many phone calls and emails for Florida home purchase financing.  Florida home buyers are learning that mortgage programs and their underwriting or qualifying guidelines have changed.  Especially when considering a sub prime or Jumbo sized mortgage loan approval.  Even conventional mortgages underwritten with FNMA have thinned out first time home buyers in qualifying.  Mainly, Florida home buyers will need to have better credit scores, qualifying incomes, and have saved money for reserves or down payments.

The Federal Reserve has finally recognized the severeness of the mortgage liquidity crisis and their discount rate improvement last week should allow home buyers to ultimate obtain their home finanicing.  Sourses say the Fed may lower again when the meet in September.   If they do, keep an eye on the conventional mortgage rates.

Stephen Thaggard

Rising foreclosures and reduced liquidity, even in the aftermath of the Federal Reserve bailoutlast week, have tremendously changed the mortgage market.  Credit is becoming less available for those with preious credit issues and those with great credit are going to experience reduced mortgage program choices.

The good news is really dependent on what your financial mortgage plans are for the upcoming few years.  Most credit problems can be corrected with time and the current market has forced many to take this time to review and repair any issues that might keep them from obtaining a conventional FNMA, FHA or VA type mortgage.

Keep in mind, lenders are reducing risk associated with many loans and I see lenders leaning towards conventional FNMA type mortgage lending programs.  First time home buyers shouldn’t fret.  FNMA has some of the best first time home buyer financing which includes 100% financing.

The consumer credit crunch simply means home buyers will need to review their credit profiles with a mortgage professional prior to purchasing their new home.  It’s the mortgage professional who keeps on top of all of the market program changes and let me tell you it’s been very interesting especially in the last couple of weeks.

For more info on FNMA mortgage programs please call me or visit FNMA’s web site.

Stephen Thaggard 

After 12 years in the Florida mortgage market; I thought I had seen it all.  The current mortgage market has been more volatile than ever as liquidity evaporates every day.  We all are experiencing the results; mostly mortgage program availability across the board.

Every day we are receiving mortgage lender guideline changes and mortgage program deletions.  All that I guess is good news as other mortgage lenders and banks are simply closing shop all together.  The overall picture with mortgage program availability is conventional programs will survive.  These are FNMA (Fannie Mae), FHLMC (Freddie Mac), FHA (Federal Housing Administration) and VA (Veterans Administration Home Loans).

Home buyers are going to have to make changes prior to considering purchasing their new home.  This is how things used to be when I started my mortgage career back in the mid 90’s.  Home buyers should consider actually saving money to use towards down payments, closing costs, or reserves.  Reviewing one’s credit history and taking steps to improve credit scores are essential these days before considering obtaining a mortgage.  And of course, home buyers are going to have to qualify with strict conventional debt ratio limits.

The market is still in change mode and we mortgage professionals will stay on top of the morgage program availability to keep home buyers informed.  If you have questions on what programs are left, know that conventional mortgage loans will remain and all of the others might disappear.

Stephen Thaggard

As everyone is aware the housing market bottom is being extended because of the sub prime meltdown and now the Alt-A atrocities.  Alt-A, for those who don’t know, are typically low documentation type mortgage programs available to good credit clients.  They include state income, no ratio (where you don’t even list your income on the application), no income and no asset types and of course the no documentation program where income, assets and employments information is not provided.

In the past 2 days we have experienced extreme pricing increases for Alt-A programs.  Or worse; as many lenders have either ceased operations altogether.  As most of these low documentation loans have not been able to be sold on the secondary markets; creating one of the worse liquidity issues we have seen. 

CNN’s Gerri Willis explains why the market reacted so strongly to one mortgage lender’s problems.

  I believe when the Federal Government jumped in a few years back expecting lenders to provide affordable housing for everyone; the problems began.  Lenders relaxed underwriting guidelines and the result was first time home owners got theirs homes, but no one was policing true affordability to protect the home buyer.  If you didn’t have to document income at all; then how much of a home could you “afford”.  The answer was, unfortunately, whatever the maximum loan amount allowed by the lender.  Crazy.

The good news?  This too shall end.  It’s time to get back to the basics.  Conventional FNMA, FHLMC or FHA and VA programs are and have always been available.  If you have any questions regarding the mortgage program you currently have please contact me at BeechTree Mortgage, Inc. or email anytime.  We are here to help educate consumers on mortgage program choices and have for over 11 1/2 years.

Stephen Thaggard

I am working with a Florida homeowner recently trying to refinance his existing mortgage.  You see, he obtained a 1%interest rate loan from his mortgage broker and was never told about the negative amortization or the recasting problems. The homeowner already owes much more than he started with last year.  I helped him realize the “real” interest rate he owes is over 8% and is adjusting each month!  He is adding more than $2,700 every month to his principal balance.  Why he, the homeowner, had to learn about the details of his mortgage months after closing; is an industry problem.

After reviewing his specific objectives we proposed a 30 year fixed rate mortgage with no prepayment penalties. Later, another Florida mortgage broker contacted our client for a little competition.  However, this mortgage broker actually offered the same negative amortization program, with prepayment penalties, our homeowner already has and wants out from.  I had to explain all of the risks involved with that type of program and reminded the homeowner why he wanted to refinance in the beginning. I found myself disclosing mortgage program specifics for mortgage brokers who obviously want the business but don’t want to disclose too many details on the programs they are presenting. 

Finding a Florida Mortgage Professional should be the 1st on the list for any homeowner or home buyer.  It’s time to start searching for the professional who follows code of ethics including honor, integrity.  Ones who will fully disclose the advantages and the disadvantages of mortgage program choices to consumers.  The best place to begin searching for your Florida mortgage professional is at FAMB, NAMB, and of course the BBB.

Stephen Thaggard , FAMB, NAMB

A reputable and professional Florida mortgage broker does earn and discloses to the homeowner or home buyer a “yield spread premium” from the Lender by offering a specific interest rate. In fact, banks earn the same premium when they sell their bundled mortgages on the secondary market.  Lets use the FNMA, Fannie Mae, conventional 30 year fixed rate mortgtage as an example to fairly compare mortgage brokers and mortgage bankers or lenders.

Of course, we will assume that the mortgage broker professional and banker are not charging discount points and origination fees.  Today’s 30 year fixed interest rate is available at an average interest rate of 6.375%; however, for the mortgage broker to earn a commission or yield spread premium, the rate is quoted slightly higher.  We would offer 6.625% which in turn will yield a profit of approximately 1.500% of the loan amount.  If the loan amount were $200,000, the premium earned would be $3,000.

You would think then that a direct lender or bank would offer a lower interest rate because there is no mortgage broker; right?  The truth is banks offer the same competitive interest rates, 6.625%.  The only difference is the bank doesn’t ever have to disclose the yield spread premium they will earn when they sell your loan on the secondary market.  It exists and you never see it on any disclosure. 

I wouldn’t have a problem with reporters saying that mortgage brokers charge higher rates; if banks actually offered lower ones.  We compete with the same rates as banks all the time.  The difference between banks and mortgage brokers is disclosure of the yield spread premium and banks are limited in mortgage program opportunities.  We, mortgage brokers have to show and do explain how we get paid and banks don’t.  Is it fair?  I don’t think so..

We need to keep it fair and everyone should be responsible to disclose how it really works regarding mortgage broker or banker financing and the yield spread premium we all earn.

Stephen Thaggard, FAMB, NAMB