you searched for dual agency

Qualified Residential Mortgages – New Rules’ Impact on Buyers & Sellers

in General Real Estate on

Part 2 of 2 . Questions? Ask ‘em. This stuff matters, folks. I know enough about them to know that I need to recommend experts to my clients; Matt is one of those experts. As such,

Part 1 by Matt Hodges with Presidential was posted on Friday and is a primer on the new Ability to Repay rules.

Okay, ATR (Ability to Repay) is straight-forward and all are common sense. What about Qualified Mortgage (QM)?

First, a QM (Qualified Mortgage) must comply with all ATR requirements. Next, and probably most misunderstood today is the 3% compensation rule. The CFPB created a 3% maximum compensation to the broker/lender/correspondent. This means that the commission that a broker makes is capped by the CFPB, but a lender or correspondent is only capped on other fees and non-bona fide points. Individual lenders are still creating rules to comply with this and there is still much debate about how to comply. Here is what the CFPB states: “…points and fees generally may not exceed 3 percent of the total loan amount…” There is a higher percentage allowed for loans below $100,000. Finally, QM’s Average Prime Offer Rate (APOR) must not exceed 1.5% over Annual Percentage Rate (APR). These are considered Higher Priced loans, and do not comply with ATR. Second liens must not exceed 3.5% and certain Small Creditor and Balloon transactions also may exceed APR by up to 3.5%.

Here’s one of the big questions – What about the 43% Debt to Income rule? Debt to income has always been calculated, though diffently applied maximums. It is the percentage of your mortgage debt to your gross monthly income or percentage of your total monthly debt to your gross monthly income. Well, it’s not really a rule today, UNLESS lenders overlay the Fannie/Freddie guidelines. The reason it’s not really a rule is Agency QM (Fannie and Freddie) uses their own determination software for maximum debt to income. The CFPB gave, for exactly seven years from implementation on January 10, 2014, both Fannie Mae and Freddie Mac an exemption, though that could be shortened if either departs federal conservatorship. Certain lenders have decided to institute the 43% rule, but generally those are not the typical 30 year fixed conforming. What I have witnessed is ARMs over $417,000, and thus a jumbo loan. Further, VA, FHA and USDA loans are exempt from this rule.

So, if 43% isn’t really “real” right now, what is?

Right now, Fannie and Freddie will regularly go to 45% DTI and for the right file, 50%. FHA will go to 46.99% on mortgage DTI and 56.99% total DTI and VA does not have a maximum. Generally, all three types will need automated underwriting System (AUS) approval, and as loan officers, we use Fannie Mae’s Desktop Underwriter and Freddie Mac’s Loan Prospector for conventional, FHA and VA loans. Guaranteed Underwriting System is used by USDA. If a loan is manually underwritten, per guides, DTI ratios are almost always lower.

Now, the 3% rule – probably the most misunderstood as well as applied most harshly against mortgage brokers, versus bankers or correspondents. There are six categories which comprise the 3% max on loan at $100,000 or greater:

  • Finance charges. Non-refundable up-front mortgage insurance premiums, loan level pricing adjustments (such as lower credit score “hits”) as well as excessive points
  • Loan originator compensation
  • Real estate related fees
  • Premiums for credit insurance and the like – very unusual
  • Maximum prepayment penalty
  • Prepayment penalty paid during a refinance

Brokers are required to disclose actual or maximum compensation on their Good Faith Estimates, but neither correspondents, nor lenders are. Further, total compensation may not be known, as “of the date the interest rate for the transaction is set,” because lenders often hedge their loans, rather than locking them with their investors. So, while legal and common place in the lending industry, a locked loan is guaranteed to the borrower at that rate and points, but some lenders may actually be “floating” the loan and, thus, the total compensation may not be known and thus, that component of the 3% rule may not have to be complied with, legally. Lenders and correspondents have an advantage in this realm. Blame politics and lobbyists – brokers lack a voice in Washington. We’ve even heard from some wholesalers, which price loans to brokers that they are increasing the costs to brokers, just to help pay for the administration of QM.

Read More

courtesy - http://www.flickr.com/photos/59937401@N07/5857462455/sizes/s/

Your Credit, CLUE Reports and Buying a House

in General Real Estate on

You know your credit affects everything, right? Did you know that your house (and the one you’re trying to buy) has a credit report? You know there’s a database for everything, right?

Several years ago a real estate agent I know had a buyer who was closing on a home purchase in a couple days. He called his insurance company a few days prior to closing and said he needed insurance. But.The combination of his credit (not 800+ credit score) and the house’s credit resulted in his insurance policy costing many, many times what he was expecting (and budgeting for). He no longer qualified to buy the house and everyone found out a few days prior to closing.

Did you know that the Clue Report goes back five years into the history of a property. It is standard industry practice to purge losses over five years old“?

So: when the power went out for a week in last year’s derecho and the seller of the home you’re trying to buy filed a homeowner’s insurance claim for the $400 worth of groceries they’d just bought? That could affect the buyer’s ability to get affordable homeowners insurance.

In other words:

“Only information about property loss claims made against homeowner’s or automobile policies is included in the CLUE database. Information from the CLUE database plus your risk score make up the complete insurance risk profile. However, your credit history can play an important part in an insurance company’s judgment about your risk potential.”

Or:

When I’m putting together offers to Purchase when representing clients, I use an addendum (that has been a part of the standard Virginia Association of Realtors’ forms since at least February 2005) called the “Homeowners’ Insurance Addendum” (simple, right?). The most difficult part of this form is that most many Realtors in Charlottesville seem to have never seen this form – and many see it as an unnecessary, superfluous contingency . I don’t know why.

The form addendum is clear – it forces the buyer to ascertain within a short time period (similar to that of the home inspection contingency) that they can get affordable homeowners’ insurance – with a certain cap on the annual premium and the deductible.

Better to find out in the first two weeks if the homeowners insurance will be $4,000 per year instead of $700, right?

Read More

No, I Won’t Drop Everything

in General Real Estate on

I know that every day I’m competing for business; but I also know the value of choosing the clients I serve.

<slight rant>

I don’t get it.

I got a call recently – a blind call – from someone who wanted to see a house (not one of my listings as all Charlottesville houses for sale show up on my site). She’d been looking online, driving by a few houses, calling listing agents, wasn’t from the Charlottesville area, nor did she have familiarity with the area or the market – and she wanted to see if I could find a house that suited them and see it. Right now.

Driving around the Charlottesville area looking for homes you’ve seen on the inter webs with no reasonable context whatsoever is, politely, not the most efficient use of one’s time. Context matters.

This isn’t how professionals work; I have no doubt that many, many real estate agents do jump when someone calls and wants to see a house (and that’s just not a safe practice). I choose not to do that. Time is valuable; efficient use of time is more valuable. Dropping everything is not fair to those clients who have chosen to work with me who depend on me.

The best part was this question:

“Do you work with a contract with your buyers?”

Yes. Yes I do … here’s why.

And the speed with which she sought to end the call was impressive.

Read More

Monday Links – 14 March 2011

in General Real Estate on

Dear National Association of Realtors: I hereby volunteer to serve again. 🙂 – How 20-somethings (and really, most of my buyer clients) approach the home-buying process . – In Heart and Mind, not brand, I apparently am a Redfin agent. … Numbers 8 and 9 are dead-on advice for the Charlottesville real estate market. #10 is telling as well, particularly coming from one of the most disruptive forces in the real estate space in a decade.

…When you over-price by $10,000, you can lose much more: after a month the listing loses its luster, mortgage and staging costs pile up, and price-reductions signal buyers to ask for more reductions .

– The Landmark continues to be an eyesore (and now tagged with unsavory, not for kids’ eyes graffiti ) – Great comments and discussion at cvillenews about Trader Joe’s merits . – My favorite recent search terms to bring visitors to this here Charlottesville real estate blog:

Read More

NGIC and DIA – What’s the Impact on the Charlottesville Real Estate Market?

in General Real Estate on

Right Now *, There are: – 289 Homes for Sale within five miles of the NGIC/DIA facility on 29 North. – 113 have “NGIC” in the public remarks. (one of these listings is mine, and it’s GREAT .)

…But understand that obtaining a new clearance, probably higher than TS, for most of the professional jobs at NGIC will be a long process (12 to 18 months), and site security policy may not allow personnel into the building until a clearance is finally granted. In that case, two issues apply. #1, even if it takes 2-4 months and several thousand dollars to relocate, a pre-cleared person from DC or straight out of the uniformed services can come on much faster than Sara’s fresh, uncleared UVa graduate. #2, assuming that fresh, uncleared Hoo gets hired, what’s s/he going to do for the next 12-18 months while awaiting clearance?

…Quite a few people have been moving to and buying homes in the Charlottesville area due to the NGIC/DIA relocation, and I suspect there will be more as the move continues its phase-in over the next few years.

Read More

Did you know there is a “Bank Secrecy Act”?

in sideblog on

Pursuant to the Bank Secrecy Act and requirements specified by the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), [ Bank Name, edited out by me ] will not engage in any transaction with any individual or entity that either appears on the list of Specially Designated Nationals and Blocked Persons, Specially Designated Terrorists, Specially Designated Narcotics Traffickers, or that [ Bank Name, edited again ] suspects to involved in a suspicious transaction or one in violation of federal law . … Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. … And from Wikipedia: The Bank Secrecy Act of 1970 (or BSA , or otherwise known as the Currency and Foreign Transactions Reporting Act ) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering . Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments , and file reports of cash purchases of these negotiable instruments of $10,000 or more (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion , or other criminal activities.

Read More

Transcript of Radio show – 27 December 2009

in sideblog on

Moore : And as our initial caller seemed to be asking is: there seems to be or you would expect a much greater – the term punishment comes to mind although that’s not really what I’m trying to say – but a strategic default makes it sound like it’s all about how much money you have left in your pocket at the time rather than – where’s the punishment that goes with it for not paying it off. … When you make your money when you sell is when you buy, so you need to make sure you buy smart from day one and I do that by giving them as much data and analysis as possible so that they can come to these conclusions on their own and the second part of that is that I’ve prepped them that if they buy a house for $100,000 today that I expect it’s going to be worth a little bit less next year. … I think that there’s going to be more distressed properties coming on the market now in the Charlottesville and Albemarle area and I’m seeing that as far as the daily updates that I get as far as the number of notice of trustee sales in our market and I’m seeing more of the MLS’s coming on as foreclosures and I’m seeing more anecdotally, again there are two properties, one in Louisa and one in Albemarle last week that each had $100,000 price reductions. … What I’m hoping to see in the next couple of years is in addition to having homes and coffee shops, etc. is homes and places to work so that people won’t have to get into their cars to drive to work and I think that’s the very good thing from the perceptive of going back to the sociological change being close to your neighbors and being close to business as keeping everything local is another trend that we’re seeing develop over the past couple of years to 2010 and beyond.

Read More